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Strategies & Market Trends : Stochastics

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To: Mark who wrote (276)	2/27/1998 11:32:00 AM
From: Wayners	Read Replies (2) of 927

I was skeptical about TA as well. When I first started out I didn't think TA had much of any value because of books I had read--like Peter Lynch's books expecially. While FA works great for the really long term investor--I'm into 4 week plays maximum. It took quite a few losing deals and lost time before I realized that FA (except for news releases) has anything to do with short term price movements. It took me 6 months of not getting anywhere when I decided that I'd looked at everything except TA and I decided to learns as much as I could about it. As soon as I saw an RSI chart I thought this is too good to be true. I could see the oversold and overbought levels lining up perfectly with price highs and lows with any non trending stocks. I honestly coudn't get a very good nights sleep after seeing that. Very exciting indeed. I've been hooked ever since. It also takes a whole lot less time to evaluate a stock. It used to take several hours to go through the fundamentals of a company and I'd still lose money. With TA I could evaluate a stock in about 2 minutes. I think I can do it faster than that now. I go through the list on here and it takes me a bit over an hour with short write-ups. If you are a longer term investor use longer moving averages and oscillators. Use a 50 and 200 day moving average and use a 25 to 100 period stochastic. If I could use only one indicator it wouldn't be stochastics or even RSI--it would be a simple moving average. That's it. Just stick with the trend. The volatility of small caps can make them highly unpredictable. Large spreads, low trading volumes don't make them good trading opportunities. Small caps that trade with some predictability that don't have large spreads can be quite lucrative as well. I think it all depends on the individual issue. I look for high volume, low spreads and high price volatility. On SFY, its been in a prolonged downtrend since Oct. Its been very consistently down. It isn't going down as fast it was so I'd think it would be looking to set up a base/bottom. Regardless of what I think it might do with regards to forming a bottom--I absolutely do not buy into a downtrend. I'd only consider shorting it--probably at the upper bollinger band or peaks in 5 day stochastics. Looks like pretty low volume too so I wouldn't be too interested in trying to trade it. Spreads aren't that bat looking at right now. Looks like its close to another short term short. Volatility is still decreasing from a slightly higher level. Not likely to break out up in its configuration. On TMAR its in a slight uptrend. I'd consider long positions. Volatility is low so you've got to actively trade it to make lots of money. Stochastics are low here but not showing an upward hook to buy into. Volatility could spike up at any time since its currently so low.

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