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Strategies & Market Trends : TA Science Projects & Experimental Indicators

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To: ftth who wrote (96)	3/22/1998 12:18:00 AM
From: HeyRainier	Read Replies (4) of 237

Dave, I just got an idea for an Experimental Indicator: how about a volatility-adjusted stochastics indicator? Ray Cunningham briefly mentioned volatility in helping determine a stock's capacity to continue along with a trend, despite running up against projected resistance. I'm not quite sure what this will turn up, but I'm thinking that a stock's susceptibility to snap-back from a run-up (or sell-off) is partially a function of its volatility. It seems to make sense, but I currently don't know of any indicator out there that combines the two measures for a better overbought/oversold reading. So for example, if a stock continues to sell-off gradually, one would expect it to have an oversold stochastics reading, but when one sees volatility easing off as the selling continues, one not-too-smart person might buy the issue based on that oversold stochastics reading, when instead he should note that the reliability of the indicator should be adjusted due to the changing dynamics of the issue's trading characteristics. Just look at issues like NYBS, KKRO, or BOST. Just a thought. Rainier

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