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Gold/Mining/Energy : Daytrading Canadian stocks in Realtime
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To: quickcat who wrote (11070)5/4/1999 11:29:00 PM
From: keith massey  Read Replies (2) of 62348
 
Quickcat

I should be careful when I say an indicator is showing oversold. All price indicators are based on the current price compared to the past price (range, average, SD, etc., etc.,) over a given range of time. If a stock is in a steady free fall an indicator can show the stock as being oversold but if the stock continues to drop the indicator will continue to show an oversold position. This is a flaw with all of the oscillating indicators. Just because the indicator is showing oversold it doesn't mean that the sellers know this and the stock could fall forever without ever recovering. Don't buy just because you see an oversold position

Most TA'ers wait for the indicator in question to cross up from an overbought position before they buy. For example RSI at 15 is considered overbought. However the stock could continue to drop and RSI would hover in the overbought range (20-0). The standard text books will tell you that a cross of RSI through the 25 line is a buy. Anyone that follows my posts know that I look at these indicators sometimes but don't base my buys just on them. I like patterns and volume indicators far more. However these indicators do have some uses and are followed by the masses.

In the case of GLE bring up the 10 day chart on CSW.

Put on 15 minute candles
Now put on a 15 period RSI.
You will notice when I put out the post to watch for a bounce the RSI was hitting new lows for the 10 days (hence huge oversold)...look what happened when it crossed up through 25.

Now put on the 3,5 slow stoch.
The %k and %d were also hitting new lows, another huge oversold indicator.

Now look at the 15 period momentum.
You will notice that negative momentum was gaining speed right before the bounce.

Once again...just because they were showing oversold doesn't mean that the stock was going to bounce. However if it did bounce I was fairly sure it was going to be a big one to make up for the large sell off. I knew from the 14 day chart and watching the stock in the past that the low $7's were a very strong support region. Both of these factors put together were enough for me to put a heads up for the group to watch for a big bounce.

Hope this helps
KEITH
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