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Gold/Mining/Energy : CDN. MOMO PUPPIES -- Ignore unavailable to you. Want to Upgrade?

To: Ed Pakstas who wrote (2700)	6/30/1999 6:29:00 PM
From: keith massey	Read Replies (2) \| Respond to of 36688

ED... I totally ignore Stochastics (and normally MACD) for penny stocks and in all my experiences I have found them both next to useless for buy and sell signals of pennies (just my opinion) What Stochastics does is look at the low and high range for X number of days (or periods if you are using day charts). It than tells you where the stock price is in relation to the high and low for the X number of days you wanted. For example, I am going to use a 10 period stochastic to show you how useless this indicator can be. The calculation for %K is just (Today's close minus the lowest price of the stock in the last 10 days) divided by (the highest price of the stock in the last 14 day minus the lowest price of the stock in the last 10 days) and then take this number and multiple by 100 Lets take the example of a stock that starts at .30, 10 days ago. Prices for each day in order: .30, .27, .30, .30, .32, .32, .33, .35, .38, .44 Just for arguement sake lets say the volume was increasing for the last 4 days and closed at a high of .44 on the last day on nice volume. That night great news comes out on the stock The %K stochastics on the 10th day would be (.44-.27)/(.44-.27)100 = 100* If the stock closed at .60 the next day the %K stochastics would be (.60-.27)/(.60-.27) * 100 = 100 If the stock closed at $1.20 the day after that (mining company turning into internet stock<ggg>) the %K stochastics would be ($1.20-.30)/($1.20-.30) * 100 = 100 For this calculation I used .30 instead of .27 because .30 was the lowest price in the last 10 periods. If the stock closed at $2 the day after that stochastics would still be at 100. The %D is just a smoothed out %K line. You can smooth out the %K line using several methods (i.e., Exponential, Simple, Time Series, Triangular, Variable, or Weighted), however normally a simple moving average is used to smooth it out. In other words the %D doesn't give you any extra information that is not already contained in the %K line. The %K is just smoothed to make the %D to remove some noise in the signal and make it easier to look at. If we use a 10,3 stochastic we would have a simple 3 day moving average of the %K line. Taking the last example, the %K was at 100 for the last 3 days of the move up to .44. This means the 3 days average of the %K would also be 100 which is just the %D line. We now have stochastics %K and %D both at 100 at a price of .44. If you listened to this you would have thought the stock was way overbought (%K,%D at 100) and might have stayed out of the trade and missed a 3 bagger. The point I was trying to make is that Stochastics is only valid for oscillation stocks and it useless for trending stocks. In the example I used a stock that was trending up nicely. One of the hardest things a TA person has to do is figure out if a stock is oscillating or trending. Some of the tools commonly used are ADX, VHF and Regression analysis. However these normally lag the stock so in the above case the stock probably wouldn't be considered trending according to these indicators until it got to $1.20. I have just tried to point out the inherent flaw in many of the math indicators people use (RSI, Momentum oscillators, etc). If you work the math on the MACD you will also see where the major flaws lie in that indicator. Hope this helps someone out there. Best Regards KEITH P.S - I'm not saying that AAD is going to $2....this was just an example.