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Strategies & Market Trends : Stochastics -- Ignore unavailable to you. Want to Upgrade?

To: posthumousone who wrote (26)	1/23/1998 9:19:00 AM
From: Wayners	Read Replies (1) \| Respond to of 927

Wow thats a lot of questions. Here goes. RSI is better than stochastics in my opinion to find divergences. This is because trendlines tend to line up better with peaks and valleys with RSI than stochastics. Now I don't try to pick tops and bottoms but I used to so I know what you are talking about. The oscillator price divergence will only get you kind of close to the top. Put a moving average on your oscillator of the same duration/period as your moving average on price. You will notice that the oscillator's moving average will peak and bottom BEFORE the moving average on price peaks or bottoms. That's a good graphical way to SEE the divergence. I espcially like to look for divergences between price and volume. For example you have gotten steadily increasing volume for the past 5 days and its quite high now and price has continued going up. Then you get a day where the volume is less than the previous day but the price has still gone up a lot. That's a good signal that you are very near a top. This method doesn't work with really random volume changes. With high volume, very active stocks this works very well. A "new high" doesn't mean anything to me. Some people (non chartists) follow new 52 week highs. Its their way of following the trend without looking at charts. I don't follow it because I'm charting. The graphical moving average is all I need. You will have to plot your last example and put your favorite moving average on it to see what the trend is. My gues though is a failed attempt to go higher will at a minimum set the trend neutral and if the failure is actually lower than the previous high it will start to send the trend down. Instead of guessing on this, plot it and look at the simple moving average.