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

To: sammy levy who wrote (217)	2/20/1998 8:26:00 AM
From: Dale Baker	Respond to of 927

Be careful here, Sammy. CDRD has been drifting up on no news and maintaining high stochastics for a while. The MACD indicator may be deceptive. I would wait for a clear price drop before starting a new short. It could keep drifting like this for weeks.

To: sammy levy who wrote (217)	2/20/1998 8:51:00 AM
From: Wayners	Read Replies (1) \| Respond to of 927

A bearish divergence is when an indicator such as MACD, RSI, or Stochastics is on a downtrend (i.e. a line drawn on top of successive peaks slopes downward) while price is still going up. With MACD on CDRD using 3 for slow period, 5 for fast period and 12 for trigger line ( I don't know what you are using) you could argue that the MACD peaks got lower once within the last few weeks while price was going up. The problem is that it looks like the third peak being built now is going higher blowing the theory out of the water. CDRD is up against resistance at $17.50 but the trend is still up and yesterday was a good up day above the $17.50 level. The volume had really been decreasing and it looks like an ascending wedge which is a bearish formation that is supposed to break to the downside between 2/3 the distance of the wedge until the apex. Another way to play it is to put in a sell short stop order when/if CDRD breaks down below a certain threshold. Draw an uptrend line under CDRD and consider placing such an order to catch a large downward move if it happens. All in all I think its too early to try to short this. Put it on short watch. Yes stochastics are overbought--but this doesn't mean anything considering the uptrend. You will notice that stochastics will stay overbought for a long time when a stock is on an uptrend (upward sloping moving average). You will lose a lot of money trying to short these unless you exactly call the top. I have to have at least a neutral trend and preferably the beginning of a downtrend before I'd short CDRD.