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

To: Wayners who wrote (469)	4/6/1998 8:50:00 PM
From: Wayners	Read Replies (1) \| Respond to of 927

<<<A friend of mine and I have been trying to get a handle on T/A. I have been following DIGI and today I was reviewing the chart on iqc. I pulled a 5 minute chart, it showed stochastics of 9.33/12.13, and while I was looking at the chart I saw a good news release hit the wires. I could not push the buy button soon enough and bought 1,000 shares. I went back to review the Stochastics this evening and it shows 84.44/81.96. This worries me, I feel I am doing something wrong to see that quick of a change in the stochastics. I am going to push the sell button at open tomorrow hoping the price holds above $19.00. I guess my question is what time frame should I use so I do not misinterpret a buy signal? I also try to pick an S & P 500, however the P/E is a little high on DIGI (47.50). Your Thoughts???>> You saw the quick stochastic change because of the short time frame chosen. 1 and 5 minute charts are primarily used by day traders. You know, buy in the morning and sell before the close in the afternoon. The other use of 5 minute charts is to precisely time entry and exits for longer term positions--where for instance you may already have a buy signal on a daily chart using a 5 day stochastic and you want to fine tune the signal within the next trading day. If you are not a day trader, then I'd suggest getting a buy signal on a daily chart before zooming in to a 5 minute chart to ultra-time the buy or sell. What I've been using in the system on this thread is daily charts with a 12 day moving average, 12 day bollinger bands, and 5 day stochastics. I rarely use a 5 minute chart except when day trading. If you were day trading DIGI, you did well today. If you want to continue using the 5 minute chart, the sell signal that you'll get will occur, I'd say when the stochastic at the iqc.com site gets down to 60. That will show enough technical weakness (for a day trader) to exit the trade. At the 60 level, the stochastic will have dropped below those earlier lows at about the 65 or 70 level today, and prices will be likely to drop further past that point. My advice to you regarding P/Es is to ignore them unless you are a longer term holder, like several months or longer. The longer the timeframe, the more important the P/E becomes. If you are looking at P/E's forget about inserting trailing earnings into the E part. Only use analysts estimates for the upcoming four quarters. Since I have not commented on DIGI, here's what I think for people that would only be interested on average to hold the position no longer than about 12 to 14 days. DIGI's trend as measured by a 12 day moving average had been down since early Jan. This has changed in just the last few days, such that it is actually on a slight uptrend which is good. The odds are that it will go higher over the next few days, but in case it does not, set a sell stop at just under today's and yesterday's lows of $18.50. I'd pick something like $18 5/16. On the upside, it would not surprise me for it to hit $20. If it goes up there, just raise your stop from $18 5/16 up to the low of the previous day. This will keep you in the trade and get you out within a dollar of the top.