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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study! -- Ignore unavailable to you. Want to Upgrade?

To: Herm who wrote (9376)	1/7/1999 11:08:00 AM
From: Douglas Webb	Read Replies (1) \| Respond to of 14162

I was working on my RSI charts for my WINS predictor a couple of nights ago, and I discovered some interesting qualities: Let's say you're doing a 9-day RSI chart on the closing price of a stock. To find out today's RSI value, you need the closing prices for the last ten days. You then divide the closing prices into two groups: one group gets all the closing prices that are higher than the day before, and the other group gets the ones that are lower. You need that tenth price so you have something to compare the ninth one to. (All the descriptions I've read don't say what to do with no-change days. I've been ignoring them, I think.) Once you have your two groups of prices, you add them each up, divide the UP sum by the DOWN sum, and do some math to scale the result so it's between 0 and 100. Here's one interesting part: if you choose a short enough period, you could get all up days or all down days. If you get all down days, you'll be dividing 0 by some number, which gives you an RSI of 0. If you get all up days, you'll be dividing some number by 0, which is infinite. I had to adjust my program to account for this, so that 'infinity' results in an RSI of 100 (rather than crashing the program with a divide-by-zero error.) So, if a stock drops every day during a period, it's very weak, and therefore has a very low RSI. If the stock goes up every day during a period, it's very strong, and therefore has a very high RSI. Most stocks don't stay weak before rebounding, so their RSI usually doesn't drop much below 30%. Most stocks also don't stay strong for long before dropping back, so their RSI usually doesn't get much higher than 70%. Now you understand what RSI charts are telling you. This description also explains why the weekly chart will give a much different reading than the daily chart: it's using a different series of prices, and measuring strengh/weakness on a weekly basis rather than a daily basis. I'm not sure how valid the weekly chart would be; if you're using a nine-week period for the chart, it's using nine closing prices (the Fridays) out of a total of 45 trading days to generate the chart. It seems to me that some information must be lost. You might be better off using a daily chart with a period of 45 days instead. Doug.

To: Herm who wrote (9376)	1/7/1999 6:38:00 PM
From: Herm	Read Replies (1) \| Respond to of 14162

Another nice day for BTGC with a one-day 11.50% up day! Well, this stock has reached the first solid overhead resistance level. Those who paid $8.00 in the past have their first opportunity to dump BTGC and break even! Our WINS BB and RSI are flashing a solid CC write signal at the month a few months out to grab up some good premies. Notice, the chart below indicates that the BTGC RSI is at a peak for this stock and the upper BB has been tagged. Volume has been good! Sideshow? Perhaps cheap PUTs for the Feb. 7 1/2s? iqc.com BTGC 4:00PM 7 7/8 + 13/16 +11.50% 1,592,300 IFMX 4:01PM 12 1/8 - 3/8 -3.00% 9,358,800 NOVL 4:00PM 19 9/16 - 3/16 -0.95% 5,300,100 CPQ 5:01PM 44 9/16 + 3/16 +0.42% 14,388,200 DELL 4:00PM 78 3/16 + 1/16 +0.08% 17,850,000