RIO, this short is now doing well. The daily RSI (14 day period, which is the default) only had a very momentary excursion above 70, then back down again. However, this is one of the signals that I look for. I noted that today’s SP close has closed below the 8 day EMA, thus perhaps providing confirmation that this short trade will continue to be a winner. Note that on 3-Jan the RSI also dropped below 70 after a brief excursion above 70, followed by a sharp SP decline. That is, ‘show me the money’ as Jerry Maguire would say.
Regarding the RSI period, please note that my understanding is that the default period on all charting software is 14, irrespective of whether you are looking at the daily, weekly, monthly, hourly, or 10 minute chart. My experience is that there is some merit in experimenting with the RSI period to determine the best RSI period to match the past performance for the stock and timeframe that you are interested in. However, this type of analysis takes time, which I don’t have a lot of to spare. Hence, I nearly always just simply stick with an RSI period of 14, irrespective of the time frame, because this is what imo most traders do anyway. If all traders are on the same page, then we all win … well its not quite that simple, but that is why TA works.
Please note that although much of my discussion centres on RSI, it is not my sole focus, but a full report on all the TA would take too long to write.
WOW, this short is still a little in the red, but the RSI is almost off the chart. I was somewhat impetuous when I opened this trade, but at the time I was very keen on setting up several short trades before the George Soros short position started paying some dividends. You may have noted that I have mentioned George several times, that is because when the AUD was about 1.08 or so, it was announced that Soros was shorting the AUD. Take a look at the AUD movements since it was last at the 1.08 mark and you may see why imo Georgey has the power to move markets, a very fortunate position to be in. Back to the chart and you will notice that at the close today the WOW RSI is 78.96, which is almost the same level as on 2-Sep-2013, which heralded a significant decline in the WOW SP. Normally I would not be so impatient, but with other blue chips heading South today, I am tempted to add to my WOW short position tomorrow. The WOW SP decline from 24-Apr-2013 to 13-Jun-2013 was a beauty. The smart thing to do is wait until divergence is evident between the SP and the daily RSI, or wait until the RSI dips back down to 70. However, in this scenario a good % of the move could be missed, and as mower said, even a return of the SP to the 10 day EMA would be a worthy and profitable short, particularly thanks to the leverage of CFDs. I also noted that the WOW 10 minute chart is responding very well to the 14 period RSI over the last couple weeks at least.
BHP, I am somewhat annoyed at myself for not opening a short trade on this at the 3960 level yesterday, as I had a bid open at this level last Friday, but closed the bid on the weekend. However, the RSI has now completed a short foray above 70 and back, hence, depending on what happens tonight, tomorrow could be a good time to open a short trade imo. I noted that the SP has a bit of a gap above the 10 day EMA, hence, even a return to the 10 day EMA would be a worthy and profitable short.
ANZ, just keeping an eye on this one. If the SP could get up to near the 3400 mark like it did on 31-Oct-2013, and the RSI bumps and/or exceeds 80 again like it did on 31-Oct-2013, then this could become an excellent short. I might have to write this into my trading plans for all blue chips. That is, if the daily RSI hits 80, and the previous highest SP in the last 6 months or so has not exceeded the present SP, then don’t wait for any more confirmations, simply short it big time.
FMG, I have traded this 4 times in the last month, all long trades, and all winning trades. Sure it has not reached my normal parameters on the daily RSI, but I got a very strong short signal on the 10 minute time frame RSI yesterday when the SP was 620. In addition, I had a short trade bid on this last Friday, but closed the bid on the weekend. Mental note to myself … stop being so conservative when I have the vibe for a stock that I have been trading regularly. Still at the close today the SP has almost touched the 10 day EMA, and the daily RSI is retreating. Hence, again depending on what happens tonight, tomorrow could be a good time to open a short trade. I have not had time to fully explore the FA of the sector (iron ore) lately, hence, any tips?
WES, bumped 4400 a few times, but now retreated a bit. If it bumps 4400 again and the global sentiment turns sour simultaneously, it could be an excellent short down to 3800.
WBC, daily RSI has just done a short foray above 70 and back. If the daily RSI exceeds 70 again, and the SP exceeds 3400 again (like it did in late October 2013), then it could be a good short opportunity.
NCM, has had a good run since the intraday low of approximately 1045 last week. Now starting to look attractive as a short term short opportunity. The daily RSI has already peaked and headed down. All eyes on gold tonight.
Have you spotted any good short, or long, set ups that you can tell me about? I am Interested to know.
I noted that Daytr has posted another interesting global market overview on the Gold thread … worth a read.
I still have not had the time nor energy to re-install BullCharts, hence, no scans or charts available from myself yet. I need to leave home shortly for the kid’s basketball, hence, I won’t have time to do it tonight, but I am keen. GL.
