Hi again Kincella, the posts below have links and some early discussion on ADX and its use on small caps. Once you have read this and backtested the technique on some favourite stocks, you might want to come back with some more questions.
"Sorry for my ignorance - what is ADX and how is it calculated ? Thanks in advance
ps : can you refer me to a definition or discussion on this ?
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New Post | Post Reply Back | View Thread Add to Favourites | Add Stock | Email to a Friend | Ignore Member | Ignore Stock Subject: re: further divergence in macd Stock Code: WMT - WESTERN METALS LIMITED Posted: 14/02/07 16:58 Hotcopper Radio: WMT on BoardRoom Radio Posted By: Purd2 Views: 506 Post #: 1565399 (In Reply to msg #1565202 from schirst) Sentiment: None IP: 58.178.xxx.xxx Voluntary Disclosure: No Stock Held I don't know either being a novice but here look at this! A great resource this site for learners.
http://www.investopedia.com/terms/a/adx.asp
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New Post | Post Reply Back | View Thread Add to Favourites | Add Stock | Email to a Friend | Ignore Member | Ignore Stock Subject: re: further divergence in macd Stock Code: WMT - WESTERN METALS LIMITED Posted: 14/02/07 17:04 Hotcopper Radio: WMT on BoardRoom Radio Posted By: paschal Views: 499 Post #: 1565414 (In Reply to msg #1565399 from Purd2) Sentiment: Buy IP: 202.161.xxx.xxx Voluntary Disclosure: Stock Held Two other good sites with easy to understand descriptions:
Its probably useful to read the section on Directional Movement Index (DMI) first as this is what ADX is derived from: http://www.asx.com.au/research/charting/library/directional_movement_index.htm
Hope this helps!
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New Post | Post Reply Back | View Thread Add to Favourites | Add Stock | Email to a Friend | Ignore Member | Ignore Stock Subject: re: further divergence in macd Stock Code: WMT - WESTERN METALS LIMITED Posted: 14/02/07 21:24 Hotcopper Radio: WMT on BoardRoom Radio Posted By: Purd2 Views: 382 Post #: 1565890 (In Reply to msg #1565414 from paschal) Sentiment: None IP: 58.178.xxx.xxx Voluntary Disclosure: No Stock Held Thanks Paschal. Good to have some well intentioned posts in positive directions. I fear for HC as I wander throught the threads and see the growth of teststrone charged aggressive posts.
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New Post | Post Reply Back | View Thread Add to Favourites | Add Stock | Email to a Friend | Ignore Member | Ignore Stock Subject: re: further divergence in macd Stock Code: WMT - WESTERN METALS LIMITED Posted: 14/02/07 22:39 Hotcopper Radio: WMT on BoardRoom Radio Posted By: paschal Views: 356 Post #: 1566047 (In Reply to msg #1565890 from Purd2) Sentiment: Hold IP: 202.161.xxx.xxx Voluntary Disclosure: Stock Held As I look at that chart now, I think we will have a new pennant with a solid base at 14c. I use an indicator on blue chips that is very effective for buy and hold positions and I have been checking out whether it holds for small caps and it seems to.
The indicator is this: when the blue (+ve) DMI line is above the Red (-ve) DMI line and the ADX crosses the Red line in an upward direction, it is a strong buy signal that usually indicates the start of a very long and profitable uptrend. This occured with WMT on 17 Oct last year at 2.6c and was a bit more prescient than the MACD indicator (which is actually a lagging indicator).
When this happens, regardless of all other signals and retracements, the stock remains in an uptrend until the Red and Blue DMI cross over altogether.
Sideways consolidation can be predicted by the ADX crossing the Blue line on its way up (it gives some advance warning that the trend will slow) and confirmation of consolidation occurs when the ADX turns down. At the moment the ADX is still heading upwards and is above 40, indicating that the trend is still strong. With a large cap stock the downturn in the ADX usually gives you a couple of days to exit the position with your shirt in tact. I notice this doesn't quite work with the small caps as I had a look at its predictive effect on the girations of CDU. It picked the upturn very well, but it could not have saved you if you bought late in the trend, after the ADX had crossed the BLUE DMI and then sold after the ADX turned down, and before the stock staged a recovery. This obviously is the most extreme case I could find to illustrate the use of the ADX on small caps, and its case was not aided in this instance by the pronouncements of CDUs CEO at the time. However, if on small cap stocks you take the crossing of the Blue DMI by the ADX as a signal not to hold, but not to buy, you should be OK. Applying this to WMT, the precipitator to any significant loss of value in this instance would be the Blue DMI line crossing the Red DMI line. I can't see this happening any time soon. However, smaller, less experienced, cuatious or new traders might want to wait until the Blue DMI line has fallen under the ADX line before they enter the stock. Of course this is also not guaranteed to happen and with the strength of the current trend it may just keep on rising after forming a consolidating pennant for a couple of days. It also might take off at the open tomorrow if new investors take interest in the stock as it gains profile because of its recent gains.
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New Post | Post Reply Back | View Thread Add to Favourites | Add Stock | Email to a Friend | Ignore Member | Ignore Stock Subject: re: further divergence in macd Stock Code: WMT - WESTERN METALS LIMITED Posted: 14/02/07 22:43 Hotcopper Radio: WMT on BoardRoom Radio Posted By: paschal Views: 351 Post #: 1566055 (In Reply to msg #1566047 from paschal) Sentiment: Hold IP: 202.161.xxx.xxx Voluntary Disclosure: Stock Held Link for the chart I was looking at.
The best beer in the world is Haagen Premium Malt with a slice of lemon. TOU violation
New Post | Post Reply Back | View Thread Add to Favourites | Add Stock | Email to a Friend | Ignore Member | Ignore Stock Subject: re: further divergence in macd Stock Code: WMT - WESTERN METALS LIMITED Posted: 14/02/07 22:46 Hotcopper Radio: WMT on BoardRoom Radio Posted By: paschal Views: 348 Post #: 1566068 (In Reply to msg #1566047 from paschal) Sentiment: Hold IP: 202.161.xxx.xxx Voluntary Disclosure: Stock Held Typo in that post it should have said:
"... However, if on small cap stocks you take the crossing of the Blue DMI by the ADX as a signal to hold, but not to buy, you should be OK...."
AXI Price at posting:
0.0¢ Sentiment: Sell Disclosure: Not Held
(20min delay)