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The stock has hit a local high, and is now going down. In this chart, price is the most important thing. The last local high is higher than the two previous local highs, which makes it a 'higher high', indicating uptrend! It helps that it also popped above the 50 day Moving Average (50MA). Price looks good. Volume: Volume was high during the last major lows, but has now settled down. Stochastics: Stochastics is dropping down from an overbought situation. So we know that price will go down a bit. Question is how much. Since price is showing a beginning uptrend, we need to remember that overbought stochastics has less meaning during an uptrend, it only has meaning during trading markets and down trends. ADX, +DI and -DI: ADX is below 25, indicating a lack of trend. Even though +DI is above -DI, showing a slight up trend bias, the +DI pivot high is unconvincing. However, -DI is not looking very dominant either. Overall about even, no strong indication of either an up trend or down trend. MACD: MACD clearly shows that we're heading from a local top. Conclusion: Clear signs we're heading down from a local top. The flat 50MA and ADX, +DI, -DI all indicate a trading market, but the 10MA and 20MA show great promise of heading up. Normally it's fine to short after the stochastics drops down from overbought in a trading range (for a little run down), but the positive price action, promising 10MA and 20MA, and price convincingly above the 50MA make this questionable. Good advice at this time is to do nothing and watch how far the leg down goes. If this is the start of an up trend, and price makes a higher low, we want to go long at the bottom of this leg. Below is the stock after a few days. It indeed made a higher low, and price is now going up. Stochastics and MACD are indicating a new leg up. +DI just kissed -DI goodbye. Volume is up! This all say buy long now. Further down is the stock four months later. Try to find the position of the first two pictures. A great run up, a giant run down, and now a rolling trading range. This is an highly tradeable stock.  Daily Chart by www.FreeStockCharts.com  Daily Chart by www.FreeStockCharts.com |
