Friday, September 24, 2010

I have been bearish on the TSX for some time.  Even so, I want to share what I would call, a recent sell signal.  Before I do, I want to reiterate that I am not a professional, and as such can not give the reader advice.  But, then, I don't mind sharing what I am doing, either.

I have circled the RSI (relative strength indicator) oscillator (please see ) if you require more information on RSI) at the point where it reached the 70-line.  That is the point I would sell half of any long position I owned.  Beneath the chart, at the bottom, I have included the Stochastics oscillator.  Notice the second peak where the green line touches it.  That is the point in time I would sell the remainder of any long position I owned. Also, notice the divergence between the slope of the green line above the Stochastics indicator, and the slope of the lines under the price candles on the chart, and the RSI at the top.  This divergence often occurs just prior to a trend reversal. 

In my own case, I am using Exchange Traded Funds (ETF's), since I am concerned about the lack of regard for fundamentals in the current market.  A sell signal such as this causes me to sell the ETF's which make money as the market goes higher, and buy the inverse ETF's which make money as the market goes lower.  While there are risks to using leveraged ETF's, I prefer them for short-term trends and use the Horizons' 2 times ETF's.  That means they are designed to return twice the daily amount of the underlying index, or commodity.  In this particular case I am talking about the Horizons BetaPro TSX ETF's, ticker symbols HXU (long), and HXD (inverse).

My current target is the point at which the RSI reaches the 30-line, again.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.