Traders looking at the stock market
right now are finding it difficult to determine the direction of the
major trend. We have seen several days where the market closed weak
after showing a large gain at the open -- a sign of weakness. In
addition, there are bearish momentum divergences building in stocks.
Charts of the major stock market averages can be interpreted as either
bullish
or bearish, but there is at least one market giving an unambiguous buy
signal, and traders can focus on that while stocks work on developing a
trend.
One indicator that I like to use is the little-known Momentum of Comparative Strength (MoCS). This indicator converts
relative strength (RS) to a MACD-style indicator. Just like
MACD, MoCS can be drawn as a histogram or as two lines with one line being the raw indicator and the second one being a
moving average
of the indicator. The two-line method offers more trading signals, but
the histogram offers highly reliable signals. MoCS makes RS signals more
precise and easier to
spot. This indicator often allows traders to get in as a trend is just getting under way.
To
picture RS, you can think of a golf ball being hit off the tee. At
first, the ball is rising very quickly. If we measured its RS (the
change in the speed of the ball), we would find that RS is accelerating
as the ball rises. Soon, the ball levels off and so does the RS as the
ball heads toward the hole. As the ball turns downward, RS will begin
falling quickly. If we were trading a golf ball, we would want to buy
shortly after the ball began moving off the tee and sell when the ball
starts falling toward the ground. MoCS is an indicator that creates that
kind of picture of RS on a chart.
Using just MoCS buy signals, you would buy when the momentum of the
price change
is accelerating and sell when the RS turns down. This simple indicator
would have delivered 71% accuracy on the daily charts of
SPDR Gold
Shares (NYSE:
GLD) and 100% winners on the weekly chart of that
ETF. Right now, we have already seen the daily signal and are setting up a weekly buy signal.
We
have only seen four previous weekly buy signals in GLD and all were
profitable with an average gain of 13.8% and lasted an average of 29
weeks. There have been 31 daily signals and 71% of those trades were
profitable. The average gain was 13.2% in about six weeks.
(more)
from KingWorldNews:
My Dear Friends,