things on way up!, page-57

Will the Turning point be today? Will we see a Big green candle at closing, clearly oversold was only a matter of time.

Good post Kacy by the way.

below is a few of my thoughts


I use the ADX indicator, it measures price expansion of a trend (either up or down) over a period of time, greater the reading greater the rate of price expansion, many say it is a measurement of trend strength but you might just call it the rate of price expansion in a given direction... when price expansion in a given direction with in a given period of time gets too high it becomes unsustainable at that pace, often these are market enviroments where the current trend becomes exhausted and a trend reversal or consolidation/base is formed. The current trend is clearly down and the ADX is reading high, high is above 50, A reading above 50 is generally a unsustainable rate of volatility for most companies and leads to changes in momentum and supply and demand shifts within share registers.Dow ADX is now reading 61! Ideally some might suggest to wait for the ADX to flatten out or even turn down,or to wait for the stock to trend up, to do so however often means the price may then be trading further away from the support zone or the market bottom and can mean greater risk (risk = the distance between your buy and you stoploss plus slippage) as your stoploss/sell point would be further away by the time you enter with those extra layers of confirmation. every thing in trading is a trade off.

So in summary high ADX readings can often lead to enviroments of opportunity, ofcourse this technique alone doesnt make a stock a buy but is one factor which may help put probabilities in ones favor, since winning in the market is all about favorable probabilities when used along with other tools and such like techniques chances of a sucessful trade become greater.


In the last 10 years the ADX for Downer EDI Limited has only exceeded 50 once whist in a downtrend so its a fairly rare occurrence, last time it lead to a strong rally afterwards, shown in the chart on 17/8/07 below post.

It a very rare opportunity to buy Downer as such a level.

Im accumulating

Happy Investing and Trading.

AA

Chart one 17/8/07
Chart Two Current Chart.