BI Stock Report

Bollinger Band means a band plotted two standard deviations away from a simple moving average.

Since standard deviation is a measure of volatility, Bollinger bands regulate themselves to the market conditions. When the markets become more volatile, the bands widen (move further away from the average), and in less volatile periods, the bands contract (move closer to the average). The tightening of the bands is frequently used by technical traders as an early sign that volatility is about to increase strongly.

The nearer the prices move to the upper band, the more overbought the market, and the nearer the prices move to the lower band, the more oversold the market.

Bollinger recommends using a 20-day simple moving average for the center band and 2 standard deviations for the outer bands.

Trial and error is one way to determine an appropriate moving average length. A simple visual judgment can be used to determine the suitable number of periods. Bollinger Bands should encompass the majority of price action, but not all of it. After sharp moves, penetration of the bands is normal. If prices appear to penetrate the outer bands too regularly, then a longer moving average may be necessary. If prices rarely reach the outer bands, then a shorter moving average may be necessary.

Sharp price changes are known to happen after the bands have tightened and volatility is low. Investors should keep in mind that Bollinger Bands do not give any clue to future direction of prices. Direction must be determined using other indicators and aspects of technical analysis.

Even though Bollinger Bands can assist in generating buy and sell signals, they are not intended to determine the future direction of a stock. The bands were designed to augment other analysis techniques and indicators.

The Bollinger Bands indicator for this stock is currently showing a bearish reading. The bearish reading may have been triggered for this stock because it resembled signs of a double top sell signal. A Double Top Sell signal is given when prices peak above the upper band and a subsequent peak fails to break above the upper band. The bearish setup is confirmed when prices decline below the middle band, or simple moving average. The Bearish reading may also have been triggered because the closer prices move to the upper band for this stock, the more overbought the market. Sharp price changes are known to happen after the bands have tightened and volatility is low. That being said, investors should keep in mind that Bollinger Bands usually do not give any clue to future direction of prices. Direction must be determined using other indicators and aspects of technical analysis. BullishInvestor.com encourages investors to view a Bollinger bands chart for signs of where this stock may be heading.

This stock is currently displaying a neutral trend. That being said, the Exponential Moving Average (EMA) is ineffective when a specific trend cannot be confirmed, which is the case this time. BullishInvestor.com would encourage you to either look at other technical indicators or current candlesticks to get a better understanding of where this stock is heading or check back at a later time when signs of a possible trend may emerge.

The Parabolic System, developed by Welles Wilder who also developed the Relative Strength Index (RSI), is usually referred to as the Parabolic "SAR" (stop-and-reverse).

The Parabolic SAR is a "stop-loss" system used to set trailing price stops. The name of the system gets its name from its parabolic shape, which trails the price movements in the form of a dotted line. When the parabola follows along below the price, the investor should be buying or going long in that particular stock. A parabola above the price suggests selling or going short in the stock.

The particular value in the Parabolic SAR is that it allows investors to catch new trends relatively early. If the new trend fails, the parabola quickly switches from one side of the price to the other, consequently generating the stop and reverse signal.

Mr. Wilder built an acceleration factor into the Parabolic system. To allow the trend time to become established, the movement of the indicator starts off slowly, with the points close together. As acceleration ramps up, the parabola move quicker (with the dots further apart) until it catches up to the price action.

As with most indicators, Parabolic SAR works best in trending markets, and is less consistent during sideways or non-trending times. Wilder himself estimates that stocks tend to trend roughly 30% of the time.

The Parabolic SAR is a good indicator for providing exit and entry points. Of course, these signals need to be confirmed by the price action itself and other, complementary indicators.

The Parabolic SAR indicator for this stock is currently showing a bearish reading. The bearish reading may have been triggered for this stock because the parabola was following along above the price of this stock. The Parabolic SAR is a "stop-loss" system used to set trailing price stops. The name of the system gets its name from its parabolic shape, which trails the price movements in the form of a dotted line. Investors are encouraged to verify that this stock is currently in a bearish trending pattern because like most other technical indicators, Parabolic SAR works best in trending markets, and is less consistent during sideways or non-trending times. The best way to determine a trending stock is by either looking at the Parabolic SAR stock chart or by simply confirming the trend with other technical indicators shown on BullishInvestor.com. The Parabolic SAR is a good indicator for providing entry points, so a change to a bullish signal could mean that the bearish run is over. There is always the possibility of a false signal, so investors are encouraged to read what the other technical indicators are currently saying about this stock and make a decision based on all the indicators.

The Money Flow Index (MFI) is a momentum indicator that is comparable to the Relative Strength Index (RSI) in both explanation and calculation. On the other hand, MFI is a more rigid indicator in that it is volume-weighted, and is for that reason a good measure of the strength of money going in and out of a security. It compares "positive money flow" to "negative money flow" to form an indicator that can be compared to price in order to recognize the strength or weakness of a trend. Like the RSI, the MFI is measured on a 0 - 100 scale and is often calculated using a 14 day period.

The MFI can be understood much like the RSI in that it can indicate divergences and overbought/oversold conditions.

Positive and negative divergences between the stock and the MFI can be used as buy and sell signals respectively, for they regularly indicate the looming reversal of a trend. If the stock price is dropping, but positive money flow tends to be greater than negative money flow, then there is more volume associated with daily price increases than with the price drops. This implies a weak downtrend that threatens to reverse as money flowing into the security is greater than money flowing out of it.

As with the RSI, the MFI can be used to establish if there is too much or too little volume associated with a stock. A stock is considered "overbought" if the MFI indicator reaches 80 and above (a bearish reading). On the other end of the range, a bullish reading of 20 and below suggests a stock is "oversold".

The Money Flow index for this stock is currently pointing towards a bearish reading. This is either because the stock is considered overbought (over 90 in the MFI scale), in which case the stock has been propped up by buyers and sellers are liquidating their positions and taking profits or if prices are rising and the MFI is decreasing, which is considered a negative divergence, then investors should look for a turn downward in prices. This is because a declining MFI suggests that there is greater volume associated with money flowing out from this stock than money flowing into it. One more thing to take note of is that when divergences occur after an overbought or oversold reading, they usually provide a more reliable signal.

Developed by Gerald Appel, Moving Average Convergence/Divergence (MACD) is one of the simplest and most reliable indicators around. MACD uses moving averages, which are lagging indicators, to include some trend-following characteristics. These lagging indicators are changed into a momentum oscillator by subtracting the longer moving average from the shorter moving average. The ensuing plot creates a line that oscillates above and below zero, without any upper or lower limits.

The most widely used formula for the "standard" MACD is the difference between a stocks 26-day and 12-day Exponential Moving Averages (EMA).

MACD measures the difference between two Exponential Moving Averages (EMAs). A positive MACD shows that the 12-day EMA is trading higher than the 26-day EMA. A negative MACD shows that the 12-day EMA is trading underneath the 26-day EMA. If MACD is positive and increasing, then the gap between the 12-day EMA and the 26-day EMA is getting larger. This indicates that the rate-of-change of the quicker moving average is higher than the rate-of-change for the slower moving average. Positive momentum is rising, indicating a bullish period for the price plot. If MACD is negative and dropping further, then the negative gap between the faster moving average (blue) and the slower moving average (red) is increasing. Downward momentum is increasing, indicating a bearish period of trading. MACD centerline crossovers take place when the faster moving average crosses the slower moving average.

MACD is not particularly good for indicating overbought and oversold levels. Even though it is possible to indicate levels that historically represent overbought and oversold levels, MACD does not have any upper or lower limits to contain its movement. MACD can continue to overextend beyond historical levels.

The MACD for this stock is currently showing a bearish reading. A negative MACD shows that the 12-day EMA is trading lower than the 26-day EMA. A bearish signal for this stock was triggered because either a negative divergence, bearish moving average crossover or a bearish centerline crossover occurred, or in some cases more than one of those bearish signals occurred at once. A Negative Divergence occurs when the stock advances or moves sideways, and the MACD declines. A Bearish Moving Average Crossover forms when the MACD declines below its 9-day EMA. Not only are the bearish moving average crossover signals the most common, but they also generate the most false signals. As such, moving average crossovers should be confirmed with other signals to steer clear of whipsaws and false readings. A Bearish Centerline Crossover forms when the MACD moves below zero and into negative levels. This is a clear sign that momentum has changed from bullish to bearish.

The RSI compares the extent of a stock's recent gains to the extent of its recent losses and converts that information into a number that ranges from 0 - 100. The RSI takes a single parameter, the number of time periods to use in the calculation. Most traders, including the RSI calculations founder, J. Welles Wilder, recommend using 14 periods as a standard parameter for optimal calculations.

Wilder suggested using 70 and 30 as the overbought and oversold levels respectively. In general, if the RSI rises above 30 on the scale, it is considered a bullish signal for the stock in question. On the other hand, if the RSI falls below 70 on the scale, it is considered a bearish signal. Some traders spot the long-term trend and then use extreme readings as possible entry points. If the long-term trend is bullish, then oversold readings could signal potential entry levels.

Buy and sell signals can also be found by looking for positive and negative divergences between the RSI and the stock in question. As an example, investors could consider a falling stock whose RSI rises from a low point of (for example) 20 back up to say, 55. Because of how the RSI is constructed, the underlying stock will often reverse its direction shortly after such a divergence. As in the above example, divergences that happen after an overbought or oversold reading frequently provide more reliable signals.

The centerline for the RSI is 50 on the scale. Readings above and below can give the indicator a bullish or bearish angle. Overall, a reading above 50 indicates that average gains are higher than average losses and a reading under 50 indicates that losses are higher than gains. Traders in general look for a move above 50 to confirm a bullish signal or a move below 50 to confirm a bearish signal.

The RSI for this stock is currently showing a bearish reading. This will indicate that the stock has either just risen above the overbought level and it's charting a course for a bearish run or a negative divergence has just occurred between the RSI and this stock. Because of how the RSI is constructed, the underlying stock will often reverse its direction shortly after such a divergence, and in this case the stock should head downward. Keep in mind that divergences that happen after an overbought or oversold reading frequently provide more reliable signals.

Developed by George C. Lane in the late 1950s, the Stochastic Oscillator Slow (SOS) is a momentum indicator that measures the relation of the current closing price to the high/low range over a given observation time period. It is based on the Stochastic Oscillator Fast (SOF) but reacts slower and smoother to price changes.

Readings below 20 are viewed as oversold and readings above 80 are viewed as overbought. However, Lane did not believe that a reading above 80 was automatically bearish or a reading below 20 bullish. A stock can keep on rising after the Stochastic Oscillator has reached 80 and also continue to fall after the Stochastic Oscillator has reached 20. Lane believed that some of the best signals formed when the oscillator moved from overbought levels back below 80 and from oversold levels back above 20.

Buy and sell signals can also be given when %K crosses above or below %D. However, crossover signals are quite frequent and can result in a lot of whipsaws. Investors are encouraged to view a SOS chart to visually attempt to verify these observations.

One of the most dependable signals is to wait for a divergence to develop from overbought or oversold levels. Once the oscillator hits overbought levels, investors should wait for a negative divergence to develop and then a cross below 80. This signal usually requires a double dip below 80 and the second dip results in the sell signal. For a buy signal, wait for a positive divergence to occur after the indicator moves below 20. This will usually require a trader to ignore the first break above 20. After the positive divergence forms, the second break above 20 usually confirms the divergence and a buy signal is subsequently given.

The SOS for this stock is currently showing a bearish reading. A bearish reading of over 80 is the usual amount needed on the SOS scale of 0-100. Keep in mind that a stock can keep on rising after the Stochastic Oscillator has reached 80 and also continue to fall after the Stochastic Oscillator has reached 20, in fact some of the best readings occur in those situations. A sell-signal is also generated if the points %KS and %DS cross in the overbought area of the SOS chart. Lastly, a bearish divergence occurs when the SOS is making lower highs while prices show the opposite trend. This indicates that the up-trend is weakening, and a trend reversal is probable. Investors should note that although divergences indicate a weakening trend, they do not indicate that the trend has reversed already.

Williams %R is a momentum indicator that works similarly to the Stochastic Oscillator. It is particularly popular for determining overbought and oversold levels. The scale ranges from 0 to -100 with readings from 0 to -20 considered overbought, and readings from -80 to -100 considered oversold.

It is imperative to remember that overbought does not automatically imply time to sell and oversold does not automatically imply time to buy. A stock can be in a downtrend, become oversold and remain oversold as the price continues to fall lower. Once a stock becomes overbought or oversold, investors should wait for a signal that a price reversal has taken place. One method could be to wait for Williams %R to cross above or below -50 for confirmation. Price reversal confirmation can also be done by using other indicators or aspects of technical analysis in collaboration with Williams %R.

In an uptrend, traders may look to oversold readings to establish long positions. In a downtrend, traders may look to overbought readings to establish short positions.

The Williams %R for this stock is currently showing a bearish reading. A bearish reading from 0 to -20 usually indicates that a stock is overbought and once a price reversal signal is noticed, it may indicate a good time to sell this stock. Investors should remember that a stock can be in an uptrend, become overbought and remain overbought as the price continues to rise higher. Once a stock becomes overbought, investors should wait for a signal that a price reversal has taken place. One method could be to wait for Williams %R to cross below -50 for confirmation. This confirmation could indicate that an downtrend is occurring with this stock. The higher the %R goes in the overbought region, the more likelihood of a stronger downward drop occurring.