DJIA

Medium Term Trend Checklist (20-50 trading days)

Checklist calculations

Stock Check List - DJIA medium term trend checklist
Stock: DJIA	BUY/SELL Rating: 3	Date: May 6, 2005
Indicator	Confirming	Negating
Trendlines (read report)	trendline break
20 & 50 day SMA's (read report)	20 day SMA crosses price line (0.5 points)	50 day SMA down (1 point since there is no SMA cross to confirm)
MACD (read report) MACD-H (read report)	MACD signal line cross (not confirmed by zero line cross : conservative) MACD-H zero line cross	MACD did not cross zero line (0.5 points)
RSI (21) (read report)	RSI crosses up through 30	trend of RSI not completely breached (0 points)
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Points:	4.5 positive	1.5 negative

Comments:

While the short term trend is clearly up, depending on the traders time frame the medium term trend will be completed when the new 2-3 month high is formed. This will cause the remaining indicators to confirm as well.

Trader Tips:

RSI:

Here's what Welles Wilder has to say about using RSI:

"One of the most useful tools employed by many technicians is the momentum oscillator. The momentum oscillator measures the velocity of directional price movement. When the price moves up very rapidly, at some point it is considered overbought; when it moves down very rapidly, at some point it is considered to be oversold. In either case, a reaction or reversal is imminent. The slope of the momentum oscillator is directly proportional to the velocity of the move. The distance travelled up or down by the momentum oscillator is proportional to the magnitude of the move."

Wilder indicates five factors in interpreting RSI alongside price:

Tops and bottoms: When RSI goes above 70 or below 30. RSI usually tops out or bottoms out before the actual market, giving an indication of imminent reversal, or at least reaction.
Chart formations: Patterns, including tops or bottoms, triangles and trendline breaks.
Failure swings: when the RSI goes above 70 or below 30 but fails to exceed the previous high or low.
Support and Resistance: support levels in RSI are often analogous to those on the price chart.
Divergence: divergence between price action and the RSI is a very strong indicator of market turning points.

Relative strength index (RSI) Buy when RSI has crossed below 30, formed a bottom, and then crossed back up through 30.
Sell when RSI has crossed above 70, formed a peak, and then crossed back down through 70. RSI Chart and Screener Examples

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The charts shown above are from Stock Tools, see features