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TECHNICAL ANALYSIS


A Look At Four Stocks To Buy

10/17/14 06:04:51 PM
by Koos van der Merwe

"Buyers beware, the bear market has begun," says a well-known and respected currency and commodities analyst.

Security:   RH, GE, FB, IJJ.
Position:   Buy

When statements suggesting the start of a bear market are made by well-known analysts in their daily letter to investors, I start becoming nervous, not because I expect the market to crash, but just the opposite, the market will start rising. This well-known letter-writer was quoted by CNBC on October 16, 2014. Why am I a contrarian in this particular case? I have written in previous articles that when the bears start shouting from the roof tops, then it is time to start looking for stocks to buy. I show four stocks that gave me buy signals based on the market on October 16, 2014.

Figure 1. Daily Omnitrader Chart Of Restoration Hardware (RH). Here a buy signal is indicated based on the relative strength index (RSI) 12 strategy but the TDIJak indicator has not given a buy signal.
Graphic provided by: Omnitrader.
 
The chart in Figure 1 is a daily Omnitrader chart of Restoration Hardware (RH). The chart suggested a buy signal based on the relative strength index (RSI) 12 strategy shown in green below the vote line. A look back at previous signals shows that they have been profitable. The conservative TDIJak indicator however has not given a buy signal, but that the share price has tested the lower external band and started moving up looks positive for the share price.

Figure 2. Daily Chart Of General Electric (GE). Again the Vote line has suggested a buy based on the RSI 12 strategy but the TDIJak indicator has not yet given a buy signal.
Graphic provided by: Omnitrader.
 
The chart in Figure 2 is a chart of General Electric (GE). Once again the Vote line has suggested a buy based on the RSI 12 strategy. Looking back on the Vote line you can see that the previous buy signal given by the RSI 12 strategy was not that successful, but in this instance could suggest strength because the share price is bouncing off the lower external band. Note the TDIJak Indicator which has not yet given a buy but the RSI 14 period indicator has.

Figure 3. Daily Chart Of Facebook, Inc. (FB). Another buy signal on the Vote line triggered by the RSI 12 strategy but no similar signal on the TDIJak indicator.
Graphic provided by: Omnitrader.
 
The chart in Figure 3 is the well known stock of Facebook Inc. (FB). Once again the buy signal on the Vote line has been triggered by the RSI 12 period strategy. Again the indicator TDIJak has not yet given a buy signal, but the RSI 14 period has.

Figure 4. Daily Chart Of iShares S&P Midcap 400 Value (IJJ). Price has bounced off the bottom external band with a Vote line buy signal given on the RSI 12 strategy. The TDIJak indicator is close to giving a buy signal and the RSI 14 has given a buy signal.
Graphic provided by: Omnitrader.
 
The chart in Figure 4 is a chart of the iShares S&P Midcap 400 Value (IJJ). The chart shows how the price has bounced off the bottom external band with a Vote line buy signal given once again on the RSI 12 strategy. The TDIJak indicator is close to giving a buy and the RSI 14 indicator has given a buy signal. That IJJ has given a buy could be positive for the market as a whole.

When markets start stabilizing, then it is time to buy. October is a month known for making lows, with the stock market usually rising into April/May of the coming year. I must say however, that all the above signals (and all the stocks I have looked at, and there are plenty of them,) that have generated a buy, have been triggered by the RSI 12 period strategy, and this does disturb me. I would prefer the signals to be triggered by the Red Green strategies, so any buying I do will have close stops.



Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.

Address: 3256 West 24th Ave
Vancouver, BC
Phone # for sales: 6042634214
E-mail address: petroosp@gmail.com

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