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RSI


A Look At Viacom

12/17/14 04:44:10 PM
by Koos van der Merwe

When the daily chart and weekly chart suggest a buy, does it mean you should buy?

Security:   VIA
Position:   Accumulate

Viacom is a company that is well known as an entertainment company across television, motion pictures, and digital media platforms. With shares having come off an all time high, should you take a gamble and add the stock to a portfolio, or sit and wait a while longer before buying?

Figure 1. Monthly Chart With Elliott Wave Count. The Elliott Wave count suggests that prices are tracing a Wave 4 of a major WAVE III.
Graphic provided by: AdvancedGET.
 
The monthly chart in Figure 1 shows how the share moved from a low of $8.24 in November 1990 to a high of $89.93 by February 2014. The Elliott Wave count suggests that the chart is tracing a Wave 4 of a major WAVE III. The relative strength index (RSI) shown on the chart is suggesting further downside, although with the RSI bouncing off the 50 level as Wave 2 of WAVE III bottomed, the RSI could well bounce off the 50 level once again, suggesting that Wave 4 of WAVE III has bottomed, and the share could start moving up into Wave 5 of WAVE III.

Figure 2. Weekly Chart With Elliott Wave Count. The stock price could be strengthening into a Wave 5 of WAVE III as suggested in the monthly chart in Figure 1.
Graphic provided by: AdvancedGET.
 
The RSI on the weekly chart in Figure 2 is suggesting a buy. This suggests that the share price could well be strengthening into a Wave 5 of WAVE III as suggested in the monthly chart in Figure 1.

Figure 3. Daily Chart Showing JM Internal Band Indicator. Given that price broke below the lower band, you can expect further downside price movement.
Graphic provided by: AdvancedGET.
 
The chart in Figure 3 is a daily chart and shows how the share price fell from $89.60 on July 15, 2014 to $66.08 by October 17, 2014. The share price, on December 10, 2014 gave a JM Internal Band sell. A JM Internal Band is a 15 period simple moving average offset by 2% positive and 2% negative. A move above the upper band is a buy and a move below the lower band, a sell. On December 10, 2014 the share price broke below the lower band suggesting a sell signal, this in spite of the RSI in a rising trend after giving a buy on October 17, 2014. Note the color of the stock price, which is red. The color of the bars is created by the XTL (expert trend locator) Parameter of the Advanced GET program. The XTL parameter uses statistical evaluation of the market that tells the difference between random market swings (noise) and direct market swings (trends). A blue color suggests that the price is in an uptrend, a red, in a downtrend, and a black a neutral. The present price is red, suggesting that there could be further downside.

As much as I like the share, and would like to add it to my portfolio, with the present correction in the market, I am veering towards caution. In spite of the RSI suggesting strength, I would be inclined to wait until either the XTL indicator suggests a buy as the color of the stock price turns blue or the share price breaks above the upper JM Internal Band.



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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