Newsletter - February 2011

February 2011 iSignals 2.4 new features The latest version (available on the AppStore) contains a set of new features and enhancements: - Some indicator charts also give an indication for sell/buy or oversold/overbought - New indicators have been added: TRIX Momentum Commodity Channel Index Ultimate Oscillator - The basic and advanced graphs can now display OHLC and Candlestick type of charts New indicators 1. Trix TRIX is a momentum indicator that displays the percent rate-of-change of a triple exponentially smoothed moving average of the security's closing price. It is designed to keep you in trends equal to or shorter than the number of periods you specify. Trades should be placed when the indicator changes direction (i.e., buy when it turns up and sell when it turns down). You may want to plot a 9-period moving average of the TRIX to create a "signal" line (similar to the MACD indicator, and then buy when the TRIX rises above its signal, and sell when it falls below its signal. Divergences between the security and the TRIX can also help identify turning points. From: Technical analysis from A to Z by Steven Achelis. 2. Momentum The Momentum indicator measures the amount that a security's price has changed over a given time span. The interpretation of the Momentum indicator is identical to the interpretation of the Price ROC. Both indicators display the rate-of-change of a security's price. However, the Price ROC indicator displays the rate-of-change as a percentage whereas the Momentum indicator displays the rate-of-change as a ratio. There are basically two ways to use the Momentum indicator: ● You can use the Momentum indicator as a trend-following oscillator similar to the MACD (this is the method I prefer). Buy when the indicator bottoms and turns up and sell when the indicator peaks and turns down. You may want to plot a short-term (e.g., 9-period) moving average of the indicator to determine when it is bottoming or peaking. If the Momentum indicator reaches extremely high or low values (relative to its historical values), you should assume a continuation of the current trend. For example, if the Momentum indicator reaches extremely high values and then turns down, you should assume prices will probably go still higher. In either case, only trade after prices confirm the signal generated by the indicator (e.g., if prices peak and turn down, wait for prices to begin to fall before selling). ● You can also use the Momentum indicator as a leading indicator. This method assumes that market tops are typically identified by a rapid price increase (when everyone expects prices to go higher) and that market bottoms typically end with rapid price declines (when everyone wants to get out). This is often the case, but it is also a broad generalization. As a market peaks, the Momentum indicator will climb sharply and then fall off-- diverging from the continued upward or sideways movement of the price. Similarly, at a market bottom, Momentum will drop sharply and then begin to climb well ahead of prices. Both of these situations result in divergences between the indicator and prices. From: Technical analysis from A to Z by Steven Achelis. 3. Commodity Channel Index The Commodity Channel Index ("CCI") measures the variation of a security's price from its statistical mean. High values show that prices are unusually high compared to average prices whereas low values indicate that prices are unusually low. Contrary to its name, the CCI can be used effectively on any type of security, not just commodities. There are two basic methods of interpreting the CCI: looking for divergences and as an overbought/oversold indicator. ● A divergence occurs when the security's prices are making new highs while the CCI is failing to surpass its previous highs. This classic divergence is usually followed by a correction in the security's price. ● The CCI typically oscillates between ±100. To use the CCI as an overbought/oversold indicator, readings above +100 imply an overbought condition (and a pending price correction) while readings below -100 imply an oversold condition (and a pending rally). From: Technical analysis from A to Z by Steven Achelis. 4. Ultimate Oscillator Oscillators typically compare a security's smoothed price with its price x-periods ago. Larry Williams noted that the value of this type of oscillator can vary greatly depending on the number of time periods used during the calculation. Thus, he developed the Ultimate Oscillator that uses weighted sums of three oscillators, each of which uses a different time period. Williams recommends that you initiate a trade following a divergence and a breakout in the Ultimate Oscillator's trend. The following text sumarizes these rules. Buy when: 1. A bullish divergence occurs. This is when the security's price makes a lower low that is not confirmed by a lower low in the Oscillator. 2. During the bullish divergence, the Oscillator falls below 30. 3. The Oscillator then rises above the highest point reached during the span of the bullish divergence. This is the point at which you buy. Close long positions when: ● The conditions are met to sell short (explained below), or ● The Oscillator rises above 50 and then falls below 45, or ● The Oscillator rises above 70. (I sometimes wait for the oscillator to then fall below 70.) Sell short when: 1. A bearish divergence occurs. This is when the security's price makes a higher high that is not confirmed by a higher high in the Oscillator. 2. During the bearish divergence, the Oscillator rises above 50. 3. The Oscillator then falls below the lowest point reached during the span of the bearish divergence. This is the point at which you sell short. Close short positions when: ● The conditions are met to buy long (explained above), or ● The Oscillator rises above 65, or ● The Oscillator falls below 30. (I will sometimes wait for the oscillator to then rise above 30.) From: Technical analysis from A to Z by Steven Achelis. Please be aware that these indicators are based on technical models. Before doing any trading you should inform yourself thoroughly and as always we don't take any responsibility. :-) Chart types Now iSignals also supports multiple chart types. In the basic chart (that is the 4th page on the instrument view) just double tap the chart area to swap between the different chart types. On the technical analysis chart you also double tap the chart area and you will see the different options. The different chart types can be seen in the picture above. Subscriptions And now some time for a bit of publicity :-). Some of you will no longer receive the signals, if you want to continue to receive them you can subscribe to them via 'Subscriptions'. For only $8.99 a month you get solid signals for a market and you help the development of iSignals. If you need multiple markets, please contact Danny. Upcoming release 2.5 In the next release we will enhance the portfolio capabilities: The possibility to define a portfolio currency Enhanced view of the portfolio positions An option to email the portfolio as a PDF file The support of multiple currencies and a currency converter Previous newsletters and blog All older newsletters can be found in the archive and for interactive communication there is a blog available. iSignals.biz is not an investment advisor. Investment and trading decisions are solely your responsibility. None of the iSignals.biz signals should be interpreted as a recommendation or solicitation to take any short or long positions, or to take any specific action. For bug reports, enhancement requests etc, send a note to Herman or Danny. Thank you for your time, The iSignals team iSignals, www.isignals.biz