Today, let’s talk about a tool to use in the market using Technician software. When you have a gap up pending like we have on Alphabet (Google) today and one that we saw on Facebook yesterday you want to know what's that going to do to the indicators. If it gets up there is it going to be overbought? Is it going to be okay to buy? Or should I think about fading the gap or go with it?
Interesting questions! Technician actually can help you with that with its price projection tool. Let’s take a look at that right here in the drawing menu. Click on projection and I have a chart of Google - I can't call it Alphabet - with Bollinger Bands here and RSI below. I want to see what happens when it gaps up today and right now it's in the pre-market trading around 801. What I'm going to do is click the chart. And bring it up to 801. Well, I hit 802 but that’s OK, it’s close enough.
So what we see here is that price is now above the upper Bollinger Band and that's not necessarily bad. With Bollinger Bands, sometimes being above the band its continuation but look what's going on with RSI. RSI jumped from say a regular strong reading to overbought above 80. That's the decision to make. Do you want to jump in on this gap and get in there or do you want to fade that gap and maybe take profits or even short the stock?
I’m not going to tell you what to do there but this tool can help you see what the indicators are going to do next.
Let's take it a step further. We can actually see what happens if the stock plays out to a scenario we have in her head. Check this out.
Okay all I did was see what happens if Google does jump up there and stays there. It doesn't do anything else so what happens to the indicators? You can see it's well back within Bollinger Bands and RSI comes back down significantly - possibly in a bearish divergence.
It's just a tool to help you project your opinion on what the stock might do and what that's going to do the indicators. That can help you decide if you want to buy, sell or hold. https://www.youtube.com/watch?v=VRr48okQEkE
Submitted July 29, 2016 at 10:17AM by TechnicianApp http://ift.tt/2ahNf31
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