Friday, November 12, 2010

12.20 am : DOW down 100 points, at 11.250. Going to 11,200 support. Can it hold?

Steel : Kinstel at 1.02(64), LionInd at 2.08(61), Jaks at 0.74(53) and AnnJoo at 3.03(50).

Learning Corner : How do I use RSI - part II

RSI : Relative strength index

Note : Please refer back to RSI(part one) when I used IGB as example.

I do use RSI-14 to track a stock, if it is at the high-end or low-end. Anything with RSI above 70 sounds ALARM to sell and anything with RSI below 30 giving me signals to STALK to buy. Simple? Not really as RSI-14 is just an initial indicator for me to watch a stock - to buy or to sell. It is NOT a call but to watch.

Example : Kencana's RSI was above 60 for very looong period of time now. It even went to 83 level at one stage when it spike up. This is a strong uptrending stock and it is only logical that its RSI is at high-end. That does not mean that we could not BUY her.

The day when its RSI at 83, it closed at 1.88. IF you say RSI 83 cannot buy, I will agree. After that spike, it went down for three consecutive days(profit taking for short contra players) to 1.80 with RSI at 63. Then, it continues its uptrend to move higher, inching upwards to 1.90-1.95 level. I was waiting for BREAKOUT.

Yesterday it gapped up, opened at 1.95 and moving towards RM2 psychological level. Well, so I moved in to its cc. It shot to 2.11 and closed at 2.03 with RSI at 73.

So, RSI is NOT a signal to BUY or SELL. RSI 83, at RM1.88 but RSI 73 now at RM2.03. Understand?

Muhibah is another very good exmple that I bought it when RSI at 74, sold it the next day when RSI at 78, only to see it gapped up shot higher yesterday with RSI at 85. Guess what, many unfortunate late comers will grab her later at 1.40 , hoping for 1.50 with RSI above 90?? Wow.

It is becoming common to see stocks trading with high-end RSI, even above 90 level. Somehow, the RISK is too high for me to chase. Let it go, man.

Note : Please do homework - name me 5 stocks which reached RSI above 90 recently.

I like downtrending good stocks and used RSI-9 and RSI-14 to track it. It gives us signal if it is EXTREMELY oversold and deserve our attention.

Evergreen, my recent buy at RM1.38 is a good example. Before the rebound, I bought it when its RSI at 24 for two days, ridiculous level for Evergreen. When it rebounded to 1.42, its RSI was at 31. Yesterday, it rebounded to 1.48 with RSI at 47. So, you see ... RSI at 24 is just an early signal to me that Evergreen is extremely oversold and deserve my attention. Mind you, I started to post Evergreen's chart two weeks ago under my WATERFALLs post. I was watching MEGB, MAS and YeeLee too.

Yes, definitely a lots of homework needs to be done, and if you are tracking so many stocks like me, you will understand that it is not possible to buy many with similar strategies. Buying Kencana and buying Evergreen is totally the opposite manner as different stocks have their own characteristics(such as their sectors, beta and such).

Having these knowledge, coupled with my RSI as an indicator, I could track many stocks before I even draw the support-resistance level.

Whe do you buy a stock? At a high-end or low-end of RSI-14? It is really depending on one's time frame, one's risk appetite and one's strategies.

Unfortunately, majority buying into stocks WITHOUT these plans or knowledge. Seriously.

For Kencana, I need to watch it closely for any signals to SELL. Its RSI at 73 level. It is shorter term trade. But as for Evergreen ... it will take me some time to watch it rebounds to next resistance before I will consider selling. That might takes a week or so.

Some stocks, you dont need to monitor much ... such as my three RM1-stocks. I will only sell at 1.10, whoever first reaching RM1.10 for my 10% profits. RSI is not in play here much. There are stocks you buy at support ... it is a heavy stock with low-beta, low RSI ... you buy and keep for months to ride on the uptrends. RSI does NOT matter here until ... one fine day, it SHOOTS up 10% per day. SELL SELL SELL. YTLPower is a good example of a good stock with low-beta and shot up 10% recently. Another was GenM months ago.

Notice that I NEVER use RSI or any of my trading systems on fatt-tatt(get rich) stocks such as KBunai, HWGB, JoTech and such. That is punting, we dont need systems or knowledge except experiences(and lots of luck) of gambling in stock markets. I m certainly many are much better to tell you when we should be punting on Maxbiz. Beats me ... I know nothing. My RSI-systems FAIL badly in these stocks. Too bad, otherwise I could be rich now. :P

These are for novices and new readers who are wondering how I use RSI as my 'favourite' indicator. It is too lengthy and also many more pointers to share. Perhaps, you treat me nice dinner, I could elaborate on it? Or be my client ... and I could share more? Hehe.

To appreciative readers, if you are 'far-away' and could not treat me D&C or Bah-kut-teh(BKT), you may re-load 'small' token to my hp. Then, sms me .... saying you have reload RMXX amount to my hp, I shall thank you to share more with you. Otherwise, dont worry .... this blog is still free and will always be free(until I have my own private blog - taking it private or sell to new owner! Haha). Oh yes, my ho no is 012 - 821 0129. Hehe

Thanks agian for many D&C offers. I know I was just kidding, but many do sound 'serious'. Next month during my holiday break, do ask me out for a drink, ok? It is like meeting-readers month. Haha ... I m really a joker! Haha

10.10 am : No one top-up for me. Nice write-up and free coaching but non appreciative readers? Poor me ... anyway, I will continue to write.

IJMPlant-wa : WOW ... why 1.20 also done!! Excuse me, I only moved-in yesterday morning, sold today!! It touched 1.24, actually.

Sunway-wc : Waiting at RM1, diving now. Oh boy ... hold or sell?

Evergreen : Touched 1.55 today, still waiting to sell. Wait.

Alam : "Mr Teh-tarik, you see ... I told you so I let Dialog to run first, then I sprint very fast up one" Alam touched 1.31 today. Collecting at 1.10-1.12 level I mentioned last week was good.

Tenaga : At 8.40 now, going lower to let me stalk her. Nice. I breached 8.80 support level I mentioned. BAD call, indeed.


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