Buy Signals Sell Signals: Strategic Stock Market Entries and Exits pdfdrive com

- 21 day EMA: This is the intermediate term moving average. It is generally the
first line of support in a volatile uptrend.
- 50-day SMA: This is the line that strong leading stocks typically pullback to.
This is usually the support level for stocks in strong uptrends.
- 100-day SMA: This is the line that provides the support between the 50-day
and the 200-day. If it doesn’t hold as support, the 200-day generally is the next
stop.
- 200-day SMA: Bulls like to buy dips above the 200-day moving average,
while bears sell rallies short below it. Bears usually win and sell into rallies
below this line as the 200-day becomes resistance, and bulls buy into deep
pullbacks to the 200-day when the price is above it. This line is one of the
biggest signals in the market telling you which side to be on. Bull above, Bear
below. Bad things happen to stocks and markets when this line is lost.
Staying on the right side of the key moving average in your time frame will give
you an edge over randomness because you will be going in the direction of the
price trend. Mechanical crossover systems can be created for entry and exit
signals both long and short.

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RSI Signals
During uptrends, the 30-35 RSI range on the daily chart presents good
risk/reward opportunities for buying the dip. The stop loss is a close under the 30
RSI. Profit target is the 50 RSI.
When the RSI is in the 65-70 range, it is considered overbought and can provide
good risk/reward opportunities for selling short. Buy to cover with a close over
the 70 RSI. Profit target is the 50 RSI.
- A break over the 50 RSI is bullish.
- A break under the 50 RSI is bearish.
- Downtrends tend to trade under the 50 RSI while uptrends tend to trade over
the 50 RSI.
- A close under the 30 RSI opens the possibility of a parabolic downtrend.
- A close over the 70 RSI opens the possibility of a parabolic uptrend.
The RSI is a technical momentum oscillator that compares the amount of recent
gains to recent losses to try to read the overbought and oversold levels of a
market’s price action. The RSI has a range of 0 to 100. A market is supposed to
be overbought with a reading of 70. For traders, this is an indication that it may
be time to sell their long positions at this level. The RSI at 30 is supposed to
signal that an asset is starting to be oversold, and may present a good risk/reward
ratio to go long at that level.
Centerline crosses at the 50 can be used as the beginning of a trend in the
direction of the break (+50 bullish / -50 bearish). The traditional use of the RSI
for swing trading is best used in stock indexes. The 65-70 range indicates
overbought and time to exit longs. The 30-35 range indicates oversold and a
potential buy signal. The RSI oscillator works best for swing trading in range
bound markets. It doesn’t work well for indicating extremes in trending markets,
as higher highs or lower lows continue for extended periods.
The RSI is best used in combination with other indicators. A confirmation of a
30 RSI near a key support level like the 200-day SMA increases the odds of the
signal working.

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