Figure 2 : Stochastic Oscilator interpretation
SOURCE : COMPILED IN THE METASTOCK ( 2011 ) DATA BASE
COLUMN
is calculated by deducting a longer term MA , normally a 26-day MA , from a shorter term MA , normally a 12-day MA . This calculation is also known as the fast MACD-line and is graphically illustrated by the solid line in Figure 4 . A second line is calculated and plotted over the MACD-line in order to generate buy and sell signals . The line is better known as the signal line ( as graphically represented by the dotted line in Figure 4 ) and is compiled by calculating a 9-day MA from the MACD . The two calculated averages are mainly used to generate buy and sell signals when the MACD-line crosses the signal line from below or above respectively . Figure 4 is a graphic illustration of a buy and sell signal , as indicated by the blue and red arrow respectively .
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Figure 3 : MA-interpretation
SOURCE : COMPILED IN THE METASTOCK ( 2011 ) DATA BASE
CONCLUSION By merely having a reasonable understanding of the above information , you will be a step ahead of the rest . However , it will be most beneficial to combine technical analysis with fundamental analysis in order to make the best possible decision . When the longer term support line is broken , it can usually be linked to fundamentally changing supply and demand factors .
Figure 4 : MACD-interpretation
data . An MA can be defined as a smooth rendering of the price movements of a security over a fixed period , where the most recent data only is used . An MA is compared to the price movements of the commodity to generate buy and sell signals . A buy signal is generated when the market price crosses the MA from below , where a selling signal is generated should the market price cross the MA from above . Both signals are represented graphically in Figure 3 by
SOURCE : COMPILED IN THE METASTOCK ( 2011 ) DATA BASE
the blue and red arrow respectively .
Despite the popularity of the MA , it is recommended that the MA be interpreted in conjunction with other indicators to ensure the accuracy of signals . The Moving Average Convergence Divergence ( MACD ) is a popular technical indicator which is analysed in conjunction with the MA . The MACD is a momentum oscilator with the intention of determining a trend and pointing out a possible change in the trend . The indicator
For more information or to obtain competitive option prices on a variety of commodities , please contact Susari Geldenhuys at 018 464 7430 or 072 116 9999 or e-mail her at Susari . Geldenhuys @ senwes . co . za .
* All concepts were defined in previous articles and are therefore not repeated .
** The calculation of the technical indicators fall outside the scope of this article and are not discussed . For further enquiries in this regard , contact your professional and knowledgeable Safex broker .
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