Rolling Stock
Rolling Stock:(ejr39)
The stocks mentioned in the Rolling Stock Strategy using an RSI Channel are examples only. The RSI Channel as an internal strength index has the advantage of ‘predicting’ a stock’s future movement. This strategy may appear long and complicated but I assure you that once you get the hang of it, you’ll spend a couple of hours a week tending the WatchList and drawing Trendlines. ? Exploiting Wilder’s RSI as an "Internal Strength Index."
#01 Wilder’s RSI Channel PCF:( 2- month channel)
((MAX(RSI14.3,42))<70)AND((MIN(RSI14.3,42))>30)
OR (not both)
#01 Wilder’s RSI Channel PCF:( 1- month channel)
((MAX(RSI14.3,21))<70)AND((MIN(RSI14.3,21))>30)
Test. Save. Update All Criteria.
Suggested EasyScan:
Rolling Stock / RSI Channel
. . . Optionable (True)
. . . Capitalization . . . (Value) 150 to Max
. . . #01 Wilder’s RSI Channel (True)
. . . Price Per Share – H . . . (Value)
. . . Volume 5-Day- H . . . (Value) 500 to Max
. . . Volume 90-Day . . . (Rank) 53 to 99 - about 2% higher than Volume 5-Day-H Rank
WatchList to Scan: All stocks
Save. Name. Scan
Each day, save this EasyScan WatchList to a bulleted WatchList. Sort the bulleted WatchList against the #01 Wilder’s RSI Channel PCF; (F)lag, erase trendlines, and remove any stocks from the bulleted WatchList which are no longer within the RSI channel.
Suggested Indicator Tab#:
Top
. . . Prices – Open Bar Chart – Daily
. . . . (Optional) Envelope Channel – Period:21 Width: 10 – Exponential
. . . . Draw a horizontal trendline connecting entry points (support).*
. . . . Draw a horizontal trendline connecting exit points (resistance).*
Middle
. . . Stochastics – Period:5 SK:1 SD:3 – Exponential – check visible
. . . . . .SK Drawing Color: Black; SD Drawing Color: Red
. . . Wilder’s RSI: Period:14, Average: 3 – Exponential – Drawing Color: Cyan
. . . . . . Linear Regression – 21 bar period – Drawing Color: Cyan
Bottom
. . .Balance of Power
. . .CMS OR OBV
Analyzing the daily charts:
1) Price Graph: price is within a trading range.
2) Wilder’s RSI: fluctuates BETWEEN the 30%- and 70%-reference lines.
3) RSI’s Linear Regression Line: flat at or near the center of the window.
4) Stochastic SD line: exhibits a ‘wave’ pattern from below the 20%-reference line to above the 80%-reference line and back below the 20%-reference line.
* See Notes for drawing and interpreting Trendlines.
Give preference to stocks with the following attributes:
1) Balance of Power: accumulation starting
2) CMS (or OBV): turning up
Notes:
The Stochastic SD line reduces ‘noise’ including whipsaws. Visually find the most recent point at which the RSI crossed into and remained between the 30%- and 70%-reference lines – assume this cross as the beginning of the ‘rolling cycle’.
Flat channel:
When drawing the horizontal trendlines for support or the entry point, use the highest (price) low since the ‘rolling cycle’ began; conversely resistance or the exit point is the lowest (price) high since the ‘rolling cycle’ began. The two trendlines MUST be parallel. Adjust the horizontal trendlines if the most recent (price) low is higher than the support trendline or the most recent (price) high is lower than the resistance trendline.
Example: ENMD
(Rolling since June; note that Wilder’s RSI has remained between 30%- and 70%-reference lines.)
DOWN Trending channel:
Draw the support trendline by connecting those price lows matching the Stochastic SD lows (below the 30%-reference line). The trendline should touch as many lows as possible.
Draw the resistance trendline by connecting the highest (price) highs matching the Stochastic SD highs (above the 70%-reference line). The
trendline should touch as many highs as possible.
The channel: The two trendlines MUST be parallel.
Extreme spikes (breakouts or breakdowns) may signal the end of the strategy; if the stock continues to ‘roll’, ignore the spike when extending the trendlines.
Example: ENE
Support:
09/02/99 Price Swing Low and Stochasic SD low
09/23/99 Price low and Stochasic SD low
10/07/99 Price Swing Low and Stochasic SD low
11/23/99 Price Swing Low and Stochasic SD low
Draw the support trendline from the low of 09/02/99 to 11/23/99; the extended trendline touches most of the lowest lows during this ‘rolling cycle’.
Each ‘roll’ begins from the lowest (price) low – one day reversal patterns are an indication that a new ‘roll’ is beginning.
Resistance:
08/24/99 One of the highest (price) highs at the beginning of the downtrend
09/10/99 Price high and Stochasic SD high
10/01/99 Price high and Stochasic SD high
10/29/99 Price high and Stochasic SD high
Draw the resistance trendline from the high of 08/24/99 to 10/29/99; the extended trendline touches most of the highest highs during this ‘rolling cycle’.
Once the trendlines have established the channel, the next entry point is the support trendline.
. . . After entry, place a GTC order to sell at the predetermined exit point.
The predetermined exit point is the price high crossing above the extended resistance trendline.
UP Trending channel:
Draw the support trendline by connecting the lowest (price) lows matching the Stochastic SD lows (below the 30%-reference line). The trendline should touch as many lows as possible.
Draw the resistance trendline by connecting those price highs matching the Stochastic SD highs (above the 70%-reference line). The trendline should touch as many highs as possible.
The channel: The two trendlines MUST be parallel.
Extreme spikes (breakouts or breakdowns) may signal the end of the strategy; if the stock continues to ‘roll’, ignore the spikes when extending the trendlines.
Example: VRIO
Support:
09/20/99 Price Swing Low and Stochasic SD low
10/18/99 Price Swing Low and Stochasic SD low
11/04/99 Price Swing Low and Stochasic SD low
11/29/99 Price Low and Stochasic SD low
Draw the support trendline from the low of 10/18/99 to 11/29/99; the extended trendline touches most of the lowest lows during this ‘rolling cycle’. Each ‘roll’ begins with the lowest low – one day reversal patterns are an indication that a new ‘roll’ is beginning.
Resistance:
11/15/99 Price high and Stochasic SD high
10/29/99 Price high and Stochasic SD high
10/07/99 Price high and Stochasic SD high
Draw the resistance trendline from the highs of 10/29/99 to 11/15/99; the extended trendline includes most of the highest highs during this ‘rolling cycle’. Once the trendlines have established the channel, the next entry point is the support trendline. After entry, place a GTC order to sell at the predetermined exit point. The predetermined exit point is the price high crossing above the extended resistance trendline.
Paper trade, Paper trade, Paper trade until you achieve a 70% success rate.
To reduce the tedium of looking at each chart every day, add the following PCFs:
#02 Rolling Stock Alert PCF:
(L< ((MAXH21-MINL21)/4)+MINL21))
Today’s Low in Lower Quadrant of 21-day Envelope Channel. From the main chart screen, SORT the bulleted WatchList using the #02 Rolling Stock Alert PCF - stocks which are near the lower Envelope Channel line (support), i.e. a possible early entry point if #03 SD Turning Up PCF becomes True.
#03 SD Turning Up PCF:
(AVG(STOC5.1.1,3)<20)AND(AVG(STOC5.1.1,3))<(AVG(STOC5.1,3))
Stochastics SD line turning up below 20%-reference line. From the main chart screen, SORT the bulleted WatchList using the bulleted WatchList using #03 SD Turning Up PCF. Stochastic SD signaling that uptrend is beginning.
Additional Notes:
Wilder’s RSI is associated with the internal strength of a single security. A more appropriate name is "Internal Strength Index." from
Educational Sources: