Tuesday, April 06, 2010

Technical Picture - Minor New Highs

We aren't overbought yet as depicted by McClellan oscillator below. Keep watch of open interest as this may signal a correction when the reading becomes too bullish.

BIDU and AMZN provided leadership today as internet stocks move into a mini base.

A weak $USD is helping oil and commodities. OIH looks ripe for a BO attempt.


M said...

I'm a newbie. So pardon my ignorance. What values are regarded as bullish & bearish in both the open interest & McClellan oscillator? Which stocks to keep an eye on if OIH breaks out?

Thanks in advance.


Jamie said...


Open interest readings below 7 are very bullish and prone to some profit taking. The McClellan oscillator measures overbought/oversold levels, also prone to reversals. At the moment we are in the neutral zone despite the fact that the markets have rallied fairly consistently off of the inverse H&S pattern from February. Readings in the +-40-60 zones are overbought/sold.

Ah, too many energy stocks to choose from. I usually trade Canadian and have done well with CNQ, ECA, SU of late. I'm also watching VLO for BO at $21.

M said...

Thanks for the answer. What is the advantage of McClellan oscillator over Stochastics for overbought/oversold readings? There are some red, green, pink lines on your $NAMO chart which seems to be S/R lines. How are they useful?

Sorry if these questions have already been mentioned on the blog. I did a search but could not find it.


Jamie said...

Hi M,

Good questions - no bother. If we compare the full stochastic of the QQQQ chart vs. the NAMO chart included in this post, we note that the stochastics give an overbought reading for roughly the last 6-7 weeks, yet the market continued to pace higher. The NAMO compliments the stochastic with a more refined reading of the overbought bias.

The colored lines just focus my eyes on the outlying zones.