CCI – Commodity Channel Index
Developed by Donald Lambert for the commodity markets, CCI can be easily adapted to the stock market due to the characteristics of the calculation. For CCI, Lambert recommends the use of 5 to 25 day periods. Many analysts use this indicator as an oscillator that displays overbought/oversold zones. Horizontally, the trends are much better matched. Following the short-term trend changes, CCI is very mobile, and even small price changes cause the gauge to move outside its axes that are limited to +100 or -100. The indicator of cutting these axes in the opposite direction again indicates a trend change. It is more appropriate to use weekly graphs in the determination of the medium-term trend. When calculating the CCI, it is seen how much the stock price deviates from its statistical average or upwards. The CCI takes a value between +100 and -100. Over 100 means the price of the paper is excessively high, and below 100 is excessive (overbought and oversold).
– Sell, if CCI +100 cuts the value in downgradient.
– Buy, if CCI -100 cuts the value in upward. These are the assumptions created.
MACD is calculated by subtracting the 12-day moving average from the 26-day moving average. The result is an indicator that moves below and above zero. When the MACD is above zero, the 12-day moving average value is higher than the 26-day moving average value. This means in a bull market, current expectations (12-day average) are stronger than previous expectations (26-day moving average). This is an indication of a bull market and an upward trend in the supply-demand balance. If the MACD is below zero, it means that the 12-day average expectations are less than the 26-day average expectations, that the bear market is strengthening, and that there is a belt on the bear market in the supply-demand balance. The MACD histogram shows the difference between the MACD and the 9-day exponential moving average of the MACD. This way, the intersection and discordance in the MACD can be seen more easily. If the value of the MACD is greater than the 9-day average, the MACD histogram is above 0. Otherwise, the MACD histogram is negative. The MACD histogram means that the MACD cuts the average of 0, which means that the MACD cuts the average upward, whereas the reverse means that the MACD cuts down the average. Moreover, the difference between the MACD and the average increase can be observed more easily with the MACD Histogram.
Momentum is an indication of how many percent of the prices have changed over a specified period of time. To put it another way, it is an indicator that demonstrates how much the stock has earned or lost in a given period. Price ROC (percentage change indicator) shows the same thing. The difference is that the reference line of the momentum is 100, the reference line of the ROC indicator is 0 and the percentage change in the price is displayed on the vertical axis. The momentum display of the last day is calculated with the formula given below.
The interpretation of the momentum indicator is very similar to the interpretation of the ROC indicator. Both indicate the rate-of-change (ROC) of the stock price. However, while the ROC indicator takes the rate of price change as a percentage, Momentum shows this change as a rate. Basically, the Momentum Indicator is interpreted in two ways. It is possible to use the Momentum Indicator as a trend monitoring indicator, just as in MACD. It is assumed that when the indicator is turned upwards after hitting the bottom, “BUY”. When the indicator hits the bottom after peaking, “SELL”. When the Momentum Indicator shows a new peak or dip (compared to past peaks and bottoms), it can be assumed that the current trend will continue, however, the rate of increase in prices has slowed down and the effects of the factors raising the stock are weakening and that prices may start to decline in a while. Nevertheless, you should change the position by waiting for the signal produced by the indicator to be confirmed by the price movement. For instance, the indicator peaked and returned, and you should expect prices to show signs of decline. Unlike the above interpretation, momentum has a very significant function: incompatibilities. While the prices are rising and new summits are made, the indicator cannot make a new summit or the prices do not make a new dip when the prices are new. This situation should be evaluated as the early signal of the trend change.
The Relative Strength Index is one of the most recognized oscillators. It was first mentioned by J.Welles Wilder in an article in Commodities Magazine in June 1978. In Wilder’s “Technical Trading Systems”, its calculation and interpretation were described step by step. RSI refers to the internal power of a single stock, not the relative power of two separate stocks, as well as the misunderstanding of its name being “Relative Strength Index”. Therefore, the “Internal Power Index” is perhaps more accurate. The formula of the RSI is quite simple, but it is necessary to give an example to clarify what it is. Wilder suggested using the RSI for 14 days when he presented the RSI, although the 9-day and 25-day RSIs are also widely used because, in the RSI calculation, you can change the time period as you like, and it is recommended that you choose the best working time period with your experience. It should be kept in mind that the shorter the time has taken on the basis, the more volatile the indicator will be. RSI is a price tracking oscillator released between 0 and 100. One of the general interpretation methods of RSI is to look for incompatibilities. As the prices go up and make new summits, it is a mismatch that shows the indicator does not pass the previous summits. This discrepancy is an indication of loss of power and a return.
Tops and Bottoms: The RSI usually makes over 70 peaks under 30, and these peaks and bottoms usually appear earlier than the prices.
Formations: Formations occur on the RSI graph as in the price graph (such as shoulder-head-shoulders or wedge formations). These formations may sometimes not be evident on the price graph. However, this should not be misleading; the formations occurring in the indicator graph should be observed and taken into account.
False Oscillations: (They are also known as support/resistance violations or breaks.) This event may occur when the RSI exceeds the previous peak or falls below the previous bottom. After a while, the indicator goes back and continues its normal course.
Support and Resistors: In the RSI graph, support and resistance lines are formed, and sometimes it shows resistance and supports much more clearly than the price graph.
Trading: If the RSI +30 cuts the level upwards, it is assumed that the buy signal gives the sales signal if it cuts down the +70 level.
The Stochastic Oscillator is an indicator that compares the closing price of a stock with the price range it has followed over a given period. Those who raise this indicator state that the paper will close to the price levels it has recently scanned. That is, if prices are rising, the closing price of the paper tends to go towards the highest price within the period chosen, and if prices fall, they tend to go to the lowest price in the selected period.
The Stochastic Oscillator is represented by two distinct curves and the interpretation is made by comparing these curves. The main curve is called the slower %K curve, and there is a second curve called the %D on the same chart. The slashed %K line is usually a continuous line while the %D line is shown as a dashed line. %K must be calculated before the slashed %K line is calculated. Calculation of %K curve is done with the help of the following formula.
%K= 100 * (SGKF – ED) / (EY-ED)
If we take the last 5 days as a period,
ED: The lowest value in the last 5 days
EY: The highest value in the last 5 days
Here, if the closing price of the last day is closer to the highest value in the last 5 days, it is expected that the prices will rise. Otherwise, the prices will fall. The slowed %K curve is the moving average of the %K curve calculated for a certain period, and the %D curve is the moving average of the slowed %K curve for a certain period. So;
%D = HOx [Slowed Down %K]
The HOx here represents the moving average for x days.
It is assumed that if
-Stochastic cuts +20 level upward, buying
-Stochastic cuts +80 level down, selling
-Stochastic cuts %D upward, buying
-Stochastic cuts %D down selling signals are formed.
Williams’ %R is a momentum indicator that measures over-buying/over-selling. This indicator was named after Larry Williams who developed the system. This system is very similar to the stochastic oscillator. But unlike it, it draws up and down graphics. Although negative values are calculated in this indicator, negative values in daily use are used as positive values. For example: -20% instead of 20%. Changes between 80 and 100 percent in this indicator can be considered as excess sales, and changes between 0 and 20 percent can be considered as excessive purchases. Using the Williams percentage, you can see the changes in stock prices and make your purchases and sales accordingly. For example, if this indicator shows that you are interested in an over-purchase, you can expect the trend to return to sell since it is not common for a share to maintain a constant overbought or an excessive sale. As a result of overbought, the price continues to rise for a while and a turn is realized. You can use Williams’ percentage to find these points of return and find good selling points.