DOW, USDJPY And VIX Updates

VIX (Red Line) is now at 27.49. This is not the highest that VIX has attained for the past one year. We have seen the VIX went as high as 37.5 in Aug 2007 and Jan 2008 respectively. Nevertheless, VIX is moving up and that is not a good sign.



The USDJPY (Green Line) is now at 102.83. It is now very close to the lower end of the down trend channel. The good news is USDJPY has rebounded from 101.41 and the hourly chart we are seeing a higher low. If it breaks 103.23, then it will make a higher high. That will be good news for the bulls. However do note that USDJPY is still clearly in a down trend and any rebound will most likely not be sustainable.

The DOW has broken through 12,000 which is a critical support level. It is now at 11,893. That is very near the Jan low of 11,508. Let’s hope that 11,508 can hold water.

KST Indicator Case Study - YangZiJiang

This is another case study on KST. This time the request is for analysis to be done for YangZiJiang. If you missed my previous post on definition of KST, please read it here http://stockstudent.blogspot.com/2008/03/kst-indicator.html

Data range is from 18 Apr 2007 till 6 Mar 2008.



In total there are 6 trades based on the KST signals. Out of the 6 trades, 3 were profitable and 2 were losers. There was an entry signal on 4 Mar and the trade is now showing a gain of 5.39%.

USDJPY Hourly Chart Updates

USDJPY recovered and hit 104 region last night. If you look at the chart, it forms a double bottom at 102.63 level. Something like a "W" formation. This usually signals a pending reversal. It then went on to test the 38.2% Fibonacci Retracement. That becomes the resistant point for the upmove and now it is back to test the 21 bar exponential moving average (Green line)

If you are new to Fibonacci, maybe it is time to hit the library to do some self study. It is a good tool to have during trading.

Force Index Case Study - Synear Food

Received a request to apply Force Index analysis to Synear Food. If you missed my article on Force Index, you can read it from http://stockstudent.blogspot.com/2008/02/force-index-oscillator-yangzhijiang.html

Data is from 18 Aug 2006 to 4 Mar 2008.



There are a total of 8 trades. 2 were losses.

The average gain is not too much to shout about. However, if you look at the chart, the gains will be much more if you do a trailing stop to lock in the profit.

Therefore, if you want to use Force Index for shorting, there is a need to look at where to set your profit target and stop loss level to extract the maximum benefits out of this indicator.

USDJPY Hourly Chart

US market is going to open soon. Futures are indicating a lower opening for the US market.

The hourly chart for USJDPY is still in downtrend. It is now approaching the 21 bar exponential average (green line) of 103.35. This is also slightly below the downtrend channel on the daily chart. Breaking this level will bring the USDJPY inside the downtrend channel.

There is hope that it will move up and close the gap. But do note that the trend is still down.

KST Indicator

KST (The Know Sure Thing) Indicator

This indicator was first introduced in the early 1990s. It uses four rate of change values to determine the trend of the market.

The formula is as follows:

ROC1 = (1-Price/Price(X1))*100;
ROC2 = (1-Price/Price(X2))*100;
ROC3 = (1-Price/Price(X3))*100;
ROC4 = (1-Price/Price(X4))*100;

Where Price refers to current closing price and Price(X1) refers to the closing price X1 bars ago.

KST = MOV(ROC1,AVG1)*W1 + MOV(ROC2,AVG2)*W2 + MOV(ROC3,AVG3)*W3 + MOV(ROC4,AVG4)*W4

Where MOV(ROC1,AVG1) refers to the AVG1 day moving average for ROC1

For Short term trend, Martin J Pring suggest the following parameters:

X1 = 10
X2 = 15
X3 = 20
X4 = 30

AVG1 = 10
AVG2 = 10
AVG3 = 10
AVG4 = 15

W1 = 1
W2 = 2
W3 = 3
W4 = 4

Let’s look at an example for this indicator. I have chosen Lu Zhou Biochem as a case study.



Entry rules:
1. When KST crosses below its 8 day exponential average, short at the next day opening price

Exit rules:
1. When KST crosses above its 8 day exponential average, close short position at the next day opening price

These simple rules gave rise to the following trades:



Out of 10 trades, 7 were profitable.

For more information regarding the KST indicator, you can refer to the book by
Martin Pring – Technical Analysis Explained.

DOW And USDJPY Updates

The DOW closed down by 315.79 points. Not good for the bulls. Lets take a look at USDJPY and what is it saying about the DOW.






The rebound in USDJPY that started on 24 Jan 08 could only take it to 108 region. The Dow managed to rebound from 12300 region to 12700 region and the bulls ran out of steam succumbing to the attack of the bears.




The warning signals started to appear on 27 Feb 08 when the 8 day exponential moving average (Red line) fell below the 21 day exponential moving average (Green line). Once that happens, USJPY started to move decisively lower.


The Fibonacci retracement is suggesting a level of 103.48 for the USDJPY which is very close to the lower limit of the downtrend channel.


Based on previous correlation between Dow and USDPY, Dow may be due for a fall below 12000 level.