STI AD RSI

I received a request for analysis of STI using the AD line derived from the 30 stocks in the FTSE STI Index.



The 13 day AD RSI is now at 28.24 level. It is certainly oversold. If you apply the technique of buying the STI index when the AD RSI rises above the 30 level, you will be 9 winners and 2 losers and 2 trades that are still opened.

The trading record is shown below:

Entry Date	Entry Price	Exit Date	Exit Price	% Change	Draw Down %	Max Gain %	Bars Held
12-May-04	1807.89	10-Jun-04	1814.08	0.34	-6.5015	1.4912	20
19-May-04	1741.09	17-Jun-04	1827.60	4.97	-0.1373	5.3851	20
24-Oct-05	2249.57	22-Nov-05	2278.74	1.3	-2.6449	2.4262	20
24-May-06	2429.77	21-Jun-06	2322.98	-4.4	-6.25	1.1993	20
12-Jun-06	2328.31	10-Jul-06	2429.42	4.34	-2.1647	5.2867	20
16-Jun-06	2354.57	14-Jul-06	2373.58	0.81	-1.8534	4.3299	20
21-Aug-07	3320.72	18-Sep-07	3452.09	3.96	-2.7723	7.2617	20
27-Nov-07	3344.57	27-Dec-07	3469.11	3.72	-1.3069	8.2902	20
18-Jan-08	3073.76	19-Feb-08	3100.26	0.86	-10.6394	3.0734	20
24-Jan-08	3055.76	25-Feb-08	3048.64	-0.23	-6.4364	3.6806	20
12-Mar-08	2964.32	10-Apr-08	3089.72	4.23	-7.3663	7.3406	20
17-Jun-08	3036.92	Open	Open	-2.67	-3.7554	0.3392	9
26-Jun-08	2986.62	Open	Open	-1.03	-2.1345	0.9144	2

For more information on the AD RSI, please refer to my earlier post.

AD RSI Update

AD RSI trade is not performing well this time. Although STI index rebounded to close at 2926, it is still below my entry point

Both opened trades are now about 4% below the entry point. DOW is now up by 67 points. Lets see if it can close higher today.

I still have 4 and 8 trading days for the STI to go above my entry point.

AD RSI Trade Updates

The 13 day AD RSI for STI is now at 44.65. This is slightly higher than the previous peak of 43.79.

Few days back, I posted the chart of DOW versus USDJPY. You can see the same relationship with STI.



And with STI rebounding from around its 50% retracement region, hope that it can hit its Fibonacci objective of 3384 in the next few weeks.


The STI index is now 0.11% and 0.7% above our entry points.

AD RSI Trading Updates

The 13 period AD RSI is now at 38.394.

FTSE STI index closed on 1 Feb 08 at 3007.8 and is now 2.15% and 1.57% below my entry points of 3073 and 3055 respectively.

DOW closed at 12743.19 on 1 Feb 08, up by 92.83 points.

The 13 period AD RSI for DOW is now at 55.63.


DOW is looking more promising.

Lets see if STI can follow DOW next week.

DOW Advance Decline Analysis

I received some emails requesting for same AD RSI analysis for DOW component stocks.

Using data from Yahoo, I perform the same analysis on DOW. Just to repeat the simple rules here

• Step 1. Obtain the number of gainers, number of losers and number of unchanged stocks that are in the 30 Dow index


• Step 2. Compute the difference between the number of gainers and number of losers


• Step 3. Compute the cumulative sum of the values obtained in Step 2.


• Step 4. Based on the series obtained in Step 3, compute a 13 day RSI. Lets call this AD RSI to differentiate it from normal RSI.
  

Below is the graph of the 13 Day AD RSI from 1999 to 2008.

For this studies, I assume the same rules as FTSE STI analysis

• Whenever the AD RSI drops below 30 wait for AD RSI to rise above 30
• When AD RSI rise above 30, buy 1 lot of DOW Index.
• Once long position is entered, hold the trade for 20 trading days before exiting.
  

Based on this simple trading method, we have the following trades

The probability of win turns out to be 72%.

Advance Decline Line For FTSE STI Stocks

In the world of technical analysis, there are numerous methods of judging whether a market participants are bullish or bearish. One such indicator is the advance and decline line. If we were to use this method to trade the Straits Times Index, can we make money?

The way I calculate the advance and decline line is as follows:

• Step 1. Obtain the number of gainers, number of losers and number of unchanged stocks that are in the 30 FTSE STI Index


• Step 2. Compute the difference between the number of gainers and number of losers


• Step 3. Compute the cumulative sum of the values obtained in Step 2.
  
• Step 4. Based on the series obtained in Step 3, compute a 13 day RSI. Lets call this AD RSI to differentiate it from normal RSI.

Below is the graph of the 13 Day AD RSI for the past 3 years.

There are only 8 instances whereby the AD RSI values drop below 30.

Lets formulate a simple trading rule based on this observation

• Whenever the AD RSI drops below 30 wait for AD RSI to rise above 30


• When AD RSI rise above 30, buy 1 lot of STI Index.


• Once long position is entered, hold the trade for 20 trading days before exiting.

Based on this simple trading method, we have the following trades




We are able to capture the rebound in Aug 07, Jan 08.

Lets see how the 2 opened trades perform next week.