Using Swami Aroon

Swami Aroon is  Green indicates uptrends and red indicates downtrends. Like all Swami indicators, the bottom of the charts shows the shorter lookback periods and gives you an early signals, while the middle provides confirmation and the upper portion provides continuation.

In the example chart for Ball Corporation (BLL) below, the top chart shows Swami Aroon and the bottom chart shows the traditional Arron indicator. The traditional Aroon gives you a view at only a single lookback period, in this case 14 bars. SwamiAroon shows a composite range of lookback periods and is typically easier to interpret. At the short lookback periods (bottom of chart) SwamiArron gives you an early indication of a change in trend. Similarly at the longer lookback periods, you are able to have a view of trend continuation.

I decided to examine Ball Corporation after reading this article arguing for it’s future success. And although the Swami Aroon is still suggesting to ignore or sell this stock I believe it could become drastically undervalued if current trends continue.

Ball Corp is a $6 billion, 131-year-old company that makes Coke (KO) cans. The company used to make those Cracker Barrel-ish glass canning jars, but it got out of glass and plastic years ago to focus on drink cans, food tins (like aluminum take-out boxes) and other metal containers. Coke is just one of hundreds of customers, including the U.S. government for aerospace parts.

In the past decade, Ball’s share price has never taken a downward turn that lasted more than about eight months. Even during the recession, these shares tended to outperform the index considerably. The share price has doubled in the past five years; rose about 50% over the past two.

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How to Use Swami Volatility

As if I needed to remind anyone, the market has continued its violent sell-off since this past Thursday.  Although not as predictive as some of the past indicators I’ve analyzed, Swami Volatility gives you a clearer picture of price volatility that can be very useful during these chaotic times.

Swami Volatility gives a clear picture of volatility by comparing the current true range of price movement to the average true range over a range of filtering periods from 12 to 48 bars. Higher volatility is indicated in light blue and lower volatility is indicated in darker blue.

Periods of high volatility are shown as lighter shades of blue while periods of low volatility are in darker blue. In the example chart below for Verizon (VZ) below, the increasing volatility shown in early June anticipates the trend reversal. Also, one could argue that the increased volatility shown in mid to late July signed the drastic price downturn we’ve been experiencing.

*You can download the set of Classic Swami indicators here.  These indicators include Swami versions of Aroon, CCI, RSI, and Stochastics.

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The Prophetic Power of SwamiPredict

Two days ago I blogged about a possible reversal in Apple (AAPL).  You can read the post here.  Today, fueled by economic concerns, the market has dropped over 2 percent taking Apple’s stock with it.  At press time Apple is down $10.  As such, I wanted to take this opportunity to again go over the exit signal detected by SwamiCharts.  Also, I’ll be adding some excerpts from an interview with a former Apple executive on why their reign could soon come to an end.  The full article can be found here.

To recap, SwamiPredict is a momentum oscillator that measures the speed and change of price movements using advanced digital signal processing (DSP) filtering techniques.

As such, this indicator gives you an early view of the change of price movements by varying the calculation period over a range of periods and displaying price movement to the upside in green and price movement to the downside in red. As a result you see both the early stages of a price movement for the shorter periods and a measure of the persistence of the movement for longer periods toward the top of the chart.

So by analyzing the chart below (data taken yesterday) you can easily see that SwamiPredict detected a sell signal on the 2nd of August.  And although the traditional stochastic oscillator also gave a sell signal before today’s massive drop the indicator was whipsawing enough to also make exit signals on the 11th and 20th of July.

Finally, Minyanville reported some fundamental concerns that Apple’s former director of strategy and marketing (Trip Hawkins) has about Apple’s future.

Trip explains that “Digital Chocolate’s games will always be in the App Store. But I think it would be an incredibly positive thing for the industry if Apple decided to support all of the web standards, because then Apple could be the best about everything. Right now they make a conscious choice. They want you to be in the App Store rather than the browser, so they cripple the browser. They’ve created this outlet and they had to have an excuse to keep you there, so they’re like, ‘Oh it’s nothing against Flash; we just prefer HTML5′. Well, Flash can actually make a really good game, and with HTML5 you can’t do that. But give HTML5 another few years to mature, and that could solve the problem. Or Apple could be more generous about deciding to support more de facto standards like Flash, or at least let it run its course.”

Adding, “[If] you want to be more successful, you have to be on more platforms, and you have to take a more open, democratic cross-platform stance.”

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Using SwamiCharts Predict

Swami Predict is a momentum oscillator that measures the speed and change of price movements using advanced digital signal processing (DSP) filtering techniques.  Green indicates a bullish condition, red indicates a bearish condition, and yellow is indeterminate.

Swami Predict gives you an early view of the change of price movements by varying the calculation period over a range of periods and displaying price movement to the upside in green and price movement to the downside in red. As a result you see both the early stages of a price movement for the shorter periods and a measure of the persistence of the movement for longer periods toward the top of the chart.

By viewing the below chart of Apple (AAPL) you can easily see that SwamiPredict indicated a bullish trend in late June.  Just recently we have begun to see a yellow “indeterminate” signal coming from the indicator.  Also, by pairing this information with the Swami SwingWave indicator one might be hesitant to invest at these prices.  The SwingWave has recently been detecting a possible “peak” as illustrated by the emerging orange coloration.

 

*You can download the set of Classic Swami indicators here.  These indicators include Swami versions of Aroon, CCI, RSI, and Stochastics.

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How to Gauge Market Trend

The Swami Market Mode indicator shows you whether a security is in trend mode or swing mode. Green indicates an uptrend and red indicates a downtrend while yellow indicates trading within a range (i.e., swing mode). This is just one of many indicators offered through SwamiCharts that allow you to clearly see market conditions by presenting the indicator’s true meaning from a big picture perspective.

After previously posting about Human Genome Sciences, Inc (HGSI) I wanted to take another look and focus what can be learned from the Market Mode indicator.  As you can tell, beginning around mid-May, the indicator detected a downtrend that has been consistently in place till present time.  Looking back several years, the stock is now trading at such low enough levels that if the Market Mode were to recognize an uptrend it could lead to substantial price movement.

In a recent report, the company’s management says it is making good progress with the US launch of it’s flagship lupus medication, Benlysta, adding that it received approval earlier this month to market the drug in Europe and Canada.  However they added by explaining that revenue has declined primarily because in last year’s second quarter it recognized $19.1 million in upfront and milestone payments as part of an agreement with Novartis over an experimental hepatitis C drug called Zalbin.

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Swami RSI Chart Analysis

It is easy to see the benefit to using SwamiCharts by comparing the functionality of Swami indicators with the originals. Take, for instance, the Swami RSI which displays upside price movements in green and downside price movements in red. Swami RSI is easier to interpret and provides additional info for pattern continuation due to its rendering over an entire range of lookback periods.

To elaborate, many traders will read an RSI oscillator to gauge whether a stock is overbought or oversold. And, although one can precisely tell when that RSI crosses over a certain numerical value, the predictive strength of the indicator is never known. In fact, there is still disagreement over how long the lookback period should be for RSI analysis. This is a tremendous oversight considering how a lookback period of 8 bars will generate a very different result than if the period were 21 bars. SwamiCharts was designed to specifically address this issue.

Fundamentally speaking, Amazon’s cloud business is growing like crazy, and could hit $1 billion in revenue next year according to analysts, Reuters reports. Right now Amazon Web Services, its cloud computing unit, is small enough that Amazon doesn’t report its revenue, but according to estimates, it generated $500 million in revenue last year and will do $750 million this year–a 50% growth rate, which is impressive for such a large unit.

I completely believe that if Amazon really hits these milestones it will be a big event for the company and could substantially move prices higher.

*Swami RSI and other classic indicators are FREE to download at http://www.swamicharts.com/Swami/Classics.aspx

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A New Way to View Stochastics

When I first began learning about the various technical indicators in use today two issues came to mind. First, that it would be incredible difficult to infer the strength of a technical buy or sell signal. And second, that many of the indicators were not nearly as predictive as they claimed to be. These are two important concerns considering how dependent successful trading is on understanding accurate indicators.

SwamiCharts improve on original indicators by displaying action over a range of parameters so that you can better assess true market action at a glance. This provide a better visualization of an indicator’s true meaning because you’re able to see a composite range of lookback periods.

To illustrate, I’ve included the Swami Stochastics indicator on the below chart showing Verizon’s past 6 month of activity.  The indicator became bullish on the 23rd March and remained that way until the 8th of April.  You simply would not have gotten these clear and contextual buy/sell signals by using the traditional stochastic visualization.

*If you would like to try SwamiCharts the classical indicators (Aroon, CCI, RSI, and Stochastics) are all free to download here.

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