RE: [CANSLIM] Use of ADX and MACD with CANSLIM/chart reading

From: "Katherine Malm" <kmalm@earthlink.net>
Subject: RE: [CANSLIM] Use of ADX and MACD with CANSLIM/chart reading
Date: Fri, 5 Sep 2003 10:40:09 -0500

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Top of Thread: Re: [CANSLIM] Use of ADX and MACD with CANSLIM/chart reading michael_niemotka@baxter.com
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Hi Tim,

It's my personal observation/opinion that tools such as MACD, ADX, etc. are
simply derivatives of price/volume action. A good quality read of a simple
price/volume chart will tell you the same thing. For example, in addition to
entering a stock on a breakout, one can enter on the first low volume
pullback to the 50dMA after the original breakout. This is a good strategy
in an uptrending market. While MACD, ADX, etc. might draw your eye to these
potential setups, they aren't necessary in order to "see" the pullback in
the chart. For some, tools like these may help them "see" better in the same
way that using candlesticks or point and figure charts will help them, but a
well practiced eye at chart reading will tell you the same thing. I think
it's a matter of practice and preference.


Here's an "Ask Bill" response on MACD:

Question
 What is the moving average convergence/divergence (MACD) and is it used in
your methodology?

Answer
 MACD is a technical analysis tool that looks at the relationship between
two moving averages, usually a 26-day and a 12-day moving average. Some
investors use it to follow trends or look for buy and sell signals. We do
not use MACD or other such "oscillators" or momentum indicators because we
don't find them to be relevant. In a bear market, they are particularly
prone to giving false signals. They merely show a stock is "oversold," which
is normal action in a bear market. We prefer to use simple 50- and 200-day
moving averages. If you're considering a stock to buy, it is especially
important for it to be above the 50-day line so you don't buy when the stock
is trending downward.



Katherine

 -----Original Message-----
From: owner-canslim@lists.xmission.com
[mailto:owner-canslim@lists.xmission.com]On Behalf Of Tim Katona
Sent: Friday, September 05, 2003 10:31 AM
To: canslim@lists.xmission.com
Subject: [CANSLIM] Use of ADX and MACD with CANSLIM/chart reading


Hi,
I 've seen two indicators that some traders use extensively:
1. ADX indicator
2. MACD

WON does not mention them in any of his books, nor IBD. I read in Elder
about them and added them to my real time stock quoting screen but am not
clear about their use with handles and pivot points.

Can anyone who uses these shed some light on why these are important to you
and how they can help CANSLIM investors select buy/pivot points better? Are
they a primary or secondary indicator to solid breakouts? Or point me in the
right direction for discussions/writings of how these indicators and
CANSLIM/handles/pivot points are complementary?
Thanks in advance,
Tim



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