Investors and paying cloes attention to shares of Ishares Plc (LQDE.L) as the Relative Momentum Indicator or RMI has been spotted trending higher over the past week. As momentum builds for the shares, we will watch to see if the price moves into overbought territory.
The Relative Momentum Index was introduced by Roger Altman, was publishing in 1993 in the Technical Analysis of Stocks & Commodities magazine. The RMI aims to iimprove upon the widely used Relative Strength Indicator, identifying when shares reach oversold or overbought range. The difference is in the “look back” period. The standard RSI compares the current close with the close 1 day ago. The RMI allows you to vary the number of days used to look back.
Investors are often faced with difficult decisions when trading the equity market. Sometimes, the decision to sell a certain stock may be just as important as the decision to buy the stock in the first place. Individual investors may have done the research, had some good fortune, and are now dealing with a big winner in the portfolio. Even though a stock has had a big run, it may be time to unload and take some profits. Holding on to a winner too long can eat into profits that may have been better spent getting into another promising name. On the flip side, investors may have trouble letting go of an underperforming portfolio loser. The emotional attachment to a stock can cause the investor to hold onto a stock for way too long. Maybe the stock was thoroughly researched, but it just keeps going lower. Being able to cut the ties instead of waiting for a bounce back may be beneficial for portfolio health in the long run.
When applying indicators for technical analysis, traders and investors might want to look at the ATR or Average True Range. The current 14-day ATR for Ishares Plc (LQDE.L) is currently sitting at 0.64. The ATR basically measures the volatility of a stock on a day-to-day basis. The average true range is typically based on 14 periods and may be calculated daily, weekly, monthly, or intraday. The ATR is not considered a directional indicator, but it may reflect the strength of a particular move.
Currently, the 14-day ADX for Ishares Plc (LQDE.L) is sitting at 20.94. Generally speaking, an ADX value from 0-25 would indicate an absent or weak trend. A value of 25-50 would support a strong trend. A value of 50-75 would identify a very strong trend, and a value of 75-100 would lead to an extremely strong trend. ADX is used to gauge trend strength but not trend direction. Traders often add the Plus Directional Indicator (+DI) and Minus Directional Indicator (-DI) to identify the direction of a trend.
Checking in on some other technical levels, the 14-day RSI is currently at 65.59, the 7-day stands at 72.21, and the 3-day is sitting at 84.28. Many investors look to the Relative Strength Index (RSI) reading of a particular stock to help identify overbought/oversold conditions. The RSI was developed by J. Welles Wilder in the late 1970’s. Wilder laid out the foundation for future technical analysts to further investigate the RSI and its relationship to underlying price movements. Since its inception, RSI has remained very popular with traders and investors. Other technical analysts have built upon the work of Wilder. The 14-day RSI is still a widely popular choice among technical stock analysts.
Investors may be watching other technical indicators such as the Williams Percent Range or Williams %R. The Williams %R is a momentum indicator that helps measure oversold and overbought levels. This indicator compares the closing price of a stock in relation to the highs and lows over a certain time period. A common look back period is 14 days. Ishares Plc (LQDE.L)’s Williams %R presently stands at -20.27. The Williams %R oscillates in a range from 0 to -100. A reading between 0 and -20 would indicate an overbought situation. A reading from -80 to -100 would indicate an oversold situation.
Taking a closer look from a technical standpoint, Ishares Plc (LQDE.L) presently has a 14-day Commodity Channel Index (CCI) of 202.12. Typically, the CCI oscillates above and below a zero line. Normal oscillations tend to stay in the range of -100 to +100. A CCI reading of +100 may represent overbought conditions, while readings near -100 may indicate oversold territory. Although the CCI indicator was developed for commodities, it has become a popular tool for equity evaluation as well.
Investors might be looking at various types of stocks that can be added to the portfolio. Selecting a wider range of equities may help the portfolio withstand prolonged market turmoil. Growth stocks typically have the potential to produce profit growth and above average revenues. Growth companies may reinvest a large amount of earnings back into the business. Fast growing companies can be attractive, but it may be important to verify whether or not shares are valued properly before buying in. Some investors may choose to select cyclical stocks. Cyclicals include companies that are very sensitive to the overall swings of the economy. Investors might also turn to adding foreign stocks to the portfolio. Keeping the portfolio diversified may end up being an important factor for longer-term investing success.
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