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A while back I wrote two articles that ultimately culminated in an indicator that I call (clearly for the lack of a better name) “RSI Everything”)

This time out let’s look at a simple method to use this indicator using weekly bar charts.  As always this information is “food for thought” and not “an automated system guaranteed to generate profits beyond the Dreams of Avarice” (although for the record I am still working on it).

It might serve as “a good place to look” for trading ideas for “Weekend Warriors”, i.e., those who don’t have a lot of time to follow the markets during the week so do most of their analysis over the weekend.

Notes

*The AIQ TradingExpert Design Studio code is posted in the articles linked above.  It can be easily adapted to other trading software (at least by trading system code junkies that are into that kind of thing – “Hi, my name is Jay”).

*This method is probably best used with sector ETFs and index ETFs rather than with individual stocks – but traders are encouraged to experiment.

The Setup

At the end of the current week:

1. The 5-week simple moving average is above the 55-week exponential moving average.
2. RSI Everything registers a weekly close of -32 or below.

The Trigger

1. Buy shares or the ETF (or stock) in question when it hits the previous week’s high price plus $0.02 per share.

The Exit

1. Close the trade at a profit on the first profitable weekly close.
2. Close the trade at a loss if price falls $0.02 or more below the previous week’s two week low.
3. Close the trade – whether at a profit or a loss – if the 5-week simple moving average closes below the 55-week exponential moving average.

More Notes

*A trader might also consider using a hard percentage of trading capital stop to cut a loss rather than waiting for the two week low to be hit.

*It may take a few weeks after the initial setup before price actually triggers an entry signal by taking out the previous week’s high.

Example

Figures 1 through 4 highlighted this method using ticker XLF Figure 1 – Ticker XLF with Indicators (Courtesy: AIQ TradingExpert)

Figure 2 – Ticker XLF with Setups (Courtesy: AIQ TradingExpert)

Figure 3 – Ticker XLF with Entries (Courtesy: AIQ TradingExpert)

Figure 4 – Ticker XLF with Exits (Courtesy: AIQ TradingExpert)

Even More Notes

There is nothing magic about:

*5-day simply and 55-day exponential moving averages;

*Previous week’s close +$0.03

*First profitable weekly close

*Two-week low – $0.02

So industrious traders are encouraged to experiment.

Also, traders may also consider trading call options as a potential low cost alternative to buying ETF shares. If you choose to go this route consider using www.OptionsAnalysis.com.

Summary

As always, remember that this is “an idea” and not “a system.”  In the end, the method described herein is simply another entry in the well established approach of “buying after a pullback.”

Same as it every was……um, but different…..sort of.

Jay Kaeppel