• Tweet
• Email
• SumoMe

• Tweet
• Email

In this article I detailed an indicator I refer to as VixRSI14 using monthly charts. Today let’s apply the same method to weekly bar charts.  Before we do that a quick look at how this indicator functions.

VixRSI combines two indicators – Larry William’s VixFix and Welles Wilder’s Relative Strength Index (RSI).  In Figure 1 you see a weekly bar chart for YHOO.  Notice that as price declines the VixFix indicator rises and RSI falls. VixRSI14 essentially measures the difference between the two and looks for extremes as a sign of a potential reversal. See Figure 5 for YHOO with VixRSI14.

Figure 1 – YHOO with Williams VixFix (with 3-day exponential smoothing) and Wilder’s 14-period RSI (Courtesy AIQ TradingExpert)

The Weekly Version of VixRSI14

We will use the same method I described in the previous article, i.e.:

*We will calculate the VixRSI14 indicator (see code at end of article) on a weekly basis

*A “buy alert” occurs when VixRSI14 drops below 3.00 after first rising to 3.50 or higher

Once again, please note that:

*There is nothing magic about 3.50 or 3.00

*Not every “buy alert” is followed by an immediate rally (or even any rally at all for that matter)

*Any actually trading”results” will depend heavily on what you trade, how much of it you trade, when you actually get in, when you get out with a profit and/or when you get out with a loss.

*This VixRSI14 alert signal is simply serving notice that a given security may be overdone on the downside and may be ready soon to reverse to the upside.  Nothing more, nothing less.Figure 2 – AAPL

Figure 3 – AXP

Figure 4 – IP (Courtesy AIQ TradingExpert)

Figure 5 – YHOO (Courtesy AIQ TradingExpert)

Summary

In 2018 I intend to try to share a few more trading “ideas” that maybe are not quite “finished products”.  VixRSI14 fits neatly into the “Idea” category. Sometimes the alerts are early.  Sometimes the alerts are late.  Sometime the alerts don’t really pan out at all.  Sometimes alerts are followed by one more sharp decline which is then followed by a major rally. So maybe some sort of trend reversal confirmation would be helpful.  I don’t know.

Hey, that gives me an idea….

Code:

William’s VixFix is simply the 22-period high price minus today’s low price divided by the 22-day period price (I then multiply by 100 and then add 50).  That may sound complicated but it is not.

The code for AIQ TradingExpert appears below.

########## VixFix Code #############

hivalclose is hival([close],22).

vixfix is (((hivalclose-[low])/hivalclose)*100)+50.

###############################

####### 14-period RSI Code ###########

Define periods14 27.

U14 is [close]-val([close],1).

D14 is val([close],1)-[close].

AvgU14 is ExpAvg(iff(U14>0,U14,0),periods14).

AvgD14 is ExpAvg(iff(D14>=0,D14,0),periods14).

RSI14 is 100-(100/(1+(AvgU14/AvgD14))).

###############################

VixRSI14 is then calculated by dividing the 3-period exponential average of VixFix by the 3-period exponential average of RSI14

####### VixRSI14 Code ###########

VixRSI14 is expavg(vixfix,3)/expavg(RSI14,3).

###############################

Jay Kaeppel

Disclaimer:  The data presented herein were obtained from various third-party sources.  While I believe the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.  The information, opinions and ideas expressed herein are for informational and educational purposes only and do not constitute and should not be construed as investment advice, an advertisement or offering of investment advisory services, or an offer to sell or a solicitation to buy any security.