Tenkan Sen Signals Positive Momentum For HomeServe PLC (HSV.L)

Bruno Cirelli
Agosto 14, 2017

Shares of Einhell Germany AG (EIN3.DE) recently touched $69.13, which places the stock above the Ichimoku cloud, indicating positive momentum and a potential buy signal for the equity. Whether or not the shares are ready to break out further is yet to be seen.

The Tenkan Line or Tenkan Sen (Sen means line in Japanese) is known as the conversion line or turning line is similar to a 9SMA but actually is quite different. A bullish signal occurs when the Tenkan Sen crosses from below to above the Kijun Sen. It is a visual technical analysis system and the charts are created to be considered in their entirety to gain a perspective on the overall direction of the share or index and distinguish higher probability opportunities from lower probability ones. Like all strategies within the Ichimoku system, the tenkan sen/kijun sen cross needs to be viewed in terms of the bigger Ichimoku picture before making any trading decisions, as this will give the strategy the best chances of success. One of the more popular combinations is to use the 50-day and 200-day moving averages.

Tracking other technical indicators, the 14-day RSI is presently standing at 40.05, the 7-day sits at 22.19, and the 3-day is resting at 3.90 for db x-trackers MSCI World Index UCITS ETF 1C (XMWD.L). The Relative Strength Index (RSI) is an often employed momentum oscillator that is used to measure the speed and change of stock price movements. Simply put, the ATR determines the volatility of a security over a given period of time, or the tendency of the security to move one direction or another. Values can range from 0 to -100. The normal reading of a stock will fall in the range of 30 to 70. A CCI reading closer to +100 may indicate more buying (possibly overbought) and a reading closer to -100 may indicate more selling (possibly oversold). On the other hand, a reading of -100 would imply that the stock is oversold and possibly set for a rally.

Another technical indicator that may be a powerful resource for determining trend strength is the Average Directional Index or ADX. The ADX was introduced by J. Welles Wilder in the late 1970's and it has stood the test of time. The ADX is typically used along with the Plus Directional Indicator (+DI) and Minus Directional Indicator (-DI) which point to the direction of the trend. At the time of writing, the 14-day ADX for VanEck Vectors Mortgage REIT Income ETF (MORT) is noted at 17.18. A value of 25-50 would indicate a strong trend. In general, and ADX value from 0-25 would represent an absent or weak trend.

Interested investors may be watching the Williams Percent Range or Williams %R. The Williams %R was developed by Larry Williams. A CCI closer to +100 may provide an overbought signal, and a CCI near -100 may provide an oversold signal. As a momentum indicator, the Williams R% may be used with other technicals to help define a specific trend. If the indicator travels under -80, this may signal that the stock is oversold. The most basic theory of this indicator is that if the price is above the cloud, the overall trend is bullish while below the cloud is bearish, and in the cloud is non-biased or unclear. The 14-day ADX for db x-trackers MSCI World Index UCITS ETF 1C (XMWD.L) is now at 30.39. Moving average indicators are used widely for stock analysis. Used as a coincident indicator, the CCI reading above +100 would reflect strong price action which may signal an uptrend. With so much historical data available, investors may choose to look at many different time frames when examining a stock.

Investors often have to decide whether to follow the crowd or go against the herd.

Value investors may be scanning the shelves for bargain stocks. They may be hoping to ride the wave higher, but may end up shaking their heads. On the flip side, many investors may hold onto stocks for far too long after they have slipped drastically. Waiting for a bounce that may never come can cause frustration and plenty of second guessing. Value investors may be searching for stocks with lower price to earnings ratios that possess higher dividend yields. This may take a lot of practice and dedication, but it may do wonders for the health of the portfolio.

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