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Volatility
by kathia

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Hansen Natural Corporation (HANS)





What's up with those funky spiked circles on the MACD graph?

When you see a "spiked circle", it indicates that a trend has started. The green marks at the bottom of the MACD graph represent uptrends while the red ones at the top denote downtrends. (They correspond with the trending bars on top of the price graphs.)

Trends are good, but when you see lots of the trending flags in a row it is not a positive sign. In fact, it's exactly the opposite.

Let's take a look at HANS. Fluctuations in the closing prices caused the MACD fast line (red) to bounce off of the signal line (blue). Each time the red line went down, crossed, and jumped back up over the blue line a new green flag was raised. Over a period of a month (mid-July to mid-August), five flags were generated.

The fact that so many signals went off should give you some important insights. The succession of flags is clueing you into the volatility of the stock. It's acting erratically, and that is not a desirable trait. In this case, it was a fairly evident sign of an ensuing fall in the price.

There is no telling what a volatile stock will do. Stocks that have fairly well timed signals and act more predictably offer better potential results.


Next: More Green Than Red


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