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More Green Than Red by kensey

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Microlog Corporation (MLOG)

If you spend a lot of time looking at ClearStation graphs, you will soon notice that there are more bullish green bars drawn on the tops of graphs than red bars. The reason for this is that a bearish red bar is born only when there is a crossover of the MACD lines below center. This does not happen as frequently as do bullish crossovers above center. This is partly due to the fact that a lot of individual stocks right now are in fact above center.

I just ran a query that told me that 7102 stocks have MACD lines above center, and 5183 have MACD lines below center. This tells me that there are more stocks right now that have an upward bias.

MLOG has obviously been in a long-term downtrend as evidenced by red bars being drawn on the price graph. You can see that the red bars start whenever there is a crossover of lines which occurs below center. The crossovers that occur closer to the center are better signals. The crossovers that occur towards the bottom of the price graph are confirmations that lower prices are on the way.

If you eyeball the stochastic indicator graph, you can see that whenever this stock gets overbought (which happens when the stochastic lines cross above the upper reference line), it's a pretty good sell signal.

Another reason that there are not as many red bars as green, is that lately it has been common for stocks to correct in short staccato bursts. We all know that retracements in the markets these days happen faster and deeper and are shorter-lived. Then the bull trend resumes. Certainly, you'd be hard pressed to find a red bar over a major market index.

I look more to stochastic for candidate stocks to short. Stochastic does a better job of locating stocks that are moving higher in the short term, but within the context of a longer-term downtrend. In this case, the fact that stochastic crossed the upper reference line in mid-April was a strong sell signal.

Next: Ill-timed Green Bars during a Downtrend: PTEL

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