TA Challenge: Emotional trading is bad? PSY doesn't think so.
The Psychological Line (PSY) makes use of 2 principles.
1. Before the start of an uptrend, the lowest point will generally be oversold twice or more.
2. Similarly, at the start of a downtrend, the highest point will be overbought twice or more.
Then when the second overbought low or oversold high occurs, it is the time to sell or buy stocks. The PSY index has such characteristics, that is, there are two overbought sell signals at high points, or buy signals with two oversold signals at low points. When PSY is 70 or higher, the stock is considered overbought. When PSY is 30 or lower, the stock is considered oversold. Psychologically, investors will use these levels to sell or buy.
1. Before the start of an uptrend, the lowest point will generally be oversold twice or more.
2. Similarly, at the start of a downtrend, the highest point will be overbought twice or more.
Then when the second overbought low or oversold high occurs, it is the time to sell or buy stocks. The PSY index has such characteristics, that is, there are two overbought sell signals at high points, or buy signals with two oversold signals at low points. When PSY is 70 or higher, the stock is considered overbought. When PSY is 30 or lower, the stock is considered oversold. Psychologically, investors will use these levels to sell or buy.
From $Rex Intl(5WH.SG$'s chart above, you can see that whenever PSY was 30 or less, a buy signal was triggered and an uptrend was started. Similarly, whenever PSY was 70 or more, a sell signal was triggered and a downtrend was started. In late Aug 2021, Rex's price fell to $0.185 and started rising. It fell back to $0.189 and $0.188 in late Sep, and investors started buying and sent the price higher. The price rose to $0.37. The next day, it reached a high of $0.365 and investors started selling. Then the price fell to $0.26 and made a bullish double bottom. The PSY was below 30 and investors started buying.
The PSY index doesn't always work by itself. For example, the price peaked at $0.485 in early Mar 2022 but PSY was not overbought. The PSY index must be used with other indicators to provide a better analysis. This will be discussed later.
PSY and other indicators
As mentioned, the PSY index doesn't aways work and must be used with other indicators. Use the indicators that work best for you.
As mentioned, the PSY index doesn't aways work and must be used with other indicators. Use the indicators that work best for you.
PSY and MACD
From $IFAST(AIY.SG$'s chart above, buy and sell signals were determined using the PSY and MACD indicators. Whenever the PSY was 30 or below and the MACD showed a bullish crossover, the price started an uptrend. Conversely, the price started a downtrend whenever the PSY was 70 or above and the MACD showed a bearish crossover. It reached an all-time high in late Sep 2021. Then a bearish double top pattern was formed in late Oct. The MACD was showing a bearish crossover and showed bearish divergence since Jun 2021. Some investors started selling. The PSY didn't work in Jan 2021 although it was less than 30 because the price continued to fall.
PSY and Bollinger Bands
From $IFAST(AIY.SG$'s chart above, buy and sell signals were determined using the PSY and BB indicators. In Dec 2020, the price fell below the lower BB to $2.51. The PSY was just above 30. This triggered a buy signal. The price then rose above the upper BB to $7 in Feb 2021 and PSY was above 70. This triggered a sell signal. Then the price fell to the bottom of the lower BB and the PSY fell below 30, triggering a buy signal.
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Dons hobby : Hope you have a great week Bull !
bullrider_21OP : thx Don. You too.
JackieRose : Well your performance is great.. and i need to know how to find good breakouts and how to enter the market
OmsFund : Dead stocks
bullrider_21OP JackieRose: tyvm. First, you need to DODD to identify the stock to buy. Then, you can use technical indicators to determine breakout, entry and exit points.
bullrider_21OP OmsFund: You can see from the charts that they can rise and fall a lot. Certainly not dead.
whqqq : you really made my day
bullrider_21OP whqqq: Thx for your kind comments. You made my day too.