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Comparative relative strength indicator or CRS indicator is a simple yet effective indicator for finding profitable trading opportunities. The indicator simply compares the performance of two securities/sectors/markets, or a security with the market or sector. CRS is calculated by dividing the first security price by the second security/market (known as base security or benchmark) price.


Comparative relative strength is also an easy to interpret indicator.

• When CRS is moving up, the first security is performing better than the base security.
• When CRS is moving sidewise, the first and base securities are performing the same (same volatility).
• When CRS is moving down, the first security is performing worse than the base security.

Comparative relative strength indicator is widely used by traders to develop spreads; to buy the outperforming security and to sell the underperforming security. It can also be utilized for better portfolio tuning to maximize returns. CRS indicator is helpful for all kinds of traders trading all kinds of securities - stocks, options, ETFs, mutual funds, futures and forex currencies.

Footnote: Comparative relative strength indicator is totally different from Relative Strength Indicator or RSI. The latter is used to find oversold and overbought levels.

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Energy Exchange Traded Funds (ETFs) tracking energy company stocks are becoming increasingly popular. Energy ETFs are widely traded by all types of traders - short-term and long-term conservative and risky traders. These are ETFs with a great diversity in themselves. There are oil ETFs which track oil and gas exploring, producing and distributing company shares or are commodity pools investing in oil derivatives like futures and options contracts.

• There are gas ETFs which track gas companies and companies dealing with other refined products.
• There are ETFs which track companies dealing with alternative energy (wind, solar, nuclear, etc) or electric utilities.
• There are ETFs which track energy sector stocks of major US markets, international markets and/or a blend of both.
• There are ETFs that track only some specific sub-sectors like nuclear energy, coal, biological sources, etc.
• There are ETFs which track stock prices, markets and those which track spot/future prices of the commodities.
• One can also find many inverse ETFs which make profits when prices of the commodity/index fall.

Different energy ETFs may have different weightings for specific stocks/sectors/counties/indexes. The increased demand for green energy is also giving rise to many ETFs tracking these companies. Investing in energy ETFs, because of their intraday trading, low tracking error, diversity and liquidity, is now considered a better option than investing in similar mutual funds. But they can be risky investments as the prices can fall/rise within a short-period of time - with economical, political and natural changes.

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The Week Ahead: An unexpected decline in August durable goods and a disappointing new home sales number were catalysts for a third straight day of declines for stocks. In addition Fed governor Kevin Warsh warned of potential aggressive tightening down the road when rates turn higher. The Case Shiller Home Price Index is released on Tuesday, and the final GDP figures for the second quarter are due by Wednesday. Thursday, October 1 brings auto sales, personal income, and construction spending data. On Friday the employment report for September will be closely watched.

Stocks to Watch: Cabot Oil & Gas (COG) received orders from the Pennsylvania DEP to halt fracturing at natural gas wells after a chemical spill and until the company completes a number of safety tasks. Two upgrades were given: Holly Corp. (HOC) by Goldman Sachs, and Brunswick Corp. (BC) by RBC Capital, but both are hitting resistance after multi month runs. Two new issues started trading on Friday: Select Medical Holdings (SEM), a hospital operator which finished higher from its $10 offering price, and Shanda Games Limited ( GAME), a chinese video game operator closed lower from its $12.50 IPO price.

Special Note: The stock market appears to have completed its rise from the March lows. Both the DOW and S&P 500 have been tracing along the underside of a resistance line drawn off the highs of May, June, and August with the S&P briefly pushing through this line but now having fallen decisively back through it is a bearish technical pattern. The Dow Transports and Utilities Indexes are all in unison to the downside, and the Daily Sentiment Index from trade-futures.com reached a peak of 92% bulls near the recent high. One more upturn that fails to reach a higher high would confirm a near term peak.

Commentary provided by Barry Ward, Registered Principal, NobleTrading.com, Inc.

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Both technical correction and technical rally are market phenomena that occur for a stock or the market as a whole. The common features of the two are

1. These are not triggered by any fundamental or economic factors but by technical reasons.
2. Are short-lived - after that the stock/market resumes the original trend.

Both technical correction and technical rally are somewhat common events that can affect the portfolio performance; especially asset price and risk management.

Technical correction is the decline in prices after strong price increase. This can occur when traders become more cautious over rising prices of stocks (over-bought levels) and want to reevaluate the value of the stock. It can also occur when the prices touch an identified resistance level. In technical correction, the buying demand of the stock reduces seriously and often the price is dropped to a short-term support level.

Technical rallies are just opposite to technical corrections. Technical rally is the increase in prices after a downtrend. This occurs when traders become more eager to buy stocks, as the prices are at low levels (over-sold levels) after an extended downtrend OR occurs when the stocks cross/reach a significant resistance level. In technical rally, the buying demand of stocks increases considerably and often stocks are found moving against the market.

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Bullish side by side white lines is a bullish trend-continuation candlestick pattern indicating continuation of an existing bullish trend. This is a three candlestick formation comprised of all bullish (white or colorless) candlesticks.


The requirements of a bullish side-by-side white lines candlestick pattern include:

• The market should be characterized by a significant uptrend.
• The first day is a bullish day.
• The second day is a bullish day but the price opens a gap above.
• The third day is also a bullish day where the real-body of the candlestick is almost identical to the second day candlestick with (almost) the same opening and closing prices.

Bullish side by side white lines formation occurs when bulls are actively controlling the market movements. The first candlestick is an indication of a strong bullish trend, the trend strengthens with the formation of a second candlestick which opens a gap above the first candlestick and closes at a new high. Though the market opens much below on the third day (close to the second day's opening price) the bullish trend is expected to continue as the market closes close to the second day's closing price.

Bullish side-by-side candlestick is a highly reliable pattern of trend continuation. The reliability increases with the similarity of second and third candlesticks and with a new high formation of the third candlestick. Confirmation of trend continuation in the form of a bullish candlestick, a gap above opening or a higher close on the next trading day is indicated.

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Detrended price oscillator or DPO, as the name suggests, is an indicator which removes long-term price trends/cycles to identify short-term trend cycles and overbought and oversold levels. The idea is that a long-term trend consists of many short-term cycles and one can find good trading opportunities and turning points in trends by smoothing the long-term trend. Detrended price oscillator compares the closing price of a security with its moving average prices (n/2) +1 periods ago.


DPO is considered a handy trading tool as it effectively uncovers the hidden cycles of short term price ranges. The typical time period is 21 or 14 days. Moving Average of (n/2) +1 is represented as a line with value 0 (Zero) and DPO is represented as an oscillator moving above and below the line. Overbought and oversold levels are identified by comparing present DPO levels to past DPO (high and low) levels.

DPO-Indications

With detrended price oscillator, buy signals are generated when the DPO crosses above the zero line and sell signals are generated when DPO crosses below zero line. Traders can also go long when DPO forms higher troughs (as it indicates a possible intermediate uptrend) and can go short when DPO forms lower peaks (as it suggests a possible intermediate downtrend). Divergence between DPO and price can also indicate change in trends. Bullish divergence occurs when DPO makes higher low but the price makes lower low, and bearish divergence occurs when DPO makes lower high but price makes higher high.

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Gold exchange traded funds (ETFs) allow traders and investors to profit from ever changing gold prices. They passively track gold prices and thus the investor needn't invest money in physically buying/storing the precious commodity. Gold ETFs are getting very popular today. They can be of many types.

• They can hold physical gold bullion. The two big gold ETFs - State Street's streetTRACKS Gold Shares (GLD) and iShares Comex Gold Trust (IAU) - have tons of gold in their safe custody.
• They can track gold stocks/indexes. E.g. Market Vectors Gold Miners ETF (GDX) track holds stocks of gold companies.
• They can track derivatives. E.g. PowerShares DB Gold ETF (DGL) tracks Deutsche Bank Liquid Commodity Index - Optimum Yield Gold, which is composed of futures contracts on gold.

Trading gold exchange traded funds is totally different from buying and selling physical gold or gold futures. Trades are done 'cash only' and, unlike futures, there is no delivery of the precious metal. The advantages of trading gold ETFs include:

• Gold ETFs are more liquid instruments; traders can buy and sell any time online.
• No cost involved for storing the metal commodity (and insurance costs).
• Passive tracking of gold price; ETFs also have low maintenance costs.
• Easy to go long or short at any time.

The disadvantages include:

• They are considered risky investments as the investors can lose their investments if the banking institutions or the ETF issuing firms face financial crisis.
• There is brokerage fees associated with buying and selling ETFs.
• They are not suitable for those who want to physically buy and hold gold; and for those looking for very long-term investments.
• Trading gold futures demands better knowledge and research.

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The Week Ahead: The money market mutual fund guarantee by the government ended on September 18 while the FDIC and FHA are running out of funds and may tap large credit lines with the Treasury. Leading economic indicators from August are due on Monday. The FOMC begins a two day policy meeting on Tuesday concluding with an interest rate decision by Wednesday afternoon, The jobless claims figures and existing home sales arrive on Thursday. Durable goods orders and new home sales are released Friday.

Stocks to Watch: WR Grace & Co.(GRA) lifted strongly on the expectation that it will exceed previous forecasts for 2009 results as it pushes into price resistance in the mid 20's. Coventry Health Care (CVH) received a downgrade by Citigroup on a valuation basis having increased 50% this year. Zumiez inc. (ZUMZ), a clothing retailer, had strong back to school sales and received an upgrade by the Wedbush brokerage. Boston Private Financial Holdings (BPFH) closed on the sale of Gibraltar Bank & Trust for $93 million to a private investor.

Special Note: The FBI has announced they have been investigating Bank of America (BAC) for the past six months in regards to their purchase of Merrill Lynch on January 1 allegedly having failed to tell shareholders of Merrill's operating losses and large bonuses to executives. Some nervousness surrounds the Fed meetings this week as any signal of the unwinding of "quantitative easing" would hurt markets, especially since Chairman Bernanke believes the recession to be over.

Commentary provided by Barry Ward, Registered Principal, NobleTrading.com, Inc..

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Panic selling or the madness of the crowd causes great decline in stock prices and might lead to investors losing their money. But it also creates opportunities for investors to buy stocks at lower prices and sell them later for higher prices. Investing after panic selling is a trading strategy which requires good planning, market timing, and courage as well as technical and fundamental analysis.

Investing after panic selling is a risky trading practice and investors should be well equipped and educated. Here are some tips for investing after panic selling.

• The first thing is to make sure that there indeed is panic selling. Make sure that stock prices have fallen rapidly with high selling volume.
• Next, make sure that the panic selling is over. You should use fundamental and technical indicators to ensure that the high selling tendency is over. Trend lines, moving average indicators, chart patterns/formations and volume based indicators are good for this purpose.
• Confirmation of trend change and market timing is also important. Bullish indicators like a higher low, trend-change candlestick patterns, moving average crossover, and increasing buying volume can be helpful.
• Position sizing and stop losses - these are two important risk management factors. Stop losses are extremely important (tight ones will be better) as the downtrend may continue.
• Tip - for investors it will be better to use long-term moving averages (40 or 50-day moving averages).

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Tweezers top is a bearish market reversal pattern usually indicating an intermediate-term reversal of an existing uptrend. It is considered a weakly reliable candlestick formation and has two or more candlesticks with ideal highs. Bearish tweezers bottom can be considered as a short-term double top formation. The formation is considered widely as an indicator of short-term resistance levels.


The requirements of a bearish tweezers top candlestick pattern include,

• The market should be characterized by a significant uptrend.
• Two candlesticks are formed with ideal highs.

With bearish tweezers top pattern, the colors of candlesticks are not important; but many traders consider the pattern more reliable if the first candlestick is a long bullish one and the second a short bearish one. The candlestick real-bodies are also not important; often the second candlestick can be a hammer or doji. The candlesticks also needn’t be consecutive.

Bearish tweezers top formation occurs when a short-term top is formed in an existing uptrend. The new resistance levels, indicated by two identical highs, can result in a short term trend reversal. Tweezers top is a low reliable pattern and it needs confirmation of trend reversal. The reliability of the formation increases with significance of previous uptrend and with occurrence of an additional candlestick with the same high.

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The Week Ahead: The stock markets 6 month rebound has helped push consumer sentiment to a 3 month high. Tuesday is a key day for economic stats as business inventories, retail sales, and the Producer Price Index will be released. The August Consumer Price Index as well as Industrial Production numbers are on the calendar for Wednesday. Weekly jobless claims and housing starts are slated for Thursday.

Stocks to Watch: Cliffs Natural Resources (CLF) lifted there 2009 North American coal and iron ore sales projections as the stock challenges its earlier May and June highs. Encana Corp. (ECA) Board of Directors approved a reorganization into 2 highly focused energy firms of natural gas and integrated oil. The stock reached levels not seen since last October. Crane Company (CR) reached new highs for 2009 and was upgraded by Barclays.

Special Note: A review of the major indexes march toward there 4 and 3.3 year converging cycle lows due in 2010 discussed here in January indicates the market forming the peak that would precede a move to new lows within a year. In addition to the other stats and indicators mentioned here in previous weeks, evidence continues to mount to support this view with the Daily Sentiment Index of S&P traders now at 90% bulls and a badly lagging Dow Utilities Index and banking index (KRE).

Commentary provided by Barry Ward, Registered Principal, NobleTrading.com, Inc.

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Keltner channel is a popular indicator for analyzing trends and for finding trend changes. The indicator was introduced by Chester W. Keltner in 1960 in his book 'How to Make Money in Commodities'; Keltner named this indicator 'Ten Day Moving Average Trading Rule'.


Many later traders have modified the Keltner channel trend indicator for getting custom results. The original one has a center line and upper and lower lines drawn using simple moving averages. The center line is a 10-day simple moving average of typical price,


The upper line is the 10-day MA of highs on each day and lower day is the 10-day MA of lows on each day. The popular modifications of Keltner channel trend indicator include:

• Using different time periods
• Using Exponential Moving Average (EMA) for drawing the lines
• Using Average True Range (ATR) for drawing upper and lower bands

As there are different types of Keltner channels available, they are interpreted in different ways. In general, close above upper band is considered a bullish signal and close below lower band is considered a bearish signal. Crossing of upper band from above and of lower band from below indicate trend reversal, and buy and sell signals are generated accordingly.

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The Week Ahead: Unemployment continues an upward trend reaching 9.7%, but the pace of job loss slowed down to 216,000 in August. Healthcare reform will be top priority as congressional lawmakers return to D.C. on Tuesday. The Feds beige book of economic activity is released Wednesday with a scheduled primetime address by the President later that day. Jobless claims are due Thursday while wholesale trade numbers and import prices come out on Friday.

Stocks to Watch: Bridgepoint Education (BPI) took a nosedive after a government audit of its Ashford University campus may get a Department of Education non-compliance notice for misuse of federal student aid. Cascade Corp. (CASC) showed a larger than expected Q2 loss but part of it was due to a non-recurring restructuring cost so the stock rose. Jazz Pharmaceuticals (JAZZ) continues a torrent rise as takeover speculation was noted by the Leerink Swann brokerage.

Special Note: The current PE of 17 on the S&P 500 is historically overvalued. The American Association of Independent Investors (AAII) recently showed only 19% bears which is where it was at the all-time high. Insiders are selling at 28 times the amount they are buying. Speculation in low priced stocks such as FNMA, Freddy Mac, and Citicorp reached as high as 25% of NYSE volume. Interesting trivia, September has not marked a high in the DOW in any given year since 1978, but has marked a high 9 times since 1896. It may be due.

Commentary provided by Barry Ward, Registered Principal, NobleTrading.com, Inc.

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Companies listed in stock exchanges have to release and file their earnings reports every three months. The period in which most companies report their earnings is a period of high volatility. Many traders, especially short-term traders and swing traders, closely watch the earnings calendar to find good trading opportunities.

• The earnings period is noticeable with high price volatility, rumors, expectations and more news.
• This is the period when companies are highlighted in the media, criticized for their performances and comparisons are made.
• This is also the period when new growing or profitable companies and underachievers are identified and company stocks are valued on their merit.

Trading the earnings calendar is a very difficult strategy to master as there is no surety that the stock price will go up with positive earnings reports or fall with negative earnings. The market expectation of a company, the comparison of a company's earnings with others or the industry performance, surprise factors, and other market factors, all come into play. Many swing traders follow the earnings trading strategy of 'buy the rumor and sell the news.'

Trading the earnings calendar is a very risky trading strategy as it requires very good skills in picking the rumors and evaluating them, very good market timings and position sizing, and a sound risk management plan. Often companies can change their earnings reporting dates and the surprise factor is so important that it can take the price in either direction within a very short period of time; of course if no surprise, the prices are expected to stay the same.

To stay on top of the latest earnings announcements or to search for historical earnings, check out NobleTrading's earnings calendar.

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Initial Public Offerings (IPOs) are always considered good trading and investing opportunities. IPOs are also the key step, from which a company's financial info and growth potential are made available to the public. An initial public offering procedure is as follows:

• The very first step is the company registration. All public traded companies need to register with the concerned regulatory body; in the USA it is the Securities and Exchange Commission (SEC).
• The registration demands filing public offering and other legal documents. The company prospects are to be made publicly available. The prospects should include details such as present company financials, company management, stock owners, growth potential and potential risks.
• After the registration, the company needs to tie up with investment bank(s) for the distribution of their shares.
• The next step is the price setting. Both the company and the investment bank come together to set a price. The price can be of lowest IPO price (traditional IPO), highest price (Dutch Auctions IPO) or of a price range.
• The price is set based on the company's financial stability, past performance, growth potential and market willingness.
• After that the stocks are made available to broker clients and are then publicly offered to retail investors/traders and institutional clients.
• The stock is also registered in a centralized stock exchange (like NYSE), where it is then traded publicly on demand and supply basis.

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Tweezers bottom, or kenuki bottom, is a bullish market reversal pattern usually indicating an intermediate-term reversal of an existing bearish trend. It is a weakly reliable candlestick formation consisting of two candlesticks with identical lows. Bullish tweezers bottom can be considered as short-term double bottom formation and is a good indicator of short-term support levels.


The requirements of a bullish tweezers bottom candlestick pattern include:

• The market/security should be characterized by a downtrend
• Two candlesticks are formed with identical lows

The colors of the candlesticks are not important in this formation; but many traders consider the pattern more reliable when the first candlestick is a long bearish one and the second a short bullish one. The real-body of candlesticks is also not important; often the second candlestick can be an (inverted) hammer candlestick or a doji candlestick. The candlesticks needn’t be consecutive too.

The bullish tweezers bottom pattern is formed when a short-term bottom is formed in an existing downtrend. The new support level formed indicated by two identical bottoms can result in a short-term trend reversal. Tweezers bottom is a low reliable pattern and needs confirmation of short term trend reversal. The pattern becomes more reliable when one additional candlestick is formed with the same low.

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Aroon is a relatively new indicator developed by Tushar Chande in 1995, which is used to analyze the direction and strength of trends. Aroon, a Sanskrit word meaning ‘dawn’s early light,’ represents the long-term or short-term trend existing in a stock or currency and also predicts trend reversals. It is an indicator comprising two lines Aroon-Up line and Aroon-Down line. Aroon-Up line measures the amount of time (in percentage) since highest price during the time period and Aroon-Down line measures the amount of time (also in percentage) since lowest price during the time period.

Aroon-Up = (No. of Periods – No. of periods since highest price) x 100

No. of periods

Most traders use Aroon indicator for a range of 25 time periods; many others use 14 time periods. Aroon indicator is an easy to interpret indicator. There are four important values 0, 30, 70 and 100. Strong bullish trend is identified when Aroon-Up is at or near 100. Potential uptrends are indicated when the Aroon-Up line is fluctuating between 70 and 100 (and Aroon Down is between 0 and 30). You can expect a weak bullish trend when Aroon-Up is below 30. Similarly, a strong bearish trend is signified when Aroon-Down is at or near 100, potential downtrends when it is between 70 and 100, and weak bearish trend when it is below 30.

Crossovers are also important. Bullish signals are generated when Aroon-Up crosses Aroon-Down upwards and bearish signal when it crosses downwards. Consolidation of existing trend is indicated when both lines run parallel to each other. Many traders also combine Aroon Up and Down lines to make a single oscillator having values between 100 and -100. Remember Aroon indicator is a lagging indicator and offers better results when used with other indicators.

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With the increasing popularity of exchange traded funds (ETFs) in recent years, the futures contracts on them are also becoming popular. Although traded much differently, ETFs futures also allow the traders to profit from the price volatility of tracking index or market. They were introduced into the market in 1997 and currently there are three stock index futures traded – S&P 500 Depository Receipts (large-cap stocks), NASDAQ 100 Index Tracking Stock (top 100 financial companies listing on NASDAQ) and IShares Russel 2000 Index Fund (small cap stocks).

Trading ETFs futures is completely different from trading ETFs.

• They are not traded in shares but as standardized units of 100 shares.
• They do have expiration dates on which the settlement is physically settled by delivering the underlying futures contracts.
• They are traded through futures account, not through securities account.
• Futures have inherent leverage on margin, often up to 15:1, allowing traders to control more money than they deposited.

ETFs futures can offer all the advantages of underlying ETFs such as diversity, liquidity and low/no tracking error. The added advantages include easy to own underlying ETFs, easy to hedge portfolio risks, easy to go long or short at any time without borrowing the shares. They are electronically traded and demand low capital requirements. But ETFs futures can also be riskier; and futures trading demands strategies different from stock or ETF trading.

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