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Early warning

In the early warning service Investtech.com calculates the price levels that will trigger the next days buy and sell signals (signal levels). This gives you the opportunity to decidebeforehand what you want to do if a buy or sell signal is given and hence to act very quickly if this should occur. By using the early warning system you get an opportunity to act on the very same day that the signal occurs.
The early warning service specifies the closing price levels that will trigger different types of technical signals. If the closing price the next day penetrates the specified levels, Investtech.com's analyses will generate buy or sell signals. We emphasise that the closing price must penetrate the indicated levels in order for a signal to be given - if the level is only temporarily penetrated during the day, a signal will not be generated.
The table below shows an example of information from the early warning system. The text below the table explains how the information should be interpreted, and especially what will trigger buy and sell signals.

Table 1: Example of early warning for a company.

Price Patterns are specified with a support or resistance level. An upward penetration of a formation will trigger a buy signal and a downward penetration will trigger a sell signal. In addition, the objective or price objective for the share is specified for a penetration of the formation.
In table 1 an Inverted Head-and-Shoulder formation will give a buy signal if the price rises above 48.42. After a decisive penetration of this level, a further increase to 79.37 or even higher can be expected.

Short term and Long term Trading Range. These price levels indicate support and resistance levels and a penetration of these will give a sell or buy signal respectively. An upward penetration will give a buy signal and a downward penetration will give a sell signal.
Table 1 shows that a closing price higher than 49 will generate a buy signal for both the Short and the Long Term Trading Range indicator.

Moving Average: The price specification for moving average indicates when the short-term average has the same value as the long-term average. A penetration of this will trigger a buy or sell signal and can indicate a trend reversal.
Table 1 shows that a closing price lower than 12.47 will trigger a sell signal from Moving Average. A value of 0 would mean that it is impossible for the indicator to trigger a signal the next day (the price would have to be negative).

High RSI (Relative Strength Index) indicates when the share enters into or comes out of an overbought condition (i.e. RSI=70) according to the RSI indicator. That RSI shows overbought indicates that the share has risen very rapidly lately, without the normal downward corrections along the way. This is often interpreted as a slight warning that a short-term downward reaction can come. If one is to sell on the basis of RSI, however, it is customary to wait until the RSI shows negative divergences, e.g. that the RSI comes out of the overbought condition. The use of RSI should be combined, however, with other observations.
In table 1 a closing price of 54.40 will give an RSI-value equal to 70 (the threshold value for overbought).

Low RSI indicates when the share enters into or comes out of an oversold condition (i.e. RSI=30) according to the RSI-indicator. That RSI is oversold, indicates that the share has dropped very sharply lately, without the normal upward corrections along the way. This is often interpreted as a slight warning that a short-term upward reaction can come. If one is to buy on the basis of RSI, however, it is customary to wait until the RSI shows positive divergences, e.g. that the RSI comes out of the oversold condition. The use of RSI should be combined, however, with other observations.
In table 1 a closing price of 41.07 will give an RSI-value equal to 30 (the threshold value for oversold).

Note that the indicated signal levels must be penetrated in order for a signal to be generated. If the closing price is equal to the signal level, the support or resistance level has not been penetrated and the analyses do not generate a sell and/or buy signal.


Investtech guarantees neither the entirety nor accuracy of the analyses. Any consequent exposure related to the advice / signals which emerge in the analyses is completely and entirely at the investors own expense and risk. Investtech is not responsible for any loss, either directly or indirectly, which arises as a result of the use of Investtechs analyses. Details of any arising conflicts of interest will always appear in the investment recommendations. Further information about Investtechs analyses can be found here www.investtech.com/disclaimer. The content provided by Investtech.com is NOT SEC or FSA regulated and is therefore not intended for US or UK consumers.

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