Canadian CANNAINVESTOR Magazine October 2017 - Page 230


Have you ever heard the term oversold or overbought and wondered what that really meant? Technically speaking it means that the stock has too much pressure in that given direction. Sometimes there is justification such as news or swarms of insider buying/selling that will keep these indicators at their levels. The RSI indicator is one of the most commonly used indicators where any value that is 70 and above is considered overbought and prices are likely to stop rising or even drop. At the other end, oversold occurs when the RSI hits 30 and below.

The Stochastic Oscillator can help us provide the same visual cues that we obtain from the RSI indicator as well. The difference being that 20 and under imply oversold, 80 and over imply overbought. The Stochastic Oscillator is a momentum indicator that compares the closing price of a stock to the range of its prices over a time period. Take a look at the trend on Canopy that I have illustrated above. It is clearly trending up, but you can see it moves up and down within this range. Observe the indicators talked about here just now. When the Stochastic indicator was overbought, prices we at their peak in this range, and vice versa for their lows. The great thing about these indicators is that it allows you to make more confident decisions on when to buy or sell a particular stock. Incorporate these trading techniques into your toolbelt and start becoming a more confident trader/investor today!

Canopy Growth Corp (TSX:WEED)