investsmart

DICTIONARY

VIX = Market Volatility Index --- read more

RSI is short for relative strength index
CCI is short for commodity channel index
They are two momentum indicators that I generally take into account when deciding on a position. I look especially for divergences between indicator and price as this usually indicates that a rally/fall is losing steam. The best signals occur when the indicator hits an extreme reading, then the price rallies/falls a little more, but the indicator fails to follow the price up/down, making a lower peak (or higher trough). A negative divergence occurs on highs and is bearish, a positive one on lows and is bullish.

The two links below offer a more detailed explanation.

http://www.stockcharts.com/education/What/IndicatorAnalysis/indic_RSI.html

http://www.equis.com/Education/TAAZ/?page=42

If you would like to write a dictionary item please email patrick@laslett.info