Have you ever wondered how these tools stack up against each other? Which one is the best? I also list the stocks recently signaling, based on the best performing indicators.
The Indicators I Evaluated: Below are some of the indicators that I looked at. Perhaps that is why no one else tries to quantify their performance. I am taking a very basic approach to what I call a buy signal. The RSI is an oscillator that ranges from zero to A best reading suggests a stock is oversold and ready to bounce. A typical buy level for this indicator is Because stocks can stay oversold for bands extended period of time, the buy signal is defined as when the RSI goes from below 30 to above In other words, it was oversold and is now heading upward.
The MACD is calculated using the difference in two different moving averages for a stock. A moving average of that difference is then used, and called the signal line. A common buy signal is generated when the MACD crosses above that signal line. A golden cross is when a shorter bollinger moving average crosses above a longer indicator moving average.
In the analysis below, I used a day and day moving average. This is simply looking at the stock price crossing above a certain moving average. I compared returns after best price crossed above and day moving averages. These use a moving average, and then bands are placed two standard deviations above and below it. When the stock price touches the bollinger band, it is often considered oversold, and a bounce in the stock price is expected.
For a stock on the rise, some traders might wait for a pullback to enter the position. One popular way to define a pullback which is then a buy signal is when the stock falls to within a range of a rising moving average.
I considered pullbacks best the day and day moving averages. Quantifying Indicator Performance the Past Five Years: Indicator went back to and considered Best stocks. I found the number of times the stocks signaled for each indicator, bands well as their return over the next month of trading specifically, 21 trading days. The table below summarizes the returns for each indicator:.
The best indicator over the past five years was a stock pulling back to its day moving average. Over the next month of trading, stocks indicator a gain of 1. The next best signal by average return and percent positive was Bollinger Bands. The worst indicator, at least over the past five years, was the Bands Cross -- that is, when a indicator day moving average crosses over its day trendline.
Technical analysis indicators move in and out of favor. Different indicators will work better or worse in different time frames and environments. The table below shows how these indicators have been doing over the past 12 months.
Interestingly, a pullback to the best moving average, which was the best indicator in the table above, is actually one of the worst indicators over the last year. The average return and percent positive rank sixth and seventh, respectively, out of the eight indicators listed. The best indicator since has been the Bollinger Bands. That indicator ranked first in both average return over the next month and percent positive. A stock crossing over its day moving average has also been a very good indicator recently.
If you're looking for some short-term trade ideas, the tables below bollinger be a starting point. Over the past year, these have been pretty good buy signals bollinger stocks:. Record Close for Dow Jones Industrial Average; Consumer Staples Rocked. Dow Wins Another Week Despite Energy, Tech Struggles.
How Stocks, Gold, Bonds, and the Dollar Perform On Fed Days. MY ACCOUNT CONTACT US SEARCH. ABOUT US NEWS AND ANALYSIS TRADING SERVICES OPTIONS EDUCATION BROKER CENTER 30 FREE TRADES. Indicator of the Week: The two best SPX buy signals in indicator last year have been Bollinger Bands and day moving average crossovers. Stocks quoted in this article: The table below summarizes the bollinger for each indicator: Over the past year, these have been pretty good buy signals for stocks: Sign up now for a trial subscription of Schaeffer's Expiration Week Countdown!
We'll send you 5 trades for expiration week, each targeting double- or triple-your-money gains in less than 5 days. Welcome to Schaeffer's Investment Research! We are a privately held provider of stock and options trading recommendations, options education, and market commentary, headquartered in Cincinnati, Ohio.