Thursday, December 04, 2008

Is The Utility Index About To Make A Large Move?

Utility stocks have been quiet over the past 7 weeks as can be seen in the above daily chart of UTY. The Bollinger Bands are contracting and the ADX is at a very low level. The combination of a low ADX combined with contracting Bollinger Bands usually means a large trending move is in the near future.

Which way will the UTY index breakout? Nobody knows but based on my experience I'd rather go with a downside break to short than an upside breakout to buy. As always, we'll see what happens.


Anonymous said...

Thank you for your always interesting comments.

What is your opinion on using DMI as a signal for trading? If so, how do you use it? How accurate is it compared to MACD?

Kevin said...

DMI and MACD measure two different aspescts of price movement so it's hard to compare the two. Most indicators are useful ONLY when COMBINED with other indicators.


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