13 February 2008

DXD - When the Dow Looks Short-Term Overbought

Yes, I've made another pwetty graph with unseasonally Christmas-y colors, depicting some simple technical data. Please click on the image to make it larger and somewhat readable.

The chart shows the 30 Dow components, along with their corresponding 2-and-14-period Relative Strength Index readings at the close of each day. When the RSI(2) falls at or below 10, that grey cell goes green. When the RSI(2) is at or above 90, the cell goes red. Green signifies short-term oversold, and suggests going long; conversely, red signifies short-term overbought, and suggests going short.

At the close of market today, the Dow rose 1.45% on light volume. The Dow is up 3% for the week, after last week's 4.5% drop. Fifteen of the 30 Dow components show up in the red today on the above chart. Another six components have RSI(2) readings at or above 80.

There are zero green boxes.

When the Dow looks short-term overbought, I like to take a look at shares of DXD.

Guess I liked what I saw. I had an order filled today at $55.48 a share. This is intended to be a short-term play, using straightforward short-term technical indicators. The goal is to trade out of the position within ten days, if/when boxes on the chart start to turn green.

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