Ultra Financials Proshares (UYG) are in trader’s focus this week as the Schaff Trend Cycle indicator has trending higher consistently over the past week. Investors will be watching to see if the price level breaches the overbought signal at 75, which would suggest the strong likelihood of a near-term pullback.
Introduced in 2008 by Douglas Schaff, the conecpt of the Schaff Trend Cycle (STC) is to identify peaks and lows and predict reversals by running through a cycle oscillator, creating an effective indicator for entry and exit signals, when used in conjuction with additional signals. The STC combines an exponential moving average with slow stochastics to display a signal line that oscillates between two levels on a scale of 0 to 100.
Taking a deeper look into the technicals, at the time of writing, the 14-day ADX for Ultra Financials Proshares (UYG) is standing at 37.56. Many chart analysts believe that an ADX reading over 25 would suggest a strong trend. A reading under 20 would suggest no trend, and a reading from 20-25 would suggest that there is no clear trend signal.
What Is ADX?
The Average Directional Index or ADX. The ADX was created by J. Welles Wilder to help determine how strong a trend is. In general, a rising ADX line means that an existing trend is gaining strength. The opposite would be the case for a falling ADX line.
When getting into the markets, most investors realize that riskier stocks may have an increased potential for higher returns. If investors decide to take a chance on some of these stocks, they may want to employ some standard techniques to help manage that risk. This may involve creating a diversified stock portfolio. Mixing up the portfolio with stocks from different sectors, market caps, and growth potential, may be the right move. In general, the goal is to maximize returns in accordance with the individual’s specific risk profile. It should be obvious that no matter how well rounded the portfolio is, there are always risks in the equity markets. Having a sound plan before investing can help ease the burden of knowing that markets can sometimes do crazy things without any rhyme or reason.
Looking further at additional technical indicators we can see that the 14-day Commodity Channel Index (CCI) for Ultra Financials Proshares (UYG) is sitting at 143.05. CCI is an indicator used in technical analysis that was designed by Donald Lambert. Although it was originally intended for commodity traders to help identify the start and finish of market trends, it is frequently used to analyze stocks as well. A CCI reading closer to +100 may indicate more buying (possibly overbought) and a reading closer to -100 may indicate more selling (possibly oversold).
Moving averages can help spot trends and price reversals. They may also be used to help find support or resistance levels. Moving averages are considered to be lagging indicators meaning that they confirm trends. A certain stock may be considered to be on an uptrend if trading above a moving average and the average is sloping upward. On the other side, a stock may be considered to be in a downtrend if trading below the moving average and sloping downward. Shares of Ultra Financials Proshares (UYG) have a 7-day moving average of 137.17. Taking a glance at the relative strength indictor, we note that the 14-day RSI is currently at 78.53, the 7-day stands at 85.75, and the 3-day is sitting at 91.94.
The Relative Strength Index (RSI) is a momentum oscillator that measures the speed and change of stock price movements. The RSI was developed by J. Welles Wilder, and it oscillates between 0 and 100. Generally, the RSI is considered to be oversold when it falls below 30 and overbought when it heads above 70. RSI can be used to detect general trends as well as finding divergences and failure swings.