Dynamic Over-bought and Over-sold Zones

//Dynamic Over-bought and Over-sold Zones

Hawk’s Scan Sentry Report September 6

Welcome to Hawk’s Scan Sentry Report. This is Sunday night with stock recommendations from Jan Arps’ Scan Sentry Toolkit for the week beginning September 6.

Today I want to talk about the Trend Exhaustion1 (R2) indicator. As many of you may know, the Trend Exhaustion1 tool is based on the Radar2 Price Acceleration oscillator, also known as the Arps Price Leader. If you have experimented with the TE1 tool at all, you know that you can use it in two different ways. It can either mark an exit from an overbought or oversold zone, or it can mark a cross of the fast and slow lines. Well, there are advantages and disadvantages to both of these approaches. If you use the overbought/oversold cross you will get fewer signals but, in order to set the OB-OS zones, you must know what the extreme ranges of this unbounded oscillator are for whatever market you are looking at.  If you use the fast/slow cross you will get a very timely signal; but, because the Radar2 Price Leader is so sensitive,  you have to filter out a lot  of the crossing signals to find the trend exhaustion indication which you want. Well, one solution is to scan your list of stocks using the TE1 tool applied twice, and in that way you can find symbols which fulfill both criteria at once. This should filter out a lot of the unwanted signals and just show you the Radar2 crosses around the overbought and oversold zones (which are the ones you typically want). Well, there is still one problem…. because the  Radar 2 Price Leader is an unbounded oscillator, the overbought and oversold zones vary from instrument to instrument.  If you want to use a scanner to monitor for OB-OS crosses you would have to readjust the OB-OS zones for every symbol. In order to overcome this obstacle, tonight I made myself  a custom TE1 scanning indicator which looks at every major peak and valley in the Radar2 oscillator and averages the highest and lowest 10 in order to set a dynamic overbought and oversold zone for any market.  These ‘dynamic’ zones will allow the indicator to change and adapt to the market as the market itself influences this unbounded indicator.  When I run this modified TE1 indicator through a spreadsheet application or a scanner, I am able to let every symbol set its own overbought or oversold zone. Consequently I can get much more timely and significant signals. Here is an image of the custom tool applied to a spreadsheet and a chart.

Using daily charts for my stock scans,  the only results I get with this tool right now are bearish. Consequently I’ll use other indications to try and find any potential buying opportunities this week.

To those of you who attended last Thursday’s webinar which presented  some of our best selling tools on the Ninja Trader platform, once again thank you. We will try and post a video of that presentation on our website soon. Of course, you can at any time get some good instruction on how to use some of  Jan Arps’ tools from our YouTube videos which can be accessed from the ‘videos’ page of our website.

So, without further ado, here are the stocks that our indicators are recognizing as potential trading opportunities this week. In these volatile times, stock trading becomes trickier and riskier. Please, never risk more than you can afford to lose.

And now for this weeks stock recommendations….


IEF                  SYKE

YONG             SFSF

UL                   ATK


May the trend be with you,


Jan Arps’ Traders’ Toolbox is not an investment advisory service nor a registered investment advisor or broker-dealer and does not purport to tell or suggest which securities customers should buy or sell for themselves. Examples presented on this site are for educational purposes only.  It should not be assumed that the methods, techniques, or indicators presented in these examples will be profitable or that they will not result in losses. There is a high degree of risk in trading.  Readers using this information are solely responsible for their actions and trade at their own risk. Readers should always check with their licensed financial advisor .

2018-01-08T08:30:13+00:00September 6th, 2011|Hawk's Picks|