There are many arbitrage technicals analysis tools out there. However, I am only going to discuss the ones that concern us in order to apply the Arbitrage Investing System.
Stocks charts in different lapses of time: the year to date (YTD), the 1-year and 3, 5, 10-years. Check if the prices are up or down for those periods of time. Look at the dividend events and determine whether they are increasing or decreasing.
Look at the 150-day moving average. It will give you a sense of the stock trend (and whether prices are moving up or down). The 150-day is also known as the smoothing mechanism, a test to see if the trend is up, “bullish.”
A down trend, “bearish,” is a negative indicator; think twice before buying that security.Also, look at the price action relative to the volume.
Volume is a confirmation mechanism, is a lie detector…
High volume and prices up is a good signal that the market is bullish.
High volume and prices down is a bad signal that the market is bearish.
Very high volume can also indicate capitulation, which means the end of a trend.
Low volume and prices up is generally a bad to neutral signal that the market is bearish.
Low volume and prices down is a bad to neutral signal that the market is bearish.
These are only but a few market technical indicators. There are many others that are mostly used for day trading, and speculation and as you know the arbitrage community don’t invest for speculation.
Now, let me introduce to you the Arbitrageur’s proprietary equation.
((present price – past price) + accumulated distributions) / past price
Present Price: current market price.
Past Price: price from the initial public offering – IPO.
The key result metric for this equation is a positive ratio of 0.314 or higher.
I prefer a strong 0.618 ratio value!
In order to download this formula already programmed on an excel spreadsheet, please consider investing in the Arbitrageur Investing System.
The Arbitrageur equation is not suitable or desirable to analyze all securities.
The Arbitrageur Ratio is based on the past performance of the security, and past performances do not guarantee future results.
It is important to understand that you could lose money by investing in any kind of security, even if it passes the Arbitrageur Test.
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