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A Major Bearish Cross For United Continental

Published April 8, 2017
9:32 PM

On April 7, 2017, the United Continental Airlines (UAL) 50 daily moving average (DMA) crossed below its 100 DMA. Historically this has occurred 16 times and the stock drops a minimum of 1.016%. The stock has a median loss of 6.904% and a maximum loss of 47.248% over the next 10 trading days.



United Continental Holdings Chart From TradingView.com

When we take a look at other technical indicators, the relative strength index (RSI) is at 52.1533. RSI tends to determine trends, overbought and oversold levels as well as likelihood of price swings. I personally use anything above 75 as overbought and anything under 25 as oversold. The current reading declares the stock is relatively neutral, and has been trending up.

The true strength index (TSI) is currently -9.9279. The TSI determines overbought/oversold levels and/or current trend. I solely use this as an indicator of trend as overbought and oversold levels vary. The TSI is double smoothed in its calculation and is a great indicator of upward and downward movement. The current reading declares the stock is down, but could head up soon.

The positive vortex indicator (VI) is at 1.1103. When the positive level is higher than 1 and higher than the negative indicator, the overall price action is moving upward. When the negative level is higher than 1 and higher than the positive indicator, the overall price action is moving downward. The current reading declares the stock has been up, but has begun a slight retreat.

The stochastic oscillator K value is 79.2644 and D value is 84.3425. This is a cyclical oscillator that is highly accurate and can be used to identify overbought/oversold levels as well as pending reversals and short-term activity. I personally use anything above 80 as overbought and below 20 as oversold. When the K value is higher than the D value, the stock is trending up. When the D value is higher that the K value the stock is trending down. The current reading declares the stock is overbought and due to head down.

Considering the moving average crossover, RSI, TSI, VI and stochastic levels, the overall direction appears to be neutral and possibly heading down. Based on historical movement compared to current levels and the current position, the stock could lose another 3% over the next 10 trading days. Although this DMA cross has only occurred 16 times, other indications support a near-term drop of more than 1%.

DISCLOSURE: I currently do not have positions in the stock mentioned above. I most likely will not enter a position within the next 72 hours. Historical movements and technical indicators should never be the sole basis for entering positions involving risk. Make sure appropriate research is conducted prior to taking any risk in a marketplace.

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