SMI Stocks Technical Analysis & SMI Stocks Signals

Developed by William Blau.

The SMI technical indicator is an adaptation of the classic Stochastic Oscillator indicator that smoothes out the stochastic trading indicator oscillations.

Construction of SMI

This stocks indicator is calculated by comparing the stocks price relative to the average of an n number of periods.

Then instead of plotting these values directly, smoothing using an Exponential Moving Average is applied & then the values drawn to form the SMI.

When the closing stocks price is greater than the average of the range, the SMI will move up.

When the closing stocks price is less than the average of the range, the SMI will move down.

This oscillator ranges between the values of +100 & -100, this indicator is also less prone to whipsaws compared to the stochastic oscillator.

Stocks Technical Analysis and How to Generate Signals

Buy & Sell Stocks Signals/ Crossover Signals

The SMI can be used to generate buy & sell signals using the method shown below, Buy when the SMI is heading upwards and sell when its heading downwards.

Buy & Sell Stocks Signals/ Crossover Signals

Overbought/Oversold Level Stocks Trading Crossovers

• Overbought levels above +40
• Oversold levels below -40

Buy signal is generated when this oscillator falls below over-sold level & then rises above this level & starts to move upwards.

Sell Stocks Signal is generated when this oscillator rises above overbought level and then falls below this level and starts to move downwards.

Divergence Stock

The example illustrated and explained below shows a bearish classic divergence between the stocks price & the SMI. When the SMI showed this divergence the stocks price trend reversed and started to move in a downward direction.

Bearish Stocks Trading Divergence