SMI Stocks Technical Analysis and SMI Stocks Signals

Developed by William Blau.

The SMI is an adaptation of the classic Stochastic Oscillator that smoothes out the stochastic 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 and 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 and -100, this indicator is also less prone to whipsaws compared to the stochastic oscillator.

Stocks Technical Analysis and How to Generate Signals

Buy and Sell Stocks Signals/ Crossover Signals

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

Buy and 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 oversold level and then rises above this level and 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 and 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