I trade stocks utilizing two principles. One is Japanese candles and the other is the Disparity Index (DI).
The DI is basically another indicator of momentum. When a stock is on the decline, the momentum is either constant on the downward path or accelerates (more people begin to panic as they notice the stock price is going lower and lower). The DI is a valuable tool because as the stock makes new lows, the DI index must also make new lows or the momentum begins to change.
On 12-18-95, Atmel made a new low at $20.25 and the DI was -21.
On 01-10-96, Atmel made a new low at $19.38 but the DI was -13.
This signifies that the momentum of the previous trend is diminishing. Albeit, in any panic driven market, the price can fall rapidly at any time but there is no question that the momentum is diminishing for now.
My studies indicates that when there is a divergence in the DI, we usually see an upward bias. At any value below $19.88, ATML becomes oversold relative to the DI and becomes a short term buy. If the market opens lower and the stock sells off too much too fast, then BUY!!!
The prospects of ATML seem promising. Some firms on Wall Street like them, the company is buying back shares, and they seem to have good management. But Wall Street is not efficient, so trading becomes necessary especially in today’s environment!!!!