What is the Schaff Indicator Suggesting For Irobot Corp (IRBT)?

Irobot Corp (IRBT) shares have seen their Schaff Trend Cycle gradually uptrend this week over the past 3 sessions.  While this indicates nice price momentum, it also suggests that if the reading moves into overbought territory (STC of 70), then the liklihood of a reversal greatly increases.  Investors will be watching very closely over the next few days to see if the trend contiunes or reverses. 

The Schaff Trend Cycle (STC) indicator combines the common indicators of MACD & Stochastic. The benefit of the Schaff Trend Cycle is that it is meant to be quicker than the standard macd and stochastic signals.  The indicator uses similar methods to a MACD i.e uses exponetial moving averages but applies a cycle factor to them. Then the ‘price’ is smoothed using a mofidied Wilders’ smoothing algorithm.  The Schaff Trend Cycle indicator fluctuates between 0 and 100. Readings below 20 are considered oversold while readings above 80 are considered overbought.  The STC indicator fluctuates between 0 and 100. Readings below 20 are considered oversold while readings above 80 are considered overbought.

Individual investors may tend to become more bullish at market tops and more bearish at the bottoms. This goes against the buy low sell high mantra that is widely preached in the investing community. The two emotions that come into play here are greed and fear. Investors tend to get greedy when they see stocks flying to new highs. It can be very tempting to get in on a name that has been running hot for a time. On the other side of the coin, investors often get fearful when the market is tanking. The fear of losing becomes prevalent when this occurs, and investors may be tempted to sell like the rest. Although this goes against logic, many investors will still end up buying high and selling low.

Moving to some additional technical metrics, we note that Irobot Corp (IRBT) presently has a 14-day Commodity Channel Index (CCI) of 159.40. The CCI was created to typically stay within the reading of -100 to +100. Traders may use the indicator to determine if a stock is trending or to spot overbought/oversold conditions. A CCI reading above the +100 level would suggest that the stock is overbought and possibly primed for a correction. On the other hand, a reading of -100 would indicate that the stock is oversold.

Investors might be reviewing portfolio performance over the last six months. Many investors will be tracking shares that are trading near important levels such as the 52-week high and 52-week low. When a stock is trading near new 52-week high, investors may have to decide whether they should sell or hold on for future gains. Stocks that are moving towards a new 52-week low may also be worth keeping an eye on. There are many factors that can have an impact on the health of a particular stock. This is one reason why stock picking can be extremely tough at times. Because there are always so many things to monitor, it may be next to impossible to build a formula that will continually beat the market. Even after all the applicable information has been examined, the investor still has to make sense of the data and figure out what to do with it. Knowing how to use company data can end up being the difference between handsome gains and crippling losses. 

A popular tool among technical stock analysts is the moving average. Moving averages are considered to be lagging indicators that simply take the average price of a stock over a certain period of time. They may also be used to assist the trader figure out proper support and resistance levels for the stock. Currently, Irobot Corp (IRBT) has a 200-day MA of 86.54, and a 50-day of 88.38. Presently, the stock has a 14-day RSI of 79.47 and the 7-day is sitting at 90.14. The Relative Strength Index (RSI) is one of multiple popular technical indicators created by J. Welles Wilder. Wilder introduced RSI in his book “New Concepts in Technical Trading Systems” which was published in 1978. RSI measures the magnitude and velocity of directional price movements. The data is represented graphically by fluctuating between a value of 0 and 100. The indicator is computed by using the average losses and gains of a stock over a certain time period. RSI can be used to help spot overbought or oversold conditions. An RSI reading over 70 would be considered overbought, and a reading under 30 would indicate oversold conditions. A level of 50 would indicate neutral market momentum.

Irobot Corp (IRBT)’s Williams Percent Range or 14 day Williams %R presently is at -8.39. In general, if the reading goes above -20, the stock may be considered to be overbought. Alternately, if the indicator goes under -80, this may show the stock as being oversold. We can also take a look at the Average Directional Index or ADX of the stock. For traders looking to capitalize on trends, the ADX may be an essential technical tool. The ADX is used to measure trend strength. ADX calculations are made based on the moving average price range expansion over a specified amount of time. ADX is charted as a line with values ranging from 0 to 100. The indicator is non-directional meaning that it gauges trend strength whether the stock price is trending higher or lower. The 14-day ADX is 24.51. In general, and ADX value from 0-25 would represent an absent or weak trend. A value of 25-50 would indicate a strong trend. A value of 50-75 would indicate a very strong trend, and a value of 75-100 would signify an extremely strong trend.

Even though the stock market can seem erratic and unpredictable, investors may be able to take some steps to help combat the chaos. One thing that investors have the ability to do is create an overall plan and stick to it. This may be one of the single most important factors in achieving success in the stock market. Of course, if something doesn’t seem to be working over an extended period of time, then maybe some action may need to be taken and the plan should be adjusted. Scrapping a plan too early may bring about a lot of unnecessary worry and confusion. Staying disciplined and keeping the proper perspective might help the investor better position themselves on the front lines. 

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