Chartists are paying particular close attention to shares of Makkah (4100.SA) as the equity has touched the near-term bottom Bollinger Band, touching 84.40 on a recent trade. Using this along with several other technical indicators can help investors understand if the shares will continue the downward momentum or bounce back up from the band.
Bollinger Bands are a technical analysis tool, specifically they are a type of trading band or envelope. Trading bands and envelopes serve the same purpose, they provide relative definitions of high and low that can be used to create rigorous trading approaches, in pattern recognition, and for much more. Bands are usually thought of as employing a measure of central tendency as a base such as a moving average, whereas envelopes encompass the price structure without a clearly defined central focus, perhaps by reference to highs and lows, or via cyclic analysis. We’ll use the term trading bands to refer to any set of curves that market technicians use to define high or low on a relative basis.
As a market becomes volatile, its Bollinger bands will expand (referred to as expansion); as it flattens out they will contract (contraction). In this way, they enable traders to see beyond short-term volatility and gain insight into longer price movements.
The use of Bollinger bands can also indicate whether a market is heading into overbought or oversold territory. When a market’s price continually moves outside the upper parameters of a Bollinger band, it can be considered to be overbought, and when it moves below the lower band it could be considered oversold.
When choosing additional indicators for technical stock analysis, traders and investors may opt to examine the ATR or Average True Range. The present 14-day ATR for Makkah (4100.SA) is currently sitting at 0.96. The ATR basically measures the volatility of a stock on a day-to-day basis. The average true range is typically based on 14 periods and may be calculated daily, weekly, monthly, or intraday. The ATR is not considered a directional indicator, but it may reflect the strength of a particular move.
Checking in on some other technical levels, the 14-day RSI is currently at 28.87, the 7-day stands at 20.72, and the 3-day is sitting at 10.86. The RSI, or Relative Strength Index, is a commonly used technical momentum indicator that compares price movement over time. The RSI was created by J. Welles Wilder who was striving to measure whether or not a stock was overbought or oversold. The RSI may be useful for spotting abnormal price activity and volatility. The RSI oscillates on a scale from 0 to 100. The normal reading of a stock will fall in the range of 30 to 70. A reading over 70 would indicate that the stock is overbought, and possibly overvalued. A reading under 30 may indicate that the stock is oversold, and possibly undervalued.
Another technical indicator that may be a powerful resource for determining trend strength is the Average Directional Index or ADX. The ADX was introduced by J. Welles Wilder in the late 1970’s and it has stood the test of time. The ADX is typically used in conjunction with the Plus Directional Indicator (+DI) and Minus Directional Indicator (-DI) to help spot trend direction as well as trend strength. At the time of writing, the 14-day ADX for Makkah (4100.SA) is noted at 33.98. Many technical analysts believe that an ADX value over 25 would suggest a strong trend. A reading under 20 would indicate no trend, and a reading from 20-25 would suggest that there is no clear trend signal.
The Williams Percent Range or Williams %R is another technical indicator worth taking a look at. Makkah (4100.SA) currently has a 14 day Williams %R of -100.00. The Williams %R fluctuates between 0 and -100 measuring whether a security is overbought or oversold. The Williams %R is similar to the Stochastic Oscillator except it is plotted upside-down. Levels above -20 may indicate the stock may be considered is overbought. If the indicator travels under -80, this may signal that the stock is oversold. Chart analysts may also use the indicator to project possible price reversals and to define trends.
Makkah (4100.SA) currently has a 14-day Commodity Channel Index (CCI) of -107.12. Active investors may choose to use this technical indicator as a stock evaluation tool. Used as a coincident indicator, the CCI reading above +100 would reflect strong price action which may signal an uptrend. On the flip side, a reading below -100 may signal a downtrend reflecting weak price action. Using the CCI as a leading indicator, technical analysts may use a +100 reading as an overbought signal and a -100 reading as an oversold indicator, suggesting a trend reversal.