Date: Dec 3, 2018
Investors have placed Australian Vanadium Ltd (AVLO.AX) shares on watch as the Aroon Down indicator has moved above 70, indicating that there is downward momentum building for the shares.
The Aroon indicator was developed by Tushar Chande in 1995. Aroon is used to measure the presence and strength of trends. According to Chande, whenever the components of the Aroon indicator are in close proximity, this is a sign of market consolidation. Aroon Up measures the uptrend, and Aroon Down measures the downtrend. When Aroon Up or Aroon Down values drop below 50, this indicates loss of upward and downside momentum respectively. Values above 70 are signs of a strong trend for either component, while values that are less than 30 show that primary trend is weakening and opposing trend is picking up.
With the stock market still riding high, bear market scenarios may not be at the forefront of the average investor’s mind. There are plenty of professionals out there that are predicting that the markets will be turning south in the near future. There are others who believe that the bulls are still in control, and they will be leading the charge higher over the next few months. Nobody knows for sure which scenario will play out, but being ready for any market situation may turn out to be a portfolio savior in the long-term. Any time the stock market drops sharply or sees sustained losses, investors may start to worry. These declines are usually followed by extreme headlines from financial news outlets. It is important to remember that corrections are a normal part of market cycles. Being able to control panic and pessimism may be a great skill for the investor to use when times get tough. Knowing exactly what stocks are in the portfolio can help make unsettling market conditions bearable for investors. If the hard research has been done and the plan is in motion, there may not be any need to second guess and cause more problems before things turn around and smooth out.
Traders also may be narrowing in on the ATR or Average True Range indicator when reviewing technicals. At the time of writing, Australian Vanadium Ltd (AVLO.AX) has a 14-day ATR of 0.00. The average true range indicator was created by J. Welles Wilder in order to measure volatility. The ATR may assist traders with figuring out the strength of a breakout or reversal in price. It is important to note that the ATR was not designed to determine price direction or to predict future prices.
