Technical Analysis 101: The Know Sure Thing (KST) Indicator

Technical analysis has been discounted by a good number of traders. 

They don’t believe that studying wiggles and lines on a chart can uncover much, if anything.  Instead, they like to rely only on fundamental analysis and have numbers predict the potential future of their investments.  And that’s fine if you want to wait years for an investment to pay off.

It’s worked for Warren Buffett.  So who are we to discourage its use?

But if you want quicker-paced returns – sometimes in a matter of days – technical analysis rules the roost.  That’s because technical analysis dictates exactly what the herd is thinking and how it’s behaving.  We’ve proven that to be very true with indicators such as Bollinger Bands, relative strength (RSI), MACD, and Money Flow (MFI), Williams’ % R (W%R) and directional movement (DMI).

They all help dictate when a stock is likely to pivot higher – sometimes with 85% accuracy depending on if each indicator can confirm others.


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But there’s another indicator that we can use to confirm the above-mentioned.  It’s referred to as the Know Sure Thing (KST).  It looks a lot like MACD, as you can see on this chart of Palo Alto Networks (PANW).

In the case of the KST, buy signals occur when it crosses above zero.  Sell signals occur when KST drops below the zero line.  When we use KST, we’re looking for peaks and troughs.  For example, as PANW began to move above $155 in February 2017, KST began to peak, letting us know there was a potential pivot.

That was also confirmed with an overbought read on RSI and MACD, as well. 

We saw a similar reversal signal at a 52-week low in early March 2017 on RSI and MACD.  However, KST had not yet bottomed out, letting us know to wait to buy the low.  Once it did bottom out, confirming RSI and MACD, there was an opportunity to buy PANW near its absolute low in mid-March 2017 weeks before the stock exploded to nearly $140 a share. 


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