Lookers Plc (LOOK.L)’s MFI Reading Under The Lens

The Money Flow Indicator for Lookers Plc (LOOK.L) has touched above 60 and has found a place on investor’s radar as it potentially nears the key 70 mark.  The MFI indicator is an oscillator which ranges between fixed values of 0 and 100 and as with most oscillators divergences form a major part of trading with the MFI indicator.  Traders look for divergence between the indicator and the price action. If the price trends higher and the MFI trends lower (or vice versa), a reversal may be imminent.  Market tops tend to occur when the MFI is above 70 or 80. Market bottoms tend to occur when the MFI is below 20.

Investors should however be wary of trading these levels blindly. As the warning goes, an overbought market can remain overbought for an extended period. Strong trends can present a problem for these classic overbought and oversold levels. The MFI can become overbought, and prices can simply continue higher when the uptrend is strong. Conversely, the MFI can become oversold, and prices can simply continue lower when the downtrend persists.  Like the RSI, this indicator is best used in conjunction with another indicator as confirmation. 

Investors who are able to wipe the slate clean and take a fresh look at a certain stock may be able to make more informed decisions that will hopefully lead to increased profits in the long-term. Figuring out when to sell an underperforming stock may end up being just as important as figuring out which stocks to buy. As the stock market continues to trade near record levels, investors will be closely following trading action heading into the latter half of the year. With many stocks reaching new highs, investors may need to make sure that they aren’t getting too overconfident with trades. When a few winning trades are strung together, investors may feel like they have the Midas touch and they can do no wrong. Nobody knows for sure how long stocks will stay in favor with investors. Keeping track of the portfolio’s contents can help when quick decisions need to be made. There may come a time when the tide turns and making a winning trade may seem impossible. Investors might want to have a plan in place in case of a sudden major market downturn. Keeping the portfolio stable during periods of market uncertainty may help prepare for unforeseen events in the future. Although there are many market enthusiasts that think the bull run may be on its last legs, there are just as many who believe that the best is yet to come, and there is much more room for stocks to climb.  

Taking a deeper look into the technicals, Lookers Plc (LOOK.L) currently has a 50-day Moving Average of 49.1, the 200-day Moving Average is 76.69, and the 7-day is noted at 56.9. Following moving averages with different time frames may help offer a wide variety of stock information. A longer average like the 200-day may serve as a smoothing tool when striving to evaluate longer term trends. On the flip side, a shorter MA like the 50-day may help with identifying shorter term trading signals. Moving averages may also function well as a tool for determining support and resistance levels.

Traders may be relying in part on technical stock analysis. Lookers Plc (LOOK.L) currently has a 14-day Commodity Channel Index (CCI) of 62.67. Despite the name, CCI can be used on other investment tools such as stocks. The CCI was designed to typically stay within the reading of -100 to +100. Traders may use the indicator to determine stock trends or to identify overbought/oversold conditions. A CCI reading above +100 would imply that the stock is overbought and possibly ready for a correction. On the other hand, a reading of -100 would imply that the stock is oversold and possibly set for a rally.

At the time of writing, the 14-day ADX for Lookers Plc (LOOK.L) is 14.92. Many technical chart 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 ADX is typically plotted along with two other directional movement indicator lines, the Plus Directional Indicator (+DI) and Minus Directional Indicator (-DI). Some analysts believe that the ADX is one of the best trend strength indicators available.

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. The 14-day RSI is currently sitting at 63.29, the 7-day is at 59.51, and the 3-day is spotted at 38.82.

There are various ways that the individual investor can approach stock picking. Starting from the top-down, investors may study overall market trends. This may include examining different sectors looking for the ones that are poised to prosper in the future. Once potential industries or sectors are identified, the investor can then start to sift through individual stocks within those groups. Investors starting from the bottom up may do just the opposite. They may choose to study individual companies that have been displaying strong performance, regardless of which sector they belong to. 

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