Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
If You Don’t Understand Bonds, You Don’t Understand Investing - 25th Aug 19
Gold's Next Move - 25th Aug 19
Fresh Water Crisis Unfolding - 25th Aug 19
Newbie Guide to Currency Pairs in Forex Trading – Review - 25th Aug 19
When A 16-Year-Old Earns $3 Million, You Know It's Not A 'Silly Fad' - 24th Aug 19
The Central Bank Time Machine - 23rd Aug 19
Stock Market August Breakdown Prediction and Analysis - 23rd Aug 19
U.S. To “Drown The World” In Oil - 23rd Aug 19
Modern Monetary Theory Could Destroy America - 23rd Aug 19
Seven Key Words That Explain "Stupidly High" Bond Market Prices - 23rd Aug 19
Is the Fed Too Late Prevent A US Housing Bear Market? - 23rd Aug 19
Manchester Airport FREE Drop Off Area Service at JetParks 1 - Video - 23rd Aug 19
Gold Price Trend Validation - 22nd Aug 19
Economist Lays Out the Next Step to Wonderland for the Fed - 22nd Aug 19
GCSE Exam Results Day Shock! How to Get 9 A*'s Grade 9's in England and Maths - 22nd Aug 19
KEY WEEK FOR US MARKETS, GOLD, AND OIL - Audio Analysis - 22nd Aug 19
USD/JPY, USD/CHF, GBP/USD Currency Pairs to Watch Prior to FOMC Minutes and Jackson Hole - 22nd Aug 19
Fed Too Late To Prevent US Real Estate Market Crash? - 22nd Aug 19
Retail Sector Isn’t Dead. It’s Growing and Pays 6%+ Dividends - 22nd Aug 19
FREE Access EWI's Financial Market Forecasting Service - 22nd Aug 19
Benefits of Acrobits Softphone - 22nd Aug 19
How to Protect Your Site from Bots & Spam? - 21st Aug 19
Fed Too Late To Prevent A US Housing Market Crash? - 21st Aug 19
Gold and the Cracks in the U.S., Japan and Germany’s Economic Data - 21st Aug 19
The Gold Rush of 2019 - 21st Aug 19
How to Play Interest Rates in US Real Estate - 21st Aug 19
Stocks Likely to Breakout Instead of Gold - 21st Aug 19
Top 6 Tips to Attract Followers On SoundCloud - 21st Aug 19
Holiday Nightmares - Your Caravan is Missing! - 21st Aug 19
UK House Building and House Prices Trend Forecast - 20th Aug 19
The Next Stock Market Breakdown And The Setup - 20th Aug 19
5 Ways to Save by Using a Mortgage Broker - 20th Aug 19
Is This Time Different? Predictive Power of the Yield Curve and Gold - 19th Aug 19
New Dawn for the iGaming Industry in the United States - 19th Aug 19
Gold Set to Correct but Internals Remain Bullish - 19th Aug 19
Stock Market Correction Continues - 19th Aug 19
The Number One Gold Stock Of 2019 - 19th Aug 19
The State of the Financial Union - 18th Aug 19
The Nuts and Bolts: Yield Inversion Says Recession is Coming But it May take 24 months - 18th Aug 19
Markets August 19 Turn Date is Tomorrow – Are You Ready? - 18th Aug 19
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Some Mining Stocks Analysis Using the True Strength Index Indicator

Companies / Company Chart Analysis Jun 13, 2010 - 09:22 PM GMT

By: John_Townsend


Best Financial Markets Analysis ArticleAre you interested in discovering a new technical tool to use in your analysis of mining stocks?  If so, this article may not only interest you, it may also help you make better trading decisions.

I hope you are familiar with the charting capabilities offered at  If not, you really owe it to yourself to explore this incredibly rich source of online and real-time charts, portfolio management and company specific news. 

The main reason I visit this site is that they have my favorite indicator, the True Strength Index.  You can select this indicator from a menu of indicators, display it in a lower panel below price, change its colors and parameters, as well as add an indicator to this indicator.  This added capability is nice because I add a moving average to the indicator as I will show you soon.

The True Strength Index, called TSI for short, is a sophisticated and extremely responsive momentum indicator with very low lag time to response.  The indicator was invented by William Blau and designed to give a couple of important interpretive certainties to its user.  Namely, when the indicator is rising above ZERO, price is always rising.  And, when the indicator is falling below ZERO, price is always falling.

Here is an hourly chart of recent SWC price action that I made at  In the lower panel are two lines.  The True Strength Index (TSI) line is the rose colored line.  The blue line is a 3 period moving average of the TSI line itself.

On this chart we note that the True Strength Index indicator began falling below ZERO on June 3 and bottomed a couple hours into June 7.  And, price correspondingly dropped from around $12.48 to $11.40. 

The white arrows on the right side of the chart pinpoint the area where the indicator was rising above ZERO.  This began a couple hours into June 9 and peaked near the close on the following day.  Price during this period rose from $12.30 to $12.80, or so.

Very observant readers have already figured out how a skilled trader could use the rose colored line as it crossed above the blue line early June 8th.   It generated a buy signal much sooner that waiting for the ZERO crossover, and also did a perfect job of crossing back under the TSI when it was most profitable to close the trade at the close on June 10. 

Using the signal given by the crossover of the indicator with the moving average, one could have bought SWC for $11.40 on June 8 and sold for $12.80……holding the trade 3 days.

Next I would like to introduce a couple of other ways to interpret the TSI.  The following daily chart of GDX provides our examples.

First, an effective interpretative tool is to look for divergences with respect to the indicator and price movement.  By this I mean, look for an occasion of price making a higher high while the TSI indicator (above ZERO) makes a lower high.  Conversely, look for a setup where the TSI indicator makes a higher low (while below ZERO) while price makes a lower low.

Second, a breakdown of a strong trend in the indicator is a sure sign to act, as this chart also shows.

To be clear, there are three different methods that the TSI can be used to render buy and sell decisions.  It is a matter of personal preference, intuition with the current market dynamics that will determine which of the three you chose to use and in what circumstance.

A quick review of the BUY signals:

  • TSI crosses above ZERO
  • TSI crosses above moving average
  • TSI makes higher low (below ZERO) while price makes a lower low

And the SELL signals:

  • TSI crosses below ZERO
  • TSI crosses below moving average
  • TSI makes a lower high (above ZERO) while price makes a higher high
  • Trend of TSI breaks down

I saved the bad news for near the end of this article.  And it is this:  nothing, and I mean nothing, works all the time.  No indicator on earth works all the time.  Even TSI.

Now I feel much better that I have told you the rest of the truth. 

Seriously though, this is a great indicator and once you understand how to use it, it should help your buy and sell decisions significantly.

One last chart.  This one is a daily of GSS.  The TSI gave the ZERO crossover buy signal on March 1 at a price of about $3.  The rally continued for quite some time – confirmed by higher highs in the TSI with each higher high in GSS price until price reached $4.75 on May 15.  At that point, GSS had made a new high but the TSI did not.  And that correctly gave the SELL signal.

I hope the True Strength Index indicator has captured your attention and curiosity.  That was the point of this article J  I have a website where I post mining stock charts with my True Strength Index analysis and pointers.  I invite you to visit and to contribute both questions and analysis.  The address is:

I wish you profitable trading,

John Townsend

© 2010 Copyright John Townsend - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules