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a brand new relative strength index
2014/12/09 15:51:27

Note: This article is published in the Newsletter of the International Technical

Analysis Alliance (IFTA) Annual Meeting of the Year 2000, pages 19-20.
English Link: http://www.ifta.org/public/files/newsletter/d_ifta_update_vol21-iss3.pdf

ANew Rela ve Strength Index

Breakthrough Relative Strength Index ™
BreakoutRela ve Strength Index - BRSI TM
In the traditional definition of stock price breakout, when the stock price
breaks through the previous highs or lows, we call it a stock price breakout.
This is a well-known, very simple concept. But if you want to know in advance
whether the stock price is likely to break through, or find a way to judge the
stock price to break through and break through the strength, it is not easy. Upcoming events
This kind of complexity will make you have a great interest in research, whether
there are ways to find the factors and signals that are implied in the
fluctuation of stock prices, and the strength of the power when the stock price
is truly broken. In other words, can you take the lead before breaking through.
Now, the breakthrough strength index is an index that provides a signal that the
stock is about to break through. It is also a brand new index that judges the
strength of the stock before and after the break. - What is the breakthrough
strength index?

The Breakthrough Strength Index (BRSI) is an index that reflects the strength of
a stock when it breaks through support or resistance. It also reflects an index
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that is hidden before the break-through and is about to break through.

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The Breakthrough Strength Index is a new index used to assess and judge the
strength of power before and after the stock price breakout, showing whether the
stock price breakthrough has been super strong or weak . Its value ranges from 0
to 100. If the index exceeds 80, it means that the breakthrough is super
(overbought) and the stock price is about to fall. If the index is lower than
20, it means breaking through the weak (oversold), that is, the stock price
breaks through the super strong, and the stock price is about to rise. In the
middle is 50, which is the dividing point of strength and weakness, and is the
holding signal.
What is the difference between the Breakthrough Strength Index (BRSI) and the
famous Relative Strength Index (RSI)? What are the characteristics and
advantages of breaking through the strength index?
From the concept of overbought and oversold, BRSI is similar to RSI, but from
the perspective of the composition of the index, there is a big difference.
Understand the calculation formula of the Relative Strength Index (RSI), it is
not difficult to know that the RSI is based on the closing price for a period of
time, to find out the upward price change, or the number of days to change
downward, and calculate their average value. To describe the relative strength
of the current stock price. However, there are no important factors in the
calculation that use the volume and the magnitude of the fluctuation of the
stock price. This is a defect of the RSI. This is also the source of the index
will be passivated in the actual operation, thus misleading the source of the
wrong sale.
The breakthrough strength index is completely different from the famous relative
strength index . The two factors, volume and volatility, are an important part
of the breakthrough of the strength and weakness index , making the breakthrough
strength index more intuitive and effective in determining the stock price
breakthrough. Breaking through the strength and weakness index provides a new
technical analysis method that fills a gap in technical analysis and makes it
easier for investors to find potential trading opportunities in the market. It
is a convincing new way of judging in practice.
The calculation of the breakthrough strength index is based on a new combined K-
line. The new K-line is called “breaking K-line”. Breaking through the K line
is a combination of the two-day K-line. The new price that breaks through the K-
line is the price of the two-day K-line, calculated according to certain
principles. This new price includes the breakthrough factor before the stock
price breaks out, which can reflect the situation that the stock price is about
to break ahead. In the calculation formula for breaking through the strength
index , there is a price that breaks through the K-line, and at the same time,
it joins the factor of breaking the K-line fluctuation range and breaks through
the volume of the K-line, thus showing the strength of the breakthrough strength
index. Therefore, BRSI not only shows the overbought and oversold phenomenon
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that RSI reflects the stock price, but more importantly reflects the status and
strength of the stock price when it breaks through.

- What is the breakthrough K line?

The structure of the breakthrough K-line comes from a different study of the
combined K-line in the book Beyond Candlesticks by Steve Nison. I think the
combination principle of the K line in the book is worth discussing. Because
Steve Nison's combined K-line does not reflect the breakthrough principle of the
stock price. After adjusting the principle of modifying the K-line combination,
using the mixed K-line to study the strength of the stock break is an important
correction to the combination method of the mixed K-line in the book. The
modified K-line obtained from this correction is theoretically more reasonable
and more practical in operation. It reflects the true fluctuation of the stock
price more than Steve Nison's K-line combination, and is more in line with the
trading signals reflected by the stock price fluctuation. (SteveNison's hybrid K
line, see pages 36-38.)
For example, falling engulf graphics (BearishEngulfing)

It is not difficult to find out that (1) is the mixed K-line formed by Steve
Nison's combination method. It is a new K-line with a long shadow and a small
entity. (2) is the breakthrough K line formed by my combination method, which is
a long falling K line of an entity. Compared with the two falling K-lines, it is
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clear that the breakthrough K-line is more in line with the stock price trend
and substance of the original pattern of Bearish Engulfing, reflecting the
stronger downward trend. It can be seen that the same K-line pattern (falling
engulfing), the mixed K-line produced by different combination methods, reflects
the strong and weak signals of the falling power. Breaking through the K line is
the closing price of the previous K line as the opening price of the new K line,
and the others have not changed. It reflects the stock price reversal of the
first rise and then fall, which is the market essence of profit taking.
The mixed K-line is not a real K-line, but an analytical method used to make
complexity simple. Since it is an analytical method, it should be closer to the
actual fluctuation of the stock price. From this point of view, the combination
method and principle of breaking the K-line is more reasonable and more in line
with the actual operation.

- Case Study
Breaking through the strength and weakness index provides a new way to judge
stock price breakouts. The stock chart used below is from the brand new
breakthrough software www.breakou radingsystem.com and the data comes from esignal .

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Figure 1, the US NASDAQ index graphics. We can intuitively see that point B is
a better buying point than point A , which is a deviation from the strength
index. When the BRSI is getting stronger, it means that the breakthrough is

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strong. At this time, the stock should be held until the BRSI weakens .

Figure 2 shows the transaction records of the US real estate stock KBH using
the Breakthrough Strength Index and the Breakthrough K- line . The records are
grouped into the following three trading strategies:

1）如果BRSI超過80，並且突破K線是弱的，即是賣出信號，準備賣出。
2）如果BRSI低於20，並且突破K線是強的，即是買入信號，準備買入。
3）如果BRSI在20-80之間，則關鍵要注意突破K線，或等待觀望。BRSI的背離也是很重要的
判斷交易策略。

下面的表格中的記錄，標明在上面股票KBH的圖形上。

參考書:
BEYOND CANDLESTICKS, NEW JAPANESE CHARTING TECHNIQUES REVEALED,

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，
STAVE NISON, Author of JapaneseCandles ck Char ng Techniques P36-38

作者介紹：

Howard Wang（王效拉）美國。Mathematics, Master of Economics. US Tradeso Corp

company CTO and Co-Founder . Member of the American Society for Technical
Analysis (TSAA-SF) . There are unique innovations and inventions in the research
of technical analysis indicators and K- line construction theory . The designer
of the stock breakthrough analysis software. Breaking through the strength index
and breaking the K- line inventor. The founder of the profit-taking theory. He
has published and published two books on " Analysis of American Stock Market
Trading Practices" and "Stock Trading 80 Manuals". Engaged in foreign exchange,
futures, options, stock investment for nearly 20 years, has a very rich
practical experience. In the unprecedented shocks of Nasdaq in 2000 , the

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private equity account of its management operations still received a return of

200%-430% .
In 2014 , the “new concept of trading” was first proposed – profit-taking theory. All the phenomena in
the stock market can be explained by this new concept, which is of great help to the actual operation and
will be published in the book.

Contact: Howard Wang tradeso usa@yahoo.com

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