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How to read the Dow Jones Utilities Indicator?
When interpreting the chart above, you need to remember
that the most important factor is the relationship between Index
Price and the Volume Moving Average (VMA).
In this example we have several signals of when to make a trading
decision, but for this purpose we will only explain the two in the
circles. The first signal shows us that just before the index drops
substantially, there was very large increase in the VMA, since the
index was only on a small downwards trend before this VMA surge, we
assume that the index was still trending up. Because the index is in
an upwards trend when the VMA surge occurred, that is a signal that
professional investors are selling and that the index will soon drop
substantially. It is just after this peak in the VMA that we would
make a trading decision.
In the second signal we see that once again the index
is in an upwards trend, and that the increase in the VMA can only mean
that investors are once again selling and that the index will begin a
new trend downwards. Since the second signal is not as substantial, we
know that the index will not decrease as much or as quickly as in the
first signal.
Below is an example of how one of our exclusive
institutional investors used this signal for
the index to maximize profits by
trading some of the derivatives of the Dow Jones Utilities index:
Details of the above trades, and the derivatives used for this index, can be found in the detailed overview and in the member's section of our site.
Listed below are some of the derivatives
which you can trade using this indicator:
| Securities |
Issuer |
Type |
Symbol / Root |
| Utilities HOLDRS |
Merrill Lynch |
ETF |
UTH |
|
Dow Jones Utility Average |
CBOE |
Options |
DUX |
|
Dow Jones Utility Average |
CBOT |
Futures |
DU/DR |
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By trading index securities using our volume indicators instead of stocks, you gain stability and predictability that stocks do not have. An index is a far more logical in it's actions than the individual stocks it's based upon.
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