Good afternoon, everybody. Welcome to our Getting Started with Technical Analysis webcast today. I' m Connie Hill. Happy to be here and share some things with you. I' m happy to see you being here as well. We' re going to talk about an indicator and the use of an indicator that might make you feel a little bit uncomfortable. All right. We like to be comfortable when we' re trading, when we' re analyzing charts. But this one might make you feel a little bit uncomfortable. And I' m good. I' m good with that. We' ll talk about it as we get into things. I see a question in the chat that I' m going to answer real quickly here. Kathy said, ' Are the DMI positive and negatives the same that we talked about last week, the same as the RSI?
The answer is no. And we' re going to talk about that. So I don' t know. You' re into my brave brain waves there, Kathy. We must be in tune with each other. Let' s go through some disclosures. Then we' ll get down to business. Before I get to that disclosure, I hope you' re following me on X. My handle is not written here for you, but it is ConnieHillCS. OK, and you can follow us. We' ll put educational content out there, things that we think that we find interesting that we think you might find interesting as well.' We will share those with you. What we talk about today is intended for educational and informational purposes only. Don' t consider it a recommendation of any particular strategy or security.
We are going to be using technical analysis in our session today because it' s getting started with technical analysis. However, keep in mind, Schwab recommends that you use additional things beyond technical analysis for your research. Past performance is not a guarantee of future results or success. Investing involves risk, including the risk of loss. We will be using the paper money downloaded Thinkorswim software today. It' s typically what we are going to be using in most of our webcasts. It' s the most robust version, and I know some of you are trying to get the hang of it. And so be patient with yourselves as you start learning. It' s a powerful program. I remember kind of going through those beginning stages with it, but I love it.
OK, don' t want you to take it away from me now. It' s like, you know, I' ve got my little sugar fix here. I don' t want it to go. All right. Today we do. We are going to talk about technical indicators. And actually, the one we' re going to focus on today is RSI, relative strength index. All right. And we ll talk about a little bit about some of the differences of some of the technical indicators that we see. And we are going to look at a lot of examples out on paper money. All right. Let me just check the chat here real quickly. Oh, it looks like we' ve got Lee bowl in the chat. Welcome, Lee. I' m happy to see you here.
He' s going to help me answer your questions. Something I can' t get to Lee will have my back. All right. Friend indicators and oscillators. OK, there are so many indicators. If you go to your studies on your charts and you pull up that alphabetic listing, there are a lot there and it can be confusing. And I' ll tell you, you don' t need to use even half of them or a quarter of them. OK, there might be some that you just latch on to that. You feel comfortable with and maybe those are the ones that you use. That' s not a problem. Now, we have some oscillators that are either trend. Well, we have some studies, I should say, that are either trend indicators or oscillating indicators, also known as momentum indicators.
OK, sometimes some of these indicators will be placed along with the price. OK, that might be like for a moving average. Right. You see that very commonly up there with. The price and then we' ll have some that have their own pain and their own measurements. OK, and they might be this one on the slide here is the MACD with some different settings. And it is definitely in a different area in our chart structure, having its own ranges that are a reaction or come from some division of the price. Some of them, most of them are based on price. Some of them might be based a little bit on volume as well. All right. So the RSI, what I wanted to focus on here today is is a fairly popular indicator.
It' s something that you' ll probably run across if you do some reading and some of the technical books, you' ll see that it' s one that technicians tend to favor. We re going to talk about maybe why they might favor it or find it useful. And it' s going to be very interesting to use Wells Wilder. He' s the one that came up with this indicator and he' s come up with several really good indicators. He also did our DMI from last week, but he was trying to solve for two problems with this indicator. One was the fact that there could be some extreme movements in the RSI when a number dropped off. So for say, for example, say we have a 14 period that we use with it.
And let' s say an old day, 14 days back, there was a really big move. When that 14th day drops off and the new day comes on, they would see a big swing. And he was trying to help smooth out that swing. And then he also wanted to have a fixed range. He wanted it to go between zero and and 100 in that fixed range. And so the RSI, as he developed it, meets those qualifications. We' re going to be using a 70 line and a 30 line. And so you can see maybe here just a little bit, you can see a 30 and a 70 here. And basically those are the extreme points. Above 70, so 70 and up, up to 100, would be considered an overbought area.
30 and below is considered an oversold area. You might be used to some oscillators that are 80 and 20. This one starts out at 70 and 30, although it can change, but we' Alright, let' s not even go to talk about that today. Alright. So, let' s do this. Let' s go ahead. And I want to jump out to our thinkorswim. And I want to backtrack a little bit first. I want to talk about our two trades that we did last week. And I want to talk about our two trades that we did last week. And I want to talk about our two trades that we did last week with DMI. And Kathy had posed the question at the very beginning of our class, wondering, are they the same as these lines on the RSI?
And they' re totally different. Okay. Let' s jump out there right now. So, we' ll come here. And some of you, I know, really like to dive into things. Alright. And you re interested in the details. And there are others of you that are just going to jump out there. So let' s jump out there. Just kind of show me the basics. I don' t need to know the formula for it. Okay. One thing I wanted to do is look at our two trades from last week with the DMI. And I do have the DMI on my chart. I got rid of volume because I didn' t want to focus on it so much. And let' s just kind of revisit what the DMI is, the directional movement index.
We have a green line and we have a red line. And if the green line is moving, and is above the red line, that would say that we' re having bullish, that the bullish trend is stronger. If the red line' s on top, then the bearish trend is stronger. So if we' re just looking at the SPX here today, the red is above the green right now. So that would give us an idea that, okay, the bearish trend is the dominant trend. And then this black line is our ADX line. It gives us an idea of the strength of the trend. So bearish, trend is the dominant one because red' s on top. Then the number corresponding to the ADX looks like right now it' s 17 and some change.
And really we want to see it above 25 to indicate that that is a strong trend. Right now we' d say it' s kind of a weak trend. Maybe it' Starting to go a little bit sideways, not making progression up or down. And that' s kind of how we might interpret it. Now, last week, one of the trades we got into was VST. All right. I had some questions come in. Some of you may have been the ones that posed the questions to me out in the comment section out on YouTube. It could have been some of you that wrote to me. I' ve written back to you, but I also think your question was really valid that it would be worth just kind of revisiting here a little bit.
So as we look at when we got in last week, it was what? May 29th or May 28th. I switched my calendar over to June, so I' m not positive on that. So here' s the 24th. And so we got in one of these days. All right. Because here' s today, here' s Monday, here' s Friday, Thursday, Wednesday, Tuesday. So actually the day that it hit this high here was the day that we got in. And there had been kind of a move off the DMI going up. Now, as long as the green stays above the red, we would stay in the trade. All right. What' s happening today, though? Yeah, look at this. I' m going to zoom in here really tight.
And I want you to see, well, just in those few days, they actually today, it' s the green has crossed down below the red, indicating that it is the more dominant. And our ADX line is up here at 39, indicating it could be fairly strong, right? Because it' s above 25. We' ll see what direction this ADX line goes. Looks like maybe it' s headed down, meaning lower reading. Maybe the strength isn' t as strong if it continues to go down, down, down. However, it would still be the dominant trend. Now, we stay in the trade until we get that crossover. Trading day isn' t over yet, but it' s going to be soon. All right. So we' re going to make a decision on this.
And the decision is going to be we are going to exit the trade because we' re following discipline. We' re following the rule that when we have the crossover, that' s when we get out. We don' I think about it for a day or two. We don' t say, ' Well, I' m seeing this and that and the other on the chart.' It' s just we see that cross. We' re going to take action. Now, some people might want to wait truly till the end of the day. OK, they might want to say, ' Well, let' s really make sure it' s there when the market closes and then take action.' And because we' re not going to be sitting here after the market closes, we' re not going to be together hanging out.
We' re not going to be able to do it. So we' re going to do at least our best here with knowing that the crossover has occurred and we' re towards the end of the trading day, although we ve got a couple of hours left. OK, so we' re going to exit the trade. You can see we had estimated a stop on this. Of where we just kind of estimating maybe the price would be down wherever when they crossed. And we obviously don' t know that. So our stop loss was clear down here. And really, if we just let it flow, let it go. I mean, this price could come back quite a bit before actually hitting that stop loss. So we' re going to go to the monitor tab and we are going to find VST.
And I' ve actually got it in here for. Let me go back here for just a moment. Twenty eight. OK, so it' s the twenty eighth that we got in to twenty eight shares. And I just wanted to make sure that I' m in the right spot because I have two VST trades. OK, that' s why my going back and double- checking thing, because this VST trade is for one hundred and sixty shares. So that' s a different one. And so our VST, I' m not seeing the VST for our twenty- eight shares. Now, I might be being a little bit blind, but I' m not seeing it here. This one, the sixty- three twenty- two, this is actually the one that we see. On the screen. So.
Let me go back here, just kind of do a check. OK, so the stop loss that we have in there actually is for that other trade. It' s not for this one at all. You can see over here we don' To have an order. We do have an alert for if the price of this, the stock changed to hit. And then I did something different, which was somebody said, could we not put on an alert to tell us? When the DMI positive crossed below the negative. OK, so I went out and I was like, oh, yeah, we could do that. We didn' t show you how to do that this week. We are going to show you that today. And that' s actually what the alert is right at this moment.
So let' s take a look here at the chat. See what questions I need to answer here. The ADX line is for the strength of the DI, positive or negative. OK, so you can use it without. Without the DMI, you could just use ADX alone for strength of trend. You could put that in your chart. Good question. So the DMI plus crossing over the DMI minus is a buy signal. Yeah, absolutely, Sandeep. Art says if the green DMI is below the ADX line, does it mean anything? Let' s go back to our chart, see if that' s the case here. I think that is the case here. That' s why I think you' re asking this. Here doesn' t mean anything. We' re just looking at the numbers.
OK, so the number here right now is thirty nine on the ADX. Anything twenty five or higher means that it' s a strong trend, whichever one is on top, whether it' s the green on top or the red on top. I wouldn' t worry so much about it if where this black line is in relationship to the green or the red lines. OK, kind of think of it as as its own Indicator being shown on the same pane. Kind of think of it that way. OK, Sandeep is letting us know the date. Yeah, it was the twenty eighth. Thank you, Sandeep. Appreciate that. All right. Let' s go through the process of a couple of things, one setting an alert. The other one that we traded last week was Nvidia.
Nvidia, we had seen a recent cross and then we saw a flare, a flare of the green line and the red line, so if I come over here to the 28th, let' s see. OK, it was that day there. So let me just kind of zoom in. And on the 28th, it was this day here when it actually hit that peak on the green. That was our entry date and I didn' t mark it, but we can see it hasn’t crossed over. The green is still above the green. The red. So we stay in the trade. But why don’t we set an alert? Let us know if the crossover occurs and we could also set a stop on it. So I want to show you the functionality of both of those things.
All right. That was the question that some of some of you wrote in and asked me about. Can we just do an alert on that? Can we just do an exit on it? I didn’t show you that last week, but I will right now. So. Let Come over to Nvidia. It doesn' t have an alert on it. I told you on BST we were just going to close it out. So let' s just go ahead and close it out. Create a closing order. We' re not going to put it with a stop. We' re just going to go. We want it to execute right now. Maybe we can get a little closer to the midpoint price. Sometimes paper money is nice to us. Sometimes it isn' t. OK, now. On Nvidia. What I want to do is I want to right mouse click and say create alert. Let' s see. I am not seeing that as an opportunity. Maybe let me try it from the chart.
Get the right chart up here. And I' m just going to do a right mouse click. Create alert. Typically, it' s thinking it' s going to be on the price of the stock, but we' re going to change it. OK, so we' re going to change it from mark to study. And then because I was out here playing with this, it is showing me DI plus crosses below DI negative. And I set that on BST. I didn' t show you that. But in yours, you probably don' t have that. So what we' re going to do is we' re just going to. We' re going to say at it. And then here.
We want to this is looking a little bit different than how I did it previously. Let' s just do an addict here. We' ll stay on the condition wizard. We' re going to say it' s not going to be based on a simple moving average. We' re going to change it. OK, so here we' re going to do and not a simple moving average. We' re going to do a study and then we' re going to type in DMI. Grab our DMI and then we' re going to say the DI plus. What do we want? We want to if it crosses below. Select the condition. We' re going to go back to study. This is a lot of steps. I know DMI. Right, so we' ll bring back our DMI.
And then we want it to cross below the DI negative. OK, so positive crossing below negative here. Kind of tricky. We' ll go ahead, we' ll hit save. Then we can receive a notification if that occurs, right, the alert will go off. You could, if you wanted, you could also set that up as a cell signal. OK, let' s do that real quick. So let' s go back to monitor. Let' s go back to our two whole shares that we bought. We know big stock split is coming up next week. We' re going to say create a closing order. Let' s go ahead and just choose with a stop. And then over here, we are going to do. Need to do this GTC and we need to mark this.
We' re going to go into the conditions. We' re going to come over here for symbol. And instead of mark like we usually do for the price, we Going to come down to study and because we previously did the DMI might crossing below the DM, the DM positive crossing below the negative. It is there, but we could also say, all right, let' s go choose it specifically because this is what you would have to do. Edit. We' re going to edit it here. Well, let' s see, DI positive crosses below negative. We actually picked that up from setting the alert. There. Okay. So you could choose that or if you need, if you didn' t have it. Get the edit and then come out here and shoes.
The study of DMI and then DI positive process below DI negative. Okay. That is a lot of steps. I recognize that. This is getting started with technical analysis, which means a beginning type of class. And what I just showed you. I would say probably falls into the intermediate range. Okay. I know some of you are ready for it. Some of you might not be. Okay. So you might go, okay. Just, just knowing how to use the study is good for me. All right. So we' re going to hit save. And we' re going to hit confirm and send. And it says study based orders carry special risk.' That' s fine. And then it' s going to trigger a market order. A market order doesn' t have a set execution price.
Nothing' s guaranteed there. So it' s just reminding us of that. We' ll go ahead, and hit send. All right, let' s go back to the chat here and see. Is there a scan that shows these DMI crossovers for all the stocks asks art. There' s not a scan that I' ve created nor one that I' m aware of. That' s, you know, already prebuilt for that. However, it wouldn' t surprise me if we quit. Okay. I won' t get into that today, but if you go out to the scan, you come out to add a filter. Come down to study, and then my guess is DMI will be in there somewhere. Okay. Back to our chart. All right. Other question.
So Kathy says we covered the DMI scan in last week' s class. And we actually did, didn' t we? Thank you, Kathy. I stand corrected. I did show you a little scan. Go look at last week' s class. I' ll have a link in the comments section of YouTube. I' ll put some information in there. Okay. Or a link rather than that class. I' ll have it here in today' s class description. If that' s the easiest way for you to find it. All right. RSI. I' m going to add RSI here. Kathy and others that were wondering about this. How do you get it? Type in RSI rather than relative strength. Okay. There it is, the RSI is an abbreviation for relative strength index, but it' s totally different than the relative strength study.
The relative strength study typically would compare say NVIDIA to the S &P 500 and would see which one is trending more strongly. Okay. Compared to each other. And so on here, type in RSI. All right. Go ahead and we' re going to choose it. I' m going to bring it on here for a minute. We' ll look at it with DMI, and then I' m going to drop the DMI. But I want you to see that how different these are from each other. Okay. I' m going to hit the gear because I' m going to make it look a little prettier. All right. I want it to look a certain way. So typically the default period is 14, 14 days if we' re looking at a daily chart, 14 weeks if we' re looking at a weekly chart, the bigger the number you put in there, the more smoothing might take place.
Now, Wells Milder said that he' s the one that created it. He knows how he wants it and how it works, right? He suggested using, if you' re going to change that 14 period, doing it in multiples of seven. So if you wanted to elongate that period of time, use a 21 or a 28. If you wanted to go a little smaller, you could go seven, five, or nine. Okay. That' s what he said. We' re going to leave it at that. We' re going to leave it plain vanilla 14 here today. I know some of you like to know some of those nuggets. So we' re going to tell you. And then here we have the RSI line. I want you to be able to see it really clearly. Okay.
So I' m going to change this from a one to a three. On our oversold, we Re going to change that to a three and that purple color is fine. And here the overbought area, which is 70 or higher. We' re going to put a purple line there as well. And you can see on here, what I mentioned earlier that the overbought is 70 or higher, oversold is 30 or lower. Sometimes, you know, oversold or overbought has a negative connotation with it. If we see something, then we say, oh, it' s crossed the 70, it' s oversold. Really, it means buyers are really in control and they remain in control till, in this case, the RSI drops below 70. Okay. All right. Now I want you to see these together.
So RSI is down here and the DMI is up here and they are totally different measurements. You can see here, this DMI plus is at 36. The red DMI minus is at 13. The ADX is at, where is that right now? 23 ish. Okay. And then the RSI line looks completely different. All right. We' re going to drop the DMI. Come to our studies, exit out. And here we go. Again, I' m leaving volume off here because I really want you to be able to see the RSI really well here. Now I' ve got Nvidia up. Obviously we already talked about it and set up an alert and a close if those were to cross. But now drop all DMI from your mind, okay. We' re going to focus on RSI here.
Now RSI, some people may use it. Use, for example, going above the 30 line when it' s been down low, coming up and out from underneath the 30. Some people may consider that an entry signal. If it, where' s our 70? Our 70 is right here, this purple line, or if the RSI drops below 70, okay, some people might consider that for an exit signal if it has already been above 70. Now, the other thing we look for, there' s a lot of things we' re going to look for on this RSI. You' re going to dream about RSI tonight and the different ways we could use it. You can see here on the RSI, I drew in what?
I drew in here a trend line, and I connected the peaks of the RSI through this period of time, and what we see here is, yep, we have that diagonal resistance line, and then what happened? RSI broke above it, okay? So, when it broke above this resistance here, some people, I' m going to say that maybe want to be a little bit more aggressive in their approach, may have considered entering at this point, okay, because it was above the 30 and it broke above diagonal resistance. Now, you can also look for different, a couple of different patterns on the RSI. You can look for a triple bottom. What if you saw a double bottom and you saw it break through a downtrend at the RSI?
Yeah, some people might take kind of those pieces of information and put them together to say, yeah, I think that could be a strong entry. Now, on NVIDIA, quite honestly, we can look up, we can see the trend is bullish. The red line I left up there is a 30-period moving average. It' s way above there right now, okay? And so, it shouldn' t surprise us that, okay, down in the RSI, it' s making these higher highs and higher lows, okay? That' s something of note. It did cross below 30 for half of a second a couple days ago. I shouldn' t say half a second. It crossed below it, but it didn' t go below it very far, and then it just went running back above.
Now, what we might look for here is if the price keeps making higher highs and higher lows, but the RSI, and let me get my little marker here, bring it on from my thing here. So, if we' re seeing that it' s making higher highs and higher lows here in the price, we might look for the oscillator to do what? Make lower lows and lower highs, and that could be something we call a divergence, and it' s like a yellow flag waving, okay? It' s, hey, pay attention. What we' re seeing in the RSI does not complement or does not act the same as what we' re seeing on price, and that can mean that a change is imminent.
Some people really like to wait for the price to confirm it, because we can see a divergence for a longer period of time, and nothing happens. The price just is consistent, and so some people want to see that confirmation of price. So, we' ve got crossing above 30 as a potential entry. We' ve got breaking, crossing and breaking a diagonal resistance line could be used as a potential entry signal. And then another thing to watch for, okay, is what we call - what do we call this? Let me change something here. Something we look for called a failure swing. You know, like a failure swing. What is this? A failure swing, it kind of goes along with the idea of a divergence in the sense of what direction are we making higher highs and higher lows?
I' m going to show you a stock here. We' re going to go to Intuit. And as we look at Intuit, we can see it had been upward trending for a while, downward trending. As it' s downward trending, we' re seeing lower peaks here on the RSI. Then, we, we, I' m going to zoom in here. Apparently, whatever they said at earnings was not happy to the market, and it sold off, right? When the RSI goes below 30, and it fails to make a lower low, which in this case, it didn' t make a lower low. In fact, it made a, made a higher low on the RSI. We will call that a swing failure, basically on the bottom side, okay? So, if we see that, would that be an indication that maybe it could become bullish?
It could be, but again, some might wait for confirmation of that. You know, as we look at what the price is doing here, even though we saw this failure swing, because it didn' t create a lower low below 30, actually created a higher, a higher point here. And here' s actually the, the next low was yesterday, and that definitely is above 30. Okay, I was pointing at the wrong spot. bottom of the line. This is really where we see that. It bounced there and then today, of course, bounced up instead of going down below 30 again and making a lower point there. Now, if you look at this, some people might go, well, okay, I see that failure swing. That can be a bullish indicator, but I' m not so sure that I' m on board with it.
I' m not so sure I want to take this risk when you see price action that really hasn' t changed trend. We' re not seeing higher highs and higher lows here. Not at all. If I were to put on a 10-day moving average, it would still be downward trending. At the beginning, I said some of you might not feel comfortable maybe trading counter- trend by solely using an oscillator that' s going against what the trend is doing. Now, if somebody sees maybe some different pieces of information, for example, what if we were to see a double bottom down here on the RSI? Then maybe it came down. It' s below 30. Maybe it goes down about the same amount that it did here and we see it break up through there.
Then some people might say, okay, that' s a little bit more information that might lead me to say, maybe I will take on a position here with the idea that you think that it is reversing. I think this thing is still dropping. Then you would not do it. You would say, no, I want a little bit more information that' s pointing that direction. We might want to see a divergence. Now, another stock here, O'Reilly. Let Take a look at O' Reilly here. O' Reilly had been upward trending. This is a fairly expensive stock here, but it had been upward trending, made a nice little peak here. That was in March, but then it started to have some weakness before the earnings. You can see I have drawn a trend line here.
There could be a couple of trend lines somebody might want to draw. I started with this peak here, but you could start with this peak and maybe catch the tops at a little bit different angle. Somebody could just as well have drawn the trend line in that second spot that I just drew it. Connecting different peaks. In this case, as we look at this, and I' m going to maybe get rid of the one I just drew, if we look here, does it look like maybe there could be a double bottom here on this RSI? Well, maybe. We can see it was low down here, and then it gets a similar low. Let me give you the value here. This is 24. 33. This one is 25. 70. So pretty close.
And then this one here is 26. So 26 and 25. 77 to me are really, really close that we could draw in here a double bottom formation. And then if it breaks across that as well, so we see the cross above this diagonal resistance on the RSI, and we see it coming out from below the 30 area. Then some might say, ' Hey, if this gives us some confirmation, maybe I' ll enter into a smaller position than what I might normally do.' In our class, we have $750 that we' re willing to risk on a trade. And so we might say, ' Do you know what? We' ll do a third of that. We will risk 250 and put on a smaller position.' And then if the stock continues to act more bullishly, then we might say, ' Okay, let' s put on another third of a position.' Okay.
Or you could do it by quarters, whatever is comfortable to you to say, ' Hey, I' m just going to do a partial position.' But we would want to look at it as though possibly that it is reversing. Okay. That the trend is reversing, even though we don' I think we have a lot of evidence of that yet. Now, here on the price, might we start to see a double bottom here? Hmm. So we see that in conjunction with the RSI. Some people might go, well, if it gets past this peak here, let' s go on and put on a trade. All right. Let me check the chat here.
See if there' s questions I need to answer. I think you guys are keeping Lee busy here. All right. I think Lee is just sharing some things here. One default says, can we set an alert for that breakdown above the downtrend? I' m going to say, ' You could sort of,' but you would have to give it a number. Okay. Because I' ve just drawn this line in here. There S not information that whatever that number is, right? We don' t have it stored anywhere. I can just look on my chart and see I drew a line there. But if you said, you know, got this downtrend going, and if it crosses above a certain area, and we might say, okay, something above where the most recent green line went, right?
You might say, okay. And if it goes above 34 or 33 . 50 or something you feel comfortable with, you could set an alert for the RSI at that value. Okay. But not specifically, hey, do something or alert me if it breaks my trend line. Does that make sense? I hope so. So the DMI that we set an alert on earlier was not a steady. So earlier, we set some alerts based on DMI for last week' s trade and for our discussion with last week' s DMI positive and negative. Okay. Let' s go ahead here. Okay. Actually, we' re going to do one more thing. Let' s go to KDP. Keurig, Dr. Pepper, my favorite drink, Dr. Pepper. Well, it' s actually Dr. Pepper Zero with cherry.
We' re going to be real technical about it. All right. We see the price making some higher highs and higher lows. In fact, today it made another 52-week high right there at $34. 85. What are we seeing going on with this? Well, we' re going to do one more thing. We' re going to do one more thing. Okay. The RSI had a couple of very short-term dips below the 70, but they just didn' t last that long and they didn' t go very low. And then it started making some lower peaks. And so I drew in using my trend line, I drew in kind of connecting those peaks and creating the trend line. And what do we see here just recently? We saw a break at that diagonal, trend line.
Okay. Therefore, because of that, we are going to use that as an entry signal on this stock. This one looks a little bit different than some of the others we' ve been looking at. The other ones have been downward trending and we' re seeing it maybe just jet above 30 here. In this case, we Re going to use the break at the trend line. All right. Now, if you feel comfortable with the trend of the stock, then you might do a full position. If you didn' t feel comfortable with the trend of the stock, or you thought, I' m being a little aggressive here, we' re just going to do a partial position. Okay. Then maybe you do, you know, have risk 250 for the trade versus 750.
In this case, the 30-day moving average is still headed up. And so somebody might feel comfortable doing it because it is consistent with the trend. Does that make sense? All right, let' s do it. Where would we put a stop loss here? We, yeah, there As a couple of places somebody might consider it, but let' s do it here. So let' s do it here. So let' s do it here. So let' s do it here. Let' s go ahead here and maybe go a little bit below the 3,323 area. Okay. That looks to be where the horizontal support is. And so let' s go down here to say 2,990. That' s going to be our stop price. So let' s figure out our risk here.
Bring up our calculator. Current price is $3,478 minus our stop of $2,990. It' s a buck 88. First share that we' re willing to risk. So let' s take our 750 divided by $1. 88, which really isn' t a lot. That' s saying we could buy 398 shares. That' s a lot of shares at 34 bucks a pop, almost 35. Some people might not feel comfortable buying that many shares on a less than $35 stock. Now this is coming out to 13 ,000 that we would spend if we bought 398. So let' s take our 750 divided by $1 . 88, which really is not a lot. That' s saying we could buy 398 shares.
Some people, if our portfolio is 150 ,000, might not want to spend more than 10% in a position. And in this case, that would meet that condition. Some people might say, I don' t want it to be 10%. Maybe I' m really only comfortable at 7 . 5% or 5%. I think they want a lot more diversification in the portfolio. Because this is less than 15 ,000, we' re going to go ahead with it. So we' re going to place a trade. We' re going to do a buy stop with a custom order. And we will go ahead, we' ll do 398 shares on both of these. And then our stop price here, we' re going to change it to $2,990.
And hopefully, we' ll start lifting that up as new support areas are maintained. We' ll make this as a good till cancel. We' ll just go ahead and get filled right now as a day order. Remember on the stop, there isn' t a good till cancel. So we' re going to guarantee an execution price because it' ll trigger that market order. All right. And I' m just going to make sure that looks right. And it does. I' ll go ahead and send it off. All right. We' re going to watch this. Now, what might we use as an exit signal? Okay. Because that' s what we would need to know. What if it breaks through that support? But technically, we' ll be watching this RSI. Right here, we saw a breakthrough resistance.
So our expectation is that it' s going to continue through there. And we will look for it above 70. And if the stock or the RSI comes down below 70, we might consider an exit at that point. Okay. That' s how we' re going to use the RSI. It' s a very, I had a lot of details with this one today. So we ll probably spend a little bit more time on it next week as well with some additional things that we can bring into the RSI. Okay. Today, we talked about a break of diagonal resistance. With it, we talked about going above the 30 as a potential entry and below the 70 as a potential exit. We talked about divergences, noting that price might be doing something different than what the RSI is doing and that being a warning flag.
Some people like to see confirmation of price when they see that warning flag before taking action on it. Okay. I want you to practice using RSI this week. Okay. I want you to identify, if it has some breaks of resistance, I want you to identify if it crosses down below 70 or crosses up below 30. Just kind of start being a little bit aware of this because the RSI can be one of those studies that helps us monitor what we' ve got going on. All right. Now, I don' t think we had a survey out here today. If we did, I would encourage you to do that. If this was helpful for you today, go ahead and hit the thumbs up button. That' ll let others know that you found this useful and they might find it useful. Lee, thank you for helping me out in the chat. Appreciate that. Coming up next is going to be exploring thinkorswim. So, those of you that are maybe know thinkorswim basics, want to learn a little bit more, join Brent Moors for that class. He does a great job with it. All right, everyone. Thanks so much. We' ll see you at the top of the hour for Exploring ThinkOrSwim. Bye-bye.
