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Technical indicators are mathematical calculations based on a stock's price, volume, or open interest. They help traders identify trends, momentum, and potential reversal points. FoudaLens uses several key indicators in its scoring model.
Moving Averages (MA) smooth out price data to show the underlying trend. The 50-day MA represents the medium-term trend, while the 200-day MA represents the long-term trend. When the shorter MA crosses above the longer one (a "golden cross"), it's typically bullish. The reverse ("death cross") is bearish.
Relative Strength Index (RSI) measures the speed and magnitude of recent price changes on a scale of 0 to 100. Readings above 70 suggest overbought conditions (potential pullback), while readings below 30 suggest oversold conditions (potential bounce). RSI between 40-60 indicates neutral momentum.
MACD (Moving Average Convergence Divergence) shows the relationship between two moving averages. When the MACD line crosses above its signal line, it generates a bullish signal. The histogram (difference between MACD and signal) shows the strength of the current momentum.
Volume is often overlooked but crucial. A price move accompanied by high volume is more significant than one on low volume. FoudaLens uses volume relative to the 20-day average — spikes above 1.5x the average volume indicate institutional interest.
Bollinger Bands consist of a moving average with upper and lower bands set at two standard deviations. When price touches the lower band, the stock may be oversold. When it touches the upper band, it may be overbought. Band width measures volatility — narrow bands often precede significant price moves.
This content is for educational purposes only and does not constitute financial advice. Always do your own research before making investment decisions.