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Tim, Philip,
This is how I worked out what I think is probably
the DiNapoli oscillator predictor.
The purpose of the oscillator predictor is to know ahead of time
what closing price would result in a predefined overbought or
oversold oscillator level being hit.
Take the Dinapoli OB/OS oscillator based on a detrended MA7.
C7 will be the close of today, C6 was the close of yesterday,
C5 the day before etc...
I'll go through it in detail, because the same process can be
used to forecast prices required to reach certain RSI values
or whatever oscillator you might be using. This same
philosophy can also be used intra-day or whatever.
The formula for the OB/OS oscillator is OBOS = Close - ma7.
Expanding the ma part of the formula, this gives
OBOS = C7 - (C1+C2+C3+C4+C5+C6+C7)/7
Multiplying each by 7 gives
7*OBOS = 7*C7 - (C1+C2+C3+C4+C5+C6+C7)
Sort out the 2 C7's gives
7*OBOS = 6*C7 - (C1+C2+C3+C4+C5+C6)
Now re-order to get the formula for the close
6*C7 = 7*OBOS + (C1+C2+C3+C4+C5+C6)
Divide everything by 6
C7 = OBOS *(7/6) + (C1+C2+C3+C4+C5+C6)/6
the last bit, (C1+C2+C3+C4+C5+C6)/6, is the MA6 for yesterday
Therefore C7 = OBOS *(7/6) + MA6
So if you know the value of OBOS that would be represent
overbought or sold, you can calculate what today's close would need to
be to reach that level.
Put another way,
Todays close needs to be = (ob/os 'limit' value) *7/6 + (yesterday's
MA6)
Generalising, C = OBOS * N/(N-1) + MA(N-1), where N is the MA period.
Hope this is useful.
Regards
Peter
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