Wow! Was I ever wrong! And am I ever happy! What? Oh yeah, man! (Emeril doesn't have that phrase copywrit - at least not yet). (By the way his Garlic Lovers Spaghetti sauce is out of this world wowee!). 'nuff about that - back to the market.
As noted in an earlier post today AAPL led the market lower because of their silly 4 penny miss. Now I was thinking - what if we all got together - all the AAPL shareholders (I am not) and gave them 4 cents out of our own pockets - do you think that would help? It's a thought.
In a later post I asked the musical question - whither the Q's next week and if you all answered up, up, and away - you might be right. In the past 6 months there has only been one down week followed by a down week - the rest have been up weeks and today was a super blow-off if I've ever seen one. A lot of crap stocks were sold today along with AAPL.
Day three of the GOOG short squeeze vigil passed without incident and I'm beginning to receive dispatches from the front - most of them saying things like - what the hell and are you kidding and who is the Jimmy Crack Corn Pone anyway? To which I can only reply - Jimmy said it - I reported it - some people believed it - and I don't care. Or in the words of my dear old Ma - Do Dah Do Dah Day.
I dumped Chiquita Banana today based on the fact that it didn't seem to want to go anywhere but held RX because I'm stupid. Also held GLW and SYMC and CRVL and added to the pain with S (Sprint). Why Sprint? Simple I read my Notable Calls this morning and Sprint is troughing (much like MOT I might add) and they are probably going to go up once all of this shake-out is over.
I might take a position in MOT tomorrow. And I heard about this little guy the other day, GTXI, that has something or other coming out of trials and the news is looking good. I might add a small bite of that to the plate as well.
Tomorrow is options expiry day and contrary to popular belief it is usually a pretty calm day. I expect a moderate to mild rally tomorrow.
And that is based on the up/down ratio printing 30% and the new 20 day high/low ratio printing 38% (they both went the same way for a change) and the fact that the VIX has climbed back up within the 5% range and the fact that every major index printed red in the final hour and GS, the proxy for the stock market of the 22nd century, printed a doji. I would like to see it go down again but trust me - everybody is in a hole and there is only one way out - up.
The magic coin says ... tails - bear market - we'll see coin, we'll see.
Marlyn is now 3 - 4 and 1 and the coin is 3 - 4 and 1. At least we disagree about tomorrow.
Thursday, January 18, 2007
Whither Q’s?
Take a look at the following chart – does anyone want to guess where the Q’s are going to go next week?
OK - let's not see the same hands all the time - you - nervous kid in the back - what's your guess?
I whine about it but I really like the weeks when the market is down - it makes the following weeks that much more profitable.
OK - let's not see the same hands all the time - you - nervous kid in the back - what's your guess?
I whine about it but I really like the weeks when the market is down - it makes the following weeks that much more profitable.
An Apple a Day?
Here we go again - the market, having run out of C stocks to abuse, will now turn its attention to a great source of vitamin C - AAPL. Yesterday evening, based on the early numbers and massive celebration that followed thereafter I failed to notice that AAPL too has forecast a missed analyst estimate by 4 cents - 4 cents. That, of course, is sufficient to drive AAPL into debtors prison and to punish all of the folks who are holding AAPL in their retirement accounts. AAPL finished the evening down another 70+ cents.
And even though GLW has nothing to do with AAPL I'm sure GLW is going to get punished too. And SYMC too. And watch MOT give it all up because, after all, they make something like phones like AAPL does. And NOK and probably the oil stocks too because isn't there a lot of oil used in plastic and doesn't AAPL rely heavily on plastic for their IPOD cases not to mention their failing Mac line.
The only one that is going to win is MSFT because MSFT is the direct opposite competitor of AAPL.
Remember - day three of the GOOG short squeeze watch is upon us. Pay attention kiddies - learn something. Learn that Jimmy Crack Corn is an entertainer and his jokes are starting to show their age.
And even though GLW has nothing to do with AAPL I'm sure GLW is going to get punished too. And SYMC too. And watch MOT give it all up because, after all, they make something like phones like AAPL does. And NOK and probably the oil stocks too because isn't there a lot of oil used in plastic and doesn't AAPL rely heavily on plastic for their IPOD cases not to mention their failing Mac line.
The only one that is going to win is MSFT because MSFT is the direct opposite competitor of AAPL.
Remember - day three of the GOOG short squeeze watch is upon us. Pay attention kiddies - learn something. Learn that Jimmy Crack Corn is an entertainer and his jokes are starting to show their age.
Wednesday, January 17, 2007
RSI 8 Vs RSI 7 - Shootout at Filter Corral
Stephen asked an interesting question - how much different from 8 20 was 7 20? I didn't know so I went to see. First - here is the filter as it was originally written:
show stocks where close is between 15 and 35
and average volume(90) > 500000
and RSI(8) < 20.00
They don't get much simpler than that.
This filter produced 69 completed trades with 45 winners for a 65% win rate with a 121% ROI. Now the ROI is not that important except for comparison purposes with other filters - you probably won't get that exact value because you will be playing different priced stocks with different amounts of money for different periods of time. What does matter though is the next item of comparison the net over days held.
What I selected was
1 day chg +++ 4 day chg+++10 day chg++++20 day chg+++30 day chg
.66% ++++++++ 1.70% +++++ 2.84% ++++++ 4.69% +++++++ 5.30%
Obviously the longer you hold the better off you are. Then I changed the last line above to
and RSI(7) < 20.00
Ran a back test with all of the same conditions as I had for the above set of results and this is what I came up with:
72 completed trades with 42 winners for 58.33% with a net gain and a 70.89% ROI.
1 day chg +++ 4 day chg+++10 day chg++++20 day chg+++30 day chg
.31% ++++++++ 1.01% +++++ 1.70% ++++++ 2.71% +++++++ 4.49%
What a difference a day makes.
Now it might make a difference if you use 7 periods over another time period rather than the one I selected. It is always dangerous to assume that because a filter tests so well that you have found the Holy Grail - or the Rosetta Stone for all TA. So I tried a different time period.
I switched to 6/01 - 9/28 which overlapped into the first month of the last period.
This time the RSI 8 tested at 76 completed trades with 58% win percentage and a 28% ROI.
The net change over time numbers looked like this:
1 day chg +++ 4 day chg+++10 day chg++++20 day chg+++30 day chg
.36% ++++++++ .62% +++++ .84% ++++++ 4.47% +++++++ 7.48%
Which suggests that the longer you hold the better off you are. Still we are just using these numbers for comparison purposes.
The RSI 7 tested at 78 completed trades with 51% win rate and 13% ROI (which happens to be 2 points less than the SPX ROI for the same period).
But the net change over time tells another story.
1 day chg +++ 4 day chg+++10 day chg++++20 day chg+++30 day chg
.09% ++++++++ .20% +++++ .82% +++++++ 3.90% +++++++ 7.72%
Short term the RSI 8 is a lot better than the RSI 7. As you get out into the longer net change numbers they are about the same - but that is explained by the fact that the period after mid-July was hot for just about anything.
And something even more subtle takes place with this kind of testing - the starting values in the later months of last year are higher - i.e. the dips are higher than they were earlier in the year. So stocks entered in Augues for example will show better appreciation than stocks entered in October even though both periods were characterized by dips.
Which is why when you have someone bragging about their great portfolio returns for the past year you should congratulate them but don't think that they are something special (even if they think it themselves) - everybody had great returns last year - including me. And if your portfolio manager didn't - then you might think about finding another manager.
Just a thought - never advice - I know nothing.
show stocks where close is between 15 and 35
and average volume(90) > 500000
and RSI(8) < 20.00
They don't get much simpler than that.
This filter produced 69 completed trades with 45 winners for a 65% win rate with a 121% ROI. Now the ROI is not that important except for comparison purposes with other filters - you probably won't get that exact value because you will be playing different priced stocks with different amounts of money for different periods of time. What does matter though is the next item of comparison the net over days held.
What I selected was
1 day chg +++ 4 day chg+++10 day chg++++20 day chg+++30 day chg
.66% ++++++++ 1.70% +++++ 2.84% ++++++ 4.69% +++++++ 5.30%
Obviously the longer you hold the better off you are. Then I changed the last line above to
and RSI(7) < 20.00
Ran a back test with all of the same conditions as I had for the above set of results and this is what I came up with:
72 completed trades with 42 winners for 58.33% with a net gain and a 70.89% ROI.
1 day chg +++ 4 day chg+++10 day chg++++20 day chg+++30 day chg
.31% ++++++++ 1.01% +++++ 1.70% ++++++ 2.71% +++++++ 4.49%
What a difference a day makes.
Now it might make a difference if you use 7 periods over another time period rather than the one I selected. It is always dangerous to assume that because a filter tests so well that you have found the Holy Grail - or the Rosetta Stone for all TA. So I tried a different time period.
I switched to 6/01 - 9/28 which overlapped into the first month of the last period.
This time the RSI 8 tested at 76 completed trades with 58% win percentage and a 28% ROI.
The net change over time numbers looked like this:
1 day chg +++ 4 day chg+++10 day chg++++20 day chg+++30 day chg
.36% ++++++++ .62% +++++ .84% ++++++ 4.47% +++++++ 7.48%
Which suggests that the longer you hold the better off you are. Still we are just using these numbers for comparison purposes.
The RSI 7 tested at 78 completed trades with 51% win rate and 13% ROI (which happens to be 2 points less than the SPX ROI for the same period).
But the net change over time tells another story.
1 day chg +++ 4 day chg+++10 day chg++++20 day chg+++30 day chg
.09% ++++++++ .20% +++++ .82% +++++++ 3.90% +++++++ 7.72%
Short term the RSI 8 is a lot better than the RSI 7. As you get out into the longer net change numbers they are about the same - but that is explained by the fact that the period after mid-July was hot for just about anything.
And something even more subtle takes place with this kind of testing - the starting values in the later months of last year are higher - i.e. the dips are higher than they were earlier in the year. So stocks entered in Augues for example will show better appreciation than stocks entered in October even though both periods were characterized by dips.
Which is why when you have someone bragging about their great portfolio returns for the past year you should congratulate them but don't think that they are something special (even if they think it themselves) - everybody had great returns last year - including me. And if your portfolio manager didn't - then you might think about finding another manager.
Just a thought - never advice - I know nothing.
Wednesday Wrap
Strange day - a little up - a little down and once again no clear direction in a directionless swamp. AAPL just came out with record earnings and that probably means the market will explode tomorrow and I can't wait. I bought a bunch of crap today and wound up holding it overnight. Among the many mistakes - RX, CQB (Chiquita Banana), CRVL, and SYMC. Still holding GLW but regretting every minute of it. Especially since it went past my buy point and I could have gotten out with a small profit this afternoon. I'm going to regret that too.
Wait did anyone hear that? That rocket blast? That was DHI - freed from the encumbrances of my owning shares it took off today with the rest of the homies. Up 2.35% on a relatively down day in the old marketplace. And Bullish Jim thinks that he sells too soon. Fahgedaboudid!
Day two of the GOOG short squeeze watch dawned bright and crisp and as the nation waited for that event with baited breath - it didn't happen. Why oh why Jimmy - tell me why...I mortgaged the homestead - I sold off the hogs including Ma's prize winning Jersey Petunia and put it all on the line at 513 - and now its selling at 497 and the broker called and he wants the cows, horses, and chickens toooooo.
Nobody knows nothing - don't ever forget it and if you wake up every morning and look in the mirror and say that and add "including me" to the end of it you will probably stay out of trouble. I didn't this morning - obviously.
MDRX that I bought yesterday for a couple of days hit a very tight stop loss this morning (my error - I told you the range was a buck and change but did I listen - oh hell no) and, of course, rebound one tick too late. Anyway I replaced it with RX and that one just kind of meandered sideways/down (swon which is the opposite of swup) all day. CQB is a buy because of the recent freeze out in CA and it was going up and then hit an imaginary ceiling and did a mime impression all morning beating against it and then fell away. Both these two are up or out tomorrow.
SYMC I grabbed up at the bottom and I actually made a buck or two on it today. If it turns tomorrow it too is gone - I should have sold at close today but I was busy with some other things - if it continues up tomorrow I'll double up. I know I'm going ot regret that. CRVL is also a purchase against a brighter day (tomorrow).
Tomorrow should be better - AAPL's earnings will make the pain go away and everything will go up and the world will be a better place. Right.
The up/down ratio actually increased today to 44% but the new 20 day high/low ratio went down to 60%. That's what I like about two disparate ratings that sound alike but are totally different. The only time they mean anything is when they both go in the same direction. Otherwise it is a split decision. The 4 majors and GS were all over the place at the end - some up - some down. More split decision - and to add to the confusion the VIX actually went down in a down market - talk about not knowing which way the wind is blowing. There's a reason for that but you'll have to go ask Adam as I haven't a clue. I think all of these holidays and extra days off and the rest of that has gotten the markets so confused they don't know which end is up. But I'm still thinking about years past and the fact that right around here you normally get a bump. Of course earnings have been pretty good in years past.
I think tomorrow will be another weak day but will close up - I'm calling tomorrow for the bulls.
The magic coin says ... heads - bull market coming.
OK it was a bear market today and I called for an up market that makes me 3 - 3 and 1 and the coin is 3 - 3 and 1. What a race - a train wreck in slow motion.
Wait did anyone hear that? That rocket blast? That was DHI - freed from the encumbrances of my owning shares it took off today with the rest of the homies. Up 2.35% on a relatively down day in the old marketplace. And Bullish Jim thinks that he sells too soon. Fahgedaboudid!
Day two of the GOOG short squeeze watch dawned bright and crisp and as the nation waited for that event with baited breath - it didn't happen. Why oh why Jimmy - tell me why...I mortgaged the homestead - I sold off the hogs including Ma's prize winning Jersey Petunia and put it all on the line at 513 - and now its selling at 497 and the broker called and he wants the cows, horses, and chickens toooooo.
Nobody knows nothing - don't ever forget it and if you wake up every morning and look in the mirror and say that and add "including me" to the end of it you will probably stay out of trouble. I didn't this morning - obviously.
MDRX that I bought yesterday for a couple of days hit a very tight stop loss this morning (my error - I told you the range was a buck and change but did I listen - oh hell no) and, of course, rebound one tick too late. Anyway I replaced it with RX and that one just kind of meandered sideways/down (swon which is the opposite of swup) all day. CQB is a buy because of the recent freeze out in CA and it was going up and then hit an imaginary ceiling and did a mime impression all morning beating against it and then fell away. Both these two are up or out tomorrow.
SYMC I grabbed up at the bottom and I actually made a buck or two on it today. If it turns tomorrow it too is gone - I should have sold at close today but I was busy with some other things - if it continues up tomorrow I'll double up. I know I'm going ot regret that. CRVL is also a purchase against a brighter day (tomorrow).
Tomorrow should be better - AAPL's earnings will make the pain go away and everything will go up and the world will be a better place. Right.
The up/down ratio actually increased today to 44% but the new 20 day high/low ratio went down to 60%. That's what I like about two disparate ratings that sound alike but are totally different. The only time they mean anything is when they both go in the same direction. Otherwise it is a split decision. The 4 majors and GS were all over the place at the end - some up - some down. More split decision - and to add to the confusion the VIX actually went down in a down market - talk about not knowing which way the wind is blowing. There's a reason for that but you'll have to go ask Adam as I haven't a clue. I think all of these holidays and extra days off and the rest of that has gotten the markets so confused they don't know which end is up. But I'm still thinking about years past and the fact that right around here you normally get a bump. Of course earnings have been pretty good in years past.
I think tomorrow will be another weak day but will close up - I'm calling tomorrow for the bulls.
The magic coin says ... heads - bull market coming.
OK it was a bear market today and I called for an up market that makes me 3 - 3 and 1 and the coin is 3 - 3 and 1. What a race - a train wreck in slow motion.
IWM Crossing
IWM just posted a crossing pattern on the 15-minute charts (11:15). Suggests that small caps are finally going to start hitting the offer. Meanwhile there is no love for GLW today - told ya - the market hates that stock and uses any old excuse to beat up on it - makes me wonder why I'm in it. SYMC is rebounding although slowly (I bought at the bottom this morning and will run it up today and sell at COB - with the exception of Glass I don't think I ever want to hold another tech stock overnight in my life - and as soon as GLW returns to profit/break even it's gone). (Piece of Crap!)
ACI (coal company) also had a crossover in the first 15 minutes and it looks like it is going to make a bit of a run.
Update - IWM crashed into the afternoon and ACI continued going down. So much for that and even though GLW got past break even this afternoon - I kept it. I'm going to hate myself for that.
ACI (coal company) also had a crossover in the first 15 minutes and it looks like it is going to make a bit of a run.
Update - IWM crashed into the afternoon and ACI continued going down. So much for that and even though GLW got past break even this afternoon - I kept it. I'm going to hate myself for that.
Notable Calls
I've added another link to my Blog rolls - Notable Calls - this site has more ideas per square inch than any other I've been to recently (including the most prolific TradingGoddess). It is worth a look and a bookmark - I'm starting to read it every day.
INTC's Turn
Yesterday was SYMC today it will be INTC that brings down the market - I can only think that there is one lesson for all of us in this - stop playing stocks that end in "C". It's obvious isn't it?
I did a quick check to see if there was any symbiosis between GLW and INTC and there doesn't seem to be any - except "tech" in general which is a shame. I just know that GLW is going to feel this pain too.
Time to take a vacation I think. The market is going to go crazy during this earnings season because the promises of yesterday are going to be dashed on the rocks today and we all know what happens then. The peasants get sacrificed on the altar of commerce in the name of the great and mighty Profit - Good Ol' Buck.
Well good ol' luck today fellow peasants - and avoid any stacks of kindling with poles sticking out of them.
I did a quick check to see if there was any symbiosis between GLW and INTC and there doesn't seem to be any - except "tech" in general which is a shame. I just know that GLW is going to feel this pain too.
Time to take a vacation I think. The market is going to go crazy during this earnings season because the promises of yesterday are going to be dashed on the rocks today and we all know what happens then. The peasants get sacrificed on the altar of commerce in the name of the great and mighty Profit - Good Ol' Buck.
Well good ol' luck today fellow peasants - and avoid any stacks of kindling with poles sticking out of them.
Tuesday, January 16, 2007
Tuesday Wrap
What was that? A bull market, a bear market - a bullish bearish bullish market? I have no idea - all I do know is that SYMC was the story of the day and I followed it closely - you seldom get to see the sharks in an irrational feeding frenzy so it pays to watch when it happens - more about that later.
Bought some MDRX this morning off a weekly breakout. The average true range is 1.74 on the weekly charts and I planned to hold it for a couple of days so I put the stop at 50 cents below the buy price. Breakouts are excellent opportunities for profit - but you need to be patient and actually wait for the breakout. I tried to show this picture earlier but Blogger, at least the server I have access to, was broken - again. Blogger = Google = hmmmmm? More about that later, too.
I hit break even with DHI in the first 15-minutes and sold it off immediately - I'll wait until housing does a real turn around before I buy any more of the homies - but at least I didn't lose any money. The way I played it was like this. On the way down I sold it off in pieces except for the last piece. Then I waited for it to turn. When it finally bottomed out I bought back enough of the pieces all at once to reduce my base to a reasonable level - when it hit that base this morning (actually a bit more on the open) I sold for a bit more than break even. Right after I sold it dropped again. Lucky me.
The Donchian Channel scan I ran off Friday's close came up with an old friend - BLG - and it showed a crossing on the first 15-minutes bar this morning but I took a pass - a shame - I would have made my losses back on that one in about an hour.
SYMC spent most of the day looking for a bottom. At 3:45 EST there were 110 million shares sold and I mean sold. Quick - tell me what percentage of SYMC is that and why do I call it an irrational overreaction to a non-event? 110 million shares is over 10% of the total outstanding shares of SYMC. Today SYMC shareholders lost more than 317 million dollars by 4 P.M. EST. And this is all based on the fact that they say that they are going to miss their estimate by about four cents. So you see - profit means nothing - perception is reality - "beat by a penny" is life and death - this is why I hate playing stocks into earnings.
The last 15-minute candle looks like short covering - so we'll see what tomorrow brings. I know one thing from watching the time and sales screen - there wasn't a second all day long from 9:30 till 4 when someone somewhere wasn't selling SYMC. The first time it went through 18.00 it looked like a waterfall of red - then the next couple of times every bid was hit but it didn't go down as fast. Probably the brokers taking out the rest and building inventory. You have to know that that was a lot of institutional selling and those guys take care of one another.
Played CRVL early for some easy change - in at 44 - out at 44.5 - the best 30 minutes of the day. After rewarding me for no reason whatsoever it turned around and went down. This might be a good chance to get involved in this stock - or maybe not.
GOOG hit 513 - but no short squeeze - gosh - could Jimmy have been wrong? At any rate it rebound off 513 as if it burned its hand. I wonder what that's all about? And there was a hell of a short squeeze - between 3 and 3:45 EST a lot of shorts piled in on a red bar cross and took it to 503 at which time the covering took it back up to 506. You can see this on the 15-minute charts. They banged it some more up to the close.
The up/down ratio is 40% which is good because it means that some of the pressure was taken off the market. The new high/low ratio is 68% which is also down but not as low as I'd like it to be. The VIX has withdrawn from being 10% under its 10 day moving average and the four major indices we follow all had strong white candles in their final hour. (I think the Q's would have turned green also if it hadn't been for SYMC). GS however finished the day red. Put all that together and I think we have an up day tomorrow.
The magic coin says ... tails - bear market tomorrow - well at least we will have a contest.
Of course today is a no decision because of the split so we have Marlyn at 3 - 2 and 1 and the coin at 2 - 3 and 1. See you tomorrow.
Bought some MDRX this morning off a weekly breakout. The average true range is 1.74 on the weekly charts and I planned to hold it for a couple of days so I put the stop at 50 cents below the buy price. Breakouts are excellent opportunities for profit - but you need to be patient and actually wait for the breakout. I tried to show this picture earlier but Blogger, at least the server I have access to, was broken - again. Blogger = Google = hmmmmm? More about that later, too.
I hit break even with DHI in the first 15-minutes and sold it off immediately - I'll wait until housing does a real turn around before I buy any more of the homies - but at least I didn't lose any money. The way I played it was like this. On the way down I sold it off in pieces except for the last piece. Then I waited for it to turn. When it finally bottomed out I bought back enough of the pieces all at once to reduce my base to a reasonable level - when it hit that base this morning (actually a bit more on the open) I sold for a bit more than break even. Right after I sold it dropped again. Lucky me.
The Donchian Channel scan I ran off Friday's close came up with an old friend - BLG - and it showed a crossing on the first 15-minutes bar this morning but I took a pass - a shame - I would have made my losses back on that one in about an hour.
SYMC spent most of the day looking for a bottom. At 3:45 EST there were 110 million shares sold and I mean sold. Quick - tell me what percentage of SYMC is that and why do I call it an irrational overreaction to a non-event? 110 million shares is over 10% of the total outstanding shares of SYMC. Today SYMC shareholders lost more than 317 million dollars by 4 P.M. EST. And this is all based on the fact that they say that they are going to miss their estimate by about four cents. So you see - profit means nothing - perception is reality - "beat by a penny" is life and death - this is why I hate playing stocks into earnings.
The last 15-minute candle looks like short covering - so we'll see what tomorrow brings. I know one thing from watching the time and sales screen - there wasn't a second all day long from 9:30 till 4 when someone somewhere wasn't selling SYMC. The first time it went through 18.00 it looked like a waterfall of red - then the next couple of times every bid was hit but it didn't go down as fast. Probably the brokers taking out the rest and building inventory. You have to know that that was a lot of institutional selling and those guys take care of one another.
Played CRVL early for some easy change - in at 44 - out at 44.5 - the best 30 minutes of the day. After rewarding me for no reason whatsoever it turned around and went down. This might be a good chance to get involved in this stock - or maybe not.
GOOG hit 513 - but no short squeeze - gosh - could Jimmy have been wrong? At any rate it rebound off 513 as if it burned its hand. I wonder what that's all about? And there was a hell of a short squeeze - between 3 and 3:45 EST a lot of shorts piled in on a red bar cross and took it to 503 at which time the covering took it back up to 506. You can see this on the 15-minute charts. They banged it some more up to the close.
The up/down ratio is 40% which is good because it means that some of the pressure was taken off the market. The new high/low ratio is 68% which is also down but not as low as I'd like it to be. The VIX has withdrawn from being 10% under its 10 day moving average and the four major indices we follow all had strong white candles in their final hour. (I think the Q's would have turned green also if it hadn't been for SYMC). GS however finished the day red. Put all that together and I think we have an up day tomorrow.
The magic coin says ... tails - bear market tomorrow - well at least we will have a contest.
Of course today is a no decision because of the split so we have Marlyn at 3 - 2 and 1 and the coin at 2 - 3 and 1. See you tomorrow.
Maybe Not Irrational - Just Nuts
According to Notable Calls SYMC is being downgraded by UBS because UBS believes that they are going to have a bad quarter. There is some proof of this of course, a company such as UBS can't just come out and say that - or can they? Of course they can - their model only takes into consideration sales in sticks and bricks stores and not on-line.
Consequently they used a half data point to make the argument - who am I to argue - I only lost money as a result of this rush to publish.
Never mind - SYMC just came out with an announcement that says it is cutting its third quarter projection - oddly enough not as a result of software sales but because of its data center management unit.
So UBS got the story right just used the wrong rationale to get there - that remains irrational.
Consequently they used a half data point to make the argument - who am I to argue - I only lost money as a result of this rush to publish.
Never mind - SYMC just came out with an announcement that says it is cutting its third quarter projection - oddly enough not as a result of software sales but because of its data center management unit.
So UBS got the story right just used the wrong rationale to get there - that remains irrational.
RSI 2 vs 14 - How About 8?
I picked this up over on Bullish Jim's site * There's a great article on Trading Markets about the use of the Relative Strength Index as an indicator in trading. Interestingly, their studies show that the RSI (14) (which is shown in the top left corner of every single chart I post!) is basically useless as a short term indicator. However, their studies have shown great predictive value in using much shorter period RSI, specifically the the two period RSI.
Well I took that as a challenge since I have the technology to prove or disprove such a contention. I tested the RSI 14 and then the RSI 2 and, truth be told - neither one of them is worth much.
So I'm sitting there thinking about the RSI 2 (which did test a little better than the 14) and I said - wait a minute - I'm checking for an exit from below the 20 what if I checked for an entrance instead? So I tested for right after the RSI 2 slipped below the 20 line. The thinking being a short term RSI doesn't spend a lot of time at either the top or the bottom so you should look at them going into a condition rather than exiting it. Long story longer - the results improved but still were nothing to write home about. (I rechecked the 14 in the same manner and got worse results - which I expected - for obvious reasons).
I made one more adjustment - I changed the hit line to 10 and then checked stocks where the RSI 2 slipped below the 10 in the last day. And I obtained good results. Nothing that I would use in any shape, form or manner - but OK results.
I thought about that for a minute or two and I said if 2 below 10 gives good results I wonder what 8 below 20 gives? So I checked that out too. And that gave the best results of all. So how did I come up with 8? Simple - 14 minus 2 = 6 plus 2 = 8. Nah - I typed in 8 and didn't feel like changing it so that's how it became 8. I did try a couple of others afterward but 8 always tested best. I tried this filter at higher prices and lower prices without any real success. I have found that to be true that not all filters work equally well at all price ranges. That's intuitively obvious so I won't bother discussing it further here.
Here's the filter:
show stocks where close is between 15 and 35
and average volume(90) > 500000
and RSI(8) crossed below 20.00 within the last 1 day
The results were a 67% win rate, 127% ROI (annualized). And that's based on a 4 day hold period with 25K being invested in each selection. The selection is the top volume stock of the day from the filter output. The stop loss (fixed 8%) was triggered 2 times out of 62 selections. This filter won't find one every day but when it does it is a good one.
You can improve the hit rate a bit to nearly 1 per day if you change line three to RSI(8) < 20.00 but you will give up a little bit of win percentage and a little bit of ROI (which is unimportant).
I'm going to explore this a bit more later and combine RSI's and vary the entry and exit criteria a little and see what we can come up with without screwing the pooch.
Well I took that as a challenge since I have the technology to prove or disprove such a contention. I tested the RSI 14 and then the RSI 2 and, truth be told - neither one of them is worth much.
So I'm sitting there thinking about the RSI 2 (which did test a little better than the 14) and I said - wait a minute - I'm checking for an exit from below the 20 what if I checked for an entrance instead? So I tested for right after the RSI 2 slipped below the 20 line. The thinking being a short term RSI doesn't spend a lot of time at either the top or the bottom so you should look at them going into a condition rather than exiting it. Long story longer - the results improved but still were nothing to write home about. (I rechecked the 14 in the same manner and got worse results - which I expected - for obvious reasons).
I made one more adjustment - I changed the hit line to 10 and then checked stocks where the RSI 2 slipped below the 10 in the last day. And I obtained good results. Nothing that I would use in any shape, form or manner - but OK results.
I thought about that for a minute or two and I said if 2 below 10 gives good results I wonder what 8 below 20 gives? So I checked that out too. And that gave the best results of all. So how did I come up with 8? Simple - 14 minus 2 = 6 plus 2 = 8. Nah - I typed in 8 and didn't feel like changing it so that's how it became 8. I did try a couple of others afterward but 8 always tested best. I tried this filter at higher prices and lower prices without any real success. I have found that to be true that not all filters work equally well at all price ranges. That's intuitively obvious so I won't bother discussing it further here.
Here's the filter:
show stocks where close is between 15 and 35
and average volume(90) > 500000
and RSI(8) crossed below 20.00 within the last 1 day
The results were a 67% win rate, 127% ROI (annualized). And that's based on a 4 day hold period with 25K being invested in each selection. The selection is the top volume stock of the day from the filter output. The stop loss (fixed 8%) was triggered 2 times out of 62 selections. This filter won't find one every day but when it does it is a good one.
You can improve the hit rate a bit to nearly 1 per day if you change line three to RSI(8) < 20.00 but you will give up a little bit of win percentage and a little bit of ROI (which is unimportant).
I'm going to explore this a bit more later and combine RSI's and vary the entry and exit criteria a little and see what we can come up with without screwing the pooch.
Monday, January 15, 2007
Some To Watch
I like these and will be watching them this week.
EMA 4 over EMA 12: RIO, SPLS
EMA 4 over EMA 8 (Lo Ball): AUY, KGC
Close > EMA 21 < EMA 90: CHS, MEE
Crossover: VRX,CBK
And that's a wrap - a very prolific weekend and to all my readers and especially my favorite reader (that's you Ma) have a great and profitable week - see you back here tomorrow nite with the Wrap.
I have no position in any of these stocks but may buy any or all of them during the next several days - especially one of the two gold (AUY, KGC) they both move about the same.
EMA 4 over EMA 12: RIO, SPLS
EMA 4 over EMA 8 (Lo Ball): AUY, KGC
Close > EMA 21 < EMA 90: CHS, MEE
Crossover: VRX,CBK
And that's a wrap - a very prolific weekend and to all my readers and especially my favorite reader (that's you Ma) have a great and profitable week - see you back here tomorrow nite with the Wrap.
I have no position in any of these stocks but may buy any or all of them during the next several days - especially one of the two gold (AUY, KGC) they both move about the same.
GOOG Short Squeeze
Oh goody - Momma Cramer's favorite little boy Jimmy says that once GOOG gets to 513 then a "short squeeze" will send it to 520. I say Bull Snot! If GOOG gets to 520 it will do so on its own merits and not on a short squeeze and here is why.
The fact is Goog was never higher than 513 so far. Since all short sales were made from 513 and lower I'm not sure what he is talking about.
If there was a short squeeze going on in GOOG it happened in the last eight trading days which is obvious on this daily chart.
You can see that during the first three days of the last eight there was rapidly elevated volume - this is probably a lot of short covering. First the market turned on 12/26 but the volume wasn't there. It then went up strong on the next day but still no volume. The next two days it went down. So far the shorts are not afraid.
Then we had the three day week. You see that spinning top candle on 01/03? That suggests indecision and because the shorts couldn't sell it down and the bulls couldn't buy it up there was a standoff on that date with heavy volume. The next day it opened and went up That's when the shorts started grabbing every offer they could. The next day was a another opportunity to close the shorts. Then it was pretty much over. If anyone was still short after that they are morons. Not that aren't a lot of morons managing money (I know of several personally) but the pro's should've been out by then.
If they weren't then the two gap ups on the last two days would have had huge volume and they didn't. Nobody stays short on a gap up - not even a moron.
In addition the two gap ups the last couple of days are relatively small candles (for GOOG) with declining volume on the second gap. If increasing volume means increased volatility in a stock - which it does - what does decreasing volume mean? Well it could mean a three day weekend but if I were short significant shares of GOOG at this time I think I'd be scurrying around to cover.
Unfortunately neither I nor Jim Cramer will be able to prove our contention - isn't it time for short interest to be reported in real time? Nah - the brokerages would never permit it - you might discover how often they take the countertrade in order to force the squeeze.
The fact is Goog was never higher than 513 so far. Since all short sales were made from 513 and lower I'm not sure what he is talking about.
If there was a short squeeze going on in GOOG it happened in the last eight trading days which is obvious on this daily chart.
You can see that during the first three days of the last eight there was rapidly elevated volume - this is probably a lot of short covering. First the market turned on 12/26 but the volume wasn't there. It then went up strong on the next day but still no volume. The next two days it went down. So far the shorts are not afraid.
Then we had the three day week. You see that spinning top candle on 01/03? That suggests indecision and because the shorts couldn't sell it down and the bulls couldn't buy it up there was a standoff on that date with heavy volume. The next day it opened and went up That's when the shorts started grabbing every offer they could. The next day was a another opportunity to close the shorts. Then it was pretty much over. If anyone was still short after that they are morons. Not that aren't a lot of morons managing money (I know of several personally) but the pro's should've been out by then.
If they weren't then the two gap ups on the last two days would have had huge volume and they didn't. Nobody stays short on a gap up - not even a moron.
In addition the two gap ups the last couple of days are relatively small candles (for GOOG) with declining volume on the second gap. If increasing volume means increased volatility in a stock - which it does - what does decreasing volume mean? Well it could mean a three day weekend but if I were short significant shares of GOOG at this time I think I'd be scurrying around to cover.
Unfortunately neither I nor Jim Cramer will be able to prove our contention - isn't it time for short interest to be reported in real time? Nah - the brokerages would never permit it - you might discover how often they take the countertrade in order to force the squeeze.
Four Days Down
This is a simple filter that I derived from something Dr. Steenbarger wrote regarding the various indices and what happens after they go down for a period of time. Needless to say after a decline there is an appreciation. Most of the time anyway.
The filter is fairly simple -
show stocks where close is between 15 and 30
and average volume(90) > 500000
and low < low 1 day ago
and low 1 day ago < low 3 days ago
and low 2 day ago < low 4 days ago
and low 3 days ago < low 5 days ago
And no that isn't a mistake - I skip a day up until the last day. I learned to skip a day from another stock market analyst who has brought some new thinking to the market - Tom DeMark. Mr. DeMark has written a number of books devoted to his methods - they're worth a scan if you have the time. I'm not that much of a true believer but I've used the skip-a-period method for so long that I know it is the best way to look for a sequence of declines or rises. I also use lows when I am looking for a sequence of down days. I want to see how far the bears are pushing the stock not how far the bulls are taking it back.
The filter back tested well but this time instead of giving you some percentages from back testing I thought I'd isolate out the various selections of the program over the last 20 days and show what has happened to them since.
20 - INTC = 6.75%
19 - AMAT = 8.7
18 - MOT = -12.95
17 - GLW = 2.77
16 - GM = 4.95
15 - S = -9.4
14 - JNPR = 7.2
13 - YHOO = 15.51
12 - CSCO = 7.4
11 - DELL = 4.43
10 - CHK = -4.8
9 - JDSU = -3.1
8 - CHS = 8
7 - CDNS = -.06
6 - STX = 1.59
5 - SGP = 4.15
4 - GPS = .2
3 - HAL = 1.43
2 - NOK = 2.15
1 - BJS = 2.66
Which isn't too bad - 15 winners and 5 losers just picking the top most volume stock in each day's output without any other consideration. The only other constraint was only going to each stock once during the run.
As always I provide these filters to stir your imagination and to show that it is possible to find good trades in the market using just straight technical analysis.
From the above list I currently have a position in GLW.
The filter is fairly simple -
show stocks where close is between 15 and 30
and average volume(90) > 500000
and low < low 1 day ago
and low 1 day ago < low 3 days ago
and low 2 day ago < low 4 days ago
and low 3 days ago < low 5 days ago
And no that isn't a mistake - I skip a day up until the last day. I learned to skip a day from another stock market analyst who has brought some new thinking to the market - Tom DeMark. Mr. DeMark has written a number of books devoted to his methods - they're worth a scan if you have the time. I'm not that much of a true believer but I've used the skip-a-period method for so long that I know it is the best way to look for a sequence of declines or rises. I also use lows when I am looking for a sequence of down days. I want to see how far the bears are pushing the stock not how far the bulls are taking it back.
The filter back tested well but this time instead of giving you some percentages from back testing I thought I'd isolate out the various selections of the program over the last 20 days and show what has happened to them since.
20 - INTC = 6.75%
19 - AMAT = 8.7
18 - MOT = -12.95
17 - GLW = 2.77
16 - GM = 4.95
15 - S = -9.4
14 - JNPR = 7.2
13 - YHOO = 15.51
12 - CSCO = 7.4
11 - DELL = 4.43
10 - CHK = -4.8
9 - JDSU = -3.1
8 - CHS = 8
7 - CDNS = -.06
6 - STX = 1.59
5 - SGP = 4.15
4 - GPS = .2
3 - HAL = 1.43
2 - NOK = 2.15
1 - BJS = 2.66
Which isn't too bad - 15 winners and 5 losers just picking the top most volume stock in each day's output without any other consideration. The only other constraint was only going to each stock once during the run.
As always I provide these filters to stir your imagination and to show that it is possible to find good trades in the market using just straight technical analysis.
From the above list I currently have a position in GLW.
Blog Review
Oh hell someone else does it all the time - my turn - if you want to be a successful trader and you don't read Brett Steenbarger's amazing Blog then you will not be a successful trader.
End of review.
End of review.
BS in a CAN
If you want to be successful in this business all you need is a system.
Some people say – “all you have to do is CAN SLIM your way to riches.” CAN SLIM is simple – (Courtesy – Wikipedia under “CANSLIM”):
C – current earnings per share are up 30% or more
A – annual earnings are up 25% or more in each of the last 3 years
N – new – the company should be under new management, have a new product, or have a new service. It should also have a new high for its stock price
S - supply and demand. Look for a company that has large trading volume. High demand = increasing prices. Micro- and small-caps are more volatile, they can go down as fast as they go up.
L = leader or laggard? Within an industry, always choose the company that is leading the way, not one that is following in another's footstep
I = institutional sponsorship. Make sure large mutual fund companies (and other institutions) are investing in your stock - you can ride on their capital. Also, focus on the better performing institutions buying your stock.
M = market trends and market indices. Recognize the cup and handle pattern, as well as other market correction footprints. Know when a stock has peaked out. Also, buy stocks only when the Dow, S&P 500, and NASDAQ are going up.
CAN SLIM was popularized by William J. O’Neil in his book Make Money in Stocks: A Winning System in Good Times or Bad.
I think IBD invented CAN SLIM and has a CAN SLIM scan. I also understand that CAN SLIM is best applied to small caps and O’Neil violated this principle in his book.
I often say that S, I, and M are probably the most important part of the puzzle (although some folks disagree with the “I” part). L is Jim Cramer’s favorite in that he often says pick the best of breed and not the also rans – and I believe that he uses C and A and sometimes N to determine L.
Whatever – apparently it works. Probably as good as “buy the dips - sell the rips”. Actually “buy the dips - sell the rips” works a lot better as long as M is being considered.
So then I went and ran a pseudo-CAN SLIM for you using the Yahoo site screener – I’m sure there are better ones out there but that one was handy and the scan was based on the following criteria:
Earnings growth for 5 years – > 20% per year
Institutional holdings - > 75
Average daily volume - > 1 Million
Capitalization - < 3 Billion
EPS (TTM) - > 30 cents
That is just CAN SLIMish but I got the following 6 hits off it –
2 energy – HLX and SPN
1 educational – CECO
1 tech – SLAB
2 retail – CAKE and PSUN
Of these I like SLAB because it printed a crossing pattern on Friday. Of the rest - the energy stocks are down so they are “buy the dip” candidates, the retails are both trending up and could be good investments (based on CAN SLIM rules) and education is falling asleep in class.
Truthfully I could invest in any one of these (CECO after its next breakout) but I will probably play SLAB on Tuesday because I understand its pattern (that’s if I can get past the name). I’ll keep the two energy stocks on my energy watch list.
Some people say – “all you have to do is CAN SLIM your way to riches.” CAN SLIM is simple – (Courtesy – Wikipedia under “CANSLIM”):
C – current earnings per share are up 30% or more
A – annual earnings are up 25% or more in each of the last 3 years
N – new – the company should be under new management, have a new product, or have a new service. It should also have a new high for its stock price
S - supply and demand. Look for a company that has large trading volume. High demand = increasing prices. Micro- and small-caps are more volatile, they can go down as fast as they go up.
L = leader or laggard? Within an industry, always choose the company that is leading the way, not one that is following in another's footstep
I = institutional sponsorship. Make sure large mutual fund companies (and other institutions) are investing in your stock - you can ride on their capital. Also, focus on the better performing institutions buying your stock.
M = market trends and market indices. Recognize the cup and handle pattern, as well as other market correction footprints. Know when a stock has peaked out. Also, buy stocks only when the Dow, S&P 500, and NASDAQ are going up.
CAN SLIM was popularized by William J. O’Neil in his book Make Money in Stocks: A Winning System in Good Times or Bad.
I think IBD invented CAN SLIM and has a CAN SLIM scan. I also understand that CAN SLIM is best applied to small caps and O’Neil violated this principle in his book.
I often say that S, I, and M are probably the most important part of the puzzle (although some folks disagree with the “I” part). L is Jim Cramer’s favorite in that he often says pick the best of breed and not the also rans – and I believe that he uses C and A and sometimes N to determine L.
Whatever – apparently it works. Probably as good as “buy the dips - sell the rips”. Actually “buy the dips - sell the rips” works a lot better as long as M is being considered.
So then I went and ran a pseudo-CAN SLIM for you using the Yahoo site screener – I’m sure there are better ones out there but that one was handy and the scan was based on the following criteria:
Earnings growth for 5 years – > 20% per year
Institutional holdings - > 75
Average daily volume - > 1 Million
Capitalization - < 3 Billion
EPS (TTM) - > 30 cents
That is just CAN SLIMish but I got the following 6 hits off it –
2 energy – HLX and SPN
1 educational – CECO
1 tech – SLAB
2 retail – CAKE and PSUN
Of these I like SLAB because it printed a crossing pattern on Friday. Of the rest - the energy stocks are down so they are “buy the dip” candidates, the retails are both trending up and could be good investments (based on CAN SLIM rules) and education is falling asleep in class.
Truthfully I could invest in any one of these (CECO after its next breakout) but I will probably play SLAB on Tuesday because I understand its pattern (that’s if I can get past the name). I’ll keep the two energy stocks on my energy watch list.
Sunday, January 14, 2007
Oil? or No Oil?
Cal Trader writes that he thinks oil is becoming a buy. I do too and have talked about it several times this past week or so - but I bring it up again because he focused on CHK (among others) and CHK just happened to show up on my newest favorite filter - Donchian Channels - this weekend. Here is what that looks like -
I showed you OIH earlier today on the weekly charts - here it is on the daily's with Donchian Channels
And then XLE from the same space -
The number one stock coming out of the Donchian Channel this weekend was HAL and it too is part of the energy space and it is a prominent (top 10) member of both XLE and OIH. Here is what it looks like -
And yes, I know grasshopper - they all look exactly the same. That is probably not an error.
Now I've left you an excrutiatingly difficult question to answer - which one to play?
Well there is no simple answer but there is an answer -
Let's say that your account can only buy 100 shares of any of the 4 issues - you would go for the one that would pay the most in the shortest time which, based on the average true range would be OIH. But otherwise let's say that you have 29000 bucks and you will use it all to buy as many shares as possible of one of the four - in that case you would go with HAL. That's because simply based on the numbers of shares and the expected return (ATR) you would achieve a higher net with HAL. OIH of course would be in second place.
Well that was easy wasn't it - actually there are some other considerations such as that you might be better off with a fund rather than an individual stock and so on and so forth. So actually you would be best served by reviewing your circumstances at the time of the buy and acting appropriate to your situation.
This is not a recommendation to buy any stock - it is simply a discussion of one sector and a lesson in how stocks reflect ETF's or vice versa.
I showed you OIH earlier today on the weekly charts - here it is on the daily's with Donchian Channels
And then XLE from the same space -
The number one stock coming out of the Donchian Channel this weekend was HAL and it too is part of the energy space and it is a prominent (top 10) member of both XLE and OIH. Here is what it looks like -
And yes, I know grasshopper - they all look exactly the same. That is probably not an error.
Now I've left you an excrutiatingly difficult question to answer - which one to play?
Well there is no simple answer but there is an answer -
Let's say that your account can only buy 100 shares of any of the 4 issues - you would go for the one that would pay the most in the shortest time which, based on the average true range would be OIH. But otherwise let's say that you have 29000 bucks and you will use it all to buy as many shares as possible of one of the four - in that case you would go with HAL. That's because simply based on the numbers of shares and the expected return (ATR) you would achieve a higher net with HAL. OIH of course would be in second place.
Well that was easy wasn't it - actually there are some other considerations such as that you might be better off with a fund rather than an individual stock and so on and so forth. So actually you would be best served by reviewing your circumstances at the time of the buy and acting appropriate to your situation.
This is not a recommendation to buy any stock - it is simply a discussion of one sector and a lesson in how stocks reflect ETF's or vice versa.
Funny Business
Back when I was in industry making bid and proposal we would determine a competitor's efficiency in a very quick and dirty manner - we simply divided their revenues by their numbers of employees (both readily available) and that would give us an idea of how good they were at what they were doing. A low number and they were pretty bad - a high number and they were pretty good.
Here are four industry leaders and their contribution per employee (C/E) values. The last column is a rough estimate of how much the company needs on a daily basis to maintain their staff. That's right IBM requires about 187 million dollars a day 7 days a week 365 days a year to keep their staff happy, housed, warm and dry. And it is obvious that the most efficient company of all is MSFT. That's because their contented employees each generate 638732 dollars each on an annualized basis.
I show you this only to give you an idea of how much money we are talking about when we discuss these various companies. They are estimates of course and are acmitedly rough - does it really cost IBM 187 mill a day? Probably not - but they do own a lot of real estate and they do have a lot of employees and they are world-wide in scope - so maybe it's only 167 million a day. Does it really matter - it is a big number.
So I ask you - why don't these little numbers such as employee contribution and the large numbers such as "nut per day" filter into the stock price? Because all that Wall Street is interested in is "beat by a penny" accounting. The rest just doesn't matter.
So if you read an article that suggests that you look at EBITA, and GAAP, and GAP, and Bladdiblah Blah Blah Blah and projected future revenue growth vs past 6 months and crapita crapita crapita - just say - "Oh bull snot, did they beat by a penny or not?" And you won't go wrong. Because if they didn't all the rest of that crap is just that - crap.
You can make these estimates for any company vs. any other company but try to stay in the same industry - it wouldn't make sense to compare WMT to IBM. I use an average annual income in the software sector of about 80K per year including benefits. This is burdened by 2.5 (you need to make 2.5 bucks for every one buck you pay an employee). As I said quick and dirty and it is probably higher these days because I'm basing on figures I last used in the mid-90's.
Here are four industry leaders and their contribution per employee (C/E) values. The last column is a rough estimate of how much the company needs on a daily basis to maintain their staff. That's right IBM requires about 187 million dollars a day 7 days a week 365 days a year to keep their staff happy, housed, warm and dry. And it is obvious that the most efficient company of all is MSFT. That's because their contented employees each generate 638732 dollars each on an annualized basis.
I show you this only to give you an idea of how much money we are talking about when we discuss these various companies. They are estimates of course and are acmitedly rough - does it really cost IBM 187 mill a day? Probably not - but they do own a lot of real estate and they do have a lot of employees and they are world-wide in scope - so maybe it's only 167 million a day. Does it really matter - it is a big number.
So I ask you - why don't these little numbers such as employee contribution and the large numbers such as "nut per day" filter into the stock price? Because all that Wall Street is interested in is "beat by a penny" accounting. The rest just doesn't matter.
So if you read an article that suggests that you look at EBITA, and GAAP, and GAP, and Bladdiblah Blah Blah Blah and projected future revenue growth vs past 6 months and crapita crapita crapita - just say - "Oh bull snot, did they beat by a penny or not?" And you won't go wrong. Because if they didn't all the rest of that crap is just that - crap.
You can make these estimates for any company vs. any other company but try to stay in the same industry - it wouldn't make sense to compare WMT to IBM. I use an average annual income in the software sector of about 80K per year including benefits. This is burdened by 2.5 (you need to make 2.5 bucks for every one buck you pay an employee). As I said quick and dirty and it is probably higher these days because I'm basing on figures I last used in the mid-90's.
HOLDRS
These "mutual funds" or ETF's invented by Merrill Lynch are useful for determining investment vs trading targets over the next whenever. HOLDR stands for Holding Company Depositary Receipts and each fund contains the big movers in that particular sector.
Remember a couple of weeks ago I said to keep an eye on the oil industry? Well here is the current weekly chart of the Oil Industry HOLDR (OIH).
You can see that oil is bouncing off the 90 period EMA even now and that, based on the past performance, seems to be a good thing.
Then some time ago I compared hardware to software in the computer industry and used the SMH/SWH as the basis - take a look now. First SMH -
And then SWH -
I think looking at these two shows that software is a bit overbought perhaps and the hardware sector might be looking for a bid.
The point being that you can use the HOLDRS to inform your investing. Set up a watch list and look at them once a week or so. I know one thing - I think if I were holding software I'd be looking for a place to exit and if I was thinking about buying some hardware I might proceed with the purchase - stocks that is.
If you are really interested in HOLDRS go to the AMEX site (amex.com) and click on HOLDRS in the left window. That will give you a list of them. You can then review them individually.
Remember a couple of weeks ago I said to keep an eye on the oil industry? Well here is the current weekly chart of the Oil Industry HOLDR (OIH).
You can see that oil is bouncing off the 90 period EMA even now and that, based on the past performance, seems to be a good thing.
Then some time ago I compared hardware to software in the computer industry and used the SMH/SWH as the basis - take a look now. First SMH -
And then SWH -
I think looking at these two shows that software is a bit overbought perhaps and the hardware sector might be looking for a bid.
The point being that you can use the HOLDRS to inform your investing. Set up a watch list and look at them once a week or so. I know one thing - I think if I were holding software I'd be looking for a place to exit and if I was thinking about buying some hardware I might proceed with the purchase - stocks that is.
If you are really interested in HOLDRS go to the AMEX site (amex.com) and click on HOLDRS in the left window. That will give you a list of them. You can then review them individually.
Correction Coming?
Regular readers of this Blog know that I don’t dwell on the gloomier side of the market such as corrections and such and that I’m usually pretty upbeat about the whole situation. I did write a post back in December that suggested that a correction was due and I’m going to follow that up today with yet another post along the same idea.
I’m a great believer in regression to the mean (duh) and I believe that the best view of any stock, index or otherwise is the 90-period EMA applied to the weekly charts. Here I show a picture of the SPY, which I use as a proxy for the S&P 500 index since it kind of is the S&P 500 index. The diagram shows clearly that the SPY weekly bars stay well in touch with the 90-period EMA. And whenever it pulls too far away it hurries back again. Now “too far” is a relative term and I normally just eyeball it and watch the highs and lows and it looks to me on this chart at least that the SPY and therefore the S&P 500 is flattening at the top. It could be that we will have another decline like last two years and then explosive growth through the remainder of the year – but I’d be careful right now if I were planning any really long-term relationships with stocks. I’m not saying don’t get involved (remember rule 1) but be watchful and don’t let your portfolio on autopilot.
Here is the IWM, which is the proxy for the Russell 2000. It isn’t as graceful as the SPY and that probably reflects the fact that the small caps are more volatile than the S&P 500 large caps. But the effect is the same and if you were to overlay the two figures you would see that the corrections occur about the same time. In other words small cap, large cap is meaningless in the context of the larger market. This one looks like it is already rolling over at the top (highs and lows lower than previous highs and lows). If we take the past as prologue (and what else can we do) then we could probably expect a 7 to 10 point drop before the correction is over. And that would be about 10%. Do I expect more? Expect - no – is it possible – yes.
Last but not least here is a picture of MSFT on the same baseline (weekly with 90-period EMA). Note Mr. Softy’s love affair with the EMA and note how very, very far away Mr. Softy has run from its anchor. I leave the rest to your fertile imaginations.
I’m a great believer in regression to the mean (duh) and I believe that the best view of any stock, index or otherwise is the 90-period EMA applied to the weekly charts. Here I show a picture of the SPY, which I use as a proxy for the S&P 500 index since it kind of is the S&P 500 index. The diagram shows clearly that the SPY weekly bars stay well in touch with the 90-period EMA. And whenever it pulls too far away it hurries back again. Now “too far” is a relative term and I normally just eyeball it and watch the highs and lows and it looks to me on this chart at least that the SPY and therefore the S&P 500 is flattening at the top. It could be that we will have another decline like last two years and then explosive growth through the remainder of the year – but I’d be careful right now if I were planning any really long-term relationships with stocks. I’m not saying don’t get involved (remember rule 1) but be watchful and don’t let your portfolio on autopilot.
Here is the IWM, which is the proxy for the Russell 2000. It isn’t as graceful as the SPY and that probably reflects the fact that the small caps are more volatile than the S&P 500 large caps. But the effect is the same and if you were to overlay the two figures you would see that the corrections occur about the same time. In other words small cap, large cap is meaningless in the context of the larger market. This one looks like it is already rolling over at the top (highs and lows lower than previous highs and lows). If we take the past as prologue (and what else can we do) then we could probably expect a 7 to 10 point drop before the correction is over. And that would be about 10%. Do I expect more? Expect - no – is it possible – yes.
Last but not least here is a picture of MSFT on the same baseline (weekly with 90-period EMA). Note Mr. Softy’s love affair with the EMA and note how very, very far away Mr. Softy has run from its anchor. I leave the rest to your fertile imaginations.
Catch a Falling Knife
Bullish Jim brought this stock up on his Blog and we've had a small discussion of it but I just wanted to show the world what a classic melt-down looks like. You seldom get this kind of relentless action from so high for so far for so long.
I give you VOL - note that it is a "red bar crossover". I've been showing you a lot of "white bar crossovers" lately and this one is gorgeous in the opposite direciton (I had mentioned that the red bar crossover was a good short signal). Then after a couple of drops note how it retreats to the 8 EMA.
Turn this stock over and it is the kind I write about frequently on the long side. What a beauty. A train wreck in slow motion.
Now - something to notice - the last 15-minutes was not a short covering rally but some really hard selling persisted and there was absolutely no one ready to catch this falling knife. This stock is splitting 3 for 2 on Tuesday (actually Monday) and it is possible that it will go up off that split. Maybe not but I'm keeping it on a watch list. I'll revisit this in Tuesday evening's wrap regardless of the outcome.
I give you VOL - note that it is a "red bar crossover". I've been showing you a lot of "white bar crossovers" lately and this one is gorgeous in the opposite direciton (I had mentioned that the red bar crossover was a good short signal). Then after a couple of drops note how it retreats to the 8 EMA.
Turn this stock over and it is the kind I write about frequently on the long side. What a beauty. A train wreck in slow motion.
Now - something to notice - the last 15-minutes was not a short covering rally but some really hard selling persisted and there was absolutely no one ready to catch this falling knife. This stock is splitting 3 for 2 on Tuesday (actually Monday) and it is possible that it will go up off that split. Maybe not but I'm keeping it on a watch list. I'll revisit this in Tuesday evening's wrap regardless of the outcome.
Superior Growth
According to a Motley Fool throwaway attempting to sell you one of their myriad services containing exclusive information that only you and several hundred thousand to maybe several million other lucky people will receive on exactly the same day - of the 348 companies that offered 20% annualized returns over the past decade - 325 were small caps 10 years ago. Thank you Motley and Fool - you are dismissed now. I won't go into their rap - you can read for yourself as to the key factor in all this blather - what I would rather talk about is probability.
The small cap index is commonly called the Russell 2000 and it is called that for a reason - can anyone guess - Ferris? Sally? No one? - OH Kay I'll tell you why - because it contains two thousand small cap stocks. Now you don't have to believe me - you can look it up. Go ahead - count 'em if you want - I'll wait. (If you don't know much about the Russell indexes (that's the way they refer to them) go to Wikipedia and type in "Russell 2000" and you will get a complete and quick history). (Also IWM which I track daily is the ETF for the Russell 2000).
Now I'm going to make a broad and absolutely guaranteed prediction - in those 2000 stocks there are a certain number that will be producing 20% annualized returns 10 years from now. I don't know which ones they are but I know for a fact that they are in there.
OK - I've done the heavy lifting for you - I've whittled the list down from over 7500 to only 2000 - all you have to do is find that handful of stocks. Trust me - it's easy - Just ask Motley Fool.
The small cap index is commonly called the Russell 2000 and it is called that for a reason - can anyone guess - Ferris? Sally? No one? - OH Kay I'll tell you why - because it contains two thousand small cap stocks. Now you don't have to believe me - you can look it up. Go ahead - count 'em if you want - I'll wait. (If you don't know much about the Russell indexes (that's the way they refer to them) go to Wikipedia and type in "Russell 2000" and you will get a complete and quick history). (Also IWM which I track daily is the ETF for the Russell 2000).
Now I'm going to make a broad and absolutely guaranteed prediction - in those 2000 stocks there are a certain number that will be producing 20% annualized returns 10 years from now. I don't know which ones they are but I know for a fact that they are in there.
OK - I've done the heavy lifting for you - I've whittled the list down from over 7500 to only 2000 - all you have to do is find that handful of stocks. Trust me - it's easy - Just ask Motley Fool.
Saturday, January 13, 2007
Tale of Two Stocks
Today’s lesson, kiddies, is how to recognize a short squeeze on the 15-minute charts and how to recognize the difference between a scalper’s stock and an investment stock.
First I will show you one of the scalpers latest favorite – CRVL. Friday's chart provides an excellent example of a blow-off bottom. The reason why it is a blow-off bottom is because the shorts have to cover. Later in the post we'll show you why the shorts had to cover but once the buyers came out in force and started picking off the offers the stock went up. Because the stock is a low volume trade it can be moved very quickly in price. Consequently the shorts need to move very quickly to ensure their profit. Consequently the price rises rapidly.
If you watch the bid – ask for awhile during one of these buying-selling sprees your head will spin. Occasionally there is a 15 or 20 cent variance. When I want to buy some I put my limit price between the two and it gets hit quickly. I wouldn't use a "market" order in this stock because "market" has no meaning.
Towards the end of the day the day traders start bailing out and the price oscillates with some very large volume - relatively speaking. That is an ideal scalper's stock - low volume and lots of mo-mo. (Mo-mo is a roaring 90's term for "momentum" - I know - so last century).
Compare that to YHOO, which is an investment grade stock. But even in YHOO a blow-off bottom is a blow-off bottom - except in YHOO the volume is in the millions and the price can't be easily manipulated by a handful of snot-nosed kids in their mommy's basement. But the same dynamic applies - traders are short the stock - the market starts moving against them and they have to scurry and cover their bids. Notice too that with YHOO there was no end-of-day bail-out. I will discuss the significance of this at length in a subsequent post this weekend.
You can make money in either one of these stocks - just watch for the blow-off bottoms - if you are careful with CRVL and keep the sharks from eating your lunch you can ride that puppy too.
For those of you who don't want to sift through dozens, hundreds, thousands of charts a day you may simply want to watch the Q's. It too will show the blow-off bottom and when it does you know it is time for a feeding frenzy. So this is what the traders saw occurring Friday at 10:30 - the Q's started to rise - this brought terror into the shortist's hearts and they started to grab every offer in site.
First I will show you one of the scalpers latest favorite – CRVL. Friday's chart provides an excellent example of a blow-off bottom. The reason why it is a blow-off bottom is because the shorts have to cover. Later in the post we'll show you why the shorts had to cover but once the buyers came out in force and started picking off the offers the stock went up. Because the stock is a low volume trade it can be moved very quickly in price. Consequently the shorts need to move very quickly to ensure their profit. Consequently the price rises rapidly.
If you watch the bid – ask for awhile during one of these buying-selling sprees your head will spin. Occasionally there is a 15 or 20 cent variance. When I want to buy some I put my limit price between the two and it gets hit quickly. I wouldn't use a "market" order in this stock because "market" has no meaning.
Towards the end of the day the day traders start bailing out and the price oscillates with some very large volume - relatively speaking. That is an ideal scalper's stock - low volume and lots of mo-mo. (Mo-mo is a roaring 90's term for "momentum" - I know - so last century).
Compare that to YHOO, which is an investment grade stock. But even in YHOO a blow-off bottom is a blow-off bottom - except in YHOO the volume is in the millions and the price can't be easily manipulated by a handful of snot-nosed kids in their mommy's basement. But the same dynamic applies - traders are short the stock - the market starts moving against them and they have to scurry and cover their bids. Notice too that with YHOO there was no end-of-day bail-out. I will discuss the significance of this at length in a subsequent post this weekend.
You can make money in either one of these stocks - just watch for the blow-off bottoms - if you are careful with CRVL and keep the sharks from eating your lunch you can ride that puppy too.
For those of you who don't want to sift through dozens, hundreds, thousands of charts a day you may simply want to watch the Q's. It too will show the blow-off bottom and when it does you know it is time for a feeding frenzy. So this is what the traders saw occurring Friday at 10:30 - the Q's started to rise - this brought terror into the shortist's hearts and they started to grab every offer in site.
Friday, January 12, 2007
Friday's Wrap
As noted earlier - after a month of holding for a better day I sold SYMC for an 18 cent loss - could have sold it yesterday for a half buck profit but nooooo had to hold it. Who would have suspected that good news such as an open portal to sell your goods to a couple of billion Chinese would be seen as such a bad thing on Wall Street. There is absolutely no rationality in this market.
I completed the first round buy on Glass (GLW) and also added to my DHI holdings. Not quite back to where I was but I will probably get there next week if they keep edging up.
Going to keep this simple today - the up/down ratio dropped back a bit to 56% but the new 20 day high/low ratio went ahead to 79%. That plus the fact that the VIX is 12% less than its 10 day moving average suggests a down day coming on Tuesday. Add to all of that the fact that the Q's, DIA, SPY, IWM and GS all put in strong white candles in the final hour and we have to say Tuesday is definitely a down day.
The magic coin says tails - also a down day.
Today makes Marlyn 3 and 2 and coin 2 and 3. We are not doing very well this year so far.
Later this weekend I'll show you the difference between a scalper special and solid investment and how to tell when to hold 'em and when to fold 'em. That's if Blogger ever allows charts to be uploaded.
I completed the first round buy on Glass (GLW) and also added to my DHI holdings. Not quite back to where I was but I will probably get there next week if they keep edging up.
Going to keep this simple today - the up/down ratio dropped back a bit to 56% but the new 20 day high/low ratio went ahead to 79%. That plus the fact that the VIX is 12% less than its 10 day moving average suggests a down day coming on Tuesday. Add to all of that the fact that the Q's, DIA, SPY, IWM and GS all put in strong white candles in the final hour and we have to say Tuesday is definitely a down day.
The magic coin says tails - also a down day.
Today makes Marlyn 3 and 2 and coin 2 and 3. We are not doing very well this year so far.
Later this weekend I'll show you the difference between a scalper special and solid investment and how to tell when to hold 'em and when to fold 'em. That's if Blogger ever allows charts to be uploaded.
That's Irrational
Held SYMC for a month - had it up a buck and a quarter once - sold it just now for a loss of 18 cents. Because - it cut a deal to sell its products through BIDU in China - that's irrational.
So much for showing me love.
So much for showing me love.
Breakouts - 2.5
It's actually 3 but the last two posts were both titled the same so I'll make this one 2.5 and the next one will be 3.
Now that you are totally confused here are some more breakouts from the ascending triangle formation. SYNA, CBG, TJX, NWSA. Those are the best 4 (of 7) and I will tell you that I don't like NWSA(NWS) which was number 1 so I put at number 4.
I just read about SYNA last night as one of the top favored (by funds) small cap complanies per Morningstar. And it actually doesn't have a bad looking chart except for the fact that the last time it got up here (32 and change) it collapsed. CBG has been humming along lately putting up new 52-week highs day after day. But it just broke out of a range-bound 32-34 area. TJX is also exploring new 52-week high territory, has been up here (29.5) before and collapsed. The only other thing I'll tell you is that SYNA has an earnings announcement coming on Jan 25th and their current historical to implied volatility numbers are 20 to 45. That 25 point variance means the market is expecing something in the future and that there will be some movement in this stock (I don't know how much) but it will be up or down - Gee - how helpful.
Do your own DD - and I really don't expect to be doing this every day - but I might convert my program to a weekly and start doing it on the weekends - we'll see.
Also - I hold no interest in any of these stocks and may or may not hold an interest at the end of the day.
Now that you are totally confused here are some more breakouts from the ascending triangle formation. SYNA, CBG, TJX, NWSA. Those are the best 4 (of 7) and I will tell you that I don't like NWSA(NWS) which was number 1 so I put at number 4.
I just read about SYNA last night as one of the top favored (by funds) small cap complanies per Morningstar. And it actually doesn't have a bad looking chart except for the fact that the last time it got up here (32 and change) it collapsed. CBG has been humming along lately putting up new 52-week highs day after day. But it just broke out of a range-bound 32-34 area. TJX is also exploring new 52-week high territory, has been up here (29.5) before and collapsed. The only other thing I'll tell you is that SYNA has an earnings announcement coming on Jan 25th and their current historical to implied volatility numbers are 20 to 45. That 25 point variance means the market is expecing something in the future and that there will be some movement in this stock (I don't know how much) but it will be up or down - Gee - how helpful.
Do your own DD - and I really don't expect to be doing this every day - but I might convert my program to a weekly and start doing it on the weekends - we'll see.
Also - I hold no interest in any of these stocks and may or may not hold an interest at the end of the day.
Thursday, January 11, 2007
Turtles – Again
The Turtles original method was based on Donchian channels. As I remember it they went long when the price went above the upper channel and short when it went below. Then they used risk management to keep them in the game. In other words if the stock kept running in their desired direction they stayed with it and if it came back the stop loss would take them out. They had many small losses and a few large wins and that’s what kept them solvent.
I wrote a filter using Donchian channels and set it up like the Turtles would have done – then I back tested it - I hate “many small losses.” I take enough as it is.
So I changed it – I set the filter to look for stocks that came back up through the lower Donchian channel after being below it for at least one close. This is what that looks like –
This output is actually for Wednesday's close - you can see that Glass responded well to the Donchian channel.
When I back tested it there were some absolutely great results. 62% win percentage and 75% annualized ROI. But the net change over time was where the real story was told – This has the potential to be a real intermediate (10 – 20 day) term filter.
NET Change
1 day - .04%
4 days – 1.07
10 days – 2.39
20 days – 4.33
30 days – 4.86
Donchian channels Marlyn’s way – it might be a winner.
I wrote a filter using Donchian channels and set it up like the Turtles would have done – then I back tested it - I hate “many small losses.” I take enough as it is.
So I changed it – I set the filter to look for stocks that came back up through the lower Donchian channel after being below it for at least one close. This is what that looks like –
This output is actually for Wednesday's close - you can see that Glass responded well to the Donchian channel.
When I back tested it there were some absolutely great results. 62% win percentage and 75% annualized ROI. But the net change over time was where the real story was told – This has the potential to be a real intermediate (10 – 20 day) term filter.
NET Change
1 day - .04%
4 days – 1.07
10 days – 2.39
20 days – 4.33
30 days – 4.86
Donchian channels Marlyn’s way – it might be a winner.
Wrapping Thursday
Fortunately I wasn't around much of today having had a little personal business to get out of the way. It seemed that for all the action in the indices the only thing that moved was - I really don't have to tell you this do I? - Homebuilders! DHI made back 54 cents and I made back most of my losses. Meanwhile SYMC managed to round trip a 40 cent profit and turned in a 13 cent loss - on a day when the COMPQ was up 25 points. One more day and I'll be done with that piece of crap. Not that I don't have a profit - I do - but I think the money will be better used somewhere else.
For example - I bought some Glass (GLW) on the open based on the dummy spot on the weekly charts from two weeks ago followed by a doji last week. All of that looks like a bottom. It went up today and given its recent past this generally this means a smack down tomorrow but GLW will be my new swing trade. Today it is printing a crossing formation on the daily charts. If GLW confirms tomorrow I'll finish the buy for this round. I never got past round one on SYMC because it never went anywhere. Should rename that stock the old yo-yo. To put things in perspective I made more today in a half position of Glass than I've made in a month in SYMC.
Since I was out I didn't do any mo-mo day trading today. Just as well none of the usual suspects did much of anything. CRVL limped around for a bit and round tripped 60 cents which is nothing for that stock - it usually round trips a a buck and a half every hour or so.
GS looks like it was shot out of a cannon and then just sat in space all day. Most of the activity in the market seemed to be over by 11 A.M. My darling from yesterday CTXS gained a half a rock today. Had I been around I probably would have played it again off a "gap up - pull back" play.
Going to be out early tomorrow so I don't think I'll make any plays at all unless I fill GLW.
Which is all well and good because I think the market will take a rest tomorrow - the up/down ratio is 60% which is not too terribly bad but the new 20 day high/low ratio is 70%. That, coupled with the VIX being more than 5% below its 10 day moving average, suggests a down day coming. We have a split ending in our four majors with two red candles and two white candles in the final hour and GS, that old tie-breaker, landed on its edge - a doji (still tired).
My prediction - down tomorrow and the magic coin says ... tails - it agrees. So once again we will both be right or both be wrong.
So far - Marlyn 3 and 1 and the coin is 2 and 2.
For example - I bought some Glass (GLW) on the open based on the dummy spot on the weekly charts from two weeks ago followed by a doji last week. All of that looks like a bottom. It went up today and given its recent past this generally this means a smack down tomorrow but GLW will be my new swing trade. Today it is printing a crossing formation on the daily charts. If GLW confirms tomorrow I'll finish the buy for this round. I never got past round one on SYMC because it never went anywhere. Should rename that stock the old yo-yo. To put things in perspective I made more today in a half position of Glass than I've made in a month in SYMC.
Since I was out I didn't do any mo-mo day trading today. Just as well none of the usual suspects did much of anything. CRVL limped around for a bit and round tripped 60 cents which is nothing for that stock - it usually round trips a a buck and a half every hour or so.
GS looks like it was shot out of a cannon and then just sat in space all day. Most of the activity in the market seemed to be over by 11 A.M. My darling from yesterday CTXS gained a half a rock today. Had I been around I probably would have played it again off a "gap up - pull back" play.
Going to be out early tomorrow so I don't think I'll make any plays at all unless I fill GLW.
Which is all well and good because I think the market will take a rest tomorrow - the up/down ratio is 60% which is not too terribly bad but the new 20 day high/low ratio is 70%. That, coupled with the VIX being more than 5% below its 10 day moving average, suggests a down day coming. We have a split ending in our four majors with two red candles and two white candles in the final hour and GS, that old tie-breaker, landed on its edge - a doji (still tired).
My prediction - down tomorrow and the magic coin says ... tails - it agrees. So once again we will both be right or both be wrong.
So far - Marlyn 3 and 1 and the coin is 2 and 2.
Breakouts
Once again an idea woke me up and nothing would do except I jump out of bed all bright eyed and - well maybe not that enthusiastically - but at least I got up to pursue the dream. I don't know who said it first, it's been said so many times, but 98% of success is just showing up.
Anyway I've been talking about breakouts for about a week now and I finally figured out how to write the formula that permits me to filter for breakouts from an ascending triangle. Actually it was in the filtering software already and I just remembered that I had read about it in their help documentation some months ago. Regardless how we got there the filter produced some interesting results.
Of 74 completed trades in 77 days the win percentage was 68% which is not too shabby and fits in with some of my all time great producers. Actually I throw out any filter that produces less than 60%. Maybe some of those others had a better ROI but I think you can lose your capital and your will to live with too many losers in a row. So I try to stay on the right side of 2/3rds in this area. The ROI was 97% annualized (based on 100K starting capital). Also there was no price bias the filter is just as likely to produce winners at 15 dollars as 35 dollars. Net change over time tells the true story.
NET Change 1 day - .11%
4 days - 1.18
10 days - 2.22
20 days - 2.89
30 days - 4.71
Obviously this is not a short term filter. I'll give you the 5 top selections (of 11) of this filter from yesterday's close. These are in highest volume to lower volume order. Remember, as normal back testing results are based on the top stock in the pile as a function of volume. So if yesterday were in a back test only AMAT would have qualified.
AMAT
SCHW
NWSA
CA
CBG
Do your own DD. While I have no position in any of them at this time I might take a interest in any one or more of these stocks today.
I use stockfetcher.com for my filtering. It is an excellent company with a rapid response to any help request you might send their way. I get nothing from the endorsement - I just use it and like it.
Anyway I've been talking about breakouts for about a week now and I finally figured out how to write the formula that permits me to filter for breakouts from an ascending triangle. Actually it was in the filtering software already and I just remembered that I had read about it in their help documentation some months ago. Regardless how we got there the filter produced some interesting results.
Of 74 completed trades in 77 days the win percentage was 68% which is not too shabby and fits in with some of my all time great producers. Actually I throw out any filter that produces less than 60%. Maybe some of those others had a better ROI but I think you can lose your capital and your will to live with too many losers in a row. So I try to stay on the right side of 2/3rds in this area. The ROI was 97% annualized (based on 100K starting capital). Also there was no price bias the filter is just as likely to produce winners at 15 dollars as 35 dollars. Net change over time tells the true story.
NET Change 1 day - .11%
4 days - 1.18
10 days - 2.22
20 days - 2.89
30 days - 4.71
Obviously this is not a short term filter. I'll give you the 5 top selections (of 11) of this filter from yesterday's close. These are in highest volume to lower volume order. Remember, as normal back testing results are based on the top stock in the pile as a function of volume. So if yesterday were in a back test only AMAT would have qualified.
AMAT
SCHW
NWSA
CA
CBG
Do your own DD. While I have no position in any of them at this time I might take a interest in any one or more of these stocks today.
I use stockfetcher.com for my filtering. It is an excellent company with a rapid response to any help request you might send their way. I get nothing from the endorsement - I just use it and like it.
Wednesday, January 10, 2007
Wednesday's Wrap
I had a busy day - I was out most of it but I was able to take two trades this morning before I left – CTXS on a 15-minute crossover with a confirmation and CRVL on a buck 43 gap down. Let’s address CTXS first – I’ve talked about the crossover several times this week and I think you all know what it looks like by now. But in case you forgot here is a picture – worth a thousand words – for me it was worth a thousand bucks – well, 763 actually but that isn’t too bad all things considered equal.
You can see how the second 15-minute bar transects the three averages and the third bar confirms. I've been watching CTXS on various time periods and it looks like it is setting up for a long term run. Here is how it looks today on the weekly charts.
Now remember we need to finish out this week with a green/white body and have a confirmation either next week or the following week before we can safely take this one. I know - it takes the patience of a Saint but that's the best way to play the intermediate or swing game - with patience and careful selections.
Now we’ll talk about CRVL – this stock is a day trader’s wet dream – lots of action, much up and down but mostly up. I’ve been watching this stock for a couple of months – actually ever since I first read about it over on the Goddess’ site. Subsequently I figured it out – it often opens on a gap down and then claws its way back to the surface – a buck and a quarter to a buck and a half is about the daily range. So when I saw it at minus a buck and change this morning I said gimme some no need for a set-up. In at 42.31 out at 43.60 and thank you Ms. Goddess for the tip (She plays it for a lonnnng tiiiime – I day trade it – who’s right? who’s wrong? who cares? – Truth – she’s right because she caught it on a dip and has ridden it long and well since. – Truth - I am because I’ve made taksan okani* off the little beast and its’ hordes of day trading demons and I plan to keep on keepin’ on). Remember these thinly traded stocks only work when there is day trading action and I told you yesterday how to put your limit between the bid and the ask because any semblance between those two and reality is purely coincidental.
Fact is I make more money on these weak start days than on any others. I don’t know why that is but had I been home all day I would’ve played HANS and GM and any number of other boomers. Even Glass (GLW) took the blue pill this afternoon. Looks like it might have taken the whole bottle.
Of course at the end of the day SYMC (my swing trade) is down 11 cents with the Naz up 15 skins. But I said I’d play it through Friday and if it doesn’t show me some real love by then – goodbye SYMC. (I long ago stopped using it on my box having found far better products for far better prices (mostly free)). My few shares of DHI managed to lose 6 cents today. I think that's a good sign because it appears to have been sold out and now everyone is waiting for a reason to buy it. Me too. I have my target in mind and if it breaks the target I'll buy back my shares. Meanwhile the money is being put to good use in scalping CRVL and day trading stocks like CTXS.
Meanwhile the up/down ratio actually lost ground today to 42% which is good and the new 20 day high/low ratio only obtained 40% and that's OK too. The VIX remains neutral but all 4 majors and GS finished the last hour bright and white and that could mean some trouble for tomorrow. I'm putting it all together and saying another up day tomorrow.
The magic coin says ... heads - bull market tomorrow - well we're either both going to be right or both be wrong.
Marlyn is now 2 and 1 and coin is 1 and 2. But it's early in the season folks - don't go away.
* "taksan okani" is Japanese for a great amount of money and is probably the only Japanese I remember from a youth spent exploring the temples and ... oh Bull - runnin' the allies staying one step ahead of the MP's. A very checkered life has led this Marlyn person - indeed.
You can see how the second 15-minute bar transects the three averages and the third bar confirms. I've been watching CTXS on various time periods and it looks like it is setting up for a long term run. Here is how it looks today on the weekly charts.
Now remember we need to finish out this week with a green/white body and have a confirmation either next week or the following week before we can safely take this one. I know - it takes the patience of a Saint but that's the best way to play the intermediate or swing game - with patience and careful selections.
Now we’ll talk about CRVL – this stock is a day trader’s wet dream – lots of action, much up and down but mostly up. I’ve been watching this stock for a couple of months – actually ever since I first read about it over on the Goddess’ site. Subsequently I figured it out – it often opens on a gap down and then claws its way back to the surface – a buck and a quarter to a buck and a half is about the daily range. So when I saw it at minus a buck and change this morning I said gimme some no need for a set-up. In at 42.31 out at 43.60 and thank you Ms. Goddess for the tip (She plays it for a lonnnng tiiiime – I day trade it – who’s right? who’s wrong? who cares? – Truth – she’s right because she caught it on a dip and has ridden it long and well since. – Truth - I am because I’ve made taksan okani* off the little beast and its’ hordes of day trading demons and I plan to keep on keepin’ on). Remember these thinly traded stocks only work when there is day trading action and I told you yesterday how to put your limit between the bid and the ask because any semblance between those two and reality is purely coincidental.
Fact is I make more money on these weak start days than on any others. I don’t know why that is but had I been home all day I would’ve played HANS and GM and any number of other boomers. Even Glass (GLW) took the blue pill this afternoon. Looks like it might have taken the whole bottle.
Of course at the end of the day SYMC (my swing trade) is down 11 cents with the Naz up 15 skins. But I said I’d play it through Friday and if it doesn’t show me some real love by then – goodbye SYMC. (I long ago stopped using it on my box having found far better products for far better prices (mostly free)). My few shares of DHI managed to lose 6 cents today. I think that's a good sign because it appears to have been sold out and now everyone is waiting for a reason to buy it. Me too. I have my target in mind and if it breaks the target I'll buy back my shares. Meanwhile the money is being put to good use in scalping CRVL and day trading stocks like CTXS.
Meanwhile the up/down ratio actually lost ground today to 42% which is good and the new 20 day high/low ratio only obtained 40% and that's OK too. The VIX remains neutral but all 4 majors and GS finished the last hour bright and white and that could mean some trouble for tomorrow. I'm putting it all together and saying another up day tomorrow.
The magic coin says ... heads - bull market tomorrow - well we're either both going to be right or both be wrong.
Marlyn is now 2 and 1 and coin is 1 and 2. But it's early in the season folks - don't go away.
* "taksan okani" is Japanese for a great amount of money and is probably the only Japanese I remember from a youth spent exploring the temples and ... oh Bull - runnin' the allies staying one step ahead of the MP's. A very checkered life has led this Marlyn person - indeed.
Breakouts
I’m going to work on my new favorite subject – breakouts and I’ll use the energy space as an example since that is one that we will be following over the next couple of weeks.
Here I have annotated the 6-month weekly chart of XLE to show you what a breakout might look like - both the last one and perhaps the next one. The fact that the under-line neatly transects those three lows is purely coincidental – at least for the moment. Point A is where the last breakout came. The obvious question is - why isn’t the over-line between 8/21 and 9/18 instead of where it is? Well the obvious answer is – it was and the breakout (by my definition) didn’t occur at that time so the line keeps getting moved until a breakout (by my definition) occurs. And that line between 8/21 and 9/18 would have bisected that tall white candle on 9/25. Now you could say that that was a “breakout indicator” and then simply have waited for the confirmation which came at 10/09 – the site of the current breakout. You always need a confirmation. Or you can bump the line forward week by week until you get a body above the line. Trust me folks – this isn’t rocket science it’s more like - art class on a 1st grade level. Remember? – connect the dots? – see the monkey? I know - I know you thought it was magic didn’t you?
Here’s another chart – this one is ACI one of the major miners (I just had to, I’m sorry). Note how this chart seems to replicate the action in XLE – there is probably a good reason for that and maybe it’s because it too is part of XLE. What I like about ACI is that it is a volatile stock that moves almost point for point with XLE but costs about 20 dollars less per share. The ramifications of that are pretty obvious - for every share of XLE you buy you can buy one and half shares of ACI. Note the breakout is almost exactly the same as with XLE. I’m following ACI too.
And for a final chart in the breakout series I’m staying with the energy patch but this time I’m showing PXE - another ETF related to energy - this one for exploration. Notice that it too follows along with XLE. With the price of this one being so low I can buy three shares for the price of one XLE. The problem is I only get an equivalent or maybe even a bit lower return so there is no real advantage to one over the other.
If energy takes off I will probably be in a stock such as ACI because I believe that it gives me the best return for my buck. If you want diversification then XLE is probably the place to be and if you are strapped for investment cash but want a piece of the sector then PXE might be your choice.
But do your own DD and remember – nobody knows nothing – including me
Charts courtesy of prophet.net - a good company (I get nothing for the endorsement - I do it because I believe it).
Here I have annotated the 6-month weekly chart of XLE to show you what a breakout might look like - both the last one and perhaps the next one. The fact that the under-line neatly transects those three lows is purely coincidental – at least for the moment. Point A is where the last breakout came. The obvious question is - why isn’t the over-line between 8/21 and 9/18 instead of where it is? Well the obvious answer is – it was and the breakout (by my definition) didn’t occur at that time so the line keeps getting moved until a breakout (by my definition) occurs. And that line between 8/21 and 9/18 would have bisected that tall white candle on 9/25. Now you could say that that was a “breakout indicator” and then simply have waited for the confirmation which came at 10/09 – the site of the current breakout. You always need a confirmation. Or you can bump the line forward week by week until you get a body above the line. Trust me folks – this isn’t rocket science it’s more like - art class on a 1st grade level. Remember? – connect the dots? – see the monkey? I know - I know you thought it was magic didn’t you?
Here’s another chart – this one is ACI one of the major miners (I just had to, I’m sorry). Note how this chart seems to replicate the action in XLE – there is probably a good reason for that and maybe it’s because it too is part of XLE. What I like about ACI is that it is a volatile stock that moves almost point for point with XLE but costs about 20 dollars less per share. The ramifications of that are pretty obvious - for every share of XLE you buy you can buy one and half shares of ACI. Note the breakout is almost exactly the same as with XLE. I’m following ACI too.
And for a final chart in the breakout series I’m staying with the energy patch but this time I’m showing PXE - another ETF related to energy - this one for exploration. Notice that it too follows along with XLE. With the price of this one being so low I can buy three shares for the price of one XLE. The problem is I only get an equivalent or maybe even a bit lower return so there is no real advantage to one over the other.
If energy takes off I will probably be in a stock such as ACI because I believe that it gives me the best return for my buck. If you want diversification then XLE is probably the place to be and if you are strapped for investment cash but want a piece of the sector then PXE might be your choice.
But do your own DD and remember – nobody knows nothing – including me
Charts courtesy of prophet.net - a good company (I get nothing for the endorsement - I do it because I believe it).
Tuesday, January 09, 2007
Tuesday Tuesday Wrapping Tuesday
Well what can I say except, good grief, Mary Margaret, what is going on? We go up we go down we go round and round and that was just the first hour. By the time I get around to trading I'm dizzy.
Didn't do very much today - watched SYMC go up and down and then up again. Another 19 cent day - wow - I'm on my way to Mickey D's and the dollar menu and I'm going supersize the fries.
DHI, the few shares I still hold, actually gained a couple of cents as well - 7 to be exact. BSX which I bought yesterday as a day trade because it was looking so strong, roundtripped a 60 cent gain and finished in the red. I sold it before it broke into the redlands. So much for my career as a swing trader. OK - so there will always be tomorrow.
I have no idea why the market imploded today but yesterday's action kind of suggested today's action as it normally does. And today's action suggests that tomorrow is going to be a huge up day.
The up/down ratio is still in neutral but a bit oversold at 45% and the new 20 day high/low ratio is well oversold at 37%. The VIX returned to neutral and everybody (DIA, SPY, QQQQ, IWM and GS (the stock market proxy of the 22nd century)) finished the last hour in the red. That normally presages a good day on the morrow.
My prediction - bull market.
The magic coin says --- tails again - still calling for the bear.
I'm calling today a bear market even though the INDU and SPoos went up. The miniscule amount was almost an after thought. So the tally is - Marlyn 1 and 1 - Coin 1 and 1. I should know better than to go up against a magic coin.
Didn't do very much today - watched SYMC go up and down and then up again. Another 19 cent day - wow - I'm on my way to Mickey D's and the dollar menu and I'm going supersize the fries.
DHI, the few shares I still hold, actually gained a couple of cents as well - 7 to be exact. BSX which I bought yesterday as a day trade because it was looking so strong, roundtripped a 60 cent gain and finished in the red. I sold it before it broke into the redlands. So much for my career as a swing trader. OK - so there will always be tomorrow.
I have no idea why the market imploded today but yesterday's action kind of suggested today's action as it normally does. And today's action suggests that tomorrow is going to be a huge up day.
The up/down ratio is still in neutral but a bit oversold at 45% and the new 20 day high/low ratio is well oversold at 37%. The VIX returned to neutral and everybody (DIA, SPY, QQQQ, IWM and GS (the stock market proxy of the 22nd century)) finished the last hour in the red. That normally presages a good day on the morrow.
My prediction - bull market.
The magic coin says --- tails again - still calling for the bear.
I'm calling today a bear market even though the INDU and SPoos went up. The miniscule amount was almost an after thought. So the tally is - Marlyn 1 and 1 - Coin 1 and 1. I should know better than to go up against a magic coin.
Weekly Charts For Intermediate Profit
Here’s another one from Bullish Jim’s experimental portfolio that I think serves as a clinic for all of us who would get rich in the stock market. (And Jim I’m not picking on you it’s just that you have such great stocks to use for examples of what to do).
Expand this one-year weekly chart of PRFT with 4, 8 and 21-EMA and then step back from the screen and look at it very closely. Then say out loud to yourself when, if you were going to buy this stock, you should have bought it. (Hopefully you picked the fourth week in August).
This particular pattern occurs over and over again in almost every stock you might want to buy. When you see a rising stock such as this consolidate simply draw a couple of lines on it as I show in the next figure then when the breakout occurs pounce.
The key factor is that the stock gets too far away from its EMA-21 and goes back to visit. In fact it just did it again. Because I know that many folks use a simple moving average for TA I printed it with the MA 20.
You can see that the MA 20 and EMA 21 on the weekly charts are very close to one another. It’s just that I prefer the EMA 21 to the simple moving average for all time scales. The result remains consistent – you buy by price and when it hits certain moving averages it behaves as if it touched a hot stove.
The next figure shows the same stock for two years on a weekly basis. From this aspect you can see the original breakout clear as a bell. If you want to get a 10-bagger first you have to get a 1-bagger and in order to get a 1-bagger you have to buy breakouts. To buy breakouts you have to be patient and wait for the breakout to develop. Generally speaking if you use the weekly charts you won’t get as many switchbacks as you might if you use daily charts.
As an aside you can also see the several "crossing" entries that I wrote about in Monday's wrap. I’ve circled them - May 2005, again first week in Sept 2005, then again in Oct 2005, and finally in August 2006. Note that the confirmation didn’t come for a week later in 2006. It is permissible to skip a period in the longer period charts.
It is also true that if you use a longer period chart to make buy or sell decisions the trend that you find will last longer than it might have with the same set-up on a shorter period chart.
Expand this one-year weekly chart of PRFT with 4, 8 and 21-EMA and then step back from the screen and look at it very closely. Then say out loud to yourself when, if you were going to buy this stock, you should have bought it. (Hopefully you picked the fourth week in August).
This particular pattern occurs over and over again in almost every stock you might want to buy. When you see a rising stock such as this consolidate simply draw a couple of lines on it as I show in the next figure then when the breakout occurs pounce.
The key factor is that the stock gets too far away from its EMA-21 and goes back to visit. In fact it just did it again. Because I know that many folks use a simple moving average for TA I printed it with the MA 20.
You can see that the MA 20 and EMA 21 on the weekly charts are very close to one another. It’s just that I prefer the EMA 21 to the simple moving average for all time scales. The result remains consistent – you buy by price and when it hits certain moving averages it behaves as if it touched a hot stove.
The next figure shows the same stock for two years on a weekly basis. From this aspect you can see the original breakout clear as a bell. If you want to get a 10-bagger first you have to get a 1-bagger and in order to get a 1-bagger you have to buy breakouts. To buy breakouts you have to be patient and wait for the breakout to develop. Generally speaking if you use the weekly charts you won’t get as many switchbacks as you might if you use daily charts.
As an aside you can also see the several "crossing" entries that I wrote about in Monday's wrap. I’ve circled them - May 2005, again first week in Sept 2005, then again in Oct 2005, and finally in August 2006. Note that the confirmation didn’t come for a week later in 2006. It is permissible to skip a period in the longer period charts.
It is also true that if you use a longer period chart to make buy or sell decisions the trend that you find will last longer than it might have with the same set-up on a shorter period chart.
Monday, January 08, 2007
Wrapping Monday
I wanted to do some of this as a midday report but Blogger wouldn't allow me to upload a figure that I am using later and so I'll do it as the normal wrap.
Maybe tomorrow we'll be able to do a "midday report". Maybe tomorrow Blogger will sprout wings and fly. Shouldn't complain - you gets what you pays for.
Picked up RAD as a day-trade - gapped up and came back to the EMA 4 and that's when I grabbed it up. Same with BSX. Sold off RAD mid-afternoon as it seemed to be done. Decided to hold BSX (convert to a swing) as it looks pretty strong. There were a number of these types of set-ups today - these were just the two I took.
Speaking of the "gap up fall back" set-up, one of Broker-A's favorites, MVIS, did that this morning. MVIS looks like it is finally catching on. They are developing a heads-up display for automobiles - just what we need - another driver distraction. Actually the tech market is so barren of new ideas that any idea sounds great. I mean let's face it how many different ways can you say "telephone and takes pictures" and make it sound new and exciting - twice? So MVIS is being rewarded for innovation if nothing else.
SYMC is up a bit. This one is driving me nuts. I'd be better off day-trading it than holding it as a swing. I'll hang in there one more cycle (4 days) and if it doesn't break out of this range (> 21.80) then I'm out of it. We'll see on Friday. If I do sell it will be your signal to load up. I dumped nearly all of my DHI this morning - maybe housing isn't ready to go up. I'll keep an eye on it and if it turns I'll get my losses back - they weren't too severe but I hate losses.
Picked up some CRVL on a reversal day-trade this afternoon. I sold at COB for a buck and change. I keep this one on my screens all the time - it is a thinly traded stock with a massive spread but I usually buy it as a limit trade by putting my bid square in the center of the bid-ask. Somebody hits it almost immediately. There are a lot of scalpers in this stock. Selling is the same process - put it out between the bid and the ask and some fish will rise to the bait. Trading is like fishing - a lot of patience and knowing where to drop your line goes a long way.
One of my fellow Bloggers - Bullish Jim - bailed on CTXS last week and look at it today - up a buck and change and look out above. Only wish I had jumped on it at open this morning (just kidding Jim). Actually I'm not, Jim. CTXS put out a "buy me" crossing signal this morning and I saw it but got distracted and by the time I got back half the move was made. That "buy me" crossing signal looks like this.
You will see this on just about every time period including daily, weekly and monthly. I use three EMA - 4, 8 and 21 and a "crossing" signal is when the open of the first 15-minute candle is below the EMA 21 and the close is above the EMA 4. When you get a confirmation (as shown in the figure) the next move is up - usually. Sometimes they fool us and go down but that is what risk management is all about. I normally set a stop just below the EMA 21 and that is generally sufficient. Readers of this Blog know that I also normally use "mental" stops. (Charts courtesy of Prophet.net - a good company).
This signal, by the way, works for shorts too (red candle crossing down) and works in many different markets. I have seen it work after the open (today NVEC for example) but keep in mind the rules are fairly strict - you must have the crossing and the confirmation before taking the trade.
I keep an eye out for this signal on my various watch lists that I have set up 24 to a page and start going through 15 minutes after the open. If I see the indicator I copy the stock to another watch list for the next 15 minute scan.
As for tomorrow - the up/down ratio is back to 52% (erroneously reported earlier as 60%) and the new 20 day high/low ratio is at 35% which is mixed. The VIX is still more than 5% greater than its 10 day moving average which, while not a hard and fast indicator, does suggest a certain amount of oversoldishness. The four indices that we track (via their ETFs) all finished the last hour in the red and GS finished with a doji. That last is understandable given the 4+ point gain it had today - poor guy had to be plumb tuckered out. Or as we New Yorkers say - "Dat guy is f'in tired." Put all of this together and it spells - another up day tomorrow. And that's my prediction.
The magic coin says - tails - bear again.
OK the score so far is Marlyn - 1 and 0 --- Coin 0 and 1 - the race has begun.
Maybe tomorrow we'll be able to do a "midday report". Maybe tomorrow Blogger will sprout wings and fly. Shouldn't complain - you gets what you pays for.
Picked up RAD as a day-trade - gapped up and came back to the EMA 4 and that's when I grabbed it up. Same with BSX. Sold off RAD mid-afternoon as it seemed to be done. Decided to hold BSX (convert to a swing) as it looks pretty strong. There were a number of these types of set-ups today - these were just the two I took.
Speaking of the "gap up fall back" set-up, one of Broker-A's favorites, MVIS, did that this morning. MVIS looks like it is finally catching on. They are developing a heads-up display for automobiles - just what we need - another driver distraction. Actually the tech market is so barren of new ideas that any idea sounds great. I mean let's face it how many different ways can you say "telephone and takes pictures" and make it sound new and exciting - twice? So MVIS is being rewarded for innovation if nothing else.
SYMC is up a bit. This one is driving me nuts. I'd be better off day-trading it than holding it as a swing. I'll hang in there one more cycle (4 days) and if it doesn't break out of this range (> 21.80) then I'm out of it. We'll see on Friday. If I do sell it will be your signal to load up. I dumped nearly all of my DHI this morning - maybe housing isn't ready to go up. I'll keep an eye on it and if it turns I'll get my losses back - they weren't too severe but I hate losses.
Picked up some CRVL on a reversal day-trade this afternoon. I sold at COB for a buck and change. I keep this one on my screens all the time - it is a thinly traded stock with a massive spread but I usually buy it as a limit trade by putting my bid square in the center of the bid-ask. Somebody hits it almost immediately. There are a lot of scalpers in this stock. Selling is the same process - put it out between the bid and the ask and some fish will rise to the bait. Trading is like fishing - a lot of patience and knowing where to drop your line goes a long way.
One of my fellow Bloggers - Bullish Jim - bailed on CTXS last week and look at it today - up a buck and change and look out above. Only wish I had jumped on it at open this morning (just kidding Jim). Actually I'm not, Jim. CTXS put out a "buy me" crossing signal this morning and I saw it but got distracted and by the time I got back half the move was made. That "buy me" crossing signal looks like this.
You will see this on just about every time period including daily, weekly and monthly. I use three EMA - 4, 8 and 21 and a "crossing" signal is when the open of the first 15-minute candle is below the EMA 21 and the close is above the EMA 4. When you get a confirmation (as shown in the figure) the next move is up - usually. Sometimes they fool us and go down but that is what risk management is all about. I normally set a stop just below the EMA 21 and that is generally sufficient. Readers of this Blog know that I also normally use "mental" stops. (Charts courtesy of Prophet.net - a good company).
This signal, by the way, works for shorts too (red candle crossing down) and works in many different markets. I have seen it work after the open (today NVEC for example) but keep in mind the rules are fairly strict - you must have the crossing and the confirmation before taking the trade.
I keep an eye out for this signal on my various watch lists that I have set up 24 to a page and start going through 15 minutes after the open. If I see the indicator I copy the stock to another watch list for the next 15 minute scan.
As for tomorrow - the up/down ratio is back to 52% (erroneously reported earlier as 60%) and the new 20 day high/low ratio is at 35% which is mixed. The VIX is still more than 5% greater than its 10 day moving average which, while not a hard and fast indicator, does suggest a certain amount of oversoldishness. The four indices that we track (via their ETFs) all finished the last hour in the red and GS finished with a doji. That last is understandable given the 4+ point gain it had today - poor guy had to be plumb tuckered out. Or as we New Yorkers say - "Dat guy is f'in tired." Put all of this together and it spells - another up day tomorrow. And that's my prediction.
The magic coin says - tails - bear again.
OK the score so far is Marlyn - 1 and 0 --- Coin 0 and 1 - the race has begun.
Sunday, January 07, 2007
Idea Stocks
Every night when I go to bed I say my prayers and I always include one extra plea - God, please save me from idea stocks.
An "idea stock" is one where you have this great idea - a can't miss idea - a wonderful, blessed, absolutely fabulous idea and then, because you are so stupid that next to you a stump is a fountain of wisdom, you invest in it because it "just can't miss".
There is nothing in this world that says a stock that went down can't keep going down nor is there anything that says a stock that went up must keep going up. There is also nothing that says that just because winter is coming that energy stocks must go up just because. Or do they? Here is an "idea stock" that maybe we should start to watch.
If for the past 6 years you had started tracking XLE on a weekly basis in September you would have wound up with some wonderful, nearly automatic money. (I didn't but that's just me).
Here is what XLE looked like on a quarterly basis in each of those six last quarters of the year.
It is interesting that in the first quarter of '03 XLE put out a stone cold dummy spot and had you invested your portfolio in energy at $25 at that time you would have doubled your money in three years. (I didn't do this either - back in '03 I didn't know much about "dummy spots").
Now this trade isn't automatic - you have to look for entry points and watch for exits too. This is what this year's looked like.
You can see based on the increasing volume in September that a bottom is forming. The last week in September served as a confirmation but I say wait for October to make the trade and any close above the third week in September (X marks the spot) would be a good buy point. Then, because of the warmish winter on the East Coast (so far) a new dummy spot top formed based on lack of interest in the energy sector at that time. If that wasn't a good enough indicator the next week should have been a solid tip off (steepling) and you could have gotten out at that time. By that time everyone in the world kind of knew that the East was enjoying spring like temps anyway.
So there you have it. Or do you? One thing I do know is that even if we don't have a cold winter we sure as shootin' are going to have a hot spring, summer and fall and guess what will happen with energy then. Do the words "air conditioning" mean anything to you?
I know I plan to keep a close eye on the sector from here on out as it might be taking off and soon.
An "idea stock" is one where you have this great idea - a can't miss idea - a wonderful, blessed, absolutely fabulous idea and then, because you are so stupid that next to you a stump is a fountain of wisdom, you invest in it because it "just can't miss".
There is nothing in this world that says a stock that went down can't keep going down nor is there anything that says a stock that went up must keep going up. There is also nothing that says that just because winter is coming that energy stocks must go up just because. Or do they? Here is an "idea stock" that maybe we should start to watch.
If for the past 6 years you had started tracking XLE on a weekly basis in September you would have wound up with some wonderful, nearly automatic money. (I didn't but that's just me).
Here is what XLE looked like on a quarterly basis in each of those six last quarters of the year.
It is interesting that in the first quarter of '03 XLE put out a stone cold dummy spot and had you invested your portfolio in energy at $25 at that time you would have doubled your money in three years. (I didn't do this either - back in '03 I didn't know much about "dummy spots").
Now this trade isn't automatic - you have to look for entry points and watch for exits too. This is what this year's looked like.
You can see based on the increasing volume in September that a bottom is forming. The last week in September served as a confirmation but I say wait for October to make the trade and any close above the third week in September (X marks the spot) would be a good buy point. Then, because of the warmish winter on the East Coast (so far) a new dummy spot top formed based on lack of interest in the energy sector at that time. If that wasn't a good enough indicator the next week should have been a solid tip off (steepling) and you could have gotten out at that time. By that time everyone in the world kind of knew that the East was enjoying spring like temps anyway.
So there you have it. Or do you? One thing I do know is that even if we don't have a cold winter we sure as shootin' are going to have a hot spring, summer and fall and guess what will happen with energy then. Do the words "air conditioning" mean anything to you?
I know I plan to keep a close eye on the sector from here on out as it might be taking off and soon.
Saturday, January 06, 2007
Wrapping the First Week
I was listening to Bloomberg radio in the car yesterday and the guy said - with all seriousness - that the Dow was down about a half a percent for the year. And you wonder why I don't pay any attention to those bozo's.
Both AES and BLG crapped out and hit the stop loss. Oh well - they were speculative buys and I was trying a new approach. Obviously I need to refine my process a bit. I'm still holding SYMC and DHI and as one goes up the other goes down which is OK for now - but I expect DHI to turn around sooner rather than later.
The good news is that the up/down ratio is at 25% which is about as low as it gets. The new 20 day high/low ratio is at 14% and looking back that seems to be about as low as it ever got. This means that there is something to buy on Monday.
The three majors, DIA, SPY, and the Q's finished mixed in their last hour as did IWM and GS. But if you have a minute this weekend take a look at the 60-minute charts for DIA, SPY, QQQQ, and IWM for Thursday. Look at the last hour and you will see what a blow-off top on the indices looks like.
The VIX is in the yellow zone (greater than 5% over its 10-day less than 10%) so there is some weakness indicated (or maybe "suggested" is a better word). I think that Monday brings a bit of an up day across the board.
The Magic Coin disagrees and says it will be a bear market. Remember - I'm going to keep track of my predictions vs the coin's and we'll see who is better in a couple of months.
And even though you didn't ask - mom's in great shape for 87 years old - still lives in her own house and drives her own car. Sees the doctor every now and again for the heart problems but if I'm in half as good a shape when I get to 87 I'll be very pleased (and it will be an improvement). My brother is close at hand and takes her on longer trips but otherwise she gets around pretty good.
Both AES and BLG crapped out and hit the stop loss. Oh well - they were speculative buys and I was trying a new approach. Obviously I need to refine my process a bit. I'm still holding SYMC and DHI and as one goes up the other goes down which is OK for now - but I expect DHI to turn around sooner rather than later.
The good news is that the up/down ratio is at 25% which is about as low as it gets. The new 20 day high/low ratio is at 14% and looking back that seems to be about as low as it ever got. This means that there is something to buy on Monday.
The three majors, DIA, SPY, and the Q's finished mixed in their last hour as did IWM and GS. But if you have a minute this weekend take a look at the 60-minute charts for DIA, SPY, QQQQ, and IWM for Thursday. Look at the last hour and you will see what a blow-off top on the indices looks like.
The VIX is in the yellow zone (greater than 5% over its 10-day less than 10%) so there is some weakness indicated (or maybe "suggested" is a better word). I think that Monday brings a bit of an up day across the board.
The Magic Coin disagrees and says it will be a bear market. Remember - I'm going to keep track of my predictions vs the coin's and we'll see who is better in a couple of months.
And even though you didn't ask - mom's in great shape for 87 years old - still lives in her own house and drives her own car. Sees the doctor every now and again for the heart problems but if I'm in half as good a shape when I get to 87 I'll be very pleased (and it will be an improvement). My brother is close at hand and takes her on longer trips but otherwise she gets around pretty good.
Tuesday, January 02, 2007
Tuesday Wraps
Of course there was no market today - President Ford's funeral and all. I guess that makes sense - but I'm not very sentimental and I'm pretty sure Gerry wasn't either.
What I'm wrapping today is the fact that the FTSI 100 closed today 90 points up which is huge! That foreshadow's a good day for tomorrow in the U.S. Markets. Unfortunately as I mentioned a week ago now - I'll be taking a short trip through the rest of the week and I don't trade when I'm on the road. I will be taking my trades that I talked about the other day before I leave and with a stop loss in place I'm sure everything will be fine.
Good luck to my readers - I'm off to see my original reader (that's you mom) and celebrate with her the 87th anniversary of her birth - should be a great day.
What I'm wrapping today is the fact that the FTSI 100 closed today 90 points up which is huge! That foreshadow's a good day for tomorrow in the U.S. Markets. Unfortunately as I mentioned a week ago now - I'll be taking a short trip through the rest of the week and I don't trade when I'm on the road. I will be taking my trades that I talked about the other day before I leave and with a stop loss in place I'm sure everything will be fine.
Good luck to my readers - I'm off to see my original reader (that's you mom) and celebrate with her the 87th anniversary of her birth - should be a great day.
Monday, January 01, 2007
Happy New Year!!!
Wheee!!! I have never figured out what the thrill is - one year passes another starts and everyone gets a holiday. And the only reason for it is to get over a hangover because, for some reason, you are supposed to drink yourself blind on New Year's Eve. Pagan holidays - why not.
I spent the morning trolling for some swing trades and I've come up with two candidates that I will enter on Wednesday morning. They are - AES and BLG. Both of these companies are well-regarded by institutions and both show a premium of implied volatility over historical volatility. And both are moderately distressed at the moment.
I had a third candidate - AGIX but when I looked at the implied volatility (IV) it was 180%+. This is a red-flag to me so I did my due dilligence on the stock and discovered that it is a one-drug small pharma that's been declining all year. It's phase 3 results on its one drug will be released early next year and I'm not waiting for a big hit. And that's why you should look at the IV. It can tell you stories you might want to listen to. Some people might know how to play options with this guy e.g buy stock and OTM puts or whatever - I don't so I won't even suggest it.
I'm going to use Dogwood's method of using the ATR for number of shares to purchase and setting the stop loss. I've tested it and I really like it. I suggest you go over to his site and review the method. It's pretty slick.
I'm working on another method that is pretty complicated and the preliminary results look good. If it works out OK I'll share it with you next week.
These are not recommendations only some thoughts about what I am planning on doing. I do not recommend any stocks nor any trading method.
I spent the morning trolling for some swing trades and I've come up with two candidates that I will enter on Wednesday morning. They are - AES and BLG. Both of these companies are well-regarded by institutions and both show a premium of implied volatility over historical volatility. And both are moderately distressed at the moment.
I had a third candidate - AGIX but when I looked at the implied volatility (IV) it was 180%+. This is a red-flag to me so I did my due dilligence on the stock and discovered that it is a one-drug small pharma that's been declining all year. It's phase 3 results on its one drug will be released early next year and I'm not waiting for a big hit. And that's why you should look at the IV. It can tell you stories you might want to listen to. Some people might know how to play options with this guy e.g buy stock and OTM puts or whatever - I don't so I won't even suggest it.
I'm going to use Dogwood's method of using the ATR for number of shares to purchase and setting the stop loss. I've tested it and I really like it. I suggest you go over to his site and review the method. It's pretty slick.
I'm working on another method that is pretty complicated and the preliminary results look good. If it works out OK I'll share it with you next week.
These are not recommendations only some thoughts about what I am planning on doing. I do not recommend any stocks nor any trading method.
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