NSU.to
I have developed several new scans that I am very excited about. I am hoping that these new scans, along with some other minor tweaks to my system, will help improve performance, which has not been great over the last 2 months:
If you are like me, and have not been trading well lately, then I recommend reading this superb post by the Art of Trading. This guy is truly a professional.
If you are like me, and have not been trading well lately, then I recommend reading this superb post by the Art of Trading. This guy is truly a professional.
BBP.v
This stock is up over 700% since its bottom in October. But who knows when the trend will end...
CUZ
I don't have a position in this one, but I think it looks rather weak. Notice the bearish upper shadow on today's candle:
THQI
I shorted this stock on Monday. I shorted it because a long was stopped out, and also because the stock made a new 20-day breakdown:
The Futility of Picking Tops and Bottoms
Here is an ETF that made a new 52 week low yesterday. This ETF follows the price of Natural Gas, and what I find interesting is that it is now down over 98% from its highs made last summer.
Over the last year, I have listened to various fundamental and technical rationalizations as to why Natural Gas was a good buy at various points in time. Some of these arguments included:
Unfortunately, none of these techniques proved effective. But there was one technique that did prove profitable, and that was, of course, trend following. Trend followers do not, as Ed Seykota puts it, "predict a nonexisting future", but follow price where ever it may lead.
Currently, a similar situation is unfolding in the general stock market. The S&P 500, surprising the vast majority of traders (including myself), has continued to rally. Every attempt to pick a top in this market has so far failed, as this chart shows:
The chart above shows a failed wedge pattern, and also a failed H&S pattern. Currently, the market is showing an overbought reading. Will this mark the top of this rally? It certainly could be the top- I really have no idea-, but an overbought reading means nothing to me, personally.
Over the last year, I have listened to various fundamental and technical rationalizations as to why Natural Gas was a good buy at various points in time. Some of these arguments included:
- RSI being "deeply oversold"
- 38.2% Fibonacci level hit
- Bullish divergence on Stochastics
- Hammer candles on daily chart
- Being at support on weekly chart
- 50% Fibonacci level hit
- Various fundamental arguments too numerous to go through
- Sentiment being overly bearish
- 61.8% retracement level hit
- Undervalued versus Oil
- Volume showing capitulation
Unfortunately, none of these techniques proved effective. But there was one technique that did prove profitable, and that was, of course, trend following. Trend followers do not, as Ed Seykota puts it, "predict a nonexisting future", but follow price where ever it may lead.
Currently, a similar situation is unfolding in the general stock market. The S&P 500, surprising the vast majority of traders (including myself), has continued to rally. Every attempt to pick a top in this market has so far failed, as this chart shows:
The chart above shows a failed wedge pattern, and also a failed H&S pattern. Currently, the market is showing an overbought reading. Will this mark the top of this rally? It certainly could be the top- I really have no idea-, but an overbought reading means nothing to me, personally.
Turtle Trader Scan
I developed a new scan that seeks out stocks that are making fresh 20 day highs/lows. I felt motivated to do so after re-reading Michael Covel's The Complete Turtle Trader, which, I have to say, is probably my favorite market related book.
In my opinion, there are certain advantages and disadvantages associated with using a 20 day breakout. The advantage is that, if a trend does emerge, you are getting in closer to the top floor, and riding it down (or vice versa). The disadvantage is that, by doing so, you are often getting in before a true trend has emerged, which may increase the probability of being whipsawed.
To develop a scan, similar to what the Turtles would have used (although they traded futures), you would have to go to Stockcharts.com, and get it to look something like this:
In any case, I will continue to pursue 52 week highs/lows, and 26 week highs/lows, but will throw in a few of these 20 day breakouts from time to time for diversification purposes.
The stocks below are examples of 20 day breakdowns:
In my opinion, there are certain advantages and disadvantages associated with using a 20 day breakout. The advantage is that, if a trend does emerge, you are getting in closer to the top floor, and riding it down (or vice versa). The disadvantage is that, by doing so, you are often getting in before a true trend has emerged, which may increase the probability of being whipsawed.
To develop a scan, similar to what the Turtles would have used (although they traded futures), you would have to go to Stockcharts.com, and get it to look something like this:
In any case, I will continue to pursue 52 week highs/lows, and 26 week highs/lows, but will throw in a few of these 20 day breakouts from time to time for diversification purposes.
The stocks below are examples of 20 day breakdowns:
SPAR
This stock, which used to be stellar performer, is now looking rather weak. I will only short this stock if the general market proves weak:
CSIQ
I did these trades this week:
I was on track to make money this week, as most of my longs are performing well, until VITA gapped down 30% on Friday morning. I think VITA was a good bet that happened to result in a bad outcome.
In the future, if a stock has the same chart pattern and strength as VITA, I will buy it again. This is because I believe that buying in the direction of the trend gives me an edge, but it does not guarantee success. There is simply too much randomness in the market for anything to work all of the time.
Unfortunately, I have not made any great trades since the beginning of June. As a result, I have less capital in my account as compared to the beginning of June. And because of this, I am trading much smaller. I have developed a position sizing calculator, based of the Turtle Trading Method, that helps me determine my position sizes. For example, if:
I have often said that knowing how much to buy is more important than knowing what to buy. The case with VITA helps illustrate this point. A fully margined position in VITA on Thursday would result in complete equity destruction by Friday morning. But by following the rules of the Turtle Trader Method, any one loss is never a catastrophic loss.
Anyway, below are some stocks that are looking good:
This stock may be breaking out:
- Covered SUN (Stop hit)
- Bought VITA
- Sold ROST (Stop hit)
- Shorted GENZ
- Bought IFN
- Sold VITA (Stock got crushed)
I was on track to make money this week, as most of my longs are performing well, until VITA gapped down 30% on Friday morning. I think VITA was a good bet that happened to result in a bad outcome.
In the future, if a stock has the same chart pattern and strength as VITA, I will buy it again. This is because I believe that buying in the direction of the trend gives me an edge, but it does not guarantee success. There is simply too much randomness in the market for anything to work all of the time.
Unfortunately, I have not made any great trades since the beginning of June. As a result, I have less capital in my account as compared to the beginning of June. And because of this, I am trading much smaller. I have developed a position sizing calculator, based of the Turtle Trading Method, that helps me determine my position sizes. For example, if:
- My account shrinks by 10%, then I trade 19% smaller
- My account shrinks by 30%, then I trade 51% smaller
- My account shrinks by 50%, then I trade 74% smaller
- My account shrinks by 70%, then I trade 93% smaller
I have often said that knowing how much to buy is more important than knowing what to buy. The case with VITA helps illustrate this point. A fully margined position in VITA on Thursday would result in complete equity destruction by Friday morning. But by following the rules of the Turtle Trader Method, any one loss is never a catastrophic loss.
Anyway, below are some stocks that are looking good:
This stock may be breaking out:
EAT
This stock is making a new 20 day low, and may be shorted by me if the general market proves weak:
VITA
I bought this stock on Monday at $6.74. So far I am down, but I think today's candle looks constructive. If the stock declines to my stop, then it will be sold. Otherwise, I will keep holding it for as long as the trend persists:
AZO
This stock recently made a new 20 day low, and looks weak (especially on a relative strength basis):
If the general market remains strong, then, in all odds, I will not be taking a (short) position in this stock.
If the general market remains strong, then, in all odds, I will not be taking a (short) position in this stock.
GENZ
Because the general market is strong, my account is mostly long stocks. Nonetheless, I decided to short this stock below:
Now that I am holding this stock, it is now reflected in my public chart list. The reason I have decided to organize my list in this way is that it allows me to quickly check the status of my holdings from any computer without having to log in.
Now that I am holding this stock, it is now reflected in my public chart list. The reason I have decided to organize my list in this way is that it allows me to quickly check the status of my holdings from any computer without having to log in.
A New Strategy
I've thought of a new strategy for trading stocks, and will be experimenting with this strategy in my retirement account. My small retirement account formerly held investments that (I thought) had strong fundamentals, such as natural gas, and oil.
Last year, I read about a dozen books on a theory known as 'Peak Oil', and I really do think that the theory is based on a sound foundation. However, as a trend follower, if oil ever does go to the moon, I am sure that it will be in the form of trend, and I will be able to capitalize on it anyway; with or without knowledge of the fundamentals.
Anyway, now that I have some extra cash in that account, I will be trading stocks based on a new technical rules based strategy. The strategy will identify 1 stock per week (every weekend) with the following characteristics:
I will be keeping tabs on how this strategy is performing on the right hand side of the page you are reading. So far, the strategy is off to a good start, with TFI.to, but there is no guarantee that this strategy will produce positive results over the long term. It truly is an experiment, and it will be interesting to see what the results will be.
This week's stock is LSG.to, shown below:
Last year, I read about a dozen books on a theory known as 'Peak Oil', and I really do think that the theory is based on a sound foundation. However, as a trend follower, if oil ever does go to the moon, I am sure that it will be in the form of trend, and I will be able to capitalize on it anyway; with or without knowledge of the fundamentals.
Anyway, now that I have some extra cash in that account, I will be trading stocks based on a new technical rules based strategy. The strategy will identify 1 stock per week (every weekend) with the following characteristics:
- The stock will be Canadian
- The stock will always be a long candidate
- The stock will often be a penny stock
- The stock may or may not be in a true uptrend
- The stock will be held for only one week, unless certain criteria are met
- The stock will, if the strategy is successful, really move
I will be keeping tabs on how this strategy is performing on the right hand side of the page you are reading. So far, the strategy is off to a good start, with TFI.to, but there is no guarantee that this strategy will produce positive results over the long term. It truly is an experiment, and it will be interesting to see what the results will be.
This week's stock is LSG.to, shown below:
API.to
I did these trades this week:
The market continued its ascent this week. Most of my shorts were squeezed quite badly, and were stopped out. It almost every case, being stopped out was the best thing that could have happened. All experienced traders must admit when they are wrong, and know when to cut losses. Dogmatically holding on to shorts in this kind of market can be a recipe for account implosion.
All of my stopped out shorts have been replaced by longs, and some of these are doing very well, which is now helping to offset losses from squeezed shorts. But, to be clear, I am not buying stocks because I believe the stock market is going to go higher. I am only buying stocks because shorts are not working, and longs are working.
- Covered VLO (crossed 50dma)
- Bought MV (Being stopped out of a short must mean the market is strong)
- Covered ELY
- Covered ASBC
- Bought HGG
- Covered NPBC
- Bought API.to (see below)
The market continued its ascent this week. Most of my shorts were squeezed quite badly, and were stopped out. It almost every case, being stopped out was the best thing that could have happened. All experienced traders must admit when they are wrong, and know when to cut losses. Dogmatically holding on to shorts in this kind of market can be a recipe for account implosion.
All of my stopped out shorts have been replaced by longs, and some of these are doing very well, which is now helping to offset losses from squeezed shorts. But, to be clear, I am not buying stocks because I believe the stock market is going to go higher. I am only buying stocks because shorts are not working, and longs are working.
SGR.v
A lot of gold stocks look like they are heating up. Perhaps this is due to the USD breaking down (not shown):
Subscribe to:
Posts (Atom)