| shatterd |
|
Gold User, Member, TeleChart
|
| Registered User |
|
|
|
|
| Unsure |
|
| Saturday, January 1, 2005 |
| Tuesday, October 24, 2006 8:12:02 PM |
35
[0.01% of all post / 0.00 posts per day] |
|
Lots of indicators measure momentum is one way or another. Such as...
MACD
Stochastics
RSI
ROC
I like the ROC..as it seems to lead price.
Watch stocks that have been in downtrends, plotted with a ROC window beneath. You'll notice that ROC lines often turn up before price turns up. I like to use trendlines drawn over declining ROC lines. Eventually the ROC will break the trendline to the upside...followed soon by price.
You'll need some other confirmation rather than just relying on ROC. Such as a bullish divergence of some sort..as on the MACD or MACD histogram...or maybe a confirming price pattern such as a double bottom, head and shoulders bottom, or perhaps a bullish candle pattern that shows you are at a support level(bottom). Such as a bullish engulfing, bullish piercing line, morning star, doji, etc.
That said...I prefer the Relative strength exercise mention previously(plotted with a RS moving average). The RS shows that this particular stock is showing some sort of temporary favoritism by the market over most other stocks...for whatever reason. It's generally a good bullish sign when a particular stock is outperforming the market on good volume. This is a clever way of trading with the insiders(smart money) even though you may not necessarily know why they are liking the stock. Technical analysis doesn't need to concern itself with reasons. If you wait for the reasons then you are usually left behind...and then it's too late. Any information known by everyone else isn't worth acting upon.
|
Just so there's no confusion...
When I say moving average(above)...I am talking about the moving average of the RS line...not the price MA. So you'll have to bring up RS (versus the S&P 500) in an indicator window...and then add a RS moving average to that same window.
|
Last thing....regarding the RS line...and it's moving average
Let's say you have 5 stocks to choose from. Now let's say that 2 of the choices show that teh RS line is above the RS moving average and the RS moving average is rising, while 2 stocks show that the RS line is falling and below a falling RS moving average, and finally one of the choices shows that the RS line is just now breaking above it's MA at time of analysis....
My conclusion would be to quickly eliminate the 2 with negative RS lines. Then I'd probably choose the one stock that showed the RS line breaking above the MA at the time of analysis. A new break above the RS moving average is more signifigant to me than one that broke above the MA say 4-5 days ago.
It's also generally positive when volume indicators(and a host of other indicators as well) confirm the RS signals.
|
another thing to consider...
Let's assume you have four possible trades and only want to pick one to go with. Go ahead and figure out where you would place the stop loss for each trade based on your technical chart analysis. Then pick the trade that has the closest stop loss of the four. This means that you are taking the trade with the better risk/reward ratio. That's a good way to choose one trade when you have several to choose from.
|
Most likely you will not be able to predict this with any accuracy...no matter the indicator.
I like to use a relative strength line(versus the S&P500) and a 40 bar moving average. Use a 20 bar(or less)MA for shorter time frames. You can experiment to find the correct MA for your trading style. Then consider the slope of the RS line. Is it rising or falling? Is the RS line above or below the RS moving average?
The better performing stocks should have a rising(up sloping) RS line...and optimally, it should be above it's rising RS moving average.
You can also use trendlines over the RS line. RS lines that are currently breaking above trendlines(bounded over the trend highs or under the trend lows) I use "snag it" software to get a screen capture of the chart. Then I can draw on it with the snag it software. This enables me to draw trendlines in the indicator windows. snag it software is great! You can get a free trial..and then buy it like I did for a small fee. Do a google search to find the download link for snag it.
So...if you have a list of four stocks that you are considering for purchase, and want to know which is likely to outperform the others, the RS exercise I described will possibly help you decide. The stocks that have rising RS lines, and are above their rising RS moving averages are perhaps your better choices because they are in demand now and are outperforming most other stocks at the time of analysis. Current and past performance however do not guarantee future performance.
Reverse this exercise for shorting.
|
I trade in longer time frames than alot of traders here. I analyze weekly charts and use 4 stage price analysis as taught by Weinstein in his book.
I like to take most or all of my position as price is moving out of a stage 1 base and into stage 2(advancing stage).....as long as I have volume and relative strength confirmation. after the breakout..I will play movie critic and decide if I really liked what I saw. If the volume, price action, and relative strength are not up to standards I will sell out of the position even if I am up and my stop loss is not in danger. If the action, in hindsight, was up to my standards then I'll sit tight. I also require that price be above the 30 week MA, and that the 30 week MA is sloping up...but I generally see this before the breakout. I'm an end of day trader too...so I do not always see my volume on breakouts in real time. I'll analyze everything after the market closes and make my decisions at night....preparing for the next day of market action.
Usually, after the breakout of the stage 1 base...there will be at least one pullback to the resistance area(now support). Most often(especially when I am right) the pullback will not come all the way back to the breakout point. Anyway...this would be my chance to add shares to the position. Some Weinstein practitioners will take 1/2 position on the breakout, and 1/2 position on that pullback. However, the strongest breakouts will not pull back until later...correcting to the rising 30 week MA. My psoture is that if I wait for the pullback I will miss some of the strongest moves that don't pull back.
That's my technique as it applies to my system. I'm sure others have their own ideas and styles.
|
|
P.S...thanks for the book rec.
|
I'm not a beginner...and I have used these systems to make money. I'm not a real short term trader...and certainly not a day trader.
You and I have different definitions of momentum.
CANSLIM is based on earnings and price momentum...but surely in different technical time frames than your ideas on momentum.
Weinstein is purely technical, and doesn't consider fundamentals. This system has proved very profitable for me..especially from the short side by shorting stage 3 tops entering stage 4 declines.
The current market is difficult.....agreed! But I'm fairly disciplined and know when to sit tight in cash.
My philosophy is that it is more important to outperform a falling market than to outperform a rising market. I also like the quote by Pascal..."I have concluded that all of man's misfortune can be derived from not being able to sit quietly alone in a room". This quote reminds me not to overtrade and to sit in cash...to be disciplined.
By the way...I work mostly with weekly charts versus daily charts...per Weinstein and O'Neil.
as of now I'm not buying any CAN SLIM breakouts. I'm looking at a few base breakouts per Weinstein, and certainly some shorts per Weinstein...like the oil related stocks.
As for technical analysis and indicators...I've used and studied all of them. I've read a wall of books from Murphy to Elder to Bulkowski to Schwager to Edwards/Magee to Pring etc. etc.
So I have found after practice and study that Weinstein and O'Neil best suit my own personality. I do admire chart pattern analysis as taught by Edwards/Magee and Bulkowski...and really admire Dan Zanger who seems to have combined CAN SLIM, momentum, and chart patterns on daily charts. I'd call him a modified CAN SLIM trader...on steroids(lots of margin).
Getting off topic.
I just thought I'd post a few ideas that some on the board might appreciate.
Keep growing, Kevin Pickell
|
Hi all...
I primarily use CAN SLIM...but also a lot of Weinstein.
I'm watching two stocks that look good and seem to be poised for breakouts to new highs and beyond. My no. 1 choice is SHLD. I also like AZO. SHLD has put in a nice 'continuation' base per Weinstein, and looks poised to continue a stage 2 advance(per Weinstein methodology). I'm primarily looking at long weekly charts here. AZO looks to be ready to take out a long horizontal resistance line that covers several years. A break of that resistance puts the stock at all time highs(weekly chart).
Other possible longs...
UTSI(near breakout of stage 1 base per Weinstein). I have the resistance breakout point at 9.20
GPS seems to be moving up to confirm a big double bottom(weekly chart) and should break above a long descending trendline(resistance) soon.
Possible shorts...
On weekly charts I see several stocks that are obviously looking weak and topping out. Several of these are energy/oil stocks.
COP
NBR
CSC
APC
SUN
The following are already breaking down...so I would short them on their next rally highs to a long term MA...such as the 30 week simple moving average(weekly chart)....
ACI
UNT
|
|
Ben Graham is rolling over in his grave.
|
|