Registered User
Joined: 11/11/2004
Posts: 21
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AVNR (Big drop)time to buy?
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Registered User
Joined: 10/7/2004
Posts: 2,181
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I think it's time to keep a close eye on it. I wouldn't be buying just now. I'm guessing this one might need some time (1-2 months?) before it's ready for any serious move up.
But while we're on the subject, this might be a great discussion on how to avoid these kinds of losses since this stock clearly appeared to be moving up earlier this month. Mr. Worden even commented to that effect.
How about some of the brain trust out there giving some insights? I think this could be a great learning opportunity.
Thanks in advance to all who contribute.
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Registered User
Joined: 10/7/2004
Posts: 2,181
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Yeeeooouuuccchhhh!
So, no takers on discussing how traders might have avoided this huge drop? People were talking about how good this stock was just a couple of weeks ago. Certainly someone might have gotten burned. Any good traders out there tell us how to avoid these drops?
Again, thanks in advance to the brain trust out there.
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Registered User
Joined: 2/2/2005
Posts: 13
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I do not pretend to know a lot about stock trading but one thing I am doing my best to do is keep stop loss, always. We do not know what is going to happen tomorrow. We all know that but when we do well it is human nature to think it is going to happen again. All these stocks seem to be very speculative, some very thinly traded. Also watch stock moving up on less volumn. Double tops. This was quick and vicious, not much warning. Sorry if you took a hit on this. Stops for protection.
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Registered User
Joined: 10/7/2004
Posts: 2,181
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Thanks walhei; No, I didn't take a hit. Just thought it was a good case study as it had such a nice chart just a few weeks before it dove off the edge.
And had I been in this stock, my system would have gotten me out before the decline (assuming I stuck to my system).
OK, who's next?
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Registered User
Joined: 11/5/2005
Posts: 180
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First off don’t even begin to follow this without using a chart or it won’t make any sense.
Here's why I wouldn't have owned AVNR after 10/27/06 and I'm not saying this in hind site this is how I trade, it has to do with volume and I always follow the rules when it comes to volume.
On 10/05/06 the stock begins to move up, everything is fine at this point, on 10/10/06 the stock pops up 1.34 on great volume, a nice accumulation day. 10/11/06 another great accumulation day, volume well above the daily volume 50DMA. 10/12/06 is an above average distribution day but after the run up I wouldn’t be too alarmed but I would make a note of it. The bounce off AVNR’s 10DMA on 10/18/06 is another sign the stock is doing well at this point, so far so good, but here’s where the problems develop that to me (and not just in hind site because this how I trade), the distribution days that follow after 10/18/06 would have had me selling and fast and here’s why. 10/19/06, 10/20/06, 10/23/06, 10/24/06, 10/25/06, were all distribution days but the volume wasn’t bad and the stock was above its 21DMA, I would have been looking for support above the 21DMA and looking back I wonder if allot of investors were expecting this. However, what follows is the sign a sell-off was coming. 10/25/06 there’s another day of distribution above the daily volumes 50DMA (warning sign) and out of the last 10 days of trading 9 days were distribution days, to me this is another warning, then the volume from 10/25/06 – 10/28/06 were all increasing distribution days, this is a sign a sell off is coming. Increasing distribution days and the price falls below the 50DMA, at this point the distribution day on 10/27/06 is 1,665,200 and I compare this to the accumulation day on 10/11/06 which was 1,697,000 to me at this point with all the distribution days and the fact there increasing means sellers are taking over. The largest accumulation day is null at this point. Would I ever have imagined it would be this big, no, but none the less any time distribution days are above the daily volumes 50DMA and increasing it’s a sign to get out? You won’t see this in the charts you simple see this by looking at the daily volume against a 50DMA. That’s straight out of William O’Neil’s books and you don’t need any charting service and it’s affective. That’s why I talked about TMM the other day, doesn’t matter how many charts you create, if you don’t understand volume you will probably do worse than better in the market.
This is how I trade and I’m not saying this to be cocky but I would have sold when the distribution days were increasing. I hear some people say, “wow, look at the volume pick up” and I watch in horror as the increase in volume is all distribution days and sure enough more times than not the stock will sell off.
This is how I trade and this works for me, every investor should develop their own strategy for investing and stick with what works for them. If you agree with what works for me I hope you learn something and benefit by making money, if you don’t agree please be constructive in your feedback. I’m hear to learn something new, please share winning strategies, stories, ideas, but don’t waist others time nor mine picking me apart or my strategy, leave that crap for Yahoo message boards.
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Registered User
Joined: 10/7/2004
Posts: 2,181
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rl; thanks. That's the kind of input that, I'm sure, is going to help all of us that are still learning. Anyone who really wants to learn should open their TC2005 in one window and your comments in another and flip back and forth (ALT-TAB is a quick way to switch windows by the way) or print your comments and review that chart with a fine tooth comb. I've even saved a picture of a chart that I want to study on a day by day basis and use Paint or some othe program to make a mini-Power Point for myself to review lessons I don't want to forget. (PrintScreen will copy whatever is on your monitor to your clipboard, then you can dump into Paint or some other software that reads graphics).
Again, rl, thanks for your time on this; I hope whoever reads this really takes time to study.
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Registered User
Joined: 10/7/2004
Posts: 2,181
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OK, my turn; once again, as rlcowan7 said, don't even bother trying to understand this without looking at the charts.
First, I don't trade intraday. So these are swing or position or short term or whatever you like to call them thoughts.
10/7 would've been the buy day for me and I would've gotten in at wherever my order was filled over 7.28. 10/09 no big deal with slight downturn; 10/10 glad I stayed in. 10/11 is the day that would've first gotten my attention as the entire candlestick became detached from the 20-day upper bollinger band. I also watch the 13-day bollinger band and use a 30 day linear regression line. The 10/11 candlestick has lost touch with all of those so I see it as just floating out there in space with nothing to support it. 10/12 and the following days are no surprise and I get stopped out somewhere around 8.94 (or wherever the order gets filled).
10/16 (a Monday morning) I put in a buy order for 8.90 (a penny over the high of 10/13--a Friday); 10/17 I move the buy stop order to 8.81; and 10/18 I move it to 8.61. I've continued entering the buy orders because the entire candlestick is still above the LR30 (30-day linear regression).
rlcowan7 makes a great point at this juncture that the volume was heavy on a down or distribution day. This should never be ignored.
So 10/18 I should be back in the stock and it's looking pretty good but I place my stop loss just under the low of 10/17 or 7.89. The growth 10/19 looks a little thin and then the low of 10/20 is below the LR30. My stop loss gets moved to 8.49, a penny below 10/20's low of the day. I'm out never to get back in (Thank God.)
This exact system saved me in late 2005 when I had done very well with CUTR and then it took a huge drop. I was tempted to stay in cause I hoped it would keep going; but by the grace of God I had the sense to follow my system and got stopped out 2 days before a massive drop in price.
One other thought, the low of 10/17 was lower than the lows of 2 days to either side of it. In my opinion, that should have become an inviolable stop loss point. Once price dropped below that on 10/26 anyone should have been out of that stock. Especially after the heavy distribution pointed out by rlcowan7.
As rl said, everyone has to develop their own systems but we all usually get our routine from learning from what others do mixed with some diligence and a pinch or two of pain.
All the best.
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Registered User
Joined: 11/5/2005
Posts: 180
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tobaydad what you are talking about is exactly what I do. I make quick notes in Telecharts but what I also do is a screen print, open mspaint, make notes and save as a jpeg. I have a picture database as far back as 1997 of almost every move I've made, seemed cumbersome at first but its priceless now. I even went as far as too name the charts like this, "GNBT F1 10/15/06 - daily" which means the stock is GNBT, F1 telechart template, date, daily graph. I can search any stock I've ever purchased instantly and have all my notes from 1997. Important thing is it’s not someone else’s notes they’re my notes. I go back and learn something about my investing style every time I review charts. I focus on making myself a better investor rather than look at what everyone else is doing to make money. Don’t get me wrong I think it’s important to learn from others but investors need a sound base one they know works for them then they can begin adding ideas and building on formulas they think may or may not work, chart it and learn from it. Without a sound base, a way to review your buying and selling, wins and losses I can see where some investors get caught up in the, “what are they doing that I’m not” mind set when they don’t have a sound base and it can get very frustrating.
The more honest you can be with yourself when making notes the better of you will in the long run, at first I was embarrassed to write about what I really did, or maybe it was painful because like most others I lost my fare share of money starting out, but I can't tell you how valuable these notes have become. I’ve been talking about NVAX, I pulled up all the charts for NVAX and others I know with the ascending triangles and my database tells me I don’t like how close it’s getting to the support line. I can’t go against over 10 years of data input that I’ve seen first hand. If I’m right the database has been valuable once again, if I’m wrong I add NVAX action into the database which will make me a better investor analyzing the next ascending triangle pattern.
I also have two 19” monitors side by side and a dual processor workstation just short of being a server, I’m not going to get into all that I have on the screens but this allows me to follow the volume patterns (along with a long list of other things) on a real time basis. My point isn’t to talk about the equipment so much although it does help; it’s also to show how active I am with my investing. I never buy and forget about it, I buy with the end in mind, if I’m not 100% when I buy, why I bought, and where I think its going I sell.
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Registered User
Joined: 10/7/2004
Posts: 2,181
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rl; all great points, no argument whatsoever. Thanks for your input.
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Registered User
Joined: 11/1/2005
Posts: 240
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I didn't read the posts close, hope I'm not repeating other comments.
bring up a 6 day chart, the stock is in a down trend, and a sideway movement, a trend line from the top and for the side trend. just another way to look at the stock
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Registered User
Joined: 10/7/2004
Posts: 2,126
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Guys this posts are as fustrating as anything i have ever seem. Looks comical.
Your so religious stop losses are not fool proof as I have mentioned about a million times by now. The only time you can count on not missing a stop loss is in intraday trading.
When a stock opens about 50% below yesterday's close, your stop loss is not going to catch that. THE ONLY WAY TO AVOID THIS IS TO CLOSE ALL POSITIONS BY MARKET CLOSE. That is what I do, that is what daytraders do. I guess that there is an advantage to daytrading.
ANOTHER WAY YOU CAN AVOID THIS IS - Leverage with the appropiate PUT option at the time of purchase (is called insurance). You may be able to reduce your losses now to some degree with the use of options.
Your Stop loss for any time frame other than intraday can be worthless.
This can happen to anyone regardless of how many monitors you have, how detailed you are on your notes, or anything else. IT IS UNCONTROLLABLE. All you can control is your position, not the behavior of any single stock.
I rest my case here, and probably going to take a break from the board for a little while. Truly it is becaming fustrating. I wish you all very good luck, and for many I advice to hit the books hard, and to watch over your back. The market is a constant battle - if you take your guard down you will get hit.
I like to say before I go for those who wonder out there, that the market is full of opportunities, but it takes a special kind to see. Many times I have said "you are the market", and "it is not what you read, but how you read - your conclusions", "it is not the numbers, but their meaning". If you are not that kind you will be confronting a loss battle, that is what most confront daily. Only a hand full of special kind have an edge. Not a done battle, but a fair game. The rest just feed the market.
Reflect strongly on that and truly find out where you stand. I think at that point it will be easy to decide which way to go. If you lie to yourself the market will certainly let you know. You can lie to yourselve, but not to the market.
good luck
Bigblock
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Registered User
Joined: 2/2/2005
Posts: 13
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This is a really great post. Hope the more knowledgable traders don't mind sharing some of their systems once in a while. I can surmise then that somebody had fundamental information, or was this whole rise in the stock price pure specualtion? Why did the price plunge? Thanks
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Registered User
Joined: 8/12/2006
Posts: 83
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Bigblock - Good comment - When a stock opens about 50% below yesterday's close, your stop loss is not going to catch that.
Future is something, no one has been able to predict yet. That said, based on past experiences one can make an educated guess what it will be tomorrow.
Though we suffer losses, we can bounce back given we have the motivation and the skill.
I have started reading "Technical Analysis of the Financial Markets - John J Murphy". What other good books you have read in the past and consider worth reading.
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Registered User
Joined: 10/7/2004
Posts: 2,181
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I don't want to perpetuate something that could degenerate into an unproductive argument; but I would like to point out that my purpose in pursuing this was to illustrate that there are different approaches to problems in the markets. BigBlock's comments are completely valid (I'm sorry that my and/or others' comments have frustrated BigBlock; not sure why but I regret it anyway).
In any event, I agree that a gap down in pre- or post-market trading will not be caught by a stop loss. That's beside the point that both rlcowan7 and I were making.
My point was (and I think rl would agree) that there are almost always technical indicators that will indicate it is time to be out of a stock before the gap down occurs. I have rarely seen a case where this was not so.
So for those that aren't inclined to utilize options for their insurance (to borrow BigBlock's example); there are techniques and "clues" that a stock's condition is degenerating. When watched closely, we can usually be out of the stock before the big problem happens. There are exceptions, of course, but I think that can be said of the markets in general.
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Registered User
Joined: 1/28/2005
Posts: 6,049
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I guess I'm a little bit in Bigblock's camp when it comes to this. While methods
and solutions for the drop in AVNR have been posted. They are somewhat
personal and impractical for others to benefit from.
1) Daytrade: This is fine if you can. If you are employed it is not an option
that's on the table.
2) Put options: This would assume you know all the details about options.
I think this would be limited to relatively large long positions to make
sure your profit covers the cost of the puts.
3) Read the chart: This is also fine if you can. However if this is not your style
this is a large learning curve. This is something I would consider dangerous
to play with for most traders unless they have a lot of experience.
4) Stop loss: While not a bad practice. It wouldn't have helped in this
case.
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There is a very simple solution to this problem. It does not require anything
fancy or a large learning curve.
Diversification.
If we assume a 50% price drop and the stocks in your portfolio:
Stocks:
1=50%
2=25%
4=12.5%
6=8.33%
8=6.25%
10=5%
I would also add that starting traders should use something to screen
the stocks they choose:
Telechart fundamentals (in an easyscan)
Value-Line (can usually be found at the library for free)
IBD
Website stock ranks.(not penny stocks)
AVNR had a very poor looking chart. It also had very poor fundamentals.
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I would also add that diversification relates not only to the number
of stocks you trade but also the systems you trade.
Daily timeframe, weekly timeframe, trend, counter trend, and so on.
Thanks
diceman
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Registered User
Joined: 1/12/2006
Posts: 296
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Just an observation over time. If you are working stiff and able to check open "long" positions in the evening:
Assuming you bought at an appropriate time, once a stock runs up in price and then you see a "red candle", I would put in a sell order. Sure, some are fake outs, but I think most of the time you will avoid losses and large losses. You just can't hang onto a stock. The hedgies control the market and continually sell - once it starts, the ball keeps rolling.
I also use the "evening star" formation (I refer to it as the Death Star, which most candle guys wait for a confirmation (next day a red candle for example) prior to placing the sell order.
Hope I helped and I certainly don't mean to offend anyone.
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Registered User
Joined: 3/25/2005
Posts: 864
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I am not a big fan of charts & technical analysis.
But, I am a fan of numbers and formulas.
In experimenting with Reward-To-Risk calculations using the most recent Swing Highs and Swing Lows, I have found that for AVNR, sentiment turned negative based on the opening price on 10/27. So after the opening on 10/27 would have been the best time for a person going long on this stock to exit.
I define negative sentiment primarily based on the 1st occurrence of a negative double digit Reward-To-Risk ratio based on the most recent Opening Price and the most recent Swing High and Swing Low.
Using AVRN as an example, the following Reward-To-Risk ratios occurred on the following dates (please take special note of the one on 10/27):
10/19 +3.65
10/20 +2.22
10/23 +2.67
10/24 +5.24
10/25 +12.57
10/26 0.00
10/27 -11.76
The Reward-To-Risk ratio of -11.76 on 10/27 is an example of a negative double digit ratio.
To calculate this ratio, you must use the following formula:
where,
SH = Most Recent Swing High
SL = Most Recent Swing Low and
OP = Most Recent Open Price
(abs(SH - SL) * 2.618 + SL) - OP / (OP - SL)
Mind you that this ratio along will not necessarily predict the future direction of the stock but it should definitely be construed as a big warning that a change in direction may be eminent.
As you can see from the explanation above, I am a big fan of watching price movement only. Volume may have its place with many of you. But, I never use it to determine future price movements and direction.
Finally, for those of you who prefer using charts -- if you have access to Power E*trade Pro, there is a Moving Average indicator called the Linear Weighted Moving Average which, when set to a period of 30 and a 'close' series status, will show you that on 10/26 a closed candle stick crossed (or intersected) this indicator line indicating that a change in price direction was about to occur in the coming days.
Hope this is helpful.
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Registered User
Joined: 1/28/2005
Posts: 6,049
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Interesting stuff memorableproducts.
What is your definition of a swing high,
swing low?
Thanks
diceman
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Registered User
Joined: 10/7/2004
Posts: 2,181
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With all due respect, I gotta tell you I think sentiment turned negative several days prior to the open of 10/27. I guess I don't see the point in losing another 4-10% (depending on which of the stops you chose). But I'm always eager to learn; so, what is the advantage of memorable's approach? (sincere question)
Thanks for your time.
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Registered User
Joined: 3/25/2005
Posts: 864
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Tobydad --
Although my approach may be a laggard indicator to your approach, my approach, in my opinion, is more definitive.
Charts & technical indicators can be subjective to the viewer's interpretation and therefore one viewer will not necessarily draw the same conclusions as another viewer. On the other hand, a physical number representation will draw the same conclusion from everyone if everyone agrees in advance that the number they are viewing should definitely represent a particular situation.
Furthermore, with charts and technicals there are too many variants that can be applied. One viewer may only choose to employ moving averages and macd or stochastics for example where as another may choose to employ bolinger bands and relative strength. Which of these is more definitive? Who knows? And, what of the learning curves involved in learning all these variants just to discover that none of them is ever totally conclusive.
Learning that stuff is a waste of time (in my opinion of course). Minimally, you can derive a 70% accuracy rate with any of them.
Diceman --
I knew someone would ask the question you are asking.
A Swing High occurs when the previous trading day's high and the high that occurs the following trading day are both lower than the high for the current day.
A Swing Low occurs when the previous trading day's low and the low that occurs the following trading day are both higher than the low for the current day.
Using these definitions, you can determine that for AVNR, the most recent Swing High and Swing Low currently are 8.09 and 2.75 respectively. And, on 10/27 the current Swing High and Swing Low were 9.09 and 7.90 respectively.
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Registered User
Joined: 10/7/2004
Posts: 2,181
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Memorableproducts;
Thank you. Your points are well taken and, of course, must be respected. I would submit that an additional factor is one's own temperament and trading style. As I have a rather mechanical system that works for me most of the time (my own diligence --or lack thereof-- is the greatest fallacy and so must be considered a constant in any system I might consider), I am inclined to let it stop me out sooner, thereby protecting more of my gains and be willing to buy back in when my system indicates the appropriate time.
Now, one other question if I might (and it's purely academic): I've heard some describe swing highs (and lows) as you just did; while others have mentioned 2 days to either side of the respective swing high or low being necessary to validate a true swing high or low.
I do pay attention to swing highs and lows as my post described in my technique to avoid the disastrous descent of AVNR. Just wondered if you had any thoughts on the 1-day-to-either-side vs. 2-days-to-either-side debate.
Again, thanks in advance for your time contributed. We all gain from these exchanges.
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Registered User
Joined: 1/28/2005
Posts: 6,049
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Thanks Memorableproducts.
That's what I thought you meant. I've heard these called isolated highs
and isolated lows.
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Just a few thoughts of mine.
Quote:"I am not a big fan of charts & technical analysis.
But, I am a fan of numbers and formulas."
I would consider what you are doing to be TA because you are
applying formulas to stock price. Even when someone says "I don't use
indicators. I look at the chart with my eyes." Even though no technicals
are applied. they are looking for trends, support, resistance and so on.
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Quote:"Although my approach may be a laggard indicator to your approach, my approach, in my opinion, is more definitive."
I think this is what makes the market. Even though indicators and formulas
can have exact calculations. They are still open to debate by traders.
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Quote:"One viewer may only choose to employ moving averages and macd or stochastics for example where as another may choose to employ bolinger bands and relative strength. Which of these is more definitive? Who knows? ".
In my opinion. What typically happens is once a trader has selected his indicators
based on comfort, timeframe, understanding. He will become expert at the use of the indicators from seeing the same patterns repeat over and over. Much more "expert' than the
casual user of these indicators.
Thanks
diceman
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Registered User
Joined: 3/25/2005
Posts: 864
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Diceman, your points are well taken and I agree with you concerning my approach to be a type of technical analysis also. I was actually refering to the chart visuals when I denounced the use of technicals. Sorry, I did not make myself more clear about this.
Now, if a person is willing to take the time to find out exactly what works or does not work for him when experimenting with all the diferent chart technical variants out there then, more power to him. I personally choose not to go down that road but that's just me I guess.
Tobydad -- Sorry, I am only aware of one definition for Swing Highs and Lows. Wouldn't you know it -- even a simple definition for Swing High and Lows has at least one variant to complicate matters 
Fortunately, you agree that both definitions are valid.
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 Platinum Customer
Joined: 11/23/2004
Posts: 21
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First of all, I agree that the combination of volume increases with distribution were the key to knowing when to bail, but having said that, it’s interesting to work backwards on this one. The day it tanked, Oct 31, the FDA issued the company a letter indicating that there were not going to totally approve a new drug application ( for a drug to treat involuntary emotional expression disorder – there’s irony there…).
In Don Worden’s must-read book, “Street-Smart Chart Reading, Vol 2” one thing he notes is that chart patterns may or may not reflect “someone in the know,” He pointed out that “…Common sense will tell you that the insider laws are especially effective in restraining a giant like IBM….A smaller company ay be more likely to leak inside information. There is a greater chance the action of somebody with superior insight may reflect in its stock chart…”
So is that what happened here? Who knows, but the churning for several days reflected in the volume increases before the breakdown certainly suggests something unusual was going on in this micro-cap stock that is heavily held by institutional investors.
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Registered User
Joined: 1/28/2005
Posts: 6,049
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Its possible it was thought the FDA news would
be positive.
(that could have lead to volume changes)
Thanks
diceman
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