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Trading breakouts with stage analysis
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Trading breakouts with stage analysis

  #51 (permalink)
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US Industry Sectors

Here's the latest US Industry Sectors charts. Utilities (XLU) continues to outperform with Consumer Staples (XLP) close to breaking out into a Stage 2 continuation. So it's worth looking through the Consumer Staples sub sectors to see what's outperforming and filter down to the individual stocks from there.

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  #52 (permalink)
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Pfizer (PFE) Stage 2 Breakout

Pfizer (PFE) made a Stage 2 breakout with a 52 week high yesterday (20th). The Industry sector (Health Care) and the sub sector (Pharmaceuticals) both look reasonable. Pfizer is outperforming both of them by roughly 8% and is also outperforming the S&P 500 by the same amount. So the relative performance requirement is in place.

What I need to see now is a pick up in volume if it breaks higher, but if I take it, I'll only take a half position as recommended by the buying guide section as this is an investor entry point. With the idea to buy the remaining half position after the first continuation pivotal point is formed.

The monthly shows there's old resistance from the 2005 and 2006 range up to $29, but that still gives it room to move and old resistance is over 2 years old and so is less relevant.

Daily ATR(200) is: 0.42 points average movement per day or 1.96% as a percentage.
Weekly ATR(52) is: 0.89 points average movement per week or 4.15% as a percentage.

The investor stop position below $18 is over 8x the daily ATR(200), so a closer stop below $19.70 might be more suitable using the daily chart. But for the least risk you would need to wait for the breakout to pullback and form a new pivot point.

Here's the charts

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  #53 (permalink)
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Market Breadth


A week seems a long time in the markets at the moment with the constant volatility. But it's caused a few of my favourite breadth indicators to move onto buy signals today (22nd) on the short and longer term time frames. Below is the summary table and charts:

Market Breadth Signals
TickerDescriptionSignalColumn
$BPNYAThe NYSE Bullish Percent IndexBuyXs
$NYA200RNYSE Percent of Stocks Above 200 Day Moving AverageBuyXs
$NYA50RNYSE Percent of Stocks Above 50 Day Moving AverageBuyXs
SPY/TLTS&P 500 / US 30 Year TreasuriesSellXs

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  #54 (permalink)
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Portfolio Management

I'm currently reviewing my first few months of live trading with the method and although it has been excellent so far a number of questions are coming up that aren't covered in the book, but need some significant attention.

Mostly, is portfolio management. For example, on the stocks long side I'm currently in mostly utilities and some consumer staples stocks as they are the sectors that are in Stage 2 at the moment. However, the premise of the method is to be in the strongest stocks, in the strongest sectors in Stage 2 at the time. But sectors rotate all the time and the current leaders might not be the leaders in a few months. And even though the sector might not be a leader anymore, there's a good chance that it will still be in Stage 2 for a long while, so the stocks I hold won't have given a sell a signal. But there might be better opportunities breaking out into fresh Stage 2 situations and becoming the new leaders elsewhere. So my question is how to deal with this?

Should I hold onto my initial portfolio stocks until they complete their respective Stage 2 situations and give a sell signal and only then start rotating into the new leading sectors.

Or another option, should I only allocate a certain weighting in my portfolio per sector. Maybe 3 to 6 sectors, so I could get into all the leading sectors at the ideal entry point per the method. This may mean that I'm only partially invested at certain times as only one or two sectors might be in Stage 2.

Or I could only invest in two leading sectors and sell out of them early as new sectors take over the leading role etc.

There's lot's of other scenarios going through my head, so I won't go on too much as I'm sure you get the gist by now. But I think this is an important area to consider, to successfully trade the method, of which there is no guidance from the book unfortunately as I imagine the scope it covers could probably fill a book itself.

But I'd appreciate any constructive insights that anyone has on this subject.

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  #55 (permalink)
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US 30 Year Treasuries

US 30 Year Treasuries have continued to consolidate near the highs. The weekly chart is currently in Stage 2B still. It made a weekly closing high three weeks ago, but failed to make a new high overall but is still near the highs, so it could breakout higher. However, momentum on the 30 week MA is slowing and a Stage 3 top looks to be developing, but it is still rising at the moment and price has yet to break it. So I consider it Stage 2B until the stop below 139.5 is breached.

Price broke below the short term trend line and is trying to break back above it again and relative performance versus the S&P 500 is flattening out.

So watch for a Stage 2 continuation move above the high or Stage 3A breakdown below the 30 week weighted moving average and stop position below 139.5

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  #56 (permalink)
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2007-2008 S&P 500 Comparision

Attached is a chart showing the 2007-2008 similar period alongside today's chart with Weinstein's advance decline momentum indicator and my 30 week MA momentum indicator. I hope it will further explain my current position on the Stage I think we're at, as although the charts look similar, I can see a number of important differences from the price action and the secondary momentum indicators. The advance decline breadth data especially.

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S&P 500 All Years Chart

Heres the S&P 500 quarterly chart since 1950 using a logarithmic scale. Ive marked it up to show you what Im seeing, as based on the price action this could possibly be the early part of a new Stage 1 formation on a quarterly basis. Or it could still be in Stage 3, but I think due to the failed Stage 4 breakdown in 2009 and two higher lows since then that it is actually now early in Stage 1 so could bounce around the 1000 to 1550 range for a few more years yet. But a break below 1000 would invalidate it.

For a historical comparison we only have the 1970's to look at on the S&P 500 of a similar consolidation period which took 5 years to resolve to the upside after the failed Stage 4 breakdown in 1974.

Below is my 61 year chart.

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  #58 (permalink)
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I am impressed by the proTA charts you are showing. I suppose you are running Ninjatrader on an Windows emulation software and proTA native on OS X. Don't you have any problem running these together ? Also, what data feed is available for proTA ?

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trendisyourfriend View Post
I am impressed by the proTA charts you are showing. I suppose you are running Ninjatrader on an Windows emulation software and proTA native on OS X. Don't you have any problem running these together ? Also, what data feed is available for proTA ?

When I use Ninja I run it on a separate PC as I don't like emulation software as has slower performance. So I just got a secondhand pc from ebay for that. But as most of my trading is longer term based the ProTA charts on my Apple are great as the custom code language is very simple so I've created loads of custom indicators for myself with no trouble at all. For data I got a plugin called StockXloader which downloads free EOD data from yahoo. But I also put most of the commodities and futures data in myself from the CME site as it just takes 15 minutes of copying and pasting at the weekend.

"Fate does not always let you fix the tuition fee. She delivers the educational wallop and presents her own bill" Reminiscences of a Stock Operator.
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  #60 (permalink)
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Could you connect proTA with a data provider such as DTN/IQ ?

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