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Trading breakouts with stage analysis
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Trading breakouts with stage analysis

  #71 (permalink)
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UNP - Union Pacific Entry

I've been watching the railroad sector for a little while now as the sub-sector was showing some good price action and was close to making a Stage 2 breakout to new highs. This led me to study the sectors individual names and UNP stood out as the strongest pick imo, as it was outperforming the market, industry and sub-sector by a good amount and had just made a Stage 2 breakout in the last few weeks.

The Stage 2 breakout was confirmed two weeks ago by it closing the week above the previous high. But I held back on taking a position as earnings were due last week. However, they had a really strong earnings report and some volume came in as a result and it gaped to a new high on Thursday. So I waited to see the price action on Friday, and when the market was pulling back UNP was showing good relative strength and failed to break below it's gap. So I went long at the gap level at 112.45

Trade Details

Union Pacific
Ticker: UNP

Industry Sector: Industrials (XLI)
Sub-Sector: Railroads (^DJUSRR)

Direction: Long
Order Type: Market

Entry: $112.45

Stop loss: $99.49
Target: $138.85

Percentage Risk: -11.53% (-4.91% ATR Adjusted)
Potential Reward: 23.48% (10.00% ATR Adjusted)

Account Percentage Risk: 1.21%
Account Potential Reward: 2.46%

Risk Ratio: 2.04

ATR(200 Day): 2.64 (2.35%)
ATR(52 Week): 5.94 (5.28%)

ATR Targets:
1x ATR: 115.09
1.5x ATR: 116.41
2x ATR: 117.73
2.5x ATR: 119.05

Attached are my charts of UNP, the Industrials sector and the Railroads sub-sector.

"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.
Attached Thumbnails
Trading breakouts with stage analysis-unp_entry_20_1_12.png   Trading breakouts with stage analysis-unp_weekly_rs_20_1_12.png   Trading breakouts with stage analysis-xli_weekly_20_1_12.png   Trading breakouts with stage analysis-djusrr_weekly_20_1_12.png  
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  #72 (permalink)
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Current Open Weinstein Method Trades

I had an active week in my portfolio as I closed two positions in Silver and Brown Foreman for a small profit in each (see Post#65) and opened three new positions in Automatic Data Processing, Nasdaq 100 and Union Pacific.

The silver exit I took last Tuesday looks like it was the right move as the price action continued to strengthen and popped on Friday. So I'm pleased with that one, however, less pleasing was closing Brown Foreman, as that ended up being an out performer this week and made a continuation move with close on Friday above the consolidation high. So that's a Stage 2 continuation buy again and I should get back in it. However, I used up my remaining risk capital with my purchase of Union Pacific on Friday, so I'll have to sit that one out.

Here's my open trades list.

Current Trades
Entry DateTickerDescriptionSectorLong/ShortEntry PriceCurrent PriceEntry StageCurrent StageATR(200) Percent
10/27/11SESpectra EnergyXLUL29.331.532A23.98%
11/1/11RR.LRolls RoyceXLIL678.85733.622A23.11%
11/25/11RAIReynolds AmericanXLPL40.0640.182A20.18%
11/27/11GBP/EURPound/Euro-L1.163601.20359124.94%
12/9/11YUMYum brandsXLYL58.2662.462A23.47%
12/16/11DUKDuke EnergyXLUL21.0821.279220.71%
1/17/12ADPAutomatic Data ProcessingXLIL55.1356.772A2A1.66%
1/18/12^NDXNasdaq 100XLKL2403.22438.82A2A0.81%
1/20/12UNPUnion PacificXLIL112.45112.822A2A0.14%

Stan Weinstein's Stage Analysis method has been really good so far and has kept me on the right side of the market through the volatility of the last quarter or so. I think we are close to moving to a new phase now though, as the stock indices are lining up for potential Stage 2 moves. The Nasdaq 100 is the closest of the major indices and closed the week within a few points of a Stage 2 breakout and the S&P 500 is now in Stage 1B. So barring any black swan events the trend appears to swinging towards the long side in the intermediate term.

"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.
Attached Thumbnails
Trading breakouts with stage analysis-open_trades_20_1_12.png  

Last edited by isatrader; January 21st, 2012 at 06:19 PM.
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  #73 (permalink)
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Major charts for analysis


Attached is the updated major charts for analysis.

"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.
Attached Thumbnails
Trading breakouts with stage analysis-spx_weekly_20_1_12.png   Trading breakouts with stage analysis-gc_weekly_20_1_12.png   Trading breakouts with stage analysis-hg_weekly_20_1_12.png   Trading breakouts with stage analysis-cl_weekly_20_1_12.png   Trading breakouts with stage analysis-us30_treasuries_20_1_12.png   Trading breakouts with stage analysis-ty10_treasuries_20_1_12.png   Trading breakouts with stage analysis-dx_dollar_weekly_20_1_12.png  
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  #74 (permalink)
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Current Open Trades

It was a very quiet week for me and I didn't have anything to do other than watch as I'm at my full risk allocation of 6%. The portfolio underperformed by -1.07% this week as it was down -1% week on week and the S&P 500 was up +0.07%. It's been fairly flat for most of January as the older picks that were outperforming have pulled back a bit while the newer picks have been picking the slack since I bought them. I think this is because the market has seen a shift to the risk asset classes of Materials and Financials since the start of year and away from Utilities and Consumer Staples which were leading the market higher at the end of last year. However, until the last week or so both were still too early in Stage 1 to consider buying anything in them. But now Materials has moved into later Stage 1, possibly 1B. So the sector is much better off and I can now look at adding a new pick from there into my portfolio. There's a few that have caught my eye, but CAT is a possible on it's next pullback and continuation breakout, but it would require me either raising my stop loss on another open position or closing a position to free up some risk capital.

Current Trades
Entry DateTickerDescriptionSectorLong/ShortEntry PriceCurrent PriceEntry StageCurrent StageATR(200) Percent
10/27/11SESpectra EnergyXLUL29.331.632A24.16%
11/1/11RR.LRolls RoyceXLIL678.85738.622A23.39%
11/25/11RAIReynolds AmericanXLPL40.0639.422A2-0.94%
11/27/11GBP/EURPound/Euro-L1.163601.18984123.24%
12/9/11YUMYum brandsXLYL58.2662.842A23.79%
12/16/11DUKDuke EnergyXLUL21.0821.169220.32%
1/17/12ADPAutomatic Data ProcessingXLIL55.1355.332A2A0.20%
1/18/12^NDXNasdaq 100XLKL2403.22458.42A2A1.26%
1/20/12UNPUnion PacificXLIL112.45114.9792A2A0.96%

"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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  #75 (permalink)
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Major charts for analysis

Attached is the updated major charts I follow. The S&P 500 held the trendline breakout from last week, however, the price action on the weekly bar shows indecision as to the next move. I've got the Stage as Stage 1B currently, so I think it could have another pullback to value before trying to reach Stage 2A like the Nasdaq 100 has already done. The 10 year Treasuries chart is interesting this week as it closed within a fraction of the previous high after a very strong week and looks poised to break out into a Stage 2 continuation this coming week. Which due to it's inverse relationship with equities, would quite likely cause equities to correct. So an interesting week ahead I think.

"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.
Attached Thumbnails
Trading breakouts with stage analysis-spx_weekly_27_1_12.png   Trading breakouts with stage analysis-gc_weekly_27_1_12.png   Trading breakouts with stage analysis-hg_weekly_27_1_12.png   Trading breakouts with stage analysis-cl_weekly_27_1_12.png   Trading breakouts with stage analysis-us30_treasuries_27_1_12.png   Trading breakouts with stage analysis-ty_10yr_treasuries_27_1_12.png   Trading breakouts with stage analysis-dx_weekly_27_1_12.png  
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  #76 (permalink)
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Major charts for analysis

Attached is this weeks major charts for analysis. The S&P 500 survived it's minor pullback to the trendline breakout at 1300 and is now in Stage 2A by my reckoning and closed the week strongly near the high of the week.

Below are the charts

"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.
Attached Thumbnails
Trading breakouts with stage analysis-spx_weekly_3_2_12.png   Trading breakouts with stage analysis-ndx_weekly_3_2_12.png   Trading breakouts with stage analysis-gc_weekly_3_2_12.png   Trading breakouts with stage analysis-hg_weekly_3_2_12.png   Trading breakouts with stage analysis-cl_weekly_3_2_12.png   Trading breakouts with stage analysis-us_30yr_treasuries_3_2_12.png   Trading breakouts with stage analysis-ty_10yr_treasuries_3_2_12.png   Trading breakouts with stage analysis-dx_dollar_index_3_2_12.png   Trading breakouts with stage analysis-spx_pnf_3-2-12.png  
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  #77 (permalink)
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Market Breadth

The market breadth indicators that I follow have continued to improve since my last update on the 21st January. But I thought now is a good time to highlight them again as all the charts have reached the end zone now and the short term chart ($NYA50R - NYSE Percent of Stocks Above 50 Day Moving Average) has reached it's highest level that it ever gets too within a few percent or so, as 90% of stocks are above their 50 day moving average in the entire New York Stock Exchange and this level has only been reached 7 times in the last 10 years. So risk is increasing of at least some sort of consolidation, as these lofty levels aren't normally held on to for very long as the market is too one sided on a short term basis. The good news however, is that as this is the first push up to this level in this bull move, and that history has shown that after the inevitable pullback/consolidation that will happen very soon due to these extended levels, that market has then started a new longer term bull move. For example it reached this level for the first time in May 2003 and in May 2009. A few months after each of those times was the best two times to buy in the last 10 years. So the question is will history repeat itself again? And the answer is no one knows, but it's certainly something to consider when the TV pundits start predicting the end of the world again over the next few months when the market decides to take a break.

Below are the breath table and charts

Market Breadth Signals
TickerDescriptionPercentSignalColumnRisk
$BPNYAThe NYSE Bullish Percent Index74.57%BuyXsHigh
$NYA200RNYSE Percent of Stocks Above 200 Day Moving Average73.81%BuyXsHigh
$NYA150RNYSE Percent of Stocks Above 150 Day Moving Average81.41%BuyXsHigh
$NYA50RNYSE Percent of Stocks Above 50 Day Moving Average89.32%BuyXsVery High
SPY/TLTS&P 500 / US 30 Year Treasuries-BuyXs-

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"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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  #78 (permalink)
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Current Open Trades

It was a better week for my portfolio last week as it rose 1.79% week on week. So it only slightly underperformed the S&P 500 which gained 2.17% week on week. I didn't make any more changes last week as I'm happy to let the positions I have ride for a bit as if the market starts to consolidate in the short term as I think it will fairly soon some of the more defensive names I have will start to outperform again and hopefully give me a chance to move my stop positions up and free up some more risk capital so I can purchase some stocks from sectors I don't have exposure to yet.

The other issue I need to address is that being based in the United Kingdom my US stock trades have currency related risk and the GBP/USD has a positive correlation with US equities, so when they rise, 34% of the time the Pound does as well. So my returns will be dampened by this unless I hedge the US positions by buying the Pound/Dollar cross to cover this. Timing however is the trickiest thing to do, so my aim currently is to buy half the position on the next major pullback in the GBP/USD.

Current Trades
Entry DateTickerDescriptionSectorLong/ShortEntry PriceCurrent PriceEntry StageCurrent StageATR(200) Percent
10/27/11SESpectra EnergyXLUL29.330.542A22.21%
11/1/11RR.LRolls RoyceXLIL678.85783.582A25.94%
11/25/11RAIReynolds AmericanXLPL40.0639.722A2-0.50%
11/27/11GBP/EURPound/Euro-L1.163601.20305124.87%
12/9/11YUMYum brandsXLYL58.2663.822A24.60%
12/16/11DUKDuke EnergyXLUL21.0821.369221.03%
1/17/12ADPAutomatic Data ProcessingXLIL55.1355.492A2A0.36%
1/18/12^NDXNasdaq 100XLKL2403.22525.32A22.79%
1/20/12UNPUnion PacificXLIL112.45116.082A21.38%

"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.
Attached Thumbnails
Trading breakouts with stage analysis-open_trades_charts_3_2_12.png   Trading breakouts with stage analysis-open_trades_3_2_12.png  

Last edited by isatrader; February 5th, 2012 at 04:28 PM.
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  #79 (permalink)
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Major charts for analysis

Attached are the major charts for analysis. It was a reversal week for most of the charts, some at key support or resistance levels. So an interesting week ahead.

"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.
Attached Thumbnails
Trading breakouts with stage analysis-spx_weekly_10_2_12.png   Trading breakouts with stage analysis-ndx_weekly_10_2_12.png   Trading breakouts with stage analysis-gc_weekly_10_2_12.png   Trading breakouts with stage analysis-hg_weekly_10_2_12.png   Trading breakouts with stage analysis-cl_weekly_10_2_12.png   Trading breakouts with stage analysis-us_30yr_treasuries_10_2_12.png   Trading breakouts with stage analysis-ty_10yr_treasuries_10_2_12.png   Trading breakouts with stage analysis-dx_dollar_index_10_2_12.png  
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  #80 (permalink)
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Current Open Trades


It's been a few weeks since I updated the open trades and the portfolio fell last week by -0.84%, but it managed to recover it all this week as it gained 1.48%. That was better than the S&P 500 which only gained 1.38% this week, however, I'm still under performing the index since the new year began by around 6% due to my weighting in more defensive sectors at the beginning of the new year. I made some changes to address this in the latter part of January, but only the Nasdaq 100 has outperformed so far from those 3 trades.

I did add a new trade this week though, which was in the GBP/USD. This is not a suitable Weinstein method trade as it's currently still in Stage 4. However, it was necessary for me to hedge the US Dollar exposure in portfolio, so I bought the position on Tuesday.

DUK paid part of it's dividend into the account this week, which was the reason for the drop on the daily chart on Wednesday, and that added 0.25% to the account. So even though the chart shows it's making a loss at the moment, it's actually just above breakeven currently.

RR.L (Rolls Royce) continues to be the best performer and made another continuation move and closed the week at a new high. It's reached it's short term measured move target now, but I think it could go further in the medium term.

The worst performer so far is ADP, however, it's retesting the breakout level at the moment so if it can pivot here then it could make a continuation move.

Below is my current trades table and charts.

Current Trades
Entry DateTickerDescriptionSectorLong/ShortEntry PriceCurrent PriceEntry StageCurrent StageATR(200) Percent
10/27/11SESpectra EnergyXLUL29.330.932A22.91%
11/1/11RR.LRolls RoyceXLIL678.85796.112A26.65%
11/25/11RAIReynolds AmericanXLPL40.0640.882A21.21%
11/27/11GBP/EURPound/Euro-L1.163601.20339124.91%
12/9/11YUMYum brandsXLYL58.2665.242A25.77%
12/16/11DUKDuke EnergyXLUL21.0820.88922-0.68%
1/17/12ADPAutomatic Data ProcessingXLIL55.1354.232A2A-0.91%
1/18/12^NDXNasdaq 100XLKL2403.22583.12A24.11%
1/20/12UNPUnion PacificXLIL112.45110.9492A2-0.57%
2/14/12GBPUSDPound / US Dollar-L1.568231.583314B-4B-1.37%

"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.
Attached Thumbnails
Trading breakouts with stage analysis-open_trades_charts_17_2_12.png   Trading breakouts with stage analysis-open_trades_17_2_12.png  
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