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Underexposed - Canadian Stock Journal
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Underexposed - Canadian Stock Journal

  #251 (permalink)
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Gold is on the rise again

here is a chart of gold for the past 24hrs at 5min intervals

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I think it will drop at the bell if the price of gold falters....I have about $1800 in my phantom portfolio here so I will say that I want to buy 1000 shares of LSG.TO at tentatively the Ask bid which is $1.37 but if it falters at the bell I would enter a market order for 1000shares and take it at whatever lower price I can get.

So I will enter a limit buy order for Lakeshore Gold Corp @ $1.37 for 1000 shares at the bell if the price rises from this price...otherwise I will enter a market order for the same number of shares at the bell if the price were lower.

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Well I did in real life as I said I would do in the previous post and bought into LSG.TO. So I picked up 1000 shares for my phantom portfolio @ $1.34

I am happy as the shares rebounded to $1.39 so far....hope the rest of the day goes as well.

Good Trading!

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Status Aug 8/14


Well so much for the excitement over gold...it fell back so of course the price of LSG.TO lost ground as well...the only saving grace was I got it cheaper than the $1.37 I was first looking at.

we lost money on the week but nothing serious...after I finish the last of my posts on that chart I have developed I will use the chart to analyze each of the holdings as to what stage they are in .

anyway here is the status as of the close today, Aug 8

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Slow Stochastic Indicator

Well again, I find this indicator to be very useful but I doen't use it in the traditional sense. The problem with most textbooks on charting in my opinion is that they focus on the indicators as though they can do all the work with respect to picking a stock. There is a tendency to try to fit all situations into the interpretation of the indicator. The fact is that indicators will always give you dodgy information if you use them in this manner...sometimes they outright lie.

When I first started my journey 20 years ago as a chartist, I fell into all those indicator traps and became quite disappointed. But then accidentally I noticed that Bollinger Bands gave pretty good indications of a major price movement....then I found that the BBWidth helped by more easily displaying the convergence/divergence of the BB upper and lower bands....It was at that point that I decided to experiment with adding other indicators and seeing how they responded when these critical BB squeeze events occurred....the first one I found useful was the MACD as I described previously.

However, it did not give me a complete picture. I needed another confirmation indicator for the trigger to buy and sell....but also I wanted an indicator that would help me decide whether to continue to hold a stock even though the BBwidth and MACD showed that the run (bear or bull) had ended. I did not want to sell if there was a chance that the run would continue on a bull run and I did not want to re-enter a stock on a bear run until I was certain the bottom for that run was reasonably certain.

I tried to find the proper third indicator for my chart....It was like a hockey coach trying to find a third member of a hockey line, you have the center, the right winger and now you need the left winger. the three hockey players have to work smoothly together. You need the sniper, the play maker and the grinder (the guy who digs the puck out of the corners). How often do you find in hockey a great center but one or the other wingers doesn't work well with him. {as a Canadian, a hockey analogy comes easy to me }

After lots of trial and error I discovered Stochastics.

Stochastics is a oscillating momentum indicator developed by George Lane in the 1950's using the highest and lowest share price in a given period of time (the look-back) and relate it to the current share price. The basic calculation is as follows (taken from Stockcharts.com stockschool - one of the best website for indicator information IHMO)

Stochastic Oscillator [ChartSchool]


Quoting 
%K = (Current Close - Lowest Low)/(Highest High - Lowest Low) * 100
%D = 3-day SMA of %K

Lowest Low = lowest low for the look-back period
Highest High = highest high for the look-back period
%K is multiplied by 100 to move the decimal point two places

the following chart looks at various forms of this indicator


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The default look-back period for the %K factor is 14 days. As you can see there is little difference between the Slow Sto at 14 or 30 day look-back but the curves for the 30 day are to me smoother and easier to read. The Fast Sto with even a 30 day look-back has a very choppy look though the general resulting curve is similar.

As a long term trader, I don't want to see every twist/turn...fast response is not a concern to me...the signal line does not enter into my basic view of the indicator...it is the trend of the %K that is interesting.

As an oscillator the chart moves between 0 - 100 with over 80 being thought of as over bought (bearish) and under 20 as over sold (bullish)...I find this to be NONSENSE ....

you can see this from the above chart..from Feb to the end of April the Slow Sto has been in so called overbought territory...If you sold the stock in mid Feb because the Slow Sto entered this "overbought" territory you would have missed out on $3 worth of gains

Similarly...if you bought this stock on July 7 because it was "oversold" you would have lost $2.25 and counting since then.

To my way of thinking....Entering a level above 80 is VERY BULLISH and will remain so until it falls out of this zone and even then it is only MILDLY BEARISH (as it easily can rebound and re-enter that zone)until it falls to 50. Similarly entering a level below 20 is full on BEARISH as long as it stays below that level and is only MILDLY BULLISH (it can fall back easily) as it rises above this level until it reaches 50.

I apply this way of thinking to any oscillating indicator between 0-100.


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Whoa....look at all the things to talk about when you add the Slow Stochastics to this chart.

On the left is a nice run that was in 2 stages...if we went strictly on the start of the run and end of the run according to BBwidth and MACD we would have started on Feb 20 (1) and ended on about March 10, jumped in again at April 3 (3) and ended at April 28 (4)...we would have followed the rise but missed out on the gains from March 10-April 3 and incurred the cost of 2 extra commission fees.

But look at the Slow Sto (3)....it stayed above or near 80 from Feb 10 - Apr 28....this showed a stock that was still bullish even as the MACD and BBwidth was declining.

between (4) to (6) we see several movements of the three indicators...the fall of the Slow Sto and MACD combined with the rise in BBwidth is a bearish situation at May 4...at June 12 the BBwidth and Slow stow are rising but the MACD is sideways ( a warning things are not as good as the price movement appears..

Now we come to the middle circle...at (5) note the strong decline in the Slow Sto and MACD and then the sudden rise in the BBwidth...a powerful Sell signal (or in this case - forget about buying....or if I was a person who played "shorts" it would be a time to initiate a short sell)

NOW we come to the last circle....remember the previous post the concept of a MACD/BBWidth squeeze...the BBwidth is completed its reversal but the MACD seems to be going sideways....Look at the Slow Stochastic...it is staying below 20 the whole time. - This means this is not a bottom....there are still more losses to come. Therefore it is best to not jump back in early ... rather it is prudent to wait for the BB's to converge again and the BBwidth to fall to about a value of 5 again...eyeballing the BBwidth I would say that will occur in 5-10 days. So position (8) is still a bear.

I hope you can see how these indicators work well together.

Here are the basic rules:

1. A buy signal occurs when the BBwidth AND the MACD AND the Slow Sto are simultaneously in a positive slope AND the trigger is the BBWidth sudden and strong movement.

2. A signal signal occurs when the BBwidth has a positive slope and the MACD AND the Slow Sto has a negative slope simultaneously in a positive slope AND the trigger is the BBWidth sudden and strong movement.

3. The end of a bull run occurs when there is a reversal of slopes to the negative simultaneously of all three indicators and the Slow Sto is less than 80

4. The end of a bear run occurs when there is a reversal of slopes to the negative for BBwidth and to the positive of MACD and Slow Sto simultaneously and the Slow Sto is above 20.

these rules are not cast in concrete (that is why I use 2 -3 other charts .... but using this chart alone (in my unbiased opinion) will help you immensely in evaluating charts for long term trades...it may even help in intra-day trades but I have not tested this as extensively.

In my next post I will take the stocks in my phantom portfolio and see how they currently stand using the chart that we have developed.

Good trading....

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Underexposed View Post
...sometimes they outright lie.

Yes, and that word 'sometimes' is the key that really makes their conventional use pointless. I don't use any of them but that's a really good post, thanks. If I ever get time I may have to write something to keep an eye on some of them for me, along the lines you describe. Do you do any system backtesting of this approach or is it all eyeballed?

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ratfink View Post

Yes, and that word 'sometimes' is the key that really makes their conventional use pointless. I don't use any of them but that's a really good post, thanks. If I ever get time I may have to write something to keep an eye on some of them for me, along the lines you describe. Do you do any system backtesting of this approach or is it all eyeballed?

I do not have any tools for back testing other than doing it manually, I also have no tools for using these concepts automatically.

I do have about 4-5 years experience using this chart that I have shown and I have not once found anything that created a problem for me and my interpretation of this chart. I have literally done hundreds of readings on other websites under pseudonyms of Naamplao or Underexposed and especially on Yahoo Answers

https://ca.answers.yahoo.com/dir/index?sid=396545322

under my name "Underexposed" I am the top person in Canada for investment answers (actually that probably speaks more to the number of Canadians answering the questions). Initially I had a lot of grief and derision from those that believed that what I did was nonsense but I prevailed and won grudging respect from participants around the world....if they tried to belittle my approach I would challenge them to predict was would happen in the near future and then I would give a complete reading (4 charts) and make my prediction and 9x out of 10 I was spot on...

My best answers (not always price predictions) at 2090 also ranks in the top 10 on the American version

https://answers.yahoo.com/dir/index?sid=396545322

I don't appear there....though we all answer the same questions and only one answer is the "best"....because I am Canadian not American....each domain of Yahoo has a listing of the best for that domain.

So...not to toot my horn too loud... my method of chart reading has survived about a 4-5 year test though I rarely go to Yahoo much anymore....their latest roll-out was buggier than heck. I found this place and I like the quality of people here and the ability to create a journal to discuss what I do....I am still active a little bit as "Naamplao" and can be found on this site

Canadian Stocks Message Boards

I do enjoy commenting on stock prices and giving readings using my charts...though frankly no one has really asked me to do so here...mainly I suppose most are not long term or long swing traders...I doubt my approach works for options or futures...I think it could be applied to intra-day trading though.

So to answer your question (why is he sooooo long winded in his answers?? ) no I have not done back testing because of not having the tools to perform it...I would expect I would need a service for data to do it efficiently for a massive test...however, I could do selected stocks from historical data downloads. I do have computer programming skills but they are rusty having been out of that business for 15 years or so.

My validation is simply anecdotal from about 5 years of doing the analysis of company stock performance... combined with the other equally useful charts that I have developed but not discussed here in detail.

I have no problem working with you though...if you think it is worth pursuing.

As always thanks

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Analysis of Lundin Mining Corp

Ok...now let's really use this chart.
@ratfink asked me if I have back tested my approach and I said no as I had no tools to do so....but then I thought about it...I do have some "rules" that might lend themselves to developing a program around to automate things but As you will see there are just too many nuances that I see when I evaluate a chart to do a complete reading....so I guess my approach overall falls under "eyeballing" as termed by Ratfink. I think those "rules" might be used in some kind of screener...I should try that out for American stocks using "StockFetcher"

http://www.stockfetcher.com/ui2/index.php

This is an excellent website where you can use a relatively simple, "like English" query language. You can try it for free on historical data or on real data if you subscribe...and I would subscribe but they don't do Canadian stocks {sigh}.

To me, stock analysis is a mystery puzzle and you must collect the clues before you finger the culprit. It is not the case of a single indicator or set of circumstances that solves the mystery.

So...let us look at the state of the first stock in this phantom portfolio and look at the past and predict the short term future.


Lundin Mining Corp [TSX:LUN]

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this is a very interesting chart with lots of variety.

(1) this is a classic Sell signal....see how the MACD was neg for a long time and kept going neg....the Slow Sto finally deccided to fall out of the "overbought" area in a serious way...the BBwith now rises....Boom .... the sell trigger is pulled

(2) this is a classic Buy signal....note the rise of the Slow Sto and MACD while the BBwidth goes lower...the BBwidth reverses and goes positive...Boom the Buy trigger is fired.

(3) is interesting....see how the share price falls to the middle band...bounces of to rise to the upper BB....falls back to the middle band....repeat...repeat....Am I worried?....nopes!...look at the Slow Sto (near over bought) and MACD...a bit choppy but both are basically drifting sideways. It is really hard to predict the end-of -that-run where consolidation comes in .

(4) however, here it is a definite sign to exit the position if you so desire as the Slow Sto and MACD are definitely and the BBwidth rises....however if you were slow to sell....don't worry....see how the BBwidth is quite muted, going sideways so if I saw that I would wait and see what developed...

(5) no clear bottom indication, but suddenly the MACD and Slow Sto reverse direction and go positive a couple of days this is confirmed by a dramatic rise in the BBwidth....Boom...a trigger to HOLD, or BUY or simply add to existing holdings.

(6) I did not draw it but July 16 is a classic end-of-run indication...see how the MACD, SLow Sto AND BBwidth go neg at once??? Typically at the end of a run...the share price returns to the middle band (very normal consolidation)

(7) SO...now we are in a BBWidth tunnel that is pretty tight and rising slightly (slight BB divergence)...

What is the prediction Bull or Bear???

a) is the Slow Sto falling??? No...it is staying near the edge of the "Overbought zone" ......neutrally bullish (neutral as going sideways)

b) Is the MACD falling??? Yes...very slightly with lower lows....mildly bearish

c) the BBwidth is not tipping its hand yet.

If this is all I had to work with...I would hold as it is not clear as to direction...adding the two indicators indicate a very slight bear bias...but it is straggling the middle band. In real life I would consult my other charts to see if I could draw a better consensus...but using this chart alone...it would be a hold/watch at this point....

Good trading....

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Analysis of Lakeshore Gold Corp

Every stock chart has a different story to tell. To me it is not mechanical, thought there are basic mechanical elements to the analysis. You still have to use your investigative skills in the final analysis...piece the puzzle together.

Lakeshore stock is heavily influenced by the price of gold...Gold surges...LSG surges....Gold falls...LSG falls a little bit. Lakeshore Gold corp is a mine that seems to have solved its problems...but you don't find that out by looking at a chart....it is information you glean by investigating the fundamentals of the company. I am a great fan of learning something about fundamentals to augment my technical analysis....the us versus them attitude by many investors is stupid to my mind both types of analysis offers clues to the future price movement.

but this is a post to show the analysis of Lakeshore Gold Corp stock using the chart we developed so let's get on with it.


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(1) A classic sell signal....falling Slow Sto and MACD... BBWidth suddenly rises...Boom goes the trigger.

(2) Similarly a classic buy signal...rising Slow Sto and MACD... BBWidth suddenly rises...Boom goes the trigger.

(3) this is very interesting...you see 2 signals of a bottom...a double bottom in the price movement. the signal on the left is clearer than the one on the right but both are there. I am sure there is merit in this for judging the end of shorts though I do-not-shot-stocks

You might say..."Well if it is a bottom, should not this be a buy sign?" Not necessarily, it might be just a rest and the stock will fall again in a week or so. However, from a swing play point of view, notice that when a stock has a volume it usually heads back to the middle bollinger band...and sometimes beyond. I am thinking about using such signs for a short term swing...but I don't do that yet.....

Finding a double bottom is usually bullish...hence you see the buy signal at (2) soon after.

(4) I have not drawn every line but you can see a couple of end-of-runs in the range represented by this "4" circle...they happen at June 23 and July 21 where the BBwidth and MACD reverses direction....Why don't I sell???? Because the Slow Sto remains bullish....so you hold and ride the wave.

Note that at this end-of-run point the stock also gravitates to the middle band....this is natural and not disturbing because the Slow Sto still looks fine.

(5) SO....What is the prediction for the future

Well it looked like another breakout was occuring....in fact if you notice last Thursday post I jumped in and did something I don't normally do...I-made-a-market transaction to add 1000 shares of LSG.TO

Was that a mistake? Well no....there was a pullback which I did anticipate...I did not pay $1.37...I got in at $1.34. The price was quite high above the upper BB at the time...it could have rocketed off for a couple of days but eventually it would be pulled back into the BB envelope. The signs looked good (rising MACD and the BBwidth trigger and Slow Sto over 80 but it pulled back and the MACD and BBWidth look quite muted now.

The reason??? It was because the price of gold fell back.

Prediction:

It still looks like the beginning of another run to me, though in truth it could be a head-fake. It all depends on the price of gold.


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it seems that the hourly chart is not going to be bad today...but is that the ending to a head and shoulders formation coming....yikes I hope not!. I don't reall believe in that formation but could happen ...gold is so fickle... I hate it really...the world is going crazy and it bobs like a cork.

at this point though despite the muted MACD and BBwidth....it is a hold/watch with a possible buy if it takes off. But my portfolio on this site is out of available money....so it is a hold for me.

I will post another analysis tonight

Good trading.....

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Analysis of Enbridge Income Fund Holdings Inc

Ok...I lied...Here is another post...I had some free time and this chart is too easy to read so I did in in a few minutes.


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I wish all my picks were as easy as this one. In real life I got it first back in late March where that Buy signal occurred. I was looking for a high dividend stock ($0.115/month) with capital gain potential... and it performed well on both counts and I have added to my holding several times....I added this stock to my phantom portfolio here near to that Buy signal in July.

There really is not much to talk here..a blind man could see this is a good stock

(1) These are both classic Buy signals...led by the Slow Sto / MACD triggered by the BBwidth jump.

the only thing to comment on is that during the first 3 months of that run the stock was in that tight envelope but it never closed below the middle band. While the Slow Sto did drop on May 6...the MACD was rising so this was not compatible with an end-of run signal (both MACD AND Slow STO must have a neg slope when the BBWidth turns positive).

You might consider the sideways movement in late June to mid July as an end of run but really it is just consolidation... then boom, another run is triggered

(2) Note prior to the "2" line...the share price was above the upper Bollie but after 4 days, it re-entered the BB envelope. That was to be expected as it generally stays out there for 5 days max...But it came in in the best possible way ... sideways with a positive drift.

Now look at the indicators where the purple "2" line crosses them. With that long shadow downward it might look like an end of run coming. The Slow Sto looks like it wants to cross the 80 line ... the MACD and BBWidth have flattened out.

HOWEVER the MACD and BBWidth did not turn negative...and the share price caught a second wind.

WAIT FOR THE COMPLETION OF THE END-OF-RUN SIGNAL.... You might lose a little gains if it does complete that signal but you'd kick yourself when it takes off again...as it did here.

(3) Prediction

Well, the stock the stock does not show signs of slowing down...I would have to look at how high it may go but right now it would take a heck of a dive to make me sell this puppy. I can see support at $29.50 and solid support at about $27.80

It would be a huge Hold for me and collect those monthly dividends.

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Analysis of Toronto Dominion Bank [TSX:TD]


I have thought even more about what @ratfink has asked me. Do I "eyeball" the chart when I do an analysis?

I have done literally hundreds, if not thousands, of these type of readings over the past 5 years, that I have spent developing these specific charts and beyond that when I first started charting. I now have 4 charts that I constantly use...they all add a piece to the puzzle. I have only really detailed the "buy/sell" trigger chart. It is effortless for me to read them and on most charts it takes 5 mins or less to come to a conclusion.

I don't really think about what I am doing as it is automatic to me. Many people ask me why I do these readings. I do it for four reasons:

1. I like helping other investors...especially the newbie who has the best intents but is listening to bad advice and has not developed a plan.

2. When I answer queries from others I get exposed to stocks that I would never have considered and somethings the questioner brings a real gem to the table and we both can profit from it.

3. To sharpen my game.... many here may know Dr. Ruth... she had a great saying that applied to her profession ... "Practice...Practice...Practise...!!!!" I can still see her with her cackling German accent ... well it applies to being a chartist. When you practice by yourself you don't think of everything...when others present problems to you, then you are confronted by a variety of situations and it makes the practice more fun...not Dr. Ruth fun maybe but it occassionally can be orgasmic

4. There is an expression that "you learn more when you teach".

I found that certainly when I did a stint teaching English as a Second Language. We don't think much about the mechanics of speaking/listening/writing/speaking English. After all we have been doing it for decades...but just try to explain why. "The sick old black tabby cat" is better English than "The black tabby old sick cat"...most of us would say that the former "sounds" better than the latter...but there is a rule. It is only by teaching the subject that you investigate further but sadly English is not a very rule based language {sigh}

Well @ratfink caused me to think even more on the subject of my TA. We try to boil down stock picking to thinking that all stocks act alike...but that is not true...it depends on the sector, maturity of the stock and influences (eg. a price of a commodity)...I think that a stock may have a signature to its price changes but they won't be the same as others. Hence the difficulty devising a perfect software...So I must say that my approach to picking a stock is very much "eyeballing", though I will use basic patterns and tools to help narrow down choices.

Analysis of Toronto Dominion Bank [TSX:TD]

That is my sermon for the day Now let us look at TD

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This is another pretty easy stock to read. As a general comment, investors basically like this stock....look at the Slow Sto and with only 2 events in 6 months it hovers around the value of 80 and even the drops have not passed 50.

Personally I have held this stock for a long while in my real holdings...I am going on my 8th month, holding (and adding frankly). This phantom portfolio is working on about 6 months.....there are several points to make though in this chart:

(1) This is a classic BUY SIGNAL that is hopefully obvious by now...but if you already held the stock it is a definite signal to add more stock to your holding...that kind of signal is not a portent of the weak.... quite the opposite.

Note how the share price was above the upper BB for 5 days (the usual maximum) before re-entering the bollie envelope...then it resumed climbing...nothing in the indicators suggest an end to the run

(2) Note the reversal of trend to the indicators....this is a sign of the end of this run...and you could sell and take your swing....personally though I would wait til the next bollie squeeze before making that decision...it is just too good a stock to abandon..it would be a hold for me there

(3) another sign of the end of the run....this time much stronger and I would not blame anyone from taking profits from the extended run

(4) But this is where I pondered Ratfink's comments again and studied the times this stock ended previous runs and you see them circled in Green. See how they fell just below the middle band (which is a natural thing after falling from a run ending position) then approached the 50daySMA and rebounded....I would investigate my other charts and see if this is a TD bank problem or a general banking malaise...then I would hold (as I have done in my phantom and real portfolios)

(5) Prediction

Well as I thought it would it rebounded in price...you can see the BBwidth is falling and the MACD and Slow Sto is showing signs of rising again... But the stock is in consolidation right now...there will be NO major price shift for a couple of weeks (end of August maybe), since the BBwidth has to fall to about 2.

It is a HOLD/WATCH ...until the BB squeeze happens...if it goes bearish...perhaps it would be time to move on and take profits...cannot be predicted at this point.

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