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Underexposed - Canadian Stock Journal
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Underexposed - Canadian Stock Journal

  #311 (permalink)
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Gold again

Before I make a post on long term Bullish evaluation I want to comment on Gold.

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We had a major failure of 2 supports that should have been fairly solid but obviously weren't....they are now resistances...at about $1280....support is now at $1250.

the result here is that it affects my gold stock Lakeshore Gold


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not serious yet a rebound in gold will save it...even if Gold goes sideways it will be ok....the stock is so linked to the commodity.


Last edited by Underexposed; September 3rd, 2014 at 03:07 AM.
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I cannot embed in an edit.)

Yes you can, click edit, then click advanced. Then manage attachments.

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long term hold - part 1


First of all, I will describe what I consider as a long hold. That being at least a 3 month hold. Anything else is a swing trade...a short swing is 1-4 weeks. A long swing is 1-3 months.

The same principles described here are also applicable to a long term swing.

But first before showing an example of a long term hold I should discuss some aspects of evaluating Bollinger Bands as well as a contrary look at Slow Stochastics (at least compared to what most books on the subject talk about)

Bollinger Band

The first consideration would be what happens when the price goes above the upper BBs

We sort of talked about this earlier when I discussed Bollinger Bands in general. The Bollies represents 2 standard deviation units from the 20daySMA, which means that 95% of the prices that make up the 20daySMA should lie within the upper/lower Bollies....in other words, a share price above the upper bollie does not belong here.

A lot depends on high high the closing value is....Just slightly above is not of concern....it is just bullish....the higher the outlying price the more of a concern it becomes.

The prices will rarely be above the upper bollies for 5 days and usually returns within 3 days. What happens on re-entry is important to watch.

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See how each example here has the share price above the upper Bollie for 2-4 days...then the share price is pulled back into the bollie envelope...examples 1, 2, 3 are the best ways to do it....the price moves horizontal with a slight positive slope in a couple of cases (the best). Case 4 is the worst case...it entered on a down slope and not only that it passed the 20daySMA. Case 5 is full of indecision flat/up/down/flat

A second consideration would be what happens when the price re-enters the BB envelop

In most cases, at the end of a mini-run, the stock tends to migrate back to the 20daySMA ... you can see that often in this example. This is a natural movement at the end of a run...during this consolidation once it reaches the 20daySMA it twists around this average until the next bollie squeeze when the next major breakout will occur.

Slow Stochastics

Most TA books will tell you that

- above 80 (some say above 30) is "Over Bought" and this is a Sell signal.

- under 20 (some say under 30) is "Over Sold" and that this is a Buy signal.

- 50-80 is bullish while 20 to 50 is bearish.

I don't like this at all it does not make sense to me...to me everything depends on the direction that the share price is moving.

the following chart shows what I mean

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A share price can stay over 80 for weeks or even months...why sell??? Similarly the price can be below 20 for the same time period....when would you buy in???

When the Slow Sto falls just below 80 it is still mildly bullish as that direction can easily turn around again...similarly when the Slow Sto rises above 20...it is still mildly bearish as it can easily fall back again.....You will note that for "3" and "7" I call this position both neutral....however 3 has a green line and 7 has a red line....so "3" is actually neutrally bullish, slightly bullish as it is rising through 50) and "7" is actually neutrally bearish, slightly bearish as it is falling through 50.


Conclusion

So these are things to think about when deciding to keep or get rid of a long term play. The next post will look at an example of a long term Bull run.


Last edited by Underexposed; September 3rd, 2014 at 02:59 PM. Reason: wanted to clarify the difference between "3" and "7" neutral positions
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Big Mike View Post
Yes you can, click edit, then click advanced. Then manage attachments.

Mike

Thanks Mike...always wondered what that option was for

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Underexposed View Post
Thanks Mike...always wondered what that option was for

It used to be the button marked 'Do not push this button'.

Travel Well
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hahaha.. @ratfink , yeah I am not in the habit of pressing buttons for fun.

As a salesman/sales manager selling scientific instruments, I always had the newest/coolest samples in my office but constantly I had a problem with someone playing with them and screwing them up. One day I found this sign....perfect and I pasted it above my samples...


Quoting 
ACHTUNG!
--------

Das machine is nicht fur gerfingerpoken und mittengrabben.
Ist easy schnappen der sprinngwerk, blowenfusen und
poppencorken mit spitzensparken.
Ist nicht fur gewerken by das Dummkopfen.
Das rubbernecken sightseeren keepen hands in das Pockets.
Relaxen und watch das blinkenlights...

The short week has been pretty neutral so far. We are slightly negative for the week but that is really due to gold prices falling {sigh}

Here is the status so far this week

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Next post here really will be about how I use main trigger chart for long term trades. I have been giving this post a lot of thought and it is amazing how many little things that I keep thinking about. This is a good exercise for me.

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Playing a stock for Long Term - Part 1

Having a stock as a long term hold can result from two major reasons:

1. By design: You want to invest in a company because it has a good dividend and you are looking for a good return due to the dividends as well as capital gain.

A good example of this case is in my phantom portfolio....Toronto Dominion Bank [TSX:TD]

I am not going to repeat how a good dividend stock is selected here as I already have done so in a previous set of posts starting with this link and continuing:

Initial scan:

https://futures.io/trading-journals/30636-underexposed-canadian-stock-journal-22.html#post421538

Final cut based on past performance:

https://futures.io/trading-journals/30636-underexposed-canadian-stock-journal-23.html#post422058

Final cut after basic Fundamental analysis

https://futures.io/trading-journals/30636-underexposed-canadian-stock-journal-23.html#post422243

Final cut after Technical analysis

https://futures.io/trading-journals/30636-underexposed-canadian-stock-journal-23.html#post422546

When YOU PLAN to hold a stock for long term, you need to go through these steps to select the best candidate IMHO. You cannot just point to a stock and will it to be a long term stock

I offer this chart of Toronto Dominion Bank as a strong fundamental stock, good dividend strong performance as a multi-year hold

TD.TO - SharpCharts Workbench - StockCharts.com

2. By happy accident: You picked the right stock at the right time for a growth stock. You thought it might be a good swing trade when you bought it and you bought it at a point where is is rising from a strong support and there is a clear resistance ahead which becomes your swing target...

In this case you have set a target at a resistance point...and you hold your breath as it approaches that resistance ....I usually set an appropriate limit stop loss just in case to catch it if it falls from that resistance and save the profits...and lo & behold it passes....then you set your next target at the next resistance point and it makes it there and passes....so what started out as a short swing turns into a long swing and then a long term play.

It just becomes an "energizer bunny" going and going....often (but not too often) contrary to its fundamentals

My example for this kind of stock is Magna International [TSX:MG] a major automobile parts manufacturer in Canada.

I now check out stocks for their ability to make money....debt is a problem for me if it is unreasonable for its revenues...but basically it the company does not make money...I don't really want to invest in it....I am not saying it is not a good intra-day trade or a short swing of a few weeks.... But I am a long term trader...at least a long term swing trader so I like companies that MAKE MONEY....and if the revenues increase in time....so much the better.

I do relax this criteria for start-up O&G and mining companies (which I do like to put money into)....there I do like debt (no debt means they are not doing much) and though they are not earning money yet....they should show at least declining negative Net revenue with increasing Operating revenue...that is a criteria I use for that type of stock


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You can see on an annual basis the Operating Revenue has been increasing since 2009 as well as the Net Revenue

let us pretend we are back in Nov of 2012 and we see this chart shaping up


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We are a little miffed because we missed that opportunity back in August....but it did not get away on us and perhaps there is a second chance at this....the Slow Sto is getting Bullish (though it fell back a bit recently)...MACD is rising and the BBWidth is showing signs of rising...but is this worth it ???? Is this a risk worth taking???

This is the P&F chart I would be looking at then


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Well I like this type of P&F chart VERY MUCH....See that Berlin wall of resistance the bulk of which is at the bottom of that box at $43.00....IF we can pass that resistance, what a great support that resistance becomes...(remember ceiling become floors when you pass through them). IF it passes what would be our initial target?....the next resistance level which is at $47ish...that may be serious but the one after that at $49.00 is weaker and they will be probably progressively weaker, at least based on history.

So what are we waiting for???? Jump in now!!!! really??? Where is the BUY signal...everything looks good in the first Magna chart but the BBWidth trigger has not been pulled and I never buy on the downside edge of a resistance...so we wait for the trigger....and my next post


Last edited by Underexposed; September 4th, 2014 at 09:35 PM.
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Playing a stock for Long Term - Part 2

Here our chart for the next several months


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1. Ok ....our patience is rewarded and see the classic buy signal ...rising Slow Sto first....then the MACD and finally the BBwidth triggers...give it a day or so to make sure but actually it broke our huge resistance at $44.00 on Nov 28 so it is not much a leap of faith here.

2. You see the pullback on Dec1 but as you can see the resistance turned support and held... now we monitor and watch a beautiful rise for about 6 weeks .... hugging the upper bollie like this is about as bullish as it gets. That potential resistance at $47ish....smashed...though you can see it act as a support for a couple of days (Jan 19-21)

3.At the tip of the arrow that run gas run out of gas a little. When this happens, in consolidation the price tends toward the 20daySMA and you see this happen along the horizontal line (3). Should you be concerned by Jan 6 or 7???

Not really....look at the Slow Sto...still over 80 (bullish) the MACD is still positive...the BBwidth is falling not rising (not a trigger)...so we wait and hope that line at 3 holds and it won't cross the 20daySMA...the latter may or may not be bad...depends on the 3 indicators and this does not look bad...so we HOLD...you could put a limit stop-loss in but the signs don't seem bad.

4. Well the patience pays off There is a mini break out that phizziles

5. Again we rise above the upper BB...a pullback is expected...

6. Again consolidation and the price tends to the 20day SMA...it runs along it then rises til Mid Feb

7. Before (7) it looks bad....the price has fallen hard...the Slo Sto is fallen below 80, the MACD is plumbing lower lows but the BBwidth is basically flat...at this point we have made about $8 (about 20%)...we hope the (6) resistance holds (you might put a limit stop loss just below the price at the #6 line.

now at (7) we are rewarded yet again with a clear BUY signal...again it rises above the upper BB so a pullback to within the BB envelope.

8. The little run peaks on about March 20ish...see the small reversal of the Slow Sto and MACD and the BBwidth??? Do we sell???

Why? there is no panic here...for the next 2 weeks look at the Slow Sto...it remains over 80 (Bullish) the MACD is going sideways (neutral) and the BBwidth still is falling further...So it is still a hold

Conclusion

9. So here we are....we reached $59.00 for the second time in April....seems like a resistance here....then it drops to $57.00....OH! Oh!

Do we sell and take our profits??? Hint: what do the indicators say...and look at the support...what clues are given ?

Will discuss this in the next post....still with me?

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well the last two days were pretty tough...I guess it was too much to ask for 4 good weeks in a row

Here is the end of week status report


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I will have to do a review after I finish these posts on Long term trading.

The dive in the price of Gold has hurt me with Lakeshore gold and Kelso Technologies is dragging its heels.

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Playing a stock for Long Term - Part 3 (next to last post)


In the last post on this subject, I left you with this question


Underexposed View Post
Here our chart for the next several months

Conclusion

9. So here we are....we reached $59.00 for the second time in April....seems like a resistance here....then it drops to $57.00....OH! Oh!

Do we sell and take our profits??? Hint: what do the indicators say...and look at the support...what clues are given ?

Will discuss this in the next post....still with me?

I did it to get you to think about what it is I do when I analyze a stock chart.

Let us recap our long play to date

1. Entered the play on Nov 28/2012 at a price of approximately $45.00/share
2. here we are at April 18/2013 and the price is at $57.00

We have gained $12.00 in 4.5 months or 12/45*100 = about 26% which is not bad for a small long term play.

But do we sell at this point and look for another play???

let us take a closer look at that chart leading up to April 18


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This has all the earmarks of a sale...look at the bear indications in that Blue rectangle

1. The candlesticks are far below the 20daySMA (dotted green line)
2. the share price has closed below the 50daySMA
3. the Slow Sto has been declining since April 12 and is now below 50...approaching bearish
4. The MACD has been declining since April 1 and 3 lower lows since mid March...bearish
5. the BBwidth show an uptick....the beginning of a bear run???

Based on this chart alone...there is not a court in the land that would condemn you from taking your profit RFN (right now)

You will note in my complete analysis I will use 2 more charts to see what they say and draw a conclusion from the consensus of the indicators.

So let us look at my "sentiment chart"


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Not looking good here, is it?

1. The CMF has been declining steadily since April 1 and now is in the mud...Bearish
2. The RSI has been in decline for a similar time....not below 50 yet but as close as damn is to swearing .... Mildly bearish
3. Look at the DI+/-....very close to a bearish cross...not there yet but looks bad...Mildly bearish

Consensus from this chart is very close to full on bearish...

Let us look at what an Ichimoku chart has to say


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Well there are some mixed messages here in this chart

1. The price is still above the green cloud...the edge of the green cloud may serve as a support...one could hope anyway...only mildly bearish here mainly due to the fall in share price...not the cloud.
2. I can never remember the Japanese names for these thin red/blue lines where the top arrow is pointing but they show bear when the red is above the blue and bull when blue is above the red....they are lying on top of each other...so I would call this neutral bearish right now, neutral because red lies on top of blue...bear because 2 days ago they were bullish.
3. The OnBal Volume is pretty neutral right now...very flat
4. The CCI is full on Bear

Consensus from this chart is mildly bearish.. to me...we are still above that cloud with a chance to recover but only a chance...everything else is bearish or neutral.

SO....The TA is over....it says SELL....doesn't it?

Well yes, but why has this stock gone down....bad news? the market? why is the price falling?

now I look to Fundamentals to get some idea of what is going on... TA is the main thrust of my judgement of stocks but more and more I appreciate some FA input.

First we look for negative news from before April 18


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No news at all from April 18....the latest news was on March 28 ...the 2012 annual report

Let's look at that report ... to get it we go to the company website and download the 2012 Annual Report to Shareholders

http://www.magna.com/investors/financial-reports-public-filings]Financial Reports & Public Filings

Here is a screen shot of the reports operating highlights and outlook


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Do you see anything bad here??? I don't. It is all good, including the outlook for the coming year. Maybe a couple of analysts wanted more for some reason .... but all looks well here.

What about market conditions....what was going on with the S&P/TSX Composite index at this time????


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AH HAH!!! Here is the answer to the drop in Magna's share price. It is just following the drop in the S&P/TSX composite of which it is a member.

Ok....now we have our answer to the drop in price....it is not the fault of Magna itself...it is suffering collateral damage frfom the market itself

CONCLUSION

Fine....when I see this, I am not so willing to respond to the first uptick on the BBWidth.

I am willing to risk some loss of profit (at 26% gain so far I am "playing with the casino's money" so to speak)

I once said in a post to @Carrerain4 a few weeks ago .


Quoting 
By setting a stop-loss type order you are limiting the downside losses BUT NOT the upside gains.

This is the way I like to sell a stock....there is a finality to a straight Limit Sell order....but a Limit Stop-loss order give the share price a chance to reverse...while protecting us if the fall becomes serious....

Where will I set the Limit Stop-loss??? Well I will take a look at that Green cloud in the Ichimoku chart that I previously showed you.

I will set it just inside the Green cloud at $54.50 with the limit being $54.40 so the limit stop-loss oder will have the range of $54.40 - $54.50.

I will give myself a chance to make more money and not respond to just one BBwidth up-tick.

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