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Underexposed - American Stock Journal (long term)
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Underexposed - American Stock Journal (long term)

  #91 (permalink)
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Week end status March 6/15

Well.... the dust has settled and I am 90% settled into this portfolio... I still have $12, 000 and change in cash and this will be used for one more stock from that watchlist.

I am now happy with the portfolio as it now stands...we shall see how it performs now.

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  #92 (permalink)
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midweek Status March 11

What a contrast to the Canadian version of my journal!!!

this is directly the result of the two economies/markets... The Canadian markets are in a down turn much more than that of the USA. This could change again but I think I am on the right track now... we are finally in the Black


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We have minor negative returns on Blue Knight and Cowen group ... nothing serious though

Look at our long term hold on Radiant Logistics a gain of 6% since Friday... I raised the stop loss on it and am tempted to remove it all together as I don't see much of a chance of it plunging.... though the stock price IS above the upper BB so a pullback is expected... hopefully it will re-enter the BB envelope sideways.

looking forward to what Friday brings next

Good trading

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  #93 (permalink)
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well... you would think I know what I am doing in the American market now....

The second week of positive return and a solid footprint in the Black now as shown in this summary


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we lost a tiny bit of ground in the last 2 days due to a drop in Radiant Logistics... but it is still performing well and more to the point the other stocks are pulling up their socks.

no changes anticipated at present.

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  #94 (permalink)
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Underexposed View Post
we lost a tiny bit of ground in the last 2 days due to a drop in Radiant Logistics... but it is still performing well and more to the point the other stocks are pulling up their socks.

RLGT is holding up quite nicely right now...if it can stay above 5, there may be a lot of potential. It would not have been in my stock screen due to the low price, but I must say, I like the fact that I can see all the horizontal consolidations forming...almost like stairs going upwards. This is exactly the type of action Darvas used to like.

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  #95 (permalink)
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grausch View Post
RLGT is holding up quite nicely right now...if it can stay above 5, there may be a lot of potential. It would not have been in my stock screen due to the low price, but I must say, I like the fact that I can see all the horizontal consolidations forming...almost like stairs going upwards. This is exactly the type of action Darvas used to like.

well I do not have a bias against $1 - $5 stocks especially in the Canadian market place. I am more cautious in the American markets as I stumbled a lot when I first started this journal.

I have no idea about Darvas and his likeable action.... this stock grabbed my attention through its chart as well as it had good fundamentals.

here are two charts right now for this stock

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If you look at the circle at the top right... the share price went above the upper BB....as normal it re-entered the BB envelop in a couple of days... looking at the lower 2 indicators you see the MACD and BBwidth did not reverse direction.... it takes all three indicators to reverse direction to say the end ended.

we have begun the breakout for further gains


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This is a bullish chart and confirms this stock still has legs... all three indicators are positive... no bears to be found right now.

More positive days to this run

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  #96 (permalink)
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Nicolas Darvas was a dancer who traded in stocks while traveling the world. You can get more details here: Nicolas Darvas - Wikipedia, the free encyclopedia

One of the books he wrote, "How I Made Two Million Dollars in the Stock Market" is quite an entertaining read, but also has several nuggets of wisdom. If you haven't read it, I would highly recommend it.

He pioneered what are called Darvas boxes, namely sideways consolidations that stair-step higher. RLGT is exhibiting those same characteristics. Some of the better stocks tend to exhibit those same characteristics during the initial stages of big bull runs. If it can continue this progression it could become a really large winner.

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  #97 (permalink)
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grausch View Post
Nicolas Darvas was a dancer who traded in stocks while traveling the world. You can get more details here: Nicolas Darvas - Wikipedia, the free encyclopedia

One of the books he wrote, "How I Made Two Million Dollars in the Stock Market" is quite an entertaining read, but also has several nuggets of wisdom. If you haven't read it, I would highly recommend it.

He pioneered what are called Darvas boxes, namely sideways consolidations that stair-step higher. RLGT is exhibiting those same characteristics. Some of the better stocks tend to exhibit those same characteristics during the initial stages of big bull runs. If it can continue this progression it could become a really large winner.

I took a look at a site that talked about these boxes and here is where they discuss charts with the boxes

Darvas Box Theory - Darvas Box Theory Explained: Example Charts

Now this is not the original author's discussion but here is another web poster's discussion


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I was curious so I plotted my "trigger chart" for the same period of time for Guess Jeans [GES] underneath.

The thing that bothered me about these boxes is that there were no mention as to how they were formed... they seem to be rather random heights and widths and seem to be just resistance/support channels made into a box ... though I think volume enters into the equation somewhere.

I drew the lines that show buy/sell signals... I would not have been fooled in that first box as clearly the Slo Sto and MACD are declining as the BBwidth rose... a clear sell signal....I also think I was a step ahead on the breakouts though the gapping situations happen so fast I doubt anyone could predict them.

An interesting chart but I see nothing that I could not predict with my "trigger Chart"....

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  #98 (permalink)
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Underexposed View Post
The thing that bothered me about these boxes is that there were no mention as to how they were formed... they seem to be rather random heights and widths and seem to be just resistance/support channels made into a box ... though I think volume enters into the equation somewhere.

I read the original Darvas book many, many years ago.

What he actually did was simply observe when a stock was in a range and then broke out. He did this by just observing the stock quotes, not even charting. As I recall, he had his broker telegraph the quotes to him wherever he was in the world as he traveled for his dancing career. The ranges are what he called "boxes," but ranges is what they were.

I have since seen, fairly recently, "Darvas Boxes" being offered as an indicator. I don't know if any of the implementations actually square very well with the Darvas approach, which was quite informal and not an indicator.

As I recall, at least, it was really all about the fact that stocks tend to rest in pullbacks or ranges before moving ahead. Hence the idea of "boxes." If you see a stock basically doing a stair-step type trend, that's what he was talking about. There really was no rule about how to form them, other than observing support and resistance, exactly as you said. I don't recall if he also looked at volume, but if he did, it would have also been very informally.

Darvas also benefited from trading during a roaring bull market.

I have a soft spot for Darvas, because he was the first person who gave me an idea that you could approach the stock market in a systematic way that could make you money. He was basically just trend following, by observing moves over previous highs. It was not revolutionary, even for the time (50's or 60's, I think), but you do see this behavior in most trends that are not just straight up. Look at it as a description of a trend with pullbacks and ranges and you've got it.

Just a little ancient historical info....

Bob.

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  #99 (permalink)
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bobwest View Post
I read the original Darvas book many, many years ago.

What he actually did was simply observe when a stock was in a range and then broke out. He did this by just observing the stock quotes, not even charting. As I recall, he had his broker telegraph the quotes to him wherever he was in the world as he traveled for his dancing career. The ranges are what he called "boxes," but ranges is what they were.

I have since seen, fairly recently, "Darvas Boxes" being offered as an indicator. I don't know if any of the implementations actually square very well with the Darvas approach, which was quite informal and not an indicator.

yes, As I mentioned above I did not see any rational to the boxes. But there was not much real TA in the 1920's other than P&F and barcharts which were certainly around back then but not performed on every stock in newspaper financial pages or supplied by a full service broker I imagine.

If you read my Canadian Journal (now approaching "novella" status ... I mentioned how I got my start in TA back in the 1980's when I would follow 100 tickers in P&F charts updated personally every Saturday afternoon and being fascinated by the concept of support/resistance lines as they revealed themselves.

While it is interesting historically and the thought processes of these players back then are interesting, the advent of the TA explosion in the 1960's to present make TA much more systemic.

I am sure Darvas would be fascinated by Bollinger Band squeezes which as I have shown correspond to the end of those boxes... My "Trigger Chart" enhances the the reliability of those signals as I have shown. As I see this method it is basically a resistance/support channeling application....the so called "stepping" is only a result of the bullish nature of the stock... I see the same stairs in my charts

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  #100 (permalink)
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Underexposed View Post
I am sure Darvas would be fascinated by Bollinger Band squeezes which as I have shown correspond to the end of those boxes... My "Trigger Chart" enhances the the reliability of those signals as I have shown. As I see this method it is basically a resistance/support channeling application....the so called "stepping" is only a result of the bullish nature of the stock... I see the same stairs in my charts

Agree that Darvas would be fascinated. The Bollinger Band squeezes tend to be during periods of low volatility or sideways movement. While I don't think he implicitly stated it, boxes with smaller resistance / support zones, i.e. smaller consolidations, allow for larger reward to risk trades. That is one of the tools in my toolbox.

I have not used the Darvas boxes indicator, all I generally do is eyeball stocks and if they exhibit the stair-step behaviour, then I am still happy to keep the position. All it is for me is an indication that the stock is still acting strongly. Also, I do not believe just using Darvas boxes is such a sound strategy. When I first backtested them results were pretty dismal. In a roaring bull market things may work better, but I find that nowadays there are a lot of false breakouts.

What made Darvas successful was that he found the market leaders, used stops to get him out of losing positions, held onto his winners, had a very concentrated portfolio and avoided excessive trading. He also had quite a lot of luck with one of his stock positions that was converted into rights. Since he bought more rights, had that position imploded we would never have heard of him.

Even though his book may be a little outdated, I love his writing style and I still found some things that influenced my trading positively.

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