Experimenting some TA

[blu3]

For a wrap-up of the week, TGR surely isn't off a good start with the price closing below the $4.5 mark, down all the way to $4.46 (-1.5%). I really need to work on my micro timings! As with my previous trades, I first checked the weekly charts to determine if it was an overall good time to get in, then the daily chart to try to find a more precise timing, but if I had instead looked at the intraday chart maybe I would have noticed the larger volumes on the way down and would have waited to see what would have happened next. Lesson learned.

As for GEM, it went all the way up to $3.71 to finish the week at $3.61, which makes it for a +8% gain in total since my entry point at $3.34 from 2 weeks ago. I took the chance to tighten up my stop loss at $3.48 to secure a positive outcome, as little as it might be—it's good for the moral

[Baa_Baa]

snip ...


Buy: TGR (ASX)




... waiting to see if the price would break through the $4.4 resistance. It did it yesterday, with almost double volume from its daily average, and also broke through the $4.5 mark where a few sellers seemed to be aligned to take profits. ... endsnip

Couple of comments blu3, nice to see the detail in your analysis. You say volume was twice average but the chart seems to say it was about the same as recent volume, where's the average line? You say resistance 4.4 but it looks like a breakout of resistance at 4.25 from the previous day close at 4.3. Also buying where you have observed that Asks/sellers emerge .. is that what you had in mind? It looks like a momentum trade on a breakout but perhaps a really tight stop at say 4.50 which will get you out quickly if this is a fake out and sellers take over ... if it isn't (great) and you ride up the curve, can you set a 'trailing stop' or is your platform only able to take manual stop adjustments?

[ratkin]

In fact I initially defined this stop loss thinking that I would get in at around $4.4, which was even tighter than what it is now! I've indeed read that longer-term trades benefit from more relaxed stop losses, which is the type of trade that I'm hoping to perform, but the other reason for making it tight is the current riskier context, that is the overall S&P/ASX 200 being in a downtrend. My thinking is that I prefer taking a smaller loss and getting in again later on if the price goes back in the right direction. After all, the rule no. 1 is to never lose money, right? And everyone knows about the rule no. 2 But maybe I'm thinking about it the wrong way. What's sure is that I definitely find it hard to come up with such entry/exit prices—I've been doing it a bit too randomly so far.

I'm also looking forward to hear other strategies if anyone is willing to chip in!

Cheers!

Yeah stops are always tricky, have you had a look at Atr stops, they can be quite useful. For long term trades around 3 times average true range seems to work well, even as much as four times ATR. They gradually move up as they price rises , while never moving down.

Personally i prefer going under previous support, especially below whole numbers like in this case 4. I dont have my software with me right now, but i suspect an ATR stop would be a fair bit further away from the price action than yours.

All my back testing on weekly systems have always performed better with a more generous stop than a close one, but i guess every chart is different.

[Baa_Baa]

Yeah stops are always tricky, have you had a look at Atr stops, they can be quite useful. For long term trades around 3 times average true range seems to work well, even as much as four times ATR. They gradually move up as they price rises , while never moving down.

Personally i prefer going under previous support, especially below whole numbers like in this case 4. I dont have my software with me right now, but i suspect an ATR stop would be a fair bit further away from the price action than yours.

All my back testing on weekly systems have always performed better with a more generous stop than a close one, but i guess every chart is different.

These are very good points ratkin, I'm just wondering whether blu3 might have cleverly bought into a clear chart breakout (nicely spotted) but at a point that sellers have previously exercised, in which case a really tight stop would hopefully get out without any serious damage. Reality may be that a reversal might require an 'at market' sell as a stop loss limit price sell could be overwhelmed. If the SP continues to run up, then I agree completely, to relax the stops back to ATR. I'm looking at the very next trading day which will determine whether the entry buy was a good decision or whether a quick exit is better. That said, I'm assuming this is pure trading, make money or get out at minimal losses.

[blu3]

Thanks for your feedbacks, Baa_Baa!

You say volume was twice average but the chart seems to say it was about the same as recent volume, where's the average line?

The chart above is the weekly chart but I did refer to “double volume from its daily average” in my comment, sorry for the confusion. But yeah, nothing too exciting volume-wise around the $4.4-$4.5 mark on the weekly chart (yet?).

You say resistance 4.4 but it looks like a breakout of resistance at 4.25 from the previous day close at 4.3.

I do see the breakout at $4.25 but thought of $4.4 as another one because two weekly candlesticks had their high bouncing off from it. Doesn't this count as a resistance level?

Also buying where you have observed that Asks/sellers emerge .. is that what you had in mind?

What I had in mind is very simple—I was concerned about buying below $4.5 seeing that there was some possible resistance levels above so I preferred to put more chances on my side by waiting for a breakout. Now, I guess the challenge is to figure out if this is actually a true breakout or not, and I most probably failed that part but I did set a tight selling price to cover me from my lack of expertise and my willingness to take risks Once again, I've been applying for this trade my current “much less than 1% rule”, so there's no big worries to have if this goes the wrong way (but if the price abruptly plunges while being away from my laptop since I need to perform my stop losses manually).

It looks like a momentum trade on a breakout but perhaps a really tight stop at say 4.50 which will get you out quickly if this is a fake out and sellers take over ...

Upon checking the definition of momentum trading, I guess this is mostly accurate at the exception that I intend to hold position on the longer-term and that I'm trying to backup my choices with some fundamentals showing growth.

if it isn't (great) and you ride up the curve, can you set a 'trailing stop' or is your platform only able to take manual stop adjustments?

I'm using Direct Broking at the moment so it's all manual work. I've created a spreadsheet to help me with the process though. For example, I have a “range” column that turns more and more red as it gets nearer to the selling price. And green the other way around. Below is an example for my trades for GEM and TGR, using an hypothetical share count of 1234 for each.




Also, before anyone asks, the “price” column is being updated automatically

Yeah stops are always tricky, have you had a look at Atr stops, they can be quite useful.

I did read about ATR somewhere (and just now again) but I can't find it neither on BigCharts, nor Yahoo Finance, nor on ft.com, so I guess that I will have to pass for now.

If the general consensus is to loosen the stop loss a bit for this trade, then I'll give it a thought. But really, I'm a bit concerned as I see this trade as “risky” according to the context and I definitely would not want to risk much more money for what is supposed to only be a little experiment.

[blu3]

Also, I guess that everyone already have their way of doing it, but for the ones who know how to run a Python script, here's a (very simple) piece of code that I use to get a preview for a trade that I want to make.

Basically, it takes the entry/stop/target prices, the trading fees, the maximum risk (including the trading fees), as well as an optional maximum cost, and it returns how many shares it is possible to buy, the relative and absolute gain/loss if reaching the target/stop prices, what price should be hit before being profitable (because of the trading fees), and the costs.

#!/usr/bin/env python

_DATA = {
    'entry_price': 12.34,
    'stop_price': 11.87,
    'target_price': 18.5,
    'trading_fees': 2 * 29,
    'maximum_risk': 123,
    # 'maximum_cost': 1234
}


def main():
    entry_price = _DATA['entry_price']
    stop_price = _DATA['stop_price']
    target_price = _DATA['target_price']
    trading_fees = _DATA['trading_fees']
    maximum_risk = _DATA['maximum_risk']
    
    share_count = int((maximum_risk - trading_fees) /
                      (entry_price - stop_price))
    cost = share_count * entry_price
    if 'maximum_cost' in _DATA:
        cost = min(cost, _DATA['maximum_cost']) - trading_fees
    
    share_count = int(cost / entry_price)
    cost = entry_price * share_count
    total_cost = cost + trading_fees
    
    profit_price = entry_price * (total_cost / cost)
    
    stop_percentage = (stop_price - entry_price) * 100 / entry_price
    target_percentage = (target_price - entry_price) * 100 / entry_price
    stop_difference = (stop_price - entry_price) * share_count
    target_difference = (target_price - entry_price) * share_count
    
    print('entry price: %.2f' % (entry_price))
    print('stop price: %.2f (%.2f%%, %.2f)' %
          (stop_price, stop_percentage, stop_difference))
    print('target price: %.2f (%.2f%%, %.2f)' %
          (target_price, target_percentage, target_difference))
    print('profit price: %.2f' % (profit_price))
    print('share count: %d' % (share_count))
    print('cost: %.2f' % (cost))
    print('total cost: %.2f' % (total_cost))
    return


if __name__ == "__main__":
    main()

With the data provided in the snippet above, including a maximum risk of $123, this is what will be printed out:

entry price: 12.34
stop price: 11.87 (-3.81%, -64.86)
target price: 18.50 (49.92%, 850.08)
profit price: 12.76
share count: 138
cost: 1702.92
total cost: 1760.92

If one does not want to spend more than say $1234 for this trade, it's just a matter of uncommenting the 9th line with “maximum_risk” in it. In this case, the result becomes:

entry price: 12.34
stop price: 11.87 (-3.81%, -44.65)
target price: 18.50 (49.92%, 585.20)
profit price: 12.95
share count: 95
cost: 1172.30
total cost: 1230.30

May it be useful to someone even though I doubt it!

[Hoop]

Nice stock pick Blu3...A TA friendly stock...those are the ones we want as it gives us confidence that TGR will continue to behave nicely...
A couple of comments before I went mad with the chart below.
1...It's not a wrong thing to do but using weekly charts for entry timing seems unusual as it could result in a late entry...The only times I use weekly charts is to cut the noise out if I have a charting conflict such as not sure which way the trend is going or the stock is too volatile to make much sense on a daily chart...Also use weekly charts for longer term analysis..(see first chart below)
2...Usually with longer term charts and using weekly periods, if there is a wide oscillation then a Log chart is preferred as the percentage price perspective is kept in proportion..(Paper Tiger would be proud of me

I've added a nother couple of charts...
First Chart..when mucking around with the charting program it's always good practice to look at the bigger picture...The first thing you will notice with the 11 year weekly log chart is that TGR seems to have a cyclical type behaviour and the present price is right at the top of the cycle..The cyclical/primary resistance seems to be approx 4.23 area so it seems TGR has broken that resistance which is very good news.....AIR supporters reading this post must now be very envious..eh?..
The not so good news ..TGR behaves as a cyclical stock...and I assume Salmon does go off the menu when economic times get tough...Therefore a chartist or TAist when investing in any cyclical type stock has to apply strict discipline, much more strict than non-cyclical stocks...therefore one must!!!! act and act quickly on any TGR sell signals...
Looking at the long term cycle oscillation, there is not enough data yet, but there's a hint that the oscillation may have an upward tilt...If this the case then TGR is not a true cyclical stock but maybe a growth stock with cyclical type behaviour...Still, as with all cyclical type stocks they rise higher than the market during good economic times making them a good investment...but during poor economic times they perform badly and are portfolio destroyers...True cyclical stocks have no overall growth which makes them lousy long term buy and holds..It seems TGR will give the TAist good warning before the quick wave down commences (see second chart)

Second Chart..TGR being such a well behaved stock, I decided to apply a lot of charting knowledge at TGR, the stock behaving in such a textbook fashion it would make a great educational piece...I could've added a lot more if space allowed.......Don't throw you arms up in the air when looking at the cluttered chart just work you way slowly through it and google what you don't understand...also..the pattern site (Bulkowski) and investopedia will help too..

I will mention my reason for tight stops....Blu3...a good reason to switch to daily candlestick charts is so a chartist can observe gaps...Gaps are valuable to a chartist as they make very reliable points when drawing S&R lines (support & resistance)....Gaps also seem to appear around certain price areas...you can see some of those areas mark on my chart.. The gaps in play at the moment are the 2 around the 4.10 and 4.23 (old cyclic top) area...Many "experts" say Gap upwards don't necessarily gap downwards but from my experience many do..so I'm always got that in my mind when buying those shares and my initial stops happen to be set in the same price area that has gaps ...I apply conservatism...

TGR having cyclical type behaviour will also have charted Gap behaviour now and in the future... so treat gaps as a normal event for TGR...
On my chart I have listed some gaps...illustrating when they open and then get filled....there are are other gap examples but I haven't written them on the chart as the chart is cluttered enough...

[ratkin]

So far we have
Blu3 stop at 4.27
Ratkin Stop at 3.98
Hoop stop at 4.23?
Baa Baa stop at 4.50? Already out

or am i totally wrong about Hoop and Baa Baa stops

[Baa_Baa]

So far we have
Blu3 stop at 4.27
Ratkin Stop at 3.98
Hoop stop at 4.23?
Baa Baa stop at 4.50? Already out

or am i totally wrong about Hoop and Baa Baa stops

Yep, looks like I'm out with my ultra defensive stop loss, my total loss $97.02 (inc brokerage) or 0.66% of trade, with $5493 left to fight another day. Can I buy back in again if it comes back to test the breakout, or lower? Lol

Actually, looking at my favoured weekly chart 10/14EMA SP cross, for strong trending stocks, this was a buy in early July and still holding.

[Hoop]

So far we have
Blu3 stop at 4.27
Ratkin Stop at 3.98
Hoop stop at 4.23?
Baa Baa stop at 4.50? Already out

or am i totally wrong about Hoop and Baa Baa stops

Nope your right with my 4.23 stop set if I enter now..

you are probably wondering why its so high...
Normally Ratkin (and I could get talked into changing it to 3.98).. I would be with you on the 3.98. Can't argue with you there as the 3.98 price has the best reasons for a stop..Its just under the bull bear line at $4.03, there's that psychological 4.00 as you mentioned, and you set the stops just below those supports using the "sell near resistance/buy near support" rule. Referring to my chart I also contradict myself (tight stop 4.23) ..the most common sailing strategy is the buy and hold strategy which is recommended until the Bull cycle dies which, using charting, occurs at the break of the bull/bear line presently at 4.03...[some may argue using MA200 line instead, currently at 3.67 (-20% ish)]

I've mentioned with my previous posts (incl AIR thread) why I'm presently too conservative when dealing with cyclical type stocks...
..to add..buying into cyclical type stocks a long way up their oscillation cycle simply gives me the willies...Buying in at these oscillation levels makes little sense when looking at the risk/reward benefits and it's doesn't look very attractive buying in with a long term view in mind..

...but, charting-wise I'm really optimistic as TGR is a well behaved stock and I don't see any past (historic) throwbacks breaking more than one level of support so the chances are very much in my favour that that my stop won't be hit within TGR's present bull cycle...(now watch it happen against the odds and prove me wrong.