MHJ - Michael Hill International.

**Phaedrus** · 06-12-2004, 05:24 PM

Morch,
(1)It seems to me that often after the 3rd line is in place it's confirmation that a retracement is more likley?
Sort of. There is nothing magic about the number 3, but the steeper the uptrend, the less sustainable it is and the bigger the retracements tend to be. All uptrends have retracements though - they are an integral part of any trend.

(2)Is the longer trendline of the three the most likley one to indicate future support?
It's not the length of a trendline that indicates its reliability, so much as the number of times it has been "respected", ie the more points of contact, the greater the reliability and the greater the significance of any subsequent trendline break.
This might seem like splitting hairs, but to me, trendlines do not "indicate future support". They are there to show me when/if the uptrend weakens. In other words, I use them to monitor an ongoing uptrend, rather than in an attempt to predict future price action.

(3) Do you always draw your lines using the closing price? and if so why? I often use OHLC
It is commonly accepted that the Close is the most important of the OHLC prices. Generally the Open is assumed to be controlled by the amateurs who have entered their buy/sell orders outside market hours, and the Close is assumed to be dominated by the professionals who are acting as a result of that days price action.
In any event, all my medium/long-term systems are based on Closing prices, so I make most of my buys and sells near the end of the trading day. My shorter-term systems utilise all 4 prices, and to depict them, I use Candlesticks almost exclusively.

**Morch** · 06-12-2004, 05:44 PM

quote:Originally posted by Phaedrus

Morch,
(1)It seems to me that often after the 3rd line is in place it's confirmation that a retracement is more likley?
Sort of. There is nothing magic about the number 3, but the steeper the uptrend, the less sustainable it is and the bigger the retracements tend to be. All uptrends have retracements though - they are an integral part of any trend.

(2)Is the longer trendline of the three the most likley one to indicate future support?
It's not the length of a trendline that indicates its reliability, so much as the number of times it has been "respected", ie the more points of contact, the greater the reliability and the greater the significance of any subsequent trendline break.
This might seem like splitting hairs, but to me, trendlines do not "indicate future support". They are there to show me when/if the uptrend weakens. In other words, I use them to monitor an ongoing uptrend, rather than in an attempt to predict future price action.

(3) Do you always draw your lines using the closing price? and if so why? I often use OHLC
It is commonly accepted that the Close is the most important of the OHLC prices. Generally the Open is assumed to be controlled by the amateurs who have entered their buy/sell orders outside market hours, and the Close is assumed to be dominated by the professionals who are acting as a result of that days price action.
In any event, all my medium/long-term systems are based on Closing prices, so I make most of my buys and sells near the end of the trading day. My shorter-term systems utilise all 4 prices, and to depict them, I use Candlesticks almost exclusively.

Many thanks for your response Phaedrus

Happy investing
Morch

**k1w1** · 13-12-2004, 04:08 PM

Is this the gentle hiss of the tyres slowly deflating on the MHI SP ?
Any techies out there who can give us a TA view ?

**Phaedrus** · 13-12-2004, 09:28 PM

K1w1, you want a TA view of MHI? I thought that was what I was giving you with all these charts!
It is only 10 days since I posted the comment "Price action has now broken below the most recent trendline and below the 6x ATR trailing stop, triggering sell signals." These were the first Sell signals in 15 months. Nothing much has happened since then - MHI is tracking more or less sideways, though it has made a lower high since the trendline was broken. Note that it is not in a downtrend yet - that would take a Close of below $7.85. (Today's close was $7.95, and the highest Bid at the moment is $7.85)

**k1w1** · 14-12-2004, 02:00 PM

SP down to $7.80 at close of play. Meanwhile ANC is up 6% at $10.60.

**Phaedrus** · 14-12-2004, 08:08 PM

With todays close of $7.80, MHI is now in a downtrend.

It is quite understandable that a sound stock in a good long-term uptrend should engender support, loyalty or perhaps even devotion from its holders. Stalwarts holding MHI consider it to be "a good buy and hold", one "to take to the grave", they "want to hold longterm", and vow it will be "the last one I will sell".

I would like to encourage such holders to consider the concept of "active investing", rather than simply buying and holding. MHI is a reasonably volatile stock and has had some fairly deep retracements in the course of its relentless longterm uptrend. If you were to avoid holding this stock when it was in a downtrend, your rewards would be much higher. Take a look at the chart below. It uses trendlines, the simplest of technical indicators, to signal entries and exits. This is not something that has been cooked up after the event - I acted on every one of the marked signals. Anyone can see that such an approach with MHI knocks the socks off the gains made by simply buying and doggedly holding through thick and thin.
It is about now that someone will raise the usual bogeys :-
(1) What about all the brokerage you have to pay? ($147.50 total!)
(2) The IRD will be onto you! (2 trades in 3 years? I don't think so!)
(3) I don't want to have to sit at my computer all day! (You don't have to)
(4) TA doesn't work! (You would have trouble convincing me of that)
(5) You will miss out on some dividends! (Maybe, maybe not - so what)
(6) I am an investor, not a trader! (OK, but try being a more active investor)
(7)You will have to pay tax on your gains!
and so on, and on.
Red herrings, every one!!!!

To sell is not disloyal and it does not mean that you will never again hold this splendid stock. Buy it back when the trend changes!

**duncan macgregor** · 14-12-2004, 08:30 PM

I agree entirely PHEADRUS. The very best companies will level off and stall or even downtrend after a strong uptrend. The price gets to high for its self people panic run in the opposite direction. The old fundamental investor rides it out but the smart money gets off the bus at the top and reboards lower down. macdunk