Technical Analysis Test

[peanuts]

This is a test. This is only a test.

I've recently had a set-back in portfolio value advancement. I'm not trying to brag, or anything that involves ego, but this is something I'm not used to.

Over my limited years of investing/trading, I've developed (what I feel is) a pretty sure-fire way to take my piece of the pie from the stock market. I'm not going to get into the details of the whole idea surrounding this, or the actual system which I use to do this, but if you've been paying attention to my posts, you'll probably agree that I've recorded some really nice gains since I've begun posting my trades/ideas on Mr. Market's forum. (thank you Ernie for the invitation to do so, by the way)

Recently, as stated before, my gains have seen a decrease in the magnitude and frequency of the gains I was initially used to. I've researched my approaches to the trades I've made and I see that some do not follow the guidelines precisely, but not so much to truely alter the basic strategy.

One aspect that I use is Technical Analysis, and some parameters of which that I feel are important. So, in order to help me to determine whether I need to alter some of my approach to Technical Analysis or not, I kindy ask a simple question of any reader of this thread.

Based on the image below, does this chart indicate whether this stock will advance higher or lower in the coming months?

some of the indicators are:
1: monthly candlesticks
2: 5-year time frame
3: 6 and 12 month exponential moving averages
4: volume bars with the 50 month moving average line added
5: no price and volume, no ticker indicated
6: bollinger bands added (bigcharts default setting)

PLEASE... you folks are a great group to be asking.... PLEASE tell me whether this stock will continue higher, or will reverse and go lower based solely on your views of the chart provided.

If you have some reasoning behind your statement, I would appreciate that as well.

Thank you very much.

If you cannot contain your curiousity and NEED to know the stock ticker, just email me at this address (not clickable):
Don't forget the period between "email" and "peanuts"

[ParkTwain]

I wouldn't want to make a prediction based solely on this chart because I know from experience that it wouldn't be a very high-probability prediction. Not enough information is shown, even for a TA-oriented trader. IMO

With that cop-out disclaimer out of the way ...

I see a lot of charts like this because I watch for breakouts beyond a long-term high price. I don't see very much price history on this chart. I would want to see the stock's points of major resistance and support going back a couple of years at least. I would also like to see the "Wilder's DMI (ADX)" plots (stockcharts.com), to see the relative intensities of buying and selling. The great thing about the +DI and -DI lines is that they give you additional context for interpreting the stock's RSI. For example, a stock's RSI and price might be declining due to an absence of buyers rather than increasing selling intensity.

But given what I see in your graphic, I would be concerned with the declining volume shown after it put in a "blow-off" high. The positive is that the price has regained the level of that previous high, but this achievement took place on steadily declining volume per period shown (daily, weekly?). If that behavior is consistent with the action of other relevant stocks/industries/etc that have been showing relative strength in the market, you might interpret this "hesitant" behavior as the prelude to further rises in price. Similarly, if the current overall market's "leading indicators" (you have to analyze what these are in the present market and track them yourself) are showing strength, I would expect the stock to have more rise left in it BUT would require evidence of a resurgence in up volume before considering a new long position.

Some pretty basic advice for anyone in the audience:

I think the game to be playing is to have identified the stock's points (or regions) of resistance and support, then to be prepared to act when the price violates these points. (That is, you want to be flexible enough in your trading set-ups to go with what the market shows you, how it reacts to news, etc., rather than hanging your hat on predictions per se.) That's where the "higher probability" money is to be made because it's a lot more clear where to set your stops. But every experienced trader in the world is doing the same thing while also watching your stock, so you've also got to expect to see false moves, shake-outs up or down, etc. in any stock that's got the market's attention. So I would also say that having some extra knowledge about the "story" surrounding the company's business prospects is pretty important to help you gauge opportunities to act on the short-term shake-outs, profit-taking, and corrections. For instance, whether a given shake-out happens before/during/after the company's earnings announcement or weeks afterward. And for your long positions, it is a GOOD thing to make sure that there are still doubters about the stock's prospects. The stock's got to climb a "wall of worry" as it moves higher, or else there won't be any more buyers out there to enter the market and push the price higher.

Since your chart shows an uptrending stock, I would set an alert at X% above the peak of the prevous blow-off high price, then when that alert is triggered, make note of that day's volume: the greater the better. Then for some significant number of sessions after this breakout, the volume's got to again show that it increases on the stock's up days. How you choose your entry after the breakout is another discussion.

You might also set a second alert on this stock's volume, such as on 100% of its 30-day avg. daily volume. If that alert triggers before noon, you need to be ready to act, whether a short or long position. (You might be witnessing the overdue collapse of a topped-out runner whose recent decline in volume turned out to be the key clue.)

[New-born baby]

My two cents

Peanuts,
Yes, there are a few indicators missing that would help my decision. As Park mentioned support and resistance levels, I would agree. I want that PnF chart to show it.

But assuming that the PnF shows an identifiable target, decent supports, here is what I would do.

Your chart shows a breakout on lower volume. It is an ascending triangle, which is a bullish formation. It is a breakout, but a suspect one due to that single factor, imho. The touch of the upper Bollinger band suggests that this stock will pull back to support (the previous resistance highs that it touched and pulled back from 5 times on your chart). My strategy, if I liked this sector and market conditions, would be to buy the pullback to support on the next day, and watch the action. If the stock moves higher, well and good. If not, and I find myself upside down (ie, in a losing position), I would buy the nearest month's call at an in-the-money strike to ensure that I could exit this position with a profit in the next few days/weeks.

In summary, you never know if a stock will move higher or not. It appears that this one might, but the lower volume adds a measure of doubt. The only reasonable way to play any stock is with an exit strategy of some kind. Mine is the call options.

[peanuts]

Thank you Park,

The timeframe for the chart is 5 years. Each Candlestick is one month. The main resistance level is at the tips of each candlestick.

Thank you New Born Baby,

The PnF chart indicates a higher price than where the stock currently trades. The current candlestick is for this month, so there is more action left to the stock around the upper bollinger band. I'm wondering whether it will be pierced and close above that upper band for this month.

The declining volume is a concern for me (but there are still 2 weeks left in this month). There is no option chain available.

This chart shows a little more. The purple line is the performance of the S&P 500 over the same timeframe:

[New-born baby]

Oh

Peanuts,
I don't make a buy/sell decision simply on the monthly. I would like to see both the daily and weekly. Still, what I wrote earlier remains true. I buy the retest of the breakout, and my strategy remains the same. Identify a target; have protection/exit plan in place, and watch the stock work.

[spikefader]

Based on that chart alone, the stock is clearly bullish, peanuts.

[spikefader]

[Sabrina]

To New_born Baby

New_born,

I have got a question about what you said below.
"...If not, and I find myself upside down (ie, in a losing position), I would buy the nearest month's call at an in-the-money strike to ensure that I could exit this position with a profit in the next few days/weeks. ".

Is it should be sell covered call instead of buy call. If buy call and the stock drops more, are you going to lose more?

For this stock, it looks like it is ready to break out. It is hard to tell if that will be a false breakout or not. If I am going to buy my first positon after it breaks out the resistant level, I will set a very tight loss limit, just below the resistant level which becomes support level now. Just IMHO.

Sabrina

[New-born baby]

New_born,

I have got a question about what you said below.
"...If not, and I find myself upside down (ie, in a losing position), I would buy the nearest month's call at an in-the-money strike to ensure that I could exit this position with a profit in the next few days/weeks. ".

Is it should be sell covered call instead of buy call. If buy call and the stock drops more, are you going to lose more?

For this stock, it looks like it is ready to break out. It is hard to tell if that will be a false breakout or not. If I am going to buy my first positon after it breaks out the resistant level, I will set a very tight loss limit, just below the resistant level which becomes support level now. Just IMHO.

Sabrina

You are correct. I should have said, "I would sell the nearest month's call at an in-the-money strike.

Spike's right: it is clearly bullish.

[ParkTwain]

Price action in most recent time periods is bullish, BUT no volume increases in the most recent time periods, so beware. I would want more confirmatory context information (market sentiment, company fundamentals, industry stocks confirmation, etc.) before I would take a long position in this stock. An ascending triangle in the price chart is no so reliable if volume doesn't confirm.

[spikefader]

Park,

How come you don't regularly enter the stock-picking contest? Personally, I'd like to see you regularly throw your hat in the ring.