ParkTwain's Parlor

[JMS]

Adbe

Park,

Does Adobe fit your criteria? It looks like it is ready break out to an ATH.

[ParkTwain]

Hi there,

Yahoo's "max" chart for ADBE shows the ATH occurring in late year 2000, but I can't tell very specifically what that high was. I can use stockchart.com's beta charting tool to view a specific range of data. (Their regular site with free access goes back only 3 years of data.)

http://stockcharts.com/h-sc/ui

Using a 2000 to 2003 timeframe, I can see that the high was actually a double top that occurred in Oct and Nov 1999 at 42.50. Today's close for ADBE is 39.50.

http://stockcharts.com/def/servlet/SC.web?c=ADBE,uu[h,a]daolyyay[dd][pb50!b200][vc60][iUb14!Ll14]&pref=G
(paste this entire URL into your browser's URL field)

As of today, in addition to noticing an uptrending RSI that is between 65 and 70 (perfect!), the few momentum-oriented technical indicators that I watch via stockcharts.com (acc/distr., Chaikin Money Flow, and Wilder ADX) are right now corroborating a nice setup situation for this stock. The breaching of the ATH on the upside will be the culmination of the setup. I prefer for the RSI to be below 70 if possible when the pps is just reaching (that is, a % or two below) the ATH pps. But that preference isn't necessary for me to act.

If you trade using an online broker (you should), use their facilities to set a price alert for ADBE at 92% to 95% of that previous ATH. When that alert triggers, if the same momentum technicals still look favorable at that time, you can (1) go long at around 5% below the previous ATH, or (2) begin watching it and its momentum technicals further while also seting a new alert at 101% of the previous ATH so that you are alerted for the actual ATH breakout.

NOTE: A stock that is strengthening right now like ADBE is can "pop" above that previous ATH at any time (on high volume, preferably), especially after it has drawn within 5% or so of that point. So you might prefer to start watching these kinds of candidates at a pps of 90% or so of the previous ATH instead of my usual 95%.

If the overall market, including (for the case of ADBE) the market for large-cap tech stocks, is acting strong when the first alert (95% of the previous ATH) triggers, it might be OK to open a partial long position in ADBE. However, you must also keep watching the stock for whether it fails (over the course of a timeframe that you must decide on and be comfortable with) to breakout. After the alert on the actual ATH breakout triggers, you can add to your position.

In a market environment when you feel you have a reason to be more conservative about adding a new long position (even for ATH breakouts), you should certainly wait to buy until AFTER the ATH breakout has occurred, BUT make sure that you make the buy within 105% of that previous ATH price.

After the breakout has happened and after only a few % of gain, for some stocks there is a retracement to (or near) the previous point (or a nearby range) of the previous ATH resistance. You want to be watching to ensure that, after your buy, this point starts serving as actual SUPPORT for your position. If it does not, then you must exit the position. Don't accept more than a 7% or so (that is, be aware of the stock's recent volatility) loss in the total position, including the buy after the ATH breakout. By being a little more aggressive and buying a partial position at a price under the ATH, you are giving yourself a little more wiggle room as to what your stop loss point (whether mental or actually placed as an order) should be.

However, I have found that for stocks with these setup characteristics, the number that fall back quickly after the ATH breakout is relatively low. That's the "setup formula" that I've been looking for all these years.

[JMS]

Adbe

Park,

Wow!! I wasn't expecting such a comprehensive answer to my question.

Thanks alot.

I will be watching ADBE closely and will set some alerts in my Ameritrade account.

[ParkTwain]

OXPS popping up again, new 52-wk and all-time high.

[ParkTwain]

New ATH breakout candidates list for a long position based on 1/13/06 new highs list:

ANX, AXE
BRY
CWEI
HYDL
KEYS
MYE
STXS
XTXI
WHQ

Most of these are oil exploration or oil services companies.

[IIC]

What's this world coming to??? First 2 of the stocks on my checkout list this morn DRQ and QSII show up on Steck's lists...Then ADBE shows up on PT's list...Whoa...Am I getting good...Or are they????...LOL

[ParkTwain]

Was checking out the "Tag and Bag" pages at Clearstation.com. Under the "Oil and Gas Operations" industry, out of the top 59 stocks listed (sorted by RS), only 13 stocks are more than 10% below their respective 52-wk highs (and several of those 13 aren't significant because they are thinly traded). This whole sector is obviously about to skyrocket again due to international tensions over Iran.

http://clearstation.etrade.com/cgi-bin/Itechnicals?TB=1&Industry=71&IndustryName=Oil%2b%26%2bGas%2bOperations&Ordering=RSRATE&SortDir=-1&hidepenny=TRUE

[IIC]

Was checking out the "Tag and Bag" pages at Clearstation.com. Under the "Oil and Gas Operations" industry, out of the top 59 stocks listed (sorted by RS), only 13 stocks are more than 10% below their respective 52-wk highs. This whole sector is obviously about to skyrocket again due to international tensions over Iran.

http://clearstation.etrade.com/cgi-b...hidepenny=TRUE

I don't know about the tensions...But looking at the charts...I believe you are right...Doug

[ParkTwain]

New to my bookshelf this week:

Stock Trader's Almanac 2006
Complete Guide to Market Breadth Indicators, by Gregory L. Morris
The Professional Commodity Trader, by Stanley Kroll
Ten Years in Wall Street, by Wm. Worthington Fowler (1870)
Street Smarts (High Probability Short Term Trading Strategies), by Connors and Raschke

Currently reading:

Market Wizards, by Jack Schwager (GREAT STUFF)
Battle for Investment Survival, by G.M. Loeb (1957)

I just finished Schwager's chapter (interview) with Larry Hite. Check out these quotes:

"I have noticed that everyone who has ever told me that the markets are efficient is poor."

"What makes this business so fabulous is that, while you may not know what will happen tomorrow, you can have a very good idea what will happen over the long run."

"The truth is that, while you can't quantify reward, you can quantify risk."

"I don't trade for excitement, I trade to win."

"If you do not manage the risk, eventually they will carry you out."

"If you argue with the market, you will lose."

"Most people think that a losing trade was a bad bet. You can lose money even on a good bet. If the odds on a bet are 50/50 and the payoff is $2 versus a $1 risk, that is a good bet even if you lose."

(in response to a question about backtesting trading methods) "It is incredible how rich you can get by not being perfect. We are not looking for the optimum method; we are looking for the hardiest method."

"In trading, you can define three categories of players: the trade, the floor, and the speculator. The trade has the best product knowledge and the best ways of getting out of positions. For example, if they are caught in a bad position in the futures market, they can offset their risk in the cash market. The floor has the advantage of speed. You can never be faster than the floor. While the speculator doesn't have the product knowledge or the speed, he does have the advantage of not having to play. The speculator can choose to only bet when the odds are in his favor. That is an important positional advantage."

[ParkTwain]

In Schwager's Market Wizards, here are some great quotes from Paul Tudor Jones:

"When you are trading size, you have to get out when the market lets you out, not when you want to get out."

"When you get a range expansion, the market is sending you a very loud, clear signal that the market is getting ready to move in the direction of that expansion."

"One of the things that Tullis (famous cotton market trader, New Orleans) taught me was the importance of time. When I trade, I don't just use a price stop, I also use a time stop. If I think a market should break, and it doesn't, I will often get out even if I am not losing any money."

[ParkTwain]

In Schwager's Market Wizards, here are some quotes from Bruce Kovner (currency trader):

"The first rule of trading--there are probably many first rules--is don't get caught in a situation in which you can lose a great deal of money for reasons you don't understand."

"Tight congestions in which a breakout occurs for reasons that nobody understands are usually good risk/reward trades. ... If everybody believes there is no reason for corn to break out, and it suddenly does, the chances that there is an important underlying cause are much greater."

"The more a price pattern is observed by speculators, the more prone you are to have false signals. The more a market is the product of nonspeculative activity, the greater the significance of technical breakouts. ... The general rule is: The less observed, the better the trade."

"The position size on a trade is determined by the stop, and the stop is determined on a technical basis."

[ParkTwain]

In today's news re: Iran:

//
"The Iranian nuclear issue is driving the market. Traders are short-covering because they know if something happens in Iran the market would be in confusion," said Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures in Tokyo. "The issue poses a threat of supply disruption in a major oil-producing country."

Russia and China on Monday joined the U.S. and its European allies in demanding that Iran fully abandon its nuclear program. The powers called for an emergency board meeting of the International Atomic Energy Agency on Feb. 2-3 to discuss the issue.
//

Turmoil manifest in spot oil prices could continue thorugh Feb. 2-3. Fasten your seat belts!

[ParkTwain]

Buying some ANX this morning.

[grebnet]

Anx

Can I ask why you are buying ANX ?? Thanks

[ParkTwain]

The chart. Recent breakout above 4.00/sh, but retracement yesterday and today. Tried to get the dip this morning, which would price it within 5% above that pivot. Early morning dip was quickly recovered (candlestick "hammer" I believe it's called), indicating strength, probable end of dip. I had identified this one several days ago in a previous post. All-time high (about 5.00/sh) was made very early in the stock's life (Jan 2001) and on low volume.