ParkTwain's Parlor

[IIC]

Hi there! I've eaten at the OPH in the Green Valley Station casino and at one in the west side of LV. Yeah, I think they do a pretty good job on their omelets, which can be pretty large.

Park...Are you sure you weren't at the bar???...It is the Green Valley Ranch.

Yes...I know Station owns it...Just giving you a hard time...Doug(IIC)

[Runner]

Park interesting list you have. I placed your list into my database and coded a standard 14-day RSI and put into a Delta Relative format. Here is what I mean by the Delta. I put the following parameters to the chart.

Stocks 14RSI
Lists 14RSI
Difference of stocks RSI Vs Lists RSI this compares stocks RSI with list.
I don’t have the code for ADX yet.
I then added an advance decline line to your list and it looks, as 6/23/06 was the bottom point for your list. Value of AD line was 74 with current=96. List current RSI=63.17 Was 47.05 on 6/23/06.
Note RSI of list is currently making a 5-month high. Last highest RSI was on 1/27/06 at 65.33

Your stock selection looks awesome!!!

[Runner]

I like OCN on a possible pullback. This stock meets my criteria. I see it had triggered on 8/2/6 around 14.05. Sector action not looking to hot though..

[ParkTwain]

Dude! Have you looked at my MOMO posts? I am averaging 20% gain per trade, and each position has been held for about a month, some much less, and a few a little more.

Good luck with this screen, but be careful of Yahoo! I once bought a stock, GRRF, because Yahoo! posted great looking numbers for the stock. But when I did some further research on the company, I found out that Yahoo! was wrong.

My trading account was up just under 100% for 2005, so I have confidence at this point in my methodology.

Also, notice that none of the parameters to my scan use Yahoo fundamental data.

[Runner]

[ParkTwain]

Well, thanks, but remember I'm not claiming any credit for performance before I posted the picks. I wouldn't have picked those stocks if they hadn't already shown strength up to that point (last Sunday)! The issue is how they do going forward from last Sunday, right?

[ParkTwain]

I like OCN on a possible pullback. This stock meets my criteria. I see it had triggered on 8/2/6 around 14.05. Sector action not looking to hot though..

Yeah, I shoulda bought OCN 2 weeks ago. I thought it might be a slow mover, but it has been steady since then. When it moved out of that little base in mid-July, kaplowww! I shoulda been there ...

[ParkTwain]

Park...Are you sure you weren't at the bar???...It is the Green Valley Ranch.

Yes...I know Station owns it...Just giving you a hard time...Doug(IIC)

Some people call it "station" because Green Valley Ranch is also the name of a development nearby.

Is this what it's like to have a conversation with you, for pete's sake?

[IIC]

Some people call it "station" because Green Valley Ranch is also the name of a development nearby.

Is this what it's like to have a conversation with you, for pete's sake?

As a matter of fact it is Park...Why is everybody around here so defensive or on edge lately anyway???...Mr. Nitpickey

PS...Actually nobody needs to answer that ???...I know why it is...It is because people are not doing well in the market...Heck, I'm not doing well overall this year either...And yes...I get a little moody sometimes over it too...But overall, I'm still the same guy...Bad times are temporary...I've been thru bad times many times...all part of the game...Get over it...No problem...It always gets better for those that never quit.

[ParkTwain]

List of reversals at Kirk Report

http://www.thekirkreport.com/

ALVR, ATHR
BRKS, BRCM, BWNG
CA
DKS
EZEM
F
ISE
JDSU
KONG
MNRO, MW
NRMX, NTLI
ODP
QCOM
RSH
SPWR, STP
TLB, TOMO
USMO
VRNT

[Rob]

Nice-looking charts on those, Park.

[ParkTwain]

Very good! You are really sharp with da graphics.

After eyeballing all charts at The KirkReport page, it seems that in each case the PPS has moved up to meet a downtrending 50DMA. That's a pretty coarse criterion, but it's obviously catching a lot of stocks.

As Mr. Kirk posted this morning:

//
The bulls can't blame the headlines which have been falling right into place for them all this week. First, we have Middle East peace and then inflation headlines that have taken the fear out of the market. Combine that we a group of traders who've been religiously shorting and selling into strength, and it is difficult to imagine a better script to play out for the bulls as the sheer majority remain wrongly positioned (including yours truly). While we should begin to see more option expiration related activity today (i.e. more volatility), the bulls certainly have the ball. It's been awhile since that we've seen that.
//

[ParkTwain]

ADX and its +DI and -DI components vs. RSI

From a couple of e-mails I sent recently:

//
Did you see my post where I go on about paying attention to the absolute reading (such as about <10.0) of the Negative Directional Indicator (-DI) measure? I really do think it is a key to having some success with the candidate stocks that my approach finds. But I certainly don't know how to scan for that particular measure, as it is a component of another measure.

As discussed here:

http://www.stockcharts.com/education/IndicatorAnalysis/indic_ADX.html

[[
ADX is derived from two other indicators, also developed by Wilder, called the Positive Directional Indicator (sometimes written +DI) and the Negative Directional Indicator (-DI).

When the ADX Indicator is selected, SharpCharts plots the Positive Directional Indicator (+DI), Negative Directional Indicator (-DI) and Average Directional Index (ADX). With the Red, White and Green color scheme on SharpCharts, ADX is the thick black line with less fluctuation, +DI is green and -DI is red. +DI measures the force of the up moves and -DI measures the force of the down moves over a set period. The default setting is 14 periods, but users are encouraged to modify these settings according to their personal preferences.

In its most basic form, buy and sell signals can be generated by +DI/-DI crosses. A buy signal occurs when +DI moves above -DI and a sell signal when -DI moves above the +DI. Be careful, though; when a security is in a trading range, this system may produce many whipsaws. As with most technical indicators, +DI/-DI crosses should be used in conjunction with other aspects of technical analysis.

ADX combines +DI with -DI and then smooths the data with a moving average to provide a measurement of trend strength. Because it uses both +DI and -DI, ADX does not offer any indication of trend direction, just strength. Generally, readings above 40 indicate a strong trend and readings below 20 a weak trend. To catch a trend in its early stages, you might look for stocks with ADX that advances above 20. Conversely, an ADX decline from above 40 might signal that the current trend is weakening and a trading range may develop.
]]

A particular data series in a particular stock chart really turned me on to what to look for with this particular indicator. Go to stockcharts.com and open a daily chart for the stock RIV for only the dates April 1, 2004 to April 1, 2005. Add the ADX(14) plot to the display. Turn your eye to the interval of about July 1, 2004 to about Feb 1, 2005. Notice the pattern that the +DI and -DI plots make relative to each other over that interval. Then also notice how the interplay of those two plots relates to what the pps was doing at the same time.

This was a situation where a casino company in Las Vegas that owns some land was receiving some publicity about what it might do to either sell the company or develop its land holdings found right on the Las Vegas Strip. There had been several publicized land sales to/from casino companies on that part (the "north Strip") of the Strip. So over this timeframe, traders were bidding up the shares in anticipation of some decision by the company to realize its (apparently) latent value.

The key thing to notice, for me, in this section of the chart is how the -DI plot was ALWAYS STAYING BELOW the +DI plot *AND* the -DI plot was LESS VOLATILE than the +DI plot. This was telling me that (1) there was weak selling pressure present during the timeframe, (2) on the other hand, the buying pressure was coming and going in waves of significant amplitude, and (3) the rise in the pps was obviously very sensitive to the presence or absence of BUYERS ONLY because there were such few sellers. When the pps stalled during that timeframe, it was due only to a "buyer's strike" (that is, an absence of buyers) for a few days at a time. And the absence of any strong selling pressure prevented the pps from declining much at all when the buyers happened to be taking a rest.

So from this I have learned to watch for a downtrending and low-valued -DI measure (such as <12 or even <10) as one of the key differentiators among any set of attractive candidate stocks that are making new ATHs. The longer that -DI stays that low, and especially if it is not very volatile while it is staying that low, the better (in this case, more bullish) the pps is going to behave. Because under my methodology this -DI scenario is being combined with a stock making a new ATH and therefore having no technical resistance, you have an opportunity to make that 10% to 15% or more in an unusually short timeframe compared to other uptrending stocks whose pps is found in other positions relative to their own historical support and resistance levels. I have seen so many charts where an uptrending pps achieves an INCREASINGLY POSITIVE SLOPE after the pps passes the previous ATH on a breakout with above-average volume.
//

E-mail #2:

//
Well, I used to be primarily a RSI indicator kind of guy. (I mostly ignore moving averages and stochastics and MACD and would rather identify pps movements between and beyond resistance and support areas on the stock's chart.) Before, I would simply watch for ATH breakouts on good volume and accompanied by an uptrending RSI in the 60 to 70 range. This scenario indicates to me that I am watching an already relatively strong stock (RSI >60 and rising) but also that its RSI has a good bit of room to rise further (>80) if it really heats up in the future due to intensifying momentum for that stock in the market. When this is the case for a stock that just surpassed its ATH and thus no longer has any technical resistance, it can be a thing of beauty to behold. I've seen it many, many times and have profited from it at least "several" times! This approach has generally served me pretty well.

Now I realize that I need to watch the relationship between the +DI and -DI plots to give me some CONTEXT in interpreting the RSI behavior, even for a relatively strong stock (i.e., pps is generally uptrending).

In the RIV chart that I described to you, you might have seen that the RSI can dip (which of course is a byproduct of some amount of dip in the pps) only due to a WANING OF BUYING INTENSITY but with NO INCREASE WHATSOEVER IN SELLING INTENSITY. That is, a decline in the +DI BY ITSELF can be associated with a pps dip and thus with a dip in the RSI, but the context of that RSI dip is a lot less dangerous to my long position than if the -DI were also to show an increase.

This is a great situation to recognize because it would tell me to stay with that long position through the dip in pps (even if that dip violated some other profit-taking trigger). Also, if I see that this situation has happened in the stock's more or less recent past, but at a time before the ATH breakout happened, it would give me some evidence of how that stock's pps behaved under that combination of circumstances, and thereby offering me either greater or lesser confidence in how that stock might behave going forward through the probable breakout and beyond.

I think that the discussion at stockcharts.com and elsewhere in the TA literature about using an ADX +DI/-DI crossover as a buy or sell trigger is marginal advice, maybe only relevant for the nimblest of momentum and reversal traders. Rather, I would say you need to be aware of the absolute magnitude and trending of the -DI plot to be able to interpret the latent strength in a stock's trend, even through a near-term pps dip.
//

Regards,

//PT

P.S. Take a look at the OCN daily chart (use the same plots described above for the RIV chart example) since about April 1, 2006 though the present. You can see a very similar +DI and -DI interplay taking place, AND you are also seeing a stock in a very strong uptrend!

[Rob]

Park, that is excellent stuff. Thanks for the write-up. I've recently been paying more attention to the DMIs, and have noted some of the very things you mention.

[ParkTwain]

My DDD has no volatility left

What's it gonna do next?