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This is a synopsis of how I'm approaching stock selection and capital accumulation.
Look for my first installment to be posted sometime on Sunday 2003-12-07.
//PT
=========================================
CHART HARVESTING Manifesto
Copyright (c) 2003 Park Twain. All rights reserved.
----------
Background
----------
Goal
----
* Achieve RAPID CAPITAL ACCUMULATION, via trades of exchange-traded (NYSE, AMEX, NASDAQ) common stocks.
* Achieve strong rate of success in choosing stocks expected to achieve capital appreciation.
* Achieve appreciation results in as short a time as possible, with lowest risk to capital possible.
Account
-------
* IRA (no Fed income tax on short-term capital gains) cash account (no margin, no shorting)
* Low, fixed-cost commission (< $20/transaction) for each buy/sell
* No more than 80% of entire risk capital invested over any calendar 30-day period
Positions
---------
* Trade round-trips span a "near-term" timeframe of 1 to 5 weeks.
* Maximum position of $10,000 per security
* 1 to 5 total simultaneous positions (1 to 3 recommended)
* Close each position on 15% gain (after all commissions). See Trading Mechanics section below.
-----------------
Trading Mechanics
-----------------
After initial buy, place stop loss at 90% of original buy position, per security.
After a position per security reaches a 15% profit (after all commissions):
* If RSI(14) at end of day is over 70, sell the entire position only if RSI measure has broken an inclining RSI measure trend line of multi-week duration.
* If RSI(14) at end of day is not over 70 and if RSI measure is above the inclining trend line of multi-week duration, set a new stop loss at 90% of the 15% profit point, and wait.
* If RSI(14) at end of day is not over 70 and if RSI measure is below the inclining trend line of multi-week duration, sell the entire position in that security.
------------------------------
Identifying candidate vehicles
------------------------------
Daily procedure
---------------
1. Examine charts of stocks making a new 52-week high price:
2. Examine charts of stocks making a new 5-year high price:
3. (For stocks making a new 52-week or 5-year high price)
Look for average daily trading volume (30 days previous) in the stock of 50,000 shares. Liquidity is the friend of the short-term trader.
4. (For stocks making a new 52-week or 5-year high price)
Look for recent (more recent the better) price/volume breakout beyond a previous multi-year high price (with previous high being further in the past the better, and with previous high being an all-time high the best).
5. (For stocks making a new 52-week high price)
Look for best combination of: a) recent (more recent the better) price/volume breakout beyond a near-term (less than 3 years) previous high price, b) next significant overhead resistance is as distant as possible, measured as a percentage of the current price (no overhead resistance is best). Add this information to the comments in the published analysis.
6. After Step 4, for each remaining candidate by ranking, discriminate in favor of candidates with RSI(14) measure of 70 +/- 3 *and* with an inclining multi-week trend line for that measure. Add this information to the comments in the published analysis.
7. After Step 5, for each remaining candidate by ranking, in the Wilder's ADX plot look for a recent (the more recent the better) significant positive "jump" in the +DI line (green line) and where the multi-week trendline for the -DI line (red line) is flat or declining. OR, in the Wilder's ADX plot look for a sustained time interval that shows a separation of the +DI line above the -DI line. Add this information to the comments in the published analysis.
8. After Step 6, for each remaining candidate by ranking, identify the slope of the best inclining (most recent multi-week interval) price trend line (with the steeper the slope the better). Add this information to the comments in the published analysis.
9. Use a rough score (A, B, C, etc.) to rank the attractiveness of a new buy position for each candidate stock. Include this item in the published analysis.
Rationale
---------
* Price/volume breakout above a previous, well-established region of resistance strongly correlates with additional gains in that stock.
* In an overall bull market, a stock that shows a breakout to an all-time high (ATH), or to a price at which there is "distant" overhead resistance (defined as >50% above the breakout pivot price), strongly correlates with strong near-term appreciation, regardless of the stock's underlying fundamental value. Thus, in this scenario the probability is increased that a 15% gain is achievable and in a relatively short timeframe.
* On any day in the markets, any stock making a new 52-week (or other time period) high price might be accomplishing a breakout. Thus, by scanning on lists of new high prices and then examining the charts of those stocks for a new price gain beyond a previous high price, those stocks breaking out can be identified.
* For stocks showing a breakout that also have an RSI(14) measure that is 70 +/- 3 and that show an inclining RSI(14) trend indicate both existing strength (momentum) and also have room to grow even stronger (to an RSI(14) measure well above 70.
* A stock that shows a breakout that also shows in its Wilder's ADX plot a marked separation between the +DI line and -DI line in the recent past, or that show a trend of diverging +DI and -DI lines, strongly correlates with additional price gains in that stock.
-----------------
Using the results
-----------------
After running the daily procedure shown above, publish a listing as follows:
CHART HARVESTING(TM)
Copyright (c) 2003 by Park Twain. All rights reserved.
END-OF-DAY LISTING
2003-12-03
-----------------------------------------------------------------------------------
Candidates from Chart Harvest(TM) from MSN Money Central Daily List of 5-Year Highs
-----------------------------------------------------------------------------------
AD // Symbol // AD Score // AD EOD price // Today's EOD price // Gain (loss) since AD // Comments
[Example]
2003-12-05 // CW // B // 83.55 // 83.55 // 0.00 % // 80.00 was prev 5Y (actually >16Y) peak in 2002-Jul.
2003-12-05 // EQT // A // 42.18 // 42.18 // 0.00 % // 41.50 was prev 5Y (actually >15Y) peak in 2003-Oct.
-------------------------------------------------------------------------------
Candidates from Chart Harvest(TM) from Barchart.com Daily List of 52-Week Highs
-------------------------------------------------------------------------------
AD // Symbol // AD Score // AD EOD price // Today's EOD price // Gain (loss) since AD // Comments [% upside to next resis]
[Example]
2003-12-05 // BAMM // A // 5.60 // 5.60 // 0.00 % // [78% >10.00]
2003-12-05 // BEXP // A // 8.22 // 8.22 // 0.00 % // [82% 15.00]
2003-12-05 // CMLS // C // 20.40 // 20.40 // 0.00 % // Approaching >3Y high of 21.50 in 2002-May. Next resis at ~55.00 in 2000-Jan.
2003-12-05 // CPRT // B // 14.23 // 14.23 // 0.00 % // [75% 25.00]
----------------------------------------------------------
Cumulative list of stock charts analyzed with A or B score
----------------------------------------------------------
5-Year Highs List
-----------------
Symbol // AD // AD EOD price // Today's EOD price // Gain (loss) // Trading days to gain 15%
[Example]
BMET // 2003-12-03 // 36.15 // 35.92 // xx // xx
BRK.A // 2003-12-03 // 84,399.98 // 84,095.00 // xx // xx
BRL // 2003-12-03 // 83.34 // 82.70 // xx // xx
BSX // 2003-12-03 // 36.14 // 35.41 // xx // xx
...
52-Week Highs List
------------------
Symbol // AD // AD EOD price // Today's EOD price // Gain (loss) // Trading days to gain 15%
[Example]
ASF // 2003-12-03 // 15.08 // 14.75 // xx // xx
BAMM // 2003-12-05 // 5.60 // 5.60 // xx // xx
BEXP // 2003-12-05 // 8.22 // 8.22 // xx // xx
BW // 2003-12-03 // 13.96 // 14.37 // xx // xx
...
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
KEY
AD = Analysis Day
EOD = End of day
AD Score =
A : Very good candidate (expect 15% gain most quickly) due to recent breakout. Establish new position ASAP.
B : Good candidate (expect 15% gain less quickly) but price is somewhat beyond most recent breakout. Establish new position when guided by stochastics trending.
C : Price approaching next significant resistance. Set a news trigger at next resistance price and wait.
D : Price well above previous breakout and no established overhead resistance to anticipate (that is, already in blue sky or too much middling resistance ahead). Must use value analysis to determine safety of new long position, which is not the purpose of this exercise.
Look for my first installment to be posted sometime on Sunday 2003-12-07.
//PT
=========================================
CHART HARVESTING Manifesto
Copyright (c) 2003 Park Twain. All rights reserved.
----------
Background
----------
Goal
----
* Achieve RAPID CAPITAL ACCUMULATION, via trades of exchange-traded (NYSE, AMEX, NASDAQ) common stocks.
* Achieve strong rate of success in choosing stocks expected to achieve capital appreciation.
* Achieve appreciation results in as short a time as possible, with lowest risk to capital possible.
Account
-------
* IRA (no Fed income tax on short-term capital gains) cash account (no margin, no shorting)
* Low, fixed-cost commission (< $20/transaction) for each buy/sell
* No more than 80% of entire risk capital invested over any calendar 30-day period
Positions
---------
* Trade round-trips span a "near-term" timeframe of 1 to 5 weeks.
* Maximum position of $10,000 per security
* 1 to 5 total simultaneous positions (1 to 3 recommended)
* Close each position on 15% gain (after all commissions). See Trading Mechanics section below.
-----------------
Trading Mechanics
-----------------
After initial buy, place stop loss at 90% of original buy position, per security.
After a position per security reaches a 15% profit (after all commissions):
* If RSI(14) at end of day is over 70, sell the entire position only if RSI measure has broken an inclining RSI measure trend line of multi-week duration.
* If RSI(14) at end of day is not over 70 and if RSI measure is above the inclining trend line of multi-week duration, set a new stop loss at 90% of the 15% profit point, and wait.
* If RSI(14) at end of day is not over 70 and if RSI measure is below the inclining trend line of multi-week duration, sell the entire position in that security.
------------------------------
Identifying candidate vehicles
------------------------------
Daily procedure
---------------
1. Examine charts of stocks making a new 52-week high price:
2. Examine charts of stocks making a new 5-year high price:
3. (For stocks making a new 52-week or 5-year high price)
Look for average daily trading volume (30 days previous) in the stock of 50,000 shares. Liquidity is the friend of the short-term trader.
4. (For stocks making a new 52-week or 5-year high price)
Look for recent (more recent the better) price/volume breakout beyond a previous multi-year high price (with previous high being further in the past the better, and with previous high being an all-time high the best).
5. (For stocks making a new 52-week high price)
Look for best combination of: a) recent (more recent the better) price/volume breakout beyond a near-term (less than 3 years) previous high price, b) next significant overhead resistance is as distant as possible, measured as a percentage of the current price (no overhead resistance is best). Add this information to the comments in the published analysis.
6. After Step 4, for each remaining candidate by ranking, discriminate in favor of candidates with RSI(14) measure of 70 +/- 3 *and* with an inclining multi-week trend line for that measure. Add this information to the comments in the published analysis.
7. After Step 5, for each remaining candidate by ranking, in the Wilder's ADX plot look for a recent (the more recent the better) significant positive "jump" in the +DI line (green line) and where the multi-week trendline for the -DI line (red line) is flat or declining. OR, in the Wilder's ADX plot look for a sustained time interval that shows a separation of the +DI line above the -DI line. Add this information to the comments in the published analysis.
8. After Step 6, for each remaining candidate by ranking, identify the slope of the best inclining (most recent multi-week interval) price trend line (with the steeper the slope the better). Add this information to the comments in the published analysis.
9. Use a rough score (A, B, C, etc.) to rank the attractiveness of a new buy position for each candidate stock. Include this item in the published analysis.
Rationale
---------
* Price/volume breakout above a previous, well-established region of resistance strongly correlates with additional gains in that stock.
* In an overall bull market, a stock that shows a breakout to an all-time high (ATH), or to a price at which there is "distant" overhead resistance (defined as >50% above the breakout pivot price), strongly correlates with strong near-term appreciation, regardless of the stock's underlying fundamental value. Thus, in this scenario the probability is increased that a 15% gain is achievable and in a relatively short timeframe.
* On any day in the markets, any stock making a new 52-week (or other time period) high price might be accomplishing a breakout. Thus, by scanning on lists of new high prices and then examining the charts of those stocks for a new price gain beyond a previous high price, those stocks breaking out can be identified.
* For stocks showing a breakout that also have an RSI(14) measure that is 70 +/- 3 and that show an inclining RSI(14) trend indicate both existing strength (momentum) and also have room to grow even stronger (to an RSI(14) measure well above 70.
* A stock that shows a breakout that also shows in its Wilder's ADX plot a marked separation between the +DI line and -DI line in the recent past, or that show a trend of diverging +DI and -DI lines, strongly correlates with additional price gains in that stock.
-----------------
Using the results
-----------------
After running the daily procedure shown above, publish a listing as follows:
CHART HARVESTING(TM)
Copyright (c) 2003 by Park Twain. All rights reserved.
END-OF-DAY LISTING
2003-12-03
-----------------------------------------------------------------------------------
Candidates from Chart Harvest(TM) from MSN Money Central Daily List of 5-Year Highs
-----------------------------------------------------------------------------------
AD // Symbol // AD Score // AD EOD price // Today's EOD price // Gain (loss) since AD // Comments
[Example]
2003-12-05 // CW // B // 83.55 // 83.55 // 0.00 % // 80.00 was prev 5Y (actually >16Y) peak in 2002-Jul.
2003-12-05 // EQT // A // 42.18 // 42.18 // 0.00 % // 41.50 was prev 5Y (actually >15Y) peak in 2003-Oct.
-------------------------------------------------------------------------------
Candidates from Chart Harvest(TM) from Barchart.com Daily List of 52-Week Highs
-------------------------------------------------------------------------------
AD // Symbol // AD Score // AD EOD price // Today's EOD price // Gain (loss) since AD // Comments [% upside to next resis]
[Example]
2003-12-05 // BAMM // A // 5.60 // 5.60 // 0.00 % // [78% >10.00]
2003-12-05 // BEXP // A // 8.22 // 8.22 // 0.00 % // [82% 15.00]
2003-12-05 // CMLS // C // 20.40 // 20.40 // 0.00 % // Approaching >3Y high of 21.50 in 2002-May. Next resis at ~55.00 in 2000-Jan.
2003-12-05 // CPRT // B // 14.23 // 14.23 // 0.00 % // [75% 25.00]
----------------------------------------------------------
Cumulative list of stock charts analyzed with A or B score
----------------------------------------------------------
5-Year Highs List
-----------------
Symbol // AD // AD EOD price // Today's EOD price // Gain (loss) // Trading days to gain 15%
[Example]
BMET // 2003-12-03 // 36.15 // 35.92 // xx // xx
BRK.A // 2003-12-03 // 84,399.98 // 84,095.00 // xx // xx
BRL // 2003-12-03 // 83.34 // 82.70 // xx // xx
BSX // 2003-12-03 // 36.14 // 35.41 // xx // xx
...
52-Week Highs List
------------------
Symbol // AD // AD EOD price // Today's EOD price // Gain (loss) // Trading days to gain 15%
[Example]
ASF // 2003-12-03 // 15.08 // 14.75 // xx // xx
BAMM // 2003-12-05 // 5.60 // 5.60 // xx // xx
BEXP // 2003-12-05 // 8.22 // 8.22 // xx // xx
BW // 2003-12-03 // 13.96 // 14.37 // xx // xx
...
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
KEY
AD = Analysis Day
EOD = End of day
AD Score =
A : Very good candidate (expect 15% gain most quickly) due to recent breakout. Establish new position ASAP.
B : Good candidate (expect 15% gain less quickly) but price is somewhat beyond most recent breakout. Establish new position when guided by stochastics trending.
C : Price approaching next significant resistance. Set a news trigger at next resistance price and wait.
D : Price well above previous breakout and no established overhead resistance to anticipate (that is, already in blue sky or too much middling resistance ahead). Must use value analysis to determine safety of new long position, which is not the purpose of this exercise.
, much less to reach blue sky. So as long as there are other stocks out there that have reached the threshold of a blue sky breakout, I would not include this stock on any of my watch lists.
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