Spike's Scientific Stock Analysis

[New-born baby]

Aci

Sure, yer welcome.

Any reason you didn't take profit on the stock after the upper channel tag?

The reason I didn't sell was that I had to be away from the computer for several days, and looks like I will continue to be in and out for the next month or more. Too busy. Sure Would have been nice to get out of the way from this fall, sell the naked calls, and then re-enter the stock today and cover the calls. Energy is taking a breather, but for how long, I don't know.
Thank you for the posts. I appreciate it very much.

[Gatorman]

Was wondering where you got off to

The reason I didn't sell was that I had to be away from the computer for several days, and looks like I will continue to be in and out for the next month or more. Too busy. Sure Would have been nice to get out of the way from this fall, sell the naked calls, and then re-enter the stock today and cover the calls. Energy is taking a breather, but for how long, I don't know.

Thank you for the posts. I appreciate it very much.

NBB
I, for one, have been missing your posts. Will be glad when you finish up with whatever it is that is taking you away from us and get back to your regular posting schedule.

[spikefader]

Spike,
Being the deep thinker that you are , answer me this. What's the difference between averaging down and buying on a pullback assuming that you already own the stock purchased at a higher price ?

billyjoe

Hey billyjoe. You've prompted some deep thoughts indeed I'll invite others to answer your question too, but my attempt is this:

First I want to clarify your question billyjoe. Are you asking for the difference between averaging down and averaging up (adding to a winner), OR are you asking the difference between averaging down multiple times and adding once to a loser on a pullback?

I've read that averaging down is the methodology of investing a fixed dollar amount at regular intervals into a stock position no matter where the stock price happens to be on a technical basis.

But IMO I don't think it has to be that organized or systematic, and that it can be less frequent and more discretionary. Even if you add once as price falls from your entry then you've averaged down - IMO anyway. So to answer you question, there's no difference save for the frequency and perhaps value of the 'buys'.

While we're on the topic, pyramiding or averaging up is a really interesting concept. Please feel free to post and contribute if you're able to give example/s where you've added to a winner. How well did it work?

I've been 'adding' to my winning YM positions lately in an attempt to pyramid/leverage the swing move I'm trying to catch. It sure is a tricky thing to do. It's a battle between wanting that leveraged swing to work, and locking in profits, of avoiding a situation where the 2nd entry erodes the profit from the 1st (or worse take a loss on the average). Which is why that add has to have a tight stop, and it has to be timed perfectly.

Am I nuts? Is adding to a winner worth it? Am I just going to frustrate myself? Well, I think that if I'm patient and keep at it, I'll eventually nail a good strong run and nail a big number. And it will make up for all the little numbers and frustration.

The more I think about it, the more I believe that by strategically leveraging the times you are 'right' about the trend is whole lot smarter than adding to a loser and hoping you're eventually right about the long-term trend. The first is acting on proven reality; the second acting on hope.

See, by adding only to winners method forces the position to prove it is correct before you add more capital. The add to losers method doesn't force the position to prove anything; it's just a money pit with no guarantees at all. It's unconditional love is what it is. And that's great in real life but not in trading. If you keep on loving that average down position, despite it not loving you back, keep investing in it, keep feeding the fire, keep throwing money after bad, you are leveraging nothing. In fact, YOU are the one being leveraged. You're being worked over; you're being mugged; you're being raped. OK, so I'm getting melodramatic hehe But you get my point by now: You're suffering pain for no benefit to the position except for the 'sought after' phenomenon of lowering your average price. But a reduced average price on a stock that's, for a worst case scenario, going to zero and never coming back to your average isn't something we want. I want to eliminate THAT possibility completely

And on the flip side, adding to winners is very conditional love of your position. You'll only feed the animal if it acts right. It does something good and it gets more cash. Do something bad and it's taken off the table. Capital preservation and getting out when you're proven wrong/not proven right is at the core of this method. And if you've read any of Jesse Livermore you may have some appreciation for the 'not proven right' comment there. Lots of interesting stuff in Jesse's "Reminiscences Of A Stock Operator".

So to finish up, when adding to winners, you're in the hunt for a dog that'll do all the tricks in the book, and be your best friend, be your guide dog in the dark forest. If the dog acts right it can be trained to lead the blind and take them places, and steer them away from danger. So you want to find a stock that's going to be your blind dog.

Adding to winners is fluid and flexible and, by design, is a great way to preserve capital while opening the leverage door when you're finally right about the trend, and you nail the entry and adds, then you will get your handsome reward. And that's what I'll be trying to do with Runner's drill thread. I'll be limited risk on the downside and building into strength. And that's what I want to do with this current YM position.

Make 'em pretty folks.

[spikefader]

NBB
I, for one, have been missing your posts. Will be glad when you finish up with whatever it is that is taking you away from us and get back to your regular posting schedule.

Here Here! May God rain the blessin's down on ya brother.

[New-born baby]

Thanks!

NBB
I, for one, have been missing your posts. Will be glad when you finish up with whatever it is that is taking you away from us and get back to your regular posting schedule.

Gator and Spike,
Thanks for the very kind words of encouragement.

[Runner]

Hey billyjoe. You've prompted some deep thoughts indeed I'll invite others to answer your question too, but my attempt is this:

First I want to clarify your question billyjoe. Are you asking for the difference between averaging down and averaging up (adding to a winner), OR are you asking the difference between averaging down multiple times and adding once to a loser on a pullback?

I've read that averaging down is the methodology of investing a fixed dollar amount at regular intervals into a stock position no matter where the stock price happens to be on a technical basis.

But IMO I don't think it has to be that organized or systematic, and that it can be less frequent and more discretionary. Even if you add once as price falls from your entry then you've averaged down - IMO anyway. So to answer you question, there's no difference save for the frequency and perhaps value of the 'buys'.

While we're on the topic, pyramiding or averaging up is a really interesting concept. Please feel free to post and contribute if you're able to give example/s where you've added to a winner. How well did it work?

I've been 'adding' to my winning YM positions lately in an attempt to pyramid/leverage the swing move I'm trying to catch. It sure is a tricky thing to do. It's a battle between wanting that leveraged swing to work, and locking in profits, of avoiding a situation where the 2nd entry erodes the profit from the 1st (or worse take a loss on the average). Which is why that add has to have a tight stop, and it has to be timed perfectly.

Am I nuts? Is adding to a winner worth it? Am I just going to frustrate myself? Well, I think that if I'm patient and keep at it, I'll eventually nail a good strong run and nail a big number. And it will make up for all the little numbers and frustration.

The more I think about it, the more I believe that by strategically leveraging the times you are 'right' about the trend is whole lot smarter than adding to a loser and hoping you're eventually right about the long-term trend. The first is acting on proven reality; the second acting on hope.

See, by adding only to winners method forces the position to prove it is correct before you add more capital. The add to losers method doesn't force the position to prove anything; it's just a money pit with no guarantees at all. It's unconditional love is what it is. And that's great in real life but not in trading. If you keep on loving that average down position, despite it not loving you back, keep investing in it, keep feeding the fire, keep throwing money after bad, you are leveraging nothing. In fact, YOU are the one being leveraged. You're being worked over; you're being mugged; you're being raped. OK, so I'm getting melodramatic hehe But you get my point by now: You're suffering pain for no benefit to the position except for the 'sought after' phenomenon of lowering your average price. But a reduced average price on a stock that's, for a worst case scenario, going to zero and never coming back to your average isn't something we want. I want to eliminate THAT possibility completely

And on the flip side, adding to winners is very conditional love of your position. You'll only feed the animal if it acts right. It does something good and it gets more cash. Do something bad and it's taken off the table. Capital preservation and getting out when you're proven wrong/not proven right is at the core of this method. And if you've read any of Jesse Livermore you may have some appreciation for the 'not proven right' comment there. Lots of interesting stuff in Jesse's "Reminiscences Of A Stock Operator".

So to finish up, when adding to winners, you're in the hunt for a dog that'll do all the tricks in the book, and be your best friend, be your guide dog in the dark forest. If the dog acts right it can be trained to lead the blind and take them places, and steer them away from danger. So you want to find a stock that's going to be your blind dog.

Adding to winners is fluid and flexible and, by design, is a great way to preserve capital while opening the leverage door when you're finally right about the trend, and you nail the entry and adds, then you will get your handsome reward. And that's what I'll be trying to do with Runner's drill thread. I'll be limited risk on the downside and building into strength. And that's what I want to do with this current YM position.

Make 'em pretty folks.

I think Spike did an awesome job in answering Billyjoe’s question. Now here is just a thing I’ve noticed at least from my perspective. I think if you’re a longer-term holder you should wait until your position is in profit before you consider buying some more. I think many add to their positions to fast thus not allowing the stock to prove it is a winner. Now you can get creative and say when XYZ is @ 7% I’ll stalk to add to my position. Then it could be wise to handle each position as a separate trade with different stops. Once you’re up on the stock you surely do not want to give back all you gains and so placement of your stops need to be carefully selected. Now a longer-term investor will most likely allow some wiggle room and protective stops need to be out of the noise.

Now once a nice profit has taken place I think buying on a pullback is wise and before you pull the trigger for your next order know where you’ll bail if it turns against you. I think we all wish to capture huge gains and trailing your positions to me makes good sense. I think many including myself bail out to soon and we miss the true run of the stock. We find winners but we do not allow enough time to pass for it to prove that it’s a power horse.

I hope what I’ve typed here makes a little sense but remember weather you day trade or hold for years it is your exit that will determine how your portfolio looks..

[Thomrich]

Greetings,

This is an interesting topic,and top shelf as always on this board.

My recent interest is in taking dual positions on a priced trade of any type.

Logically,taken to its extreme,which may be the point of diminishing returns,if a position is not rewarding,would not an opposite play of an increased value be valid.It reminds me of the Martingale gambling tecnique used in roulette play.

$1 bet and lost,next bet $2 if won even,if lost $4 bet,and so on.Concept is that a winning streak will be captured hopefully before bets get too big.With skills like Spikes a winning streak could be capitalized on much more than the poor odds of roulette.

I will be updating,likely in a new thread the concept,using only a few stocks that are somewhat predictable.I like the monthly distribution issues for this idea.I have a hunch this is the mechanism that makes them sell off sometimes 10 times the distribution amount on ex dates.

cordially Tom

[billyjoe]

Spike and Runner,
Thanks for both of your comments something new to think about is always helpful. I guess my original thought was about adding once to a loser on pullback. Spike , you're right , that is unconditional love of a stock , very dangerous ("but I'm sure it's going to be a great stock ,once it goes up"). Especially if it initially advances followed by a dip before profits are taken.

In the last 2 or 3 years my best gains have come by multiple purchases of AH and BMHC. Sometimes averaging up, others with several purchases and sales. Finally went bad on the 5th BMHC purchase after starting at 29 , but at that point was using a smaller % of the portfolio as Mr.Market does in diversifying making the total loss not very significant in the grand total. Another observation , the longer a stock lingers after purchase without upward movement, the odds diminish that the trade will work to your favor. Thanks again. Learning a little more each day.

billyjoe

[IIC]

My Grandpa always said that a swift kick in the butt on occasion was good for you.

My Grandpa always said..."Just because they are relatives...Doesn't mean you have to like 'em"...IIC

[IIC]

Tom,
HANS impressive huh! It's booming through a major weekly channel. Big fat buy signal yesterday on the 20-day PSAR MFI system. Bubble?! But where to short it? Intraday it's looking kinda triple toppish this morning, but the action since isn't what I'd look for in a short....patience I think.

If you noticed...HANS was # 1 on the IIC 100 last weekend...Of course, BOOM was # 2...But it is a mechanical scan anyway.

I bot HANS last year at about 15...sold about 25...Never went back

[spikefader]

MESA is a great looking chart! With nice 38% profit target for the triangle.

MEA's and SCIFO's MESA! Bears for this one have been in a mess-a alrighty

[spikefader]

ZICA Wow, he's brave....

Hope your boss ain't holding this mess any more.

[skiracer]

I was thinking about the concept of adding to a position and I'm not sure if it's worthwhile. One thing for certain is that adding to a losing position, especially if it is past your loss exit point, is a losing plan and shouldn't be done except if you're holding some blue chip stock like IBM or KO etc. in a retirement plan forever then it makes sense to buy on the dips while your holding over the long term.
My logic on the other point is that if you bought 1000 shares @ $10 and it went to $12 you would have $10000 on the line an at risk with $2000 in paper profit on the 1000 shares.
If at $12 you decided to buy another 1000 shares you would now have 2000 shares and $22000 on the line an at risk with a 1 point gain ( the average between 12 and 10 = 11 or 1 point) times 2000 shares = $2000 in paper profit. So the same gain but more at risk and less % of gain with the additional trade at $12. The 1st position would be $2000/$10000 = 20% gain vs. the 2nd position at $2000/$22000 = 9 % gain.
If it were to go to $13 and you had just the original position of 1000 shares at $10 = $10000 you would have a 3 point gain on 1000 shares or $3000 profit for a gain of 30 %.
With the $22000 and 2000 shares you would have a 2 point gain on 2000 shares or $4000 profit for a gain of 18 % but you have had to put up more that twice as much to risk to gain less % on the trade and the stock would have to continue trending up.
Say the stock went to 16. On the original 1000 shares at $10 you would have 6 points x1000 shares = $6000 gain on $10000 or 60%.
On the 2000 shares at $22000 you would have 5 points x 2000 shares = $10000 gain on $22000 = 45.54 %. Still not as attractive to me as the original 1000 shares at $10 with $10000 put up at risk as far as % of gain but you do get an additional $4000 in profit for putting up the additional $12000 to buy the 2nd lot of 1000 shares.
I guess it just boils down to what you're looking for. Of course all of this depends on the supposition that the stock will continue to trend up. If it goes the opposite direction the losses will compound that much more with the larger amount at risk.

[rjesag]

Hi

first i want to introduce my self; im from south america, i live in s. america. (english is not my first so pls. excuse certain mistakes) im less than 25. i ´ve been investing since my 20´s, i have read this forum and i think you know a lot and take this in a pro sense; i used to invest based purely in fundamental, never used stop loss, had huge losses.
now im trying to use tech mostly to profit from options trading but it´s difficult. i have to say that i try to be objective in my decissions but trigger is kind of instinct, a feeling that im entering ok, i want to ask you what is the kind of reasoning you use and if you have some rec´s for me?
i´had done little paper trade, it was +-, i trade real mostly

[spikefader]

Add to YM at 10684. Average now 10626. 4 point stop on this add.