Spike's Scientific Stock Analysis

[spikefader]

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.

Ski, that sure is a long way to say that an averaged position won't return the same % profit as your first entry. That's a basic premise of averaging UP and no-one can dispute that. But two things:

1. In your example, +10k profit outcome is 4k more profit than your +6k outcome. And from a percentage basis, it's 65% BETTER than 6k! So in your example, you've successfully leveraged the performance of your 'rightness' by 65%. That's a pretty good ROI there.

2. I don't think you can measure the worthiness of this by just looking at % profit from entry nor the ROI. It's deeper than that and embodies the psychological aspects.

You are leveraging the fact that you are RIGHT about the trend. You are demanding that the position PROVE it's worth you investing in it. You want to see measurable success before you put your money down.

And by the way, I think it's a whole lot more clever than using a buy stop to buy when it first reaches in your case $12 a share. That would be too aggressive for me. The adds have to be clever and you may well wait for a move to 13 then a fall 12 where you buy into weakness, according to your system rules (in my case a channel long or perhaps even a later turn up in the right circumstances). On top of that, the add HAS to be very tightly limited to avoid eroding your profit of the 1st position. In other words, stalk a perfect add, with maybe 1 or 2% risk on the entry.

Without question, in a choppy market this method will frustrate and stop you out more often than you'll be successful. But it's never ONLY about % win rate. I've already covered this ground in this thread, highlighting how one can have a very low % win rate, and yet be very respectably profitable.

And I think averaging up is a very good example of how one might do that - in a way that, while very tricky and frustrating, leverages the times when you are 100% right about a move, and onboard and leveraging the peformance by throwing more wood on the fire. The more wood, the bigger the fire. You just don't want it to rain!

[mrmarket]

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

I've used the Martingale in Roulette...what happens is that it is extremely boring and after I drink 10 beers I have to go pee and then I lose my place....

[spikefader]

CMT dude! Channel long today, inverted 5 min SHS now. The neckline is there ready to break, and so it's buy stop limit 6.63 or bid 6.05 for double bottom entry, which is much better r/r.

CMT workin nicely. Stop to even now.

[kingofthehill]

spike what do see for my ELN

[spikefader]

spike what do see for my ELN

Congrats on the bullish week! Finally those bones I posted are starting to wake from the dead. heh

But that said, clearly resistance here. No pattern yet to confirm the short, so shorters should be holding off. If bull can keep the power on and bust through/turn up the channel, and get into that gap on a closing basis, then you'll be better off.

[ForeverInvesting]

Exp

Spike,

Can you post your take on EXP? It looks like a short to me. Is there a SHS on the chart or am I seeing things?

Mike

[skiracer]

Spike,
Sorry it took so long to illustrate my point but I wanted to show the numbers.
I'm not saying that it's a bad thing to do but isn't the ROI the gain/ amount invested. So the $10000 gain is 10000/22000 = 45%. The extra $4000 comes with the larger amount ($22000) invested which is great if it goes that way. Of course the extra $4000 is 65% more than the $6000 for the initial $10000 invested but you had to put up another $12000 to get that so it's not like you're getting it for nothing or at no risk. It's great if you can pull it off and the trade keeps trending upward and to have that much confidence in your trade is also key. I wasn't knocking the play but just pointing out the percentages. You only get what you pay for and the extra $4000 comes at the risk of more money invested. Of course it could go the other way which even at limiting the loss with a close stop still would cost you more but who ever thinks that the damn trade is going to go wrong. One of my problems, if you want to call it a problem, is that I am the eternal optimist. Again not knocking the stratgegy and have and will do it again sometime I'm sure but personally I don't buy into it but that's only speaking for myself. Personally I like to put it up initially and when I really feel comfortable and real confident with the setup will double up or something over my normal full position.
I also must agree with your point on the psychological aspects of it and demanding the trade prove itself. Very good point an I like that confidence when you feel that you're right. Very good.

[spikefader]

On the weekly charts, three straight weeks of bullishness for COMPX, INDU and SPX and thankfully I've been on the right side of it and made some nice gains.

Holding swing long YM from average of 10626 and sitting with +178 points. I've really got to consider taking it all off the table now that the DOW is approaching resistance here at 10700....or whether I risk it for the breakout. Opinions? I am anticipating the breakout, but smart money sells resistance..... hmmm. I think I shall ponder that over a glass of red But I think much will depend on the nature of the market open next week and how intraday Vector is. But Vector on a daily basis closed slam dunk bullish and I have a green light to hold long at this resistance area. Qs have broken out nicely and those puts sit nicely in 39% profit at close. GOOG puts were remarkable today. You'll recall I bought em at $4.00, and they gapped up and ran up to $10.40 (+160% from my entry in 2 days!!!) before profit-taking began. They closed at the intraday pivot of $6.10 (+53% from my entry) and I'm holding them all long over the weekend, a big fat hungry bull. Why didn't I take that +160% on them? Well frankly there wasn't a good pattern for GOOG that signaled it. I really think that is a daily runaway gap back there in late October, and it's going higher. I got THE perfect GOLD medal entry long for these GOOG puts, and intend on giving them every chance to turn into a monsterous win instead of hastily taking fast profits without the right reason. The weekly GOOG chart is clearly impulsive and the candle at close isn't particularly bearish. I'm yet to do the count, so invitations for reasons to bail, or a count to show why I made a mistake today.

Great weekends all.

PS. Welcome to the thread rjesag! I invite you to read as much of this thread as you possibly can. There is an abundance of information as to how I trade and what I look for, and reasoning you ask for. That is my first rec for you!

My second rec is to to you is then sit back and patiently stalk those perfect entries and manage every trade with great r/r and money management. Cut the losers short and let the winners run. Target and avoid emotional decisions. Post questions, and thoughts, and ideas, and participate. Great little forum this one. As for stock recs, you'll see them posted as they happen.

[dmk112]

Spike,

RE: ELN - it is a expanding channel short and it appears to me it actually brroke the downtrend at this point and it looks very BULLISH.

[spikefader]

Spike,
RE: ELN - it is a expanding channel short and it appears to me it actually brroke the downtrend at this point and it looks very BULLISH.

Expanding channel short just means 'caution' shorts. It's resistance pure and simple. And it'll be resistance until it isn't. It hasn't broken the channel, it's still got price resistance above, it's still a 10 year monthly bull flag, volume is declining on a monthly bases during this rise to the resistance, the market is helping it, there is a big fat question as to whether they can make Tysabri profitable for them, even IF patients aren't scared off from the side-effects. There's nothing bullish about that chart, save for the fact that price rose! haha That's funny isn't it?! OK, just checked the weekly and there's a channel turn up. OK, so it's really at the line of last resistance now and it could well boom up and impress the socks off me. But it SETS up short. There isn't any question for me and the way I trade 'em. Call me wrong, call me picky, call me stubborn, call me anything. Just don't call me undisciplined.
Bullish? Patience grasshopper! hehe

[skiracer]

I think you can throw the charts out the window with this one right now. It's reacting entirely on the newswire. You could go back and check out the newsbreaks and see the corresponding bounces and valleys inbetween the positive newsbreaks. I'm sure the momo guys that are daytrading or scalping this stock couldn't give a shit whether or not they ever get the drug back on the market but are playing the news to the benefit of their trading accounts. Still can't discount the fact that anyone who entered early on around 5/6 range is sitting on some decent gains right now and will benefit inadvertently from these bounces. And if anyone would have caught that news early this morning they could have had a decent scalp. Would you short it this coming week on the chart alone after this weeks gains?
The story with this stock right now is that for the time being the only news coming out about it will be good news until the big shocker lands and that will be the end of it but in the meantime every newsbreak will probably be leaning toward the positive side and will provide some bounce up.

[Websman]

ELN is like SIRI was last year. It's definite momentum play. Those who have the guts to hold will profit.

[Thomrich]

Greetings,

As a fool who bought ELN a while back when it tested a gap at the high 7s,and sold for a small profit,fearing armageddon,a play like this comes around only a couple of times in a persons life.

I cant tell where this will end up by looking at a chart,but if it goes anywhere near its previous prices King and Webs will be sitting pretty.

congradulations to all making money on ELN,

cordially Tom

[spikefader]

Spike's Cream of the Crop

OK folks, I feel the need to do something clever with MM's data dump. I've decided to have a regular special event I'll run that I will call "Spike's Creme of the Crop", filtered from MM's data dump.

I don't think there's any doubt MM's model is amazing and has the ability to discover handfuls of gems that have the potential to make fast profits. It's highly likely MM's final pick out of all those candidates will be successful, and I wish him Godspeed in his selection process for that pick. But it seems a shame to take and trade only one pick out of those great charts!

I feel it in my bones there is a system yet to be devised that will use that data in a different and more complex way that can cut short losers and divert those funds into winning picks to leverage their success.

We've been talking about leveraging success lately, so this exercise comes at a good time. Ski doesn't buy into the idea, and I'm sure he's not the only one. I see the value, and some may agree with me. But it's not about being right or wrong, it's finding the truth, and adjusting ourselves and our attitudes to get in line with that truth.

I've filtered the most recent dump of 112 stocks down to 20 sizzlin' hot picks using a couple of simple methods. First was the weekly chart pattern and wave count method. I used my own discretion to select charts I liked the look of and that show upside targets. I then deleted from the list any pick that was not in a bullish PSAR trend on the daily and hourly charts. I then filtered the low volume stocks out. I then deleted any that had negative daily moneyflow readings.

What is left is 20 hot solid volume momo stocks that are in clear uptrends, with positive money flow that have weekly patterns with upside targets and/or wave counts that have upside. I was please to see that GOOG was in that list since I'm long calls for it

And would you be surprised to know that 13 out of the 20 picks have buy signals with my very own 20-day PSAR/Money Flow Index system! Now that sure is an interesting fact.

OK, so there we have it; 20 amazing picks. Let's trade 'em. For the benefit of time and how busy I am in the mornings I'm assuming I bought the last trade price on Friday.

I'll hold every one of them until they stop out. Downside will be limited to -4%. Profitable positions will get a trailing PSAR stop (probably on the daily psar) and so they will eventually all stop out. Positions that stop out will be added to any open positions at intraday support levels, and therein lays the leverage part.

So 1 particular pick may stop out for -4% (or +2% for that matter) and the funds will be immediately put into one of the other (most successful) trades at support levels, whichever gives a support entry first. In this way, trades that have PROVED they are working will get the funds, and at sensible levels of intraday support.

They will eventually all stop out where I'll have a final profit/loss percentage that we can all ponder. Will this number outperform the broader market? Will leveraging success work or will it be shown to be just overrated hype? I think THAT will only be determined over a whole series of these dump exercises over several months, and I intend on doing it for a while to see how it goes. So wish me luck

I'll run it like I ran POTW with Quotetracker, and for ease of calculation I'll use the last trade price on Friday for the buys. Adds will get a 2nd entry and I'll use the 'combine' function with QT to average the price. Stopped out trades will be totaled separately since I don't know how to do it with QT (anyone??). I'll do a final + or - % number as we go along. I'll also post screenshots of the port and charts like I did for POTW.

Suggestions are welcomed for tweaking this to maximize profitability, so speak up! And if you think I've eliminated a pick from the dump that should be in there, speak up and I'll have a second look at it. I may have had fat fingers and deleted it by mistake!

And here they are! : (Note: Look at those charts will ya! Consistently strong across the board!)

[billyjoe]

Spike,
Did you edit MIG or did I imagine seeing it ?

billyjoe