Skiracer's stock slopes

[skiracer]

Ski, Could you explain your use of the 20DMA , 50DMA and resistance and support levels in your shorter term trading ? Also healthy vs. dangerous pullbacks. Thanks


------------billy

The 20 and 50 dma's can offer either resistance or support depending on whether the stock is trading above or below their line. When above they're resistance and below act as support. I use the 20 moreso than the 50 only because it offers a shorter term view of what the stock has been doing within the past few months (2-3 months) and the 50 for longer term (4-6 months). What I look for specifically is how long a stock has been tracking in either direction to determine "trend" and for crossovers either up or down.

Crossovers are important to me as it is a strong signal when the 20, which normally will be tracking above it's 50, crosses and drops below it's 50. Moving averages are strong lines of support or resistance and when one crosses over the other it's a big thing for me. When the 50 is tracking below it's 20 and the 20 turns down and drops below that line of support at it's 50 I take that as a strong signal that the stock is weakening and any entry to the long side wouldn't be prudent at that time. And visa versa. When the 20 has been tracking below it's 50 and turns up and crosses back over it's 50 that to me is a stronger indication that entry to the long side is your best bet and the "edge" is certainly in your favor. The best part about using the moving averages as indicators is that you can watch and see the movement long before any actual crossover takes place and can thus anticipate "a developing trend" and time your trade/entry for that moment that best suits your discipline.

I like that moment when I have been watching a stock begin a move up from a point where it's 20 has been tracking below it's 50 and after watching it for a week or two (and sometimes longer) it gets right up to it's 50, remember this line is a strong line of resistance to break thru, and knowing that it has been trending up for a couple of weeks, watch it break thru that line. To me that is a perfect time for entry and especially if the market in general has been in and uptrend itself. Being early doesn't bother me at all knowing that the most I am going to lose is my standard 7% stoploss or less in some cases.

Sometimes that line of resistance will stop a stocks advance and deny it's crossing over the line. Many times you will see a stock try 2 or 3 times to breach that resistance and be denied. Each time this happens it only supports my feelings that the stock is strengthening and that the "odds" are increasing that it will make a successful breach of that line. I have made numerous trades where my timing has been wrong or early and I have had to exit at my stoploss point but in the end see the stock make a successful crossover and go on to make up the nominal losses and and much more. The stop loss is your only and strongest defense.

[skiracer]

Ski, Could you explain your use of the 20DMA , 50DMA and resistance and support levels in your shorter term trading ? Also healthy vs. dangerous pullbacks. Thanks


------------billy

Every stock in an uptrend has to at some time consolidate (pullback) those gains. It is a "natural" turn of events and is "healthy". How much percent is normal or healthy is never set in stone but my personal feelings are that 5-8% of a stocks current price is not unusual. Determining what is "healthy" or enough is another thing and when to begin looking for it to take place is also harder to determine.

There are several indicators that I use to make these determinations. Perhaps the most important one is Fibonacci lines. I'm not going to get into explaining how to determine or use them but you can Google them or find out how to determine them mathematically and how they work at any number of websites. I think the Morpheus website will have an explanation of them. Fibonacci lines work. I don't know exactly why but in almost every instance I find they are correct and it amazes me each and every time how close they can be to being right on the money in predicting a turning point in either direction as support or resistance. I also use the RSI alot as an indicator for a stock being "overbought" or "oversold".

When I look at a chart and I see a stock that was trading at $15 and begins tracking up and over the course of a month or two it has continued the upward trend with an occasional pullback for consolidation of those gains and I see that it is trading at say $22-23 with the RSI over the 70 line indicating it's being "overbought" and my Fibonacci lines suggest that it has reached a point where it's current trend could reverse I begin looking for a reversal of that upward trend. I'm not saying this is written in stone but I know for a fact that what goes up must come back down. To what degree remains another story and Fibonacci lines can help in making that determination to the upside or the downside.

What makes a healthy vs dangerous pullback is a hard question. Like I said, they all must consolidate their gains and pullback at some point so knowing and accepting that concept is your best line of defense. Anticipating that and including it into your trading discipline and specific plan for any trade with an entry, stoploss, and targeted exit point is the key along with the feel you have for letting your winners run out to maximize the trade on the winning side. Letting them run out to the point of "running out of gas" is what I look for and then when they do and turn downward knowing what you can live with "giving back some portion of your gains" before you pull the trigger and make your exit comes from emotional control and experience.

I can best relate the entire thought process to this. Looking at any chart and seeing a stock start a move up from some price you must understand that there is some trader who bought in at that price and is presumably watching the stock as I have explained above. And as that stock continues to make it's move upward thousands of other traders are making entries and watching and anticipating in the same manner as the ones in before and below them. As that stock's move up continues and it's price escalates the gains the guys in first and each successive level above them are increasingly becoming more on edge to protect their profits and to me this is where emotions come into place and have to be understood as human nature takes over. Those guys want and need their gains and just like you and I and are not going to let them get away from them. At least the smart ones won't and the foolish ones will hold on in hope while their gains evaporate, but you have to accept that the smart ones will be ready to make an exit at the slightest indication of any consolidation or pullback or especially some reversal in the current trend. Plus the fact that if they are experienced and disciplined they already have a targeted exit strategy in place and if the stock has already made 20-30 % or more they know that what goes up must come down and are already ready to make their exit.

So when I see a stock's chart and I see a decent gain already in place I know that people, retail traders, general funds, and hedge funds and are getting ready to exit and implementing their plans. Dangerous to me is when a stock is trading above the 70 or "overbought" line on it's RSI and when near or already over any Fib line I have in place.

[skiracer]

In NSPH at $3.53 and still holding at present price of $3.36. 7% stoploss at $3.24. We'll see!

[wooish]

In NSPH at $3.53 and still holding at present price of $3.36. 7% stoploss at $3.24. We'll see!

Ski

I understand your 7% is at 3.24, why not set it at 3.15 or 3.10 because 3.20 is at the 50MA on the daily chart. Many stocks like to retest their support before taking off again, if it does you will be taken out and the stock leaves without you. Just my 2 cents.

[skiracer]

Ski

I understand your 7% is at 3.24, why not set it at 3.15 or 3.10 because 3.20 is at the 50MA on the daily chart. Many stocks like to retest their support before taking off again, if it does you will be taken out and the stock leaves without you. Just my 2 cents.

great observation Wooish and definitely holds water. I saw that on the chart myself. Since I'm able to physically watch my trades real time almost everyday all day I would be a liar if I said that my stop losses are exactly at the 7% number. I usually don't set a hard stop since I am watching them everyday and even moreso when they get pretty close to the stoploss point. Truthfully they are more like what you proposed if a line of support from a MA or Fib number is within cents of what the 7% number is. Great point and very true.

[billyjoe]

Ski, I got in this stock , CAMP, a little early but held on and as of today have about a 10% gain. I'm worried about losing it all if I don't sell now. What do you make of this chart ? Is it a disaster about to happen ? It was almost a good setup when I bought on Aug. 2nd but I jumped the gun and should have sold, then it turned. Thanks

http://finviz.com/quote.ashx?t=camp

----------billy

[noshadyldy]

Ski, I got in this stock , CAMP, a little early but held on and as of today have about a 10% gain. I'm worried about losing it all if I don't sell now. What do you make of this chart ? Is it a disaster about to happen ? It was almost a good setup when I bought on Aug. 2nd but I jumped the gun and should have sold, then it turned. Thanks

http://finviz.com/quote.ashx?t=camp

----------billy

I'm interested in your answer too, Ski, because I don't see the disaster about to happen.

[billyjoe]

Noshady, I didn't realize they had a great earnings report on Tuesday. I'm more hopeful but still don't know how to read this chart.

I'm interested in your answer too, Ski, because I don't see the disaster about to happen.

--------------billy

[skiracer]

I'm interested in your answer too, Ski, because I don't see the disaster about to happen.

You gotta be happy with todays action and volume Billyjoe. I don't see anything catastrophic in this chart. I would be holding on.
BTW, I bought TASR today at $6. Been procrastinating on this stock for a couple of weeks and should could have gotten in much earlier but I like the way it has been fighting to stay at around the $5.80 / 6 level.
Not sure why they deleted that first chart capture after the fact. I think I was up to the limit of 500 uploads on the freebie acct. which I went in and deleted about 100 older charts. Should be ok now. Also sent them an email to see what is going on.



Uploaded with ImageShack.us

[skiracer]

TASR. Be sure to take a look at this one. I think it is getting ready to make a move.

[skiracer]

I straightened out the problem with Imageshack. So the chart of CAMP is there now and please take a look at TASR!

[noshadyldy]

Are you still holding onto HOV and NSPH?

[skiracer]

Are you still holding onto HOV and NSPH?

yes I am still holding both. My stop with NSPH is $3.24 plus or minus a couple of pennies. HOV is doing exactly as I thought it would and posted a week or two back when you asked me if I thought it was due for a pullback from $3.89 range. I posted then that I thought a 8-10% consolidation of gains would be normal and that would put it at around $3.39 which is right where it closed at today. If you look at the 1 yr. / weekly chart todays candlestick was a Doji / spinning top candle which suggests indecision. I think that this is good and normal for the next move up and will provide a nice nook for those traders anticipating an entry to pull the trigger. But I am in HOV until it drops to somewhere around $2.50 range if that be the case. I'm assuming you are still holding both.

[noshadyldy]

yes I am still holding both. My stop with NSPH is $3.24 plus or minus a couple of pennies. HOV is doing exactly as I thought it would and posted a week or two back when you asked me if I thought it was due for a pullback from $3.89 range. I posted then that I thought a 8-10% consolidation of gains would be normal and that would put it at around $3.39 which is right where it closed at today. If you look at the 1 yr. / weekly chart todays candlestick was a Doji / spinning top candle which suggests indecision. I think that this is good and normal for the next move up and will provide a nice nook for those traders anticipating an entry to pull the trigger. But I am in HOV until it drops to somewhere around $2.50 range if that be the case. I'm assuming you are still holding both.

Yes, I'm still in both. With HOV I got out around it's top 3.88 or so and got back in at 3.45. Took a little of the sting out of this pullback. With NSPH it's been a frustrating ride. Make money, see it vanish, make money, see it vanish. I'm waiting for the make money part again.

[wooish]

I grabbed a 1000 shares of NSPH, it's good to see that it bounces off 50MA on the daily chart.