Latest Update from the Stocks Trading Journal of the Trading Safely Team
Exclusive to Technician, Trading Safely has been designed in such a way as to take the complex calculations and studies derived from Shaun Downey’s ground breaking book Trading Time: New Methods in Technical Analysis published in 2007 and his Technical Book of the Year 2014, Mapping Your Voyage of Discovery, http://trading-time.com/books to create a simplified process and visualization of what the professional traders use. Its unique process involves the use of Multiple Time-frame Analysis from Daily up to Yearly data represented on one chart. This can be viewed on your Pc, Tablet or Smartphone.
All of the components of Trading Safely method are derived from the indicators or studies, which means that the logic and techniques are freely available for those who wish to delve deeper. There are no mysteries and this is not a Black Box and we are here to answer any questions.
Trading Safely has been specifically formulated for Individual Stocks on Daily Charts but can be applied up to 20 day charts, and will work on any asset class.
The Blue Triangles represent a positive outlook if it is below the bar or candle and a negative outlook if it is above and is the beginning of the Trade Safely process. At that point a Pink line and value also appears. This is your protection line so if price closes beyond there you would take a loss. It also tells you what the difference is between your entry price of the trade and the protection point so you can work how how much volume to place on your trade. Remember, we recommend that nobody risks any more than 1% of their total equity on any one position. As time progresses a sequence of numbers appear and a brown line will track the direction of the trade. This is the Trailing protection line.
Each time a number appears it means that you reduce your position by 20 to 25%. Numbers can appear during the day so it is wise to wait to near the close of the day or the following day to make sure that the number is still there.
With the stock market still close to all time highs buying opportunities are few and far between, which is why we look to sector rotation as opportunities to take advantage of opportunities in unfashionable stocks. The issue has been that with the market so strong, even unfashionable stocks have been moving upwards just at a slower rate than the fashionable sectors. On our watch list at present is Apparel and Clothing which is languishing at sector 194. It has 27 stocks within its sector including such well know brands such as Under Armour and Ralph Lauren. Thus far only one stock has produced a positive signal (PVH). The chart shows a sell back in December with 4 partial take profit numbers highlighted in Green, before a buy signal appeared last month. As is common with an unloved stock or sector, the timing has to be correct or price at an extreme for a strong rally to occur. Price has edged upwards and produced one partial profit point but with results coming out on March 22nd its value will have to rise significantly in order for permission to be given to hold the position through the results. The brown protection line has edged upwards and a close below that point would also signal that the position can be liquidated.
Time Area is a study that gives up our timing points and is shown below. It takes multiple time points all the way to annual levels as is beginning to show a pattern that indicates when a rally can truly occur. The yellow line is the annual point and is below the current value at 89.78 and therefore is support. The red line is monthly and that is also below and is also support. This creates a zone between 89.78 and 88.93, which is above the current protection line at 87.71 as shown by the brown line on the chart itself. This has created space above as the next line of resistance is the semi annual value in Time Area and is much higher at 102.46. We will be monitoring price behavior ahead of the results and act accordingly. We will update in our next stocks trading journal.
At the opposite end of the spectrum is MCS . Trading at just a fraction from its 5 Year high in P/E terms it has been a leader in its sector and fashionable. Its latest results were treated favorably. The chart shows the buy back in the summer of last year and the 4 exits that occurred before the sell last week. Whilst superficially the chart looks bullish the Time Area betrays some negativity and what had been support throughout the rally has flipped to resistance. We’ll update this in our next stocks trading journal update.
WAFD is a stock that is within a top 5 sector but is one of the weakest against its peers, whilst still trading at its 5 year high in term of P/E. PowwerPlay and SlammDunk are patterns that identify behavior out of the ordinary, with two buy signals appearing last year before last weeks negative signal. What is significant is the fact that the Peak Expansion study moved long term support points marked by the circles and switched them to resistance. This marks a sea change in sentiment, which will see this stock slide more aggressively when the sector drifts out of fashion as always happens. Note that Time Area has also changed from supportive to negative. Watch out for our next stocks trading journal for the progress onthis trade
Caterpillar has been widely tipped and supported as a benefit of the Trump administration and has been a darling of the market for some time. In recent weeks a plethora of negative signals appeared, before events conspired in their favor with a surprise story of investigators raiding their office. This caused a sharp one day slide last week. However, its only now that the Time Area is showing a proper breakdown as price moves below the annual level of 92.74. Check up on CAT in our next stocks trading journal update.
Airlines grabbed our attention this week in what has been a loved sector for most of the year. The catalyst was a sudden shift downwards across the board when oil was not going up. There is an obvious correlation between the two but the price action belied this fact. UAL is one that has posted a negative signal and this far cannot get a benefit from this week’s slump in oil. See how this progresses in our next stocks trading journal update
Please note this is general advice from Trading Safely for all our clients and has been prepared without taking into account your personal objectives, financial situation or needs. If you do wish to consider acting on our information please contact a licensed financial advisor to discuss the appropriateness of this recommendation for your own personal financial circumstances. Please obtain any relevant product disclosure documents before deciding to invest. Trading derivatives, stocks and CFDs can lead to losses greater than your deposit.