Advanced charting last meeting
description
Transcript of Advanced charting last meeting
Advanced charting last meeting
• Only invest when:– Share passes our filters on REFS – Dominant trend in market is up– Dominant trend in share is up– Share shows short term buying signal
• Always use stop loss [7.5%] and ‘time controlled selling signals’
• Use centred moving averages
Googled author
• Much in demand in UK and USA
• Sells data and programmes via his own company
• Last [expensive] book in ‘99
80:20 rule
• Sectors in year when Index -16%
80:20 rule
• Sectors in year when Index +1%
80:20 rule
• Sectors in year when Index +25%
80:20 rule• Shares in year when Index +25%
• Shares behave similarly when Index is flat or decreasing
• “Most of the time, 80% of shares will follow the direction of the market while 20% will do the opposite” - don’t try to buck the market!
How to determine dominant trend in market?
• Use 41 week centred, moving average of FTSE 100
Centred is more accurate
But centred MA stops short
• Extrapolate by eye to NOW
• ‘Price analysis’ extrapolation
• Average MA itself
• Try a shorter span MA near NOW [NAS]
• If share’s dominant trend has been up for >6 months, look for share with younger trend
Dominanttrend changing?• Calculate % of 120
shares with rising41 week MAs; <60% is signal for caution
• Lot of work or buyauthor’s data andsoftware
Buy signals• Trough in 5 week MA - more accurate than
10 day MA cutting up through 50 day MA
Channelanalysis• Best technique
of all
• Must use centred MA
• Drawing by eye is fine
Quick profits• Channel shows dominant trend is up
• Half channel bounce gives 17% in 4 weeks
• Full channel bounce gives 22% in 7 weeks
Extrapolate channel to NOW
• Easy and accurate to do by eye
• If difficult, don’t invest!
• Use weekly prices until price approaches lower boundary when daily prices are better
• Lots of examples show good gains and when not to invest
• No losses as market buoyant
Example of CA - buying• Select growth share using Zulu and REFS
• Channel is rising so extrapolate by eye and wait until price arrives at lower boundary
• Buy when trough formed
Example of CA - selling• Peak on upper boundary
• Stop loss already triggered
• Sell for 41% gain in less than 4 months
Conclusions
• Plot FTSE 100 and its 40 week MA using website• Centre MA by moving it left 20 weeks using
tracing paper• Draw in channels to NOW; get excited if trend is
up!• Draw channel for selected share and extrapolate• Buy/sell when price at a boundary• Refer to these slides on our website• I’m willing to help!
Reasons for failure
• Trying to pre-empt market• Buying on price fall[a trend continues until it
ends!]• Misplaced patience• Holding on for dividends• Listening to advice• Not spreading the risk [8-12 shares]• CAPITAL MUST BE PRESERVED