Am I Good, or Am I Good?

[Arindam]

The US equity markets close in a few minutes and will probably close down on the day. By contrast, a stock I called attention to yesterday as possibly offering a good entry point will likely hold its gain. Was that just a lucky call, or was it an informed, disciplined call, the product of decades and decades of doing this charting stuff?

Who knows, right? Nor does it matter.

By contrast, a stock that Andy followed the crowd into, ASPN, continues its fall, just as I said it would for it having completed its third wave. Again, was that just a lucky call, or was the call a consequence of having a disciplined, consistent method of making Buy/Sell decisions? Who knows, right? And who cares? But I would say this. His following the crowd into ASPN and getting into it late is the consequencce of his trying to apply an investing/trading method --the IBD method-- he doesn’t understand. And it isn’t just this one stock he has screwed up on. Go back and look at earlier threads in this forum in which he touts ENPH that he got into at its high price and watched it get cut in half.

I like Wm O’Neil a lot. He’s a thoughtful chartist. I own his books. I’ve attended his seminars. For years, I subcribed to the print edition of the Business Investor Daily. But there’s a world of difference between what Bill can do and his would-be followers can do, especially when they don’t have the tailwind of a bull market to bail them out of their misunderstandings and mistakes.

As I’ve said before, I bought my first stock when I was ten, and markets have been more than kind to me, enough so, that this investing/trading stuff is now just a hobby, not a daily necessity. Hence, when I want to build a boat or to get out on the water, I’m not tied to a computer screen, scrambling to plan my next trade.

Charlie

Blue Lake messabout June 2024 - RiversWest Small Craft Center

[Quillnpenn]

If I had owned ASPN, the rules sez to Sell on June 6th, 2024. Only HODlers hang on for dear life. WHY !Again per the rulz, I sold QQQ, NVDA, COST, ARM in order to save my ASSets. Now, Lucas and I wait for the next buy signal.

Quill - a poor church mouse scratching for a living as a Swing Trader.

[bridgewater]

ASPN: My daily chart said sell on June 12 per SSez3

[bridgewater]

COST: SSez daily said sell on Friday Jun21 - I still keep it because COST is still above 11dEMA - I dónt sell when it stays above 11dEMA

[bridgewater]

ditto for ARM

[Arindam]

“If I had owned ASPN, the rules sez to Sell on June 6th, 2024. Only HODlers hang on for dear life. WHY !”

Quill,

Permit me, if you would, to quibble a bit with your dismissal of them whom you call “Holders” by which you mean the ‘Buy-n-Hold’ crowd.

If one has a high tolerance for risk and a long time horizon, plus a sound method for picking stocks or asset classes, plus the discipline to throw in the towel when it really should be thrown in, then BnH can be an effective way to build weath. Yeah, you zip in and out of COST. But wouldn’t you have done quite well with the stock if you had never, ever sold any of your shares but just keep building your position? Just saying.

OTOH, most of the techie, current darlings --EVs, “green” energy, AI, the cryptos-- are likely to prove to be flash-in the pans and are better traded than held for “the long term”. (IMHO, natch.)

Charlie

[Quillnpenn]

Charlie,

Lucas was messing with my crystal ball and is in the repair shop waiting for new advanced AI computer chips.

re: HODlers

https://tinyurl.com/5n7vk29y

Quill -

[Arindam]

Quill,

That’s a cute explanation of your use of the term ‘HOLDer’, but does fail to distinguish when hanging on makes sense and when it doesn’t. Or as is often asked, "What’s the diff between “persistence” vs “stubborness”? One often pays off. The other only rarely so.

Charlie

[PuddinHead42]

@bridgewater

ASPN: My daily chart said sell on June 12 per SSez3

OK, another SS3 clarification please. I feel like Quill only uses the OHLC charts and relies on those price labels and he does not use HA for SS3 (but I am confused). When I posted some OHLC charts he confirmed some buy points I mentioned did not say “well, what does the HA chart from BarChart say?”

When I look at the HA smoothed chart on BC, it has many fewer buy and sell signals than the SC OHLC. Also, on BC, if the change the time period, the frowny and smiley faces disappear or show in different places. on the SC OHLC chart, they are always the same.

I fail to see how these two different charting methods mess into a coherent, actionable signal. Could someone explain it like I am a 10-year old?

Thanks.

[Arindam]

@PuddinHead42

I fail to see how these two different charting methods mess into a coherent, actionable signal. Could someone explain it like I am a 10-year old?

Pete,

The simple expanation is this. “The man who has two watches never knows what time it really is.” Said anothr way, “Input determines output.”

Said yet another way, “Yesterday’s market cannot be bought”. What matters --when you’re at the hard, right-hand edge of the chart, is having a clear-cut plan as to how you intend to react to what can be known from the recent past.

If you build charts with OHLC bars, vs HA bars, vs Renko bars, vs P&F columns, you’ve created a different abstraction from the time-price series than if you had used other methods. So, decide which fictional world you want to gamble in. (Cf, Plato’s Cave.)

Frankly, Quill’s method(s) --as confusing as they can be-- are built on solid, insights about markets work and how money can be made using them. He has a would-be trader always buying low and selling high, and that’s not a bad plan.

Charlie

[PuddinHead42]

@Arindam

Frankly, Quill’s method(s) --as confusing as they can be-- are built on solid, insights about markets

Charlie, thanks, but I still don’t understand how the HA and OHLC work together. If you just use the HA, then you have way fewer buys. The OHLC price labels look like magic and “always” work. The rules for SS3 that Quill gave me do not include mention of HA smoothing charts, yet this thread does use that to point out when ASPN should have been sold.

The OHLC said it pretty clearly all by itself…

[Arindam]

Pete,

Now it’s me who’s not understanding your not understanding.

The essence of Quill’s method is price-based, breakout/breakdown trading, as opposed to momentum trading, or pattern trading, or event trading, or seasonal trading, or macro trading, or data-mining trading, etc, etc, etc. That’s The Big Picture (TBP). The small picture (TSP) is one’s choice of lookback periods, chart formatting, indicators, stop types, etc. But that stuff is just surface details.

For sure, those details will affect when trades get put on and taken off. But
the essence of his insight and method hasn’t changed any more than if I ask you in Spanish vs English what time it is. Don’t speak Spanish? If I point to my wrist and give you a questioning look, and you hold up five fingers, we both have understod each other.

That’s the beauty of Quill’s method. All he has to do is show a ten-year old (his neices and nephews) one chart and two rules and they can pull money out of markets. It’s we grownups who want to make things more complicated than they need to be.

For sure, he’s fudged the game a bit for them by restricting their trading universe, thus ensuring their likely success. But that’s a tactic all of us should consider rather than thinking we can trade any stock or ETF with equal success.

Charlie

[Arindam]

Followup

Pete,

Go to StockCharts. Find the section with 'Predefined Scans". Pick one of the ‘Bullish Scans’. Chart the stocks/ETFs suggested by the scan at BarCart using Quill’s setup (plus, maybe, a tweak of your choice). Below is typical of AT-THE-GATE setups that can be found. Literally, in mere minutes, more good trades can be found than one would have the time to manage.

But let’s look at something a bit more complicated. The simple and strict version of Quill’s rules would have gotten a would-be trader into the trade you’re seeing in the middle of the chart when it was at the hard, right-hand edge. But it would have failed to get him/her out in a timely manner, though trading off of the gravestone doji would have done so, concluding the trade profitably.

So, yeah. Quill’s rules could use some amendments, namely, how to tell when a trade should be taken off. But that is easily done when what Quill calls “The Business Plan” is written. What’s his metaphor? That a trader is an inventory manager. When demand for your product is weakening, you dump it.

So, let’s run through how that might have been done, this time using HA bars. Here’s that same stock with that trade still ahead of us.

We’ve got a downward trend and a lookbacl low, aka, Simely Face, at the hard right-hand edge of the chart. That’s Quill’s classic setup. So, advance the chart by a day.

BINGO! Rule One has been met. If trading EOD, as most would-be users of Quill’s method should be --for likely having a day job-- then the stock is bought with a resting market order at next day’s open. (I.e., the order is written and submitted the evening of the signal day.)

In the evening of the execution day, the stock is charted.

BINGO! The market has confirmed that the entry was correct. Per the simplest of Quill’s rules, there is nothing to do. Per an amended version, the position could be added to. (By how much would be dealt with in The Business Plan.)

Now comes a complication. As often happens, four days into the rally, some profiting taking occurs and that day’s bar prints red.

In the simple version of Quill’s rules, our would-be trader would do nothing and would wait for a Hi flag to print, aka, a Frowny Face. But we know we’re in a twitchy, late, Stage Three market, and need to be a bit more proactive about protecting our ASSets (as Quill puts it.) In fact, there’s a trader’s proverb that covers this situation. “When in doubt, get out.” So that’s what our would-be trader does by writing and submitting a market order to sell to be executed at next day’s open.

So, what’s the final scorecard? Let’s assume there was no “averaging up”. In at 23.80 and out at five market days later at 24.15 produces a low-effort, low-risk gain of 1.75%. That might seem like tiny money. But it isn’t. There are roughly 250 market days per year. A gain of 35 bps per market day would produce an annual profit of 87.5%.

What’s the long-term, yearly gain for owing stocks? Around 10%, right? Using Quill’s methods clearly can beat that. So pernit our would-be trader to deleverage not just his/her capital, but also his/her time and put on just a couple trades per quarter. Even with that little effort and risk, he/she could match --on a dollars risked basis-- what a full year’s, Buy-and-Hold exposure to the market’s craziness might produce.

I’ve been trading for a lot of years, sometimes doing as many as 400 round trips per year. Nothing that’s available to the “average” retail investor --or afforded by him or her-- can match what can be done with Quill’s methods and insights. All it takes is a bit of practice and a willingness to make the inevitable adjustments needed to make his methods truly one’s own. Are his methods fool-proof? Hardly. No trading sytsem is. But his methods are a low-cost way --like, free-- to dip one’s toe in an auction market and to maybe even make a buck or two.

Charlie

[Arindam]

I posted the first chart in the previous post pre-market this morning. Just in case anyone doesn’t remember what it was, here it is again.

The green bar at the chart’s hard, right-hand edge in based on Friday’s closing price for the stock being charted whose ticker I’ve deliberately omitted, because the stock tipping game doesn’t interest me and because finding
good trades is like shooting fish in a barrel provided you have a sound, disciplined method for making Buy/Sell decisions, such as Quill’s Simon Sez.

Here is the chart for that same stock as of Monday, 10AM Pacific, or 3-1/2 hours into the regular session and up 2.49% on a day that the broad market is up a mere 0.20%.

In other words, acting on the signals proved by Friday’s close, our would-be investor in this stock is making very decent money, simply by doing what Quill says to do. Nor is this an isolated example. Pre-market, I found plenty of other stocks/ETFs that offered similar possiblities.

For sure, these are dozens if not hundreds of other ways to invest/trade stocks and ETFs than Quill’s Simon Sez methods, any of which might be profitable for you, and none of which are fool-proof. So choose the path that makes sense to you. “Caminate, no hay camino. Se hace camino al andar.”

Charlie

[Carpian]

Apologies if I’m asking a question that is addressed elsewhere. I do mean to go back through the various threads on Simon Sez, but whenever I start I quickly get lost, particularly when things switch back and forth between Stockcharts and Barcharts.

I use Stockcharts, and just eyeballing the price labels–I haven’t done any actual trades yet–it looks like that could be a good system.

On Barcharts however, I believe their “smiley faces” and “frowny faces” are simply the low and high prices of whatever time frame you’ve chosen for your chart. So if you’re using a 2-month chart, the smiley face will be whatever the 2-month low was. So if you’re buying based on an uptick after a 2-month low, it seems to me you would buying a stock that is clearly in a downtrend and just playing a “dead cat bounce” most likely and you’d want to have a really tight stop–tighter than waiting for the next frowny face.

I hope that makes sense. Am I missing something? It seems like there’s a huge difference between using the price labels on Stockcharts and the funny faces on Barcharts.

[PuddinHead42]

@Carpian

On Barcharts however, I believe their “smiley faces” and “frowny faces” are simply the low and high prices of whatever time frame you’ve chosen for your chart

You are correct. The arcs appear and disappear as you change the time frame, or as you go back in time without changing the time frame. You can’t set a 2-month time frame on COST and then slide back 4 months and say “see, you could have bought there and sold there”. It only counts if the arc is there at the right edge of the time frame. Hope that makes sense.

Yes, the Stockcharts price labels seem like magic to me with all my observations so far. They never fail. So I don’t understand why you need HA from BarChart and OHLC from Stockcharts. Perhaps I am just thickheaded but I don’t feel anyone has been able to answer that. I also can’t get someone to explain the 10-year old approach Quill is teaching for his grandkids. Do they use both charts and wait for a coinciding price label. Do they only use one of the charts. Do they use the 5MA-triangular on the HA charts as a tell? Do they use the TSI as a confirmation? Do they look for doji and gravestone candles? I just want to start like a 1-year old but I am not convinced I have been told the rules and charts in use for that approach. Are there price labels on the OHLC that Quill would tell his grandkids to ignore?

[Arindam]

Carpian,

No apologies are necessary. These threads are mess due to topic-hopping on the part of posters (to which I’ll freely confess I’m as guilty as anyone).

Quill is the StockCharts guy. I prefer BarCharts for its advantages for them wanting free accounts, such as the ability to save chart templates and to run multiple watchlists. (But a Plus Memembership isn’t costly, and it’s what meets my needs.)

First things first.

#1. You’ve gotta distinguish between ‘bottom fishing’ and ‘breakout trading’. They are two separate games.
#2. You’ve gotta distinguish between ‘mean-reversion trading’ and ‘momentum trading’. They are two separate games.
#3. Decent money can be made using any of them, as well as from dozens of other approaches. It all depends on your means, neeeds, goals, opportunities, likes, dislikes, preferences, etc.

Think ‘fishing’. Investing/trading is no different. The waters you fish, the species you target, can vary from bluegills on a worm and bobber, to bass on plugs, to steelhead on streamers. Who’s to say whom has more fun? This investing/trading stuff is no different. So don’t hold back. Put on some small trades and watch what happens with the most important part not being whether the trade makes money, but whether you can put togther an action plan and have the discipline to stick to it long enough to discover whether you’re comfortable using it or not, and if the latter, how to fix that. That means doing a couple hundred trades, not just a couple dozen trades whose limited statistics have no significance for more likely being due to broad market conditions, be they favorable or unfavorable, than the specifics of your businness plan. (“Never confuse brains with a bull market.”)

As for the ‘price labels vs lookback Hi/Lo flags’ debate, that’s mostly just a distraction you should ignore. (IMHO. 'natch).

Charlie

[Carpian]

Pete and Charlie,

Thanks for the responses! I’ve dabbled in trading off and on (lately more off than on) for a number of years, and always thought I would have the aptitude for it but didn’t get the results that would make it worth it for me. I’ll likely dip some toes in again. This looks interesting.

I have used charts to pick entries into LTBH stocks, with I think pretty good success. Basically I look at weekly charts and look for RSI (14) around 30 if I’m willing to be very patient for a stock (that doesn’t trigger very often on a good one, especially in a bull market) or around 50 if I’m being less patient on a stock in a long-term up trend. Then look for support points around those numbers.

John

[Arindam]

John,

RSI (14) 30 is a good screening tool for finding stocks that are breaking out and it’s easy to set up at FinViz. Generally, for every 20 stocks the screen identifies, only one or two will pass the next screen, which is to chart them using Quill’s methods and rules. But those do tend to be money makers especially if they can pass a third screen, which is a fundamentalist screen that asks three questions: Is the company --if it is a company rather than an ETF-- “healthy”? By how much does present price differ from intrinsic value? What is the forecasted earnings growth?

Obviously, if the tradable is an ETF rather than a stock, those three questions can’t be asked. But ETF’s can be subjected to relative strength comparisons to estimate how they might perform going forward.

Lastly, if it’s the intermediate trend you want to track and trade, such as can be picked up from charts based on weekly bars rather than ones, then a whole bunch of problems about stops and such can be simplified, though not avoided.

Right now, US markets are “fragile” --to say the least-- due the US policy makers becoming increasingly irrational and irresponsible. By constrast, the BRICS are becoming an increasingly favorable investing environment, with 59 more countries wanting to join them and with their increasing ability to settle trades with each other in local currencies.

Charlie