Applying HA Smoothie to Stock Picks

“I think we will have another leg down, but it’s hard to say when.”

Andy,

The cheap-shot answer is that’s is impossible to say when. But the better answer, the evidence-driven answer, is that there are ways to make decent market forecasts. Making use of them just requires more consistency, discipline, and effort than most investors want to expend.

But every brokerage firm and every hedge fund has one or more people on their staff whose job it is to make those forecasts. (How good they are is a whole 'nother matter, and a subject Nassim Talib takes up in his books). But if you want try your hand at the game, look up ‘market-breadth indicators’, or head on over to StockCharts and poke around in what they offer.

Arindam

PS Here’s the link you need. Market Indicators [ChartSchool]

Thanks Arindam, that article on Investopedia was very interesting. I really appreciate your help.

Would you mind looking at this and explain it to me? The orange line I think is charting accumulation and distribution but what is the blue/green line saying? Is that the median?

Andy

“Would you mind looking at this and explain it to me? The orange line I think is charting accumulation and distribution. But what is the blue/green line saying? Is that the median?”

Andy,

Your guess is as good as mine. It’s not an indicator I like or use, nor is ‘accumulation/distribution’ a market fact I pay any attention to. (Liquidity and spreads? Yeah. Them’s important to me and the underlying psychology of market participants as is reveled by Candle Pattern Analysis.)

The guy who launched the study of ‘accumulation/distribution’ is Wyckoff, whose book is an easy, fun read, and a solid explanation of his method(s) and insights can be found here. Wyckoff Method: Rules, Accumulation, and Distribution

While you’re poking around and exploring, you’ll probably come across ‘Bollinger Bands’, about which I’d say the same thing. His book is an easy, fun read. But I make no use of his method(s). Ditto what Chaikin or Donchian or dozens of others have contributed to the study of markets and the use of technical indicators to understand them.

Nor is any of the fancy stuff necessary. The old-timers built their charts by hand, one day at a time, as data became available and then tried to make sense of them with lines drawn for support and resistance. The old methods still work just fine, because markets are markets, and human nature never changes.

Arindam

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Hi Arindam,
Ok I made a mistake using Quill’s Simon says rules. I went into Enphase because I saw the smiley face but after reading more of yours and Quills posts I realized I should have waited one day to make sure the smiley face was confirmed. Well Enphase smiley face keeps dropping every day. So I sold out of it today and unwound the trade. Luckily I made a few pennies off of it so the mistake didn’t cost me anything. I bought yesterday at $208.81 and sold today at 210.37. I like it when my mistakes actually make money but the rules are the rules so instead of staying in I’m out.

I am also into Swav using the rules. I bought in at 189.35 and it is down about 2.24 percent but the rules say this will make it. still watching.

Andy

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Andy,

Kudos to you for having the courage to report those two trades and to call them mistakes.

I tried to reproduce your trade on ENPH, but couldn’t, because we don’t seem to be working off the same charts. So here’s how I’d have traded ENPH using Quill’s rules, but with my default format of hollow candle sticks, where the green arrow is the day of entry, and the red arrow is the day of exit, both trades done with a market order at market open. By my calcs, the trade would have offered a 4-day gain of 2.09%, which is decent enough money, for reasons I’ll sketch below.

Here’s ENPH done with HA Smoothie where the MA type is BarChart’s default, and the period of the MAs is ‘3’.

Here’s ENPH again, but this time done with PARTP added, which would get a person in and out on the same days as if hollow candlesticks were used, which suggest that there’s a lot of ways to do this stuff, and that they might not make much difference. In short, Chef’s Choice as to how you built your charts.

As for SWAV, I’d have gotten clobbered, too, which means that Quill’s rules need to be reviewed, though not necessarily revised if extensive back-testing shows that, on average, the rule set offers a positive expectancy. My gut feeling --from looking at a lot of charts-- is that the rule set shouldn’t be messed with. But I haven’t yet done the needed back-testing.

Aside: There are 52 weeks in a year. But markets close roughly 10 days a year. Therefore, there are roughly 250 days a year that trades can be placed. The avg historical return for stocks is around 10%/yr, or 4 bais points (bps) per market day. If you make 2.09% in four market days --not calendar days, market days-- , then you’re averaging ~52 bps/market day, which projects to ~130%/yr, which is decent money and total nonsense for this reason. You aren’t betting the whole of your account on every trade, nor are you continuously in a trade. But a 4-day trade that gains 2.09% means that money can sit idle for another 48 days, and you’re still on track to make a journeyman’s 10%/yr on that portion of the account.

Knowing that should take off the pressure to be always trading, and it should help a person follow Quill’s advice to “be the spider, waiting to pounce on only the best setups.”

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Thanks Arindam, to make it clear I am still in the SWAV. I wanted to buy that stock and I am willing to hang on for awhile to see if it works out.

As far as Enphase goes here is what I was doing and my mistake.

The smiley face and the end of the red. I thought it was signaling a buy signal but instead it was following the trend down. I should have waited till it fell behind one day and then bought. Here is swav

Now the smiley face is behind me and I bought in yesterday. Then the doji was showing up but I still have hopes that this will turn positive.

Andy

Andy,

From long practice, Quill can make his Smiley face system work for him. But trying to use it drives me crazy. Decide what you what to do.

As for SWAV, that’s a whole 'nother story. The company passes my fundamental screens. So I don’t see a problem there. But why isn’t the stock moving upward in synch with the past couple days of manic market action, much less, why is it diverging so strongly to the downside over the last three months?

At what point do you have to say, Someone knows something, and that something isn’t good." and simply walk away while losses are still tolerable?

You’ve heard the expression? Don’t fight the Fed. No matter than none of them at the Fed knows anything worth knowing about economics or finance, nor the idiots over at Treasury, their misbeliefs and actions impact markets. Same-same with whomever is selling SWAV down. You don’t fight them. You don’t say they are wrong. You close the trade and look for a less problematic opportunity. (IMHO, 'natch.)

Yes Arindam that is what worries me about the stock. I probably should sell it because looking at the chart again I see to much red and not enough green. It seems that it goes green for a few days and then drops green a few days then drops. Not a really good chart but the fundamentals are fantastic. Going to think about this over the weekend. Thanks for your input it really helps.

Andy


Would have sold SWAV per Simon Sez III rules on 11/29/22.
Then me and Lucas my spider says " let the prey come to you not inverse", so we bought SWAV on the 1/23/23. And we now have to wait and wait for a sell signal.

I am trying to learn to buy on the E (earnings) signal, but SWAV went negative. Anyway, I would have sold SWAV on 11/04/22
bought on 11/23/22
sold on 11/30/22 (how am I doin)
and we wait and we wait until 1/26/23 to BUY on 1/26/23 and now it is off to the races for the next RED bar.
I gave my index card to one of my new students last night. I feel naked without my cheat sheet.
I taught them in a Drivers Ed car. Stop (SELL) when you see the Red light ahead and press on the EV pedal to GO (BUY) when they see the Green light and travel at 55 MPH until they see the next RED traffic light to STOP ( SELL).

All Grasshoppers are to be reminded of reading the simple two (2) rules for both types of charts that we are currently using. Simon Sez.

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"Thanks for your input. It really helps.

Andy,

Au contraire, mon ami. Thanks for YOUR input. It’s questions like yours that force me to review and rethink what I’m doing, which, right now, is mostly treading water while I try to put together a plan for how to deal with this crazy current market. The US wants to escalate its shooting war with Russia, and stocks are going up? That kind of stupidity is going to get us all killed.

Arindam

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Thanks Quill,

I appreciate it.

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…so we bought SWAV on the 1/23/23. And we now have to wait and wait for a sell signal."

Quill,

I’m going to question your report that you bought SWAV on 1/23.

No matter how SWAV is charted, the candle for 1/23 was ‘red’ and couldn’t have been a ‘confirming day’. That you might have bought today, 1/27, if you’re charting with HA Smoothie, I’d believe. Or on 1/26 if you’re charting with hollow candlesticks. But not 1/23, because there no evidence to have done so.

Arindam

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I cant believe it, I think I am almost getting it, thanks to you and Quill penn!

Looking at this chart, I am guessing Jan 26th would have been the buy date

Similarly, based on the HA smoothed, it appears that 11/29 the reversal starts, but 12/1/2022 is the actual sell?

Thanks again to both of you…

Charlie

Arindam,

Also, I am pretty sure I am doing something silly compared to what you have shown…although the overall shape of the chart appears similar, I see a line that is running across diagonally in mine, whic I dont see in yours, Quill’s or Andy’s…

This is what I did:
study - HA Smoothed
It gave 2 options for moving averages and I chose MA, 3 days for both setting 1 and setting 2.

Is that right?

I noted that you mentioned 10 days somewhere…so do you use 10 days MA and 3 days MA for the 2 smoothing periods ?

image

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Charlie,

BarChart uses ‘10 days’ as the default value for the Heikin-Ashi Smoothed indicator. If that setup makes sense to you, use it. For for some reason I stumbled onto using ‘3 days’ and prefer it.

Arindam

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Charlie,

The diagonal line you’re seeing in your chart isn’t “something silly”, but something smart. It’s a 'trend line, and it’s showing were resistance is.

Probably it was generated using a linear regression. So, keep it on the chart, but add a shorter period one. Now you’ve got breakout signals. Give me some time, and I’ll post some examples.

Arindam

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See those two boxes Charlie? Extended hours and real time CBOE. Quill said to check those.

Andy

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I have been using the default settings on most of places.

My settings are EMA for Smoothing 1
My settings are EMA for Smoothing 2
period 1 says 3
period 2 says 3

Now where it says RESET in the box

I have two boxes side by side is CLONE STUDY and RESET.

Again, never touched anything.

The EMA has the same function as the MA, but the EMA is more sensitive to price movements than the MA. So, the answer to which is the best of the two is up to you. If you want an indicator that reacts more quickly to price movements, for example, at the beginning of a trend, the EMA is the right choice for you to use.

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Awesome, thanks a lot Quill, Arindam and Andy! Very helpful!!

I am looking forward to sometime this weekend to go through all the posts carefully again and assimilate everything.

Once again, thanks so much!
Charlie

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I am a newby to Charlie so don’t listen to me. I have already made my first mistake. :joy:

Andy