Possible Stocks for Tuesday
TRVN, NRXP, LYEL SRNE, GERN, OPGN, CNDT, PETZ, FRBK, MRKR, PDAG, ONCT, CRNT, GRTS.
These are some penny stocks my scanner identified as possible breakouts. I haven’t vetted them. Don’t yet know which I’ll trade. Do your due diligence.
[later]
FRBK looks pretty solid.
Here’s three possibles from the SP500: BAX, GIS, IEX, and --maybe-- PCAR.
Of that list of 15 possibles, only seven fit the chart pattern below: FRBK, GERN, TRVN, NRXP, AVIR, LYEL, CNDT.
Here’s how to construct that chart:
Main Panel: Pick any bar type you want and then turn it off. From the Studies menu, select ‘Heikin-Ashi Smoothed’ and use these parameters (MA, 3, MA, 3). From the Studies menu, also select ‘Parabolic Time/Price (SAR)’ and use Barchart’s default parameters.
Second Panel: From the Studies menu, select ‘True Strength Index’ and use these parameters (16,8,4).
To trade off of that chart, use these (suggested) rules:
BUY Rule: Get in at next day’s open when the dots switch from ‘red’ to ‘green’ AND TSI confirms by turning upward.
SELL Rules: Get out when the dots turn from ‘green’ to ‘red’ AND TSI has begun to turn downward. Also sell if TSI turns down. (Showing why this is prudent will be done in a separate thread, but it has to do with the fact that HA Smoothie is plotting smoothed prices, not the actual ones.)
HOLD rule: ‘Hold’ if the dots turn to ‘red’, but TSI is still moving upward.
STAND ASIDE Rules: If the chart isn’t drop-dead obvious, don’t try to see signals that aren’t there. Go to the next chart. Also, don’t try to trade ahead of major news announcements. Let the dust settle.
ADD Rule: If you’ve decided to scale into your positions, then ‘average up’ once the market has confirmed that your original entry was correct. DO NOT AVERAGE DOWN IF YOU INTEND A SHORT-TERM TRADE. If you’re a ‘value investor’ and you’re trying to build a long-term position, then different rules will apply as well as the use of different charts and a far greater emphasis on ‘fundamental’ factors rather than ‘technical’ ones.
WINDFALL PROFITS Rule: Whether you intend a ST trade or a LT position, if prices jump hugely (for whatever reasons), CASH OUT IMMEDIATELY for this reason. “Gaps generally get filled”, and that temporary, fat profit will fade away like the morning dew. Later, when the dust has settled, you can re-establish your position if conditions warrant.
Lastly, there are two more rules that need to be added to that list, a rule for ‘sizing positions’ and a rule for ‘When to cut losses?’. But first, I’m going to have to draft 'em and then test 'em. LOL
[later]
CUT-LOSSES Rule: I’m going to weasel out of suggesting a specific rule, because each investor is unique in his/her discomfort when prices move against a position. As has been said before, Wm O’Neil (of Investor Business Daily fame) suggests trailing an 8% stop. Stan Weinstein argues that cut-loss points should be determined by where structural features, such Trendlines, Support and Resistance, are to be found in the chart. The important thing isn’t the exact number or technique used but having a cut-losses policy in place that one follows in a consistent, disciplined manner, so that one doesn’t get thrown out of the game before one has a chance to learn the game.
POSITION-SIZING Rule: This rule, also, is a matter of ‘Chef’s Choice’. But on this, I’ll take a cue from Ben Graham and assert that all investments --stocks, bonds, whatever-- can be binned into one of three ‘risk tranches’ whose characteristics are intuitively understood by everyone and --therefore-- don’t need to be defined or quantified: ‘Defensive’, ‘Enterprising’, ‘Speculative’. (The mutual fund industry and 401k plans use the terms "Conservative, ‘Moderate’, ‘Aggressive’ to the same effect when discussing an investor’s choices.)
Aside: For sure, there will be borderline cases, as there is with any typological scheme. So decide in advance how you want deal with them. (Me? When in doubt, I down-grade.)
As for allocating among those three risk-tranches, I borrow a scheme from an old-time pit trader who would scale into his trades 3:2:1 and then start looking to get out. So I allocate 1/2 of AUM into ‘defensive’ where no single position is ever more than 1% of AUM. 1/3 of AUM goes toward ‘enterprising’ where no position is ever more than 1/2% of AUM. 1/6 of AUM goes into ‘speculative’ where no single position is ever more than 1/4 of 1% of AUM. In short, the riskier I think the bet is, the smaller I size my position. That also means I’m typically carrying a lot of positions. “Bet widely. Bet small.” This is something some (most?) people aren’t comfortable with due to their own personality/temperament. So you gotta know who you are and what you’re comfortable doing.
Next question: Whether to leverage or not? There have been times when the there were so many good opportunities that I was comfortable buying using borrowed money. But by and large, even just becoming fully invested is a struggle, and right now, I’m half cash & equivalents. In other words, I’m seriously deleveraged while I wait for things to shake out. So do what makes sense to you and what is consistent with your own shorter-term and longer-term market and economic forecasts and your own individual household situation.
What time frame do you use on your chart? I’m looking at your system…doc
I looked at your chart and figured it out, thanks…doc
Doc,
Charts with daily bars and a 1-month lookback are easy on the eyes. A 3-month lookback gives a better idea of Support and Resistance. A 2-month lookback is a compromise. But I frequently use charts with weekly bars and BarChart’s default 1-yr lookback.
Thanks for the info. I’ll remember that…doc
Doc,
Charts can serve two purposes: ‘analysis’ and ‘execution’. Typically, the charts useful for analysis have longer lookbacks than those useful for execution.
A useful metaphor borrowed from classic Dow Theory are the distinctions between ‘ripples’, ‘waves’, and ‘tides’.
Found some more penny stocks that are ‘near’ or ‘at-the-gate’ (to use Quill’s phrase.)
ABUS, ACHL, PSHG, WWR, NOGN, NURO, PEAR. Here’s a chart for ABUS.
Notice these things. #1 TSI has turned upward. #2. Price has close above the lower and midline MAs. The Force indicator has turned positive. Whether those trends will carry through in Tuesday’s trading is anyone’s guess. But that’s the smart way to bet.
Some short-term/near-term bond ETFs are perking up. E.g., IBDP, as is the ETf that tracks base metal, DBB.
I’ll be watching them in the morning and trying some paper trades…doc