Blast from the past. I was looking for a list of teeter totter stocks and found a link to Saul’s Discussion Board from Feb 2016. It was a thread on ABMD earnings and @Quillnpenn was berating everyone for wasting their time with that methodology. It was a big long scribe and did have the list of TeeterTotter ETFs. The next post was ME just talking about earnings. The next post was @Arindam
What are the odds.
ABMD earnings - Investment Analysis Clubs / Saul’s Investing Discussions - Motley Fool Community
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Pudding,
Much thanks for that ‘blast from the past’.
I wouldn’t change a word of what I wrote then, namely, there’s no magic in any set of indicators, parameters, or trading systems All are just tools that can be effective for them who do the work of learning their strengths and limitations and who use those tools when and how it is appropriate for them to do so.
Alex Elder makes this point in his book on Trading for a Living. He argues that investing/trading success is a matter of getting this trio right: Money, Mind, Market. Jake Bernstein makes the same point in his books. Jake Schwager in his. The personality of the investor or trader matters, and a method that might work for one will put another into the poor house.
It’s easy to become envious of the market success of others and to fool oneself into thinking one could do the same if only they would just show us how. But I’d argue that investing (or trading) beyond the basic mechanics can’t be taught. It can only be learned, one trade at a time, if ever, which is why most people should run the other way when someone pitches Modern Portfolio Theory to them and promises easy riches. If investing or trading really were so easy, we’d all be poor, because there’d be no profits to be made from the mistakes of others. That’s the question most would-be investors/traders fail to answer for themselves:
"Why is the opposite side of my trade wrong about the direction and timing of prices and not me?"
Charlie
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I have discovered something with the SimonSez charts that worry me. Here is the 2 month chart for FIX. I have marked it with a “B” at the Simon Sez buy point.
So, I could show you this chart and teach you that at the smiley point you would want to buy at the next green bar. Then I would say “look how successful that trade was”
But, then I discovered that if I rolled the 2-month chart back towards that date of this smiley, the smiley thus the buy signal disappear. They did not exist at that time and you would not have made this successful run. That means you could not use this chart or many like it to teach the SimonSez “Joan-of-arc” approach.
Am I wrong? How can this system work if the buy and sell signals are not there in real-time but get added only when the chart rolls forward. I think my brain exploded. Please help.
Pet
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Sorry Pete, Those are your rules and your chart set up per Quill. But according to my chart and my rules I wouldn’t have bought that till the next day when the TSI line crossed. Now I like the smileys and frowns also but use them as secondary indicators. If I have a smiley and the TSI crossing I see that as a real strong indicator. But that is just me. Looking at that chart I never would have bought back in because I would wait until a smiley and tsi crossed. That is what a choppy chart will do for you and a choppy market. You don’t have to buy until everything is aligned.
Andy
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The argument for years (literally) has been that “smiley faces” and "frowns,’ are simply highs and lows, not indicators. Similar to the proprietary Stockcharts labels, which are strongly related to highs and lows. They all repaint. Dejavu all over again. Confirmatory signals rule but just seem nebulous.
Lakedog
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Pete,
Not only do the hi/lo flags repaint as a chart is advanced, the flags are planted (and replanted) on the basis of the low or high for that day compared to highs and lows for the lookback period. But those lows and highs are often extreme, single-trade prices and not very indicative of where the majority of the action for tradable was happening. (If you want to see where the lows and highs are, --hence, Support and Resistance-- use the body of that low/day day as the basis from which to project a horizontal line.)
However, consider this fact. If you buy after the planting of a flag (if the change of trend is confirmed, hence, Quill’s ‘Wait One’ day) and sell after the planting of a flag (again, doing the ‘Wait One’ day) , you’ve guaranteed that you bought and sold very close to the low and high of the lookback period.
That insight was a stoke of genius on Quill’s part. Kudos to him for that. Kudos to him also, because he can make the system work for him. Using charts I preferred, I couldn’t make the flagging system work for me, and I dropped trying to use it.
However, with the new chart template I’m developing, the high/lo flags make sense. In fact, they become almost indispensable, a point that Andy makes. The flags are useful if other elements in the chart confirm their implied signal.
Lastly, I’ll make one further point. The charts one uses for ‘analysis’ might not be --and they aren’t likely to be-- the same ones that one ‘executes’ from. For ‘analysis’, what is needed is a chart whose vote --yea or nay – is so clear that a six-year could say what to do in one second, which is the pitch Quill makes about his Simon Says system and has his nieces and nephews confirming that.
‘Analysis charts’ need to be clean and simple, and they need to do the work for you. ‘Execution charts’ are a whole 'nother matter. They typically carry more information, and they require engagement and thought.
Charlie
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Pete and Andy,
thanks for this thread. A lot of what I have learned the hard way you two through this discussion have covered. When I first became interested in this SS technique, the explanations that Quill gave were not clear to me and there were things that I learned through experience that were not explained. One important thing was the repainting of flags or smiley faces. At first that was confusing to me, but now it is clear. You and Andy explaining different things about SS has really been clarifying. Charlie was always a good resource too. Really appreciate you all. Also, I use the SS rulez to follow the Saul thread for buying and selling. I don’t need to say anything else about the Saul guys because I know you all frequent that forum regularly enough.
thanks again…doc
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Doc I always thought Quill was running around trolling everyone until Charlie started explaining what he was saying. LOL. Quill would pop into a forum and spout something about Tetter Totting and I would say to myself that sounds interesting but what the hell did he say. But after working through it all with Quill and Charlie, then thinking about it and reading books it started to make sense. Not saying I know very much but it did become clearer.
Andy
Still reading.
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I think Quill is one of those guys that knows something in such detail that he assumes others know more than they do, which causes his explanations to be missing something we need. As a software nerd, I know that feeling. My long-time colleague and I could have shorthand discussions with each other that we totally understood, but everyone else was like “huh!??”
So, maybe this is the way to say it. Running a 2-month SS chart means that you are waiting for the lowest price in the last 2 months and then a green up bar. When waiting to sell, you are looking for the highest price in the last 2 months and then a red bar to sell. (This is the simple Joan-of-Arc approach with no moving average.) Whatever is in the rear view mirror doesn’t count - it may be closer than it seems as they say. We can only look forward and wait.
Doc and Andy. Do you track your SS buys against the S&P? Some smart guy at MF created a Google sheet that will do that because David Gardner placed a lot of importance on that. This is especially helpful if you don’t separate your SS trades in a standalone account that can be tracked. The Sheet is not helpful for tracking the effects of being in cash while the S&P goes up or down.
Pete
I track my portfolio against the S&P but not each trade or investment. My trades I track on whether they win or lose because I am not in them that long. But they still provide cash into the portfolio. So I don’t go that granular.
Andy
HUBS is a buy if you use TSI crossover, it is a “wait until green bar” if you use Joan-of-Arc. What say ye?
From an IBD point of view, it appears to be building a base on base and IBD folks will often talk about taking an early entry on certain signals, one of which is a big jump above 50dma on strong volume (the case now).
Two methodologies saying buy?? (I am sure you can find two that say don’t buy).
Pete,
If you’re looking for confirmation bias, it’s easy to find. Here’s the result of throwing a basket of trading systems against HUBS to see what sticks. (Done with StockAlyze.)
But the charting/scanning program I trust (Candle Power Plus) --and old-fashioned tape reading-- says that HUBS has already made its move and that it is of no present interest to someone using any of Quill’s trading systems.
I could be wrong about this, of course. But I never chase prices, and my expectation is that today’s gap up will get filled back down to previous support.
Charlie
According to this chart, that I use of Simon Sez, that is a buy. Smiley face, Green bar, TSI cross over. I would have bought this today and put a tight stop on it. But tomorrow you will be one day late.
Andy
I think its a buy. The TSI is a confirming indicator. What I like about SS is that if you follow the rules, you can catch most of the rise in a stock price and miss most of the drop. Its not 100 percent as Quill will claim, but most of the time you can make some profits and catch 80% of the rise. I use tight stops on the purchase until the stock starts to run and then I loosen up to 5% or 10%. My rule number one is minimize your losses…doc
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If one is trying to buy stocks that might be a good investment --as opposed to being merely a quick trade-- then HUBS seems to suck majorly. (I cribbed the following from WallStreetZen, which runs a fundie checklist similar what Simply Wall Street offers.)
HUBS is unprofitable.
HUBS is poor value based on its book value relative to its share price (20.75x), compared to the US Software - Application industry average (6.33x)
HUBS’s Earnings (EBIT) of -$110.16M are insufficient to safely cover interest payments on company debt ($774.06M)
HUBS’s revenue is forecast to grow at a rate of 16.06% per year, which is not exceptional
HUBS’s Return on Equity (-10.5%) shows a company that is not efficient at transforming shareholder equity into returns
HUBS is generating lower Return on Assets (-4.5%) than the US Software - Application industry average (4.75%)
HUBS’s ability to generate Return on Capital (-4.93%) has decreased compared to 3 years ago (-3.13%)
OTOH, if you look at their balance sheet, Receivables more than cover Payables, just as Current Assets more than cover Current Liabilities. That’s A Good Thing. But Retained Earnings are hugely negative. Operating Cash Flow is down from prior quarters. Investing Cash Flow is negative. They are raising money from issuing shares. That means ‘shareholder dilution’, Not a Good Thing. Free Cash Flow is down compared to the prior three quarters.
In short, HUBS’s financials are a mixed bag, as is its chart. I’d rate the stock as AVOID.
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Charlie, the HUBS earnings look pretty good to me…
Sales have been growing in the high 20 precents, not meeting the 30% threshold, but not bad. I would never judge a growth stock on book value.
IBD show ROE at 27% and EPS Growth rate of 42%. Very strange divergence of data between the two sources.
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Pete
Are the divergences in the fundamentals in those two reports a reason to dig deeper before buying or a reason to back away without even bothering? Given that there are 5,000 plus stocks that trade on the major exchanges, plus another 6,000 that trade OTC, it’s not as if HUBS is the only girl at the dance.
Also, I did this. I pulled HUBS’s 153 supposed competitors --according to BarChart-- and ran those stocks through my scanner using two different setups. Fewer than 6 were picked out as worth a second look on a technical basis.
Weinstein’s pitch was always this. “Be buying the strong stocks in the strongest sectors.” O’Neil makes the same pitch, right? But the sector isn’t doing well, just as most of the market isn’t doing well, for lots of obvious reasons.
Don’t be persuaded or dissuaded by what I say. If HUBS looks like a ‘Buy’ to you, then go for it. But I think HUBS is headed sideways to down.
Charlie
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Charlie, If I believe the past earnings and sales are incorrect, and that the estimates from FactSet are incorrect, then I have to through out all of IBD and believe it is wrong on 5000 stocks as well. Second, HUBS can’t possibly have 153 competitors.
True, O’Neil does say select the strongest stocks from the strongest groups and HUBS is in group 67 of 197 (it was 71 in the screenshot in previous post, but seems to have changed this morning). So the group is a bit weak. I am probably a little biased toward HUBS because I have a log-term position from an MF rec that is up 850%, so maybe I let myself get too loose with my criteria.
Pete,
This investing/trading stuff ain’t no different than fishing. Everyone will their own favorite waters and methods. You like IBD and O’Neil’s methods. I prefer a combo of Ben Graham and Jesse Livermore. Such is the world.
Charlie
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“However, with the new chart template I’m developing, the high/lo flags make sense. In fact, they become almost indispensable, a point that Andy makes. The flags are useful if other elements in the chart confirm their implied signal.”
Charlie - could you please post the new chart template you are developing? I would be interested in seeing where your analysis is leading.
Mike
