Wednesday, 28 June 2017

Market Stages and Emotional Cycle

Always know where you are in the market cycle.  Three trend definitions:
A. Primary trend - Use about two years data and draw a line, touching the troughs (low turning points).
B. Intermediate trends - Using channels to highlight them and within
C. Short term trends like the red lines.


Pick-N-Pay is a text book example trade

All stock has a four cycle stage: Love It, Hate It and Somewhere in Between.  Similar to the economic cycle, which consists of: expansion, peak, decline and recovery, stock can be categorised into four different stages. These stages are:
1. Accumulation – Accumulation follows a period of decline; it is the process of buyers fighting for control of the trend. It is a neutral period marked by contraction of price ranges that offer no tradable edge for a trend trader.
2. Markup – Once buyers have gained control of the stock and pattern of higher highs and lower lows has been established, the path of least resistance is higher.  It is a bull market and traders should be trading the long side aggressively as price expands higher in search of supply.
3. Distribution – After the market has exhausted the majority of buying demand, sellers become more aggressive, which turns the market neutral.  This period of price contraction precedes a decline.
4. Decline – When the lows of stage 3 are breached, price expands to the downside in search of demand to satisfy the aggressive supply being offered.  The pattern of lower highs and lower lows is the hallmark of bear market, and the only appropriate strategy for a trend trader is to sell short.



Trend traders always focus on being long the stage 2 stocks and short the stage 4 stocks, avoiding the neutral stage 1 and 3 stocks.  An uptrend is defined by a series of higher highs and higher lows while a downward trend is defined by a series of lower highs and lower lows. Successful trading is all about finding an edge and exploiting it for your gain. If we can’t find such advantage, there is no reason to be involved.

In more detail:





@Duplo123

Saturday, 24 June 2017

How to find a reliable stock, not letting you down

To find a stock in the sea of markets


This is always the question where do I start finding a reliable stock, not letting you down?


The only way in proceeding is the top-down method. Let me try simplify and explaining it. OK, let's start with this: The JSE stock market, have listed companies (All listed shares on the JSE) and it's grouped into sectors or indices.


Different type of indices:
•Broad Market Indices
•Sector Indices
•Strategy & Thematic Indices



Indices can serve as:
•Economic indicators
•Performance benchmarks
•The basis for index-linked investment products
•Tools for research & analysis



To more simplify and be specific, we can focus on the following indices:


Market Indices
•J203 ALSI



Broad Market Indices
•J200 Top 40
•J210 Resources
•J211 Industrial
•J212 Financial



Sector Indices
•J150 Gold Mining, J150 ANG CRD DRD GFI PAN SGL
•J153 Platinum Mining, J153 AMS IMP JBL LON NHM WEZ
•J173 Forestry & Paper, J173 MND MNP SAP
•J235 Construction, J235 AEG AFT ESR GRF MUR PPC RBX WBO
•J533 Food & Drugs Retailers, J533 CHP CLS PIK SHP SPP
•J537 General Retailers, J537 ADH CMH COH CSB HSP ITE LEW MRP MSM TDH TFG TRU WHL
•J540 Health Care, J540 ACT AIP APN AVL LHC MEI NTC
•J560 Telecommunications, J560 BLU HUG MTN PNC TKG VOD
•J835 Banks, J835 BGA CPI FSR NED RMH SBK
•J857 Life Insurance, J857 CLI DSY LBH MMI OML SLM



In our process to find the one-and-only stock, using the top-down method, we will start analysing the Market or Broad Market Indices. We need determine the market’s direction. The easiest way doing it: Looking at the chart on a weekly scale, using a standard MACD indicator and while the MACD is above the signal line or the histogram is above the 0 line the market is defined bullish or in an up trend.


Using this same charting setup and run through all the Sector Indices. You can create a Watch List group including all indices, this will make life very easy.  Then find the best looking sector between them.

Switching back to a daily chart and with your favorite charting setup.  Zooming into this good looking Sector, we need to scan through those stocks and after that pick one of the best stocks in the best sector. This will give you a reliable stock, not letting you down. 

Using the above information and create Watch List groups for these ten Sectors and add the related stocks to them.


Consider the merits of the top-down approach for a moment. Let’s say you have correctly pegged the direction of the market, and it is rallying. In addition, you’ve successfully identified one of the best sectors, and it is  also  rallying.  Plus,  you  have  picked  a  strong  stock  in  one  of  the  best sectors. It would be difficult for your stock not to go up. Look at all the factors  favoring  your  trade.  The  general  market  trend  is  pulling  up  your stock, and the sector is also adding to the upward momentum. You have put the odds decidedly in your favor.


The goal of every trader is to make trades in which risk is the lowest and profit potential is the highest. The optimum opportunity to make such trades is when the market is at an extreme bottom and starting to rise.

To identify these trades, you must undertake the correct analysis, to identify bullish setups. These analyses must come first in order to have the  “wind at your back” — the most favorable market conditions. You cannot engage in sector analysis and stock analysis until you have determined that the overall market is in your favor (thus putting the wind at your back). Otherwise, the reliability of the signals generated by sectors and stocks will not be as accurate.


Once you know the market conditions are ripe for making a trade, you can buy virtually any stock and most likely it will be a profitable move because, as the saying goes, a rising tide raises all boats.

At this point, let’s quickly review the three steps of the top-down approach:
 1.    Find the direction of the overall market. 
 2.    Select the best sectors. 
 3.    Find the strongest stocks in the best sector.

Using Performance Comparisons to Find the Strongest Sectors and Stocks.

This line chart of the Gold Mining stocks displayed together, so that a trader can see the performances of each compared to the others. The stock that stayed near the top of this chart performed the best from the September top to the decline at the December bottom. These ones would likely be the ones to buy for the next rally phase.

 


The current index comparison status at 24 June 2017 looks as follow, with the Forestry and Paper index clearly outperforms:




Finding the stock, Sappi is the one who outperforms.


Zooming in on Sappi  more....


 
Trade with caution as the markets are very unstable and uncertain.
@Duplo123 or join us on Skype





SAP

Sappi is a global company focused on providing dissolving wood pulp, paper pulp and paper-based solutions to its direct and indirect customer base across more than 100 countries. We produce approximately 5.7 million tons per year of paper, 2.4 million tonnes per year of paper pulp and 1.3 million tonnes per year of dissolving wood pulp.  more....

This stock is one of the market performers and trading in an uptrend. Though, the thing to note is the good risk-to-reward ratio if traded. Stepping through it, we notice the Stochastic indicator (A) is oversold and the stock price has found support on the trend line (E).  A kicker false break at point B, printing the new low and turning point. This price level is loved by traders as its confirmed by the volume peak at point C.  Looking at the centered five day moving average, at point D, it's noticeable that the trend has changed, as it start pointing upwards.

 

How to trade: Use a stop loss or exit point just below point B. Buy in at the break of the resistance line at point D.  This will give you about 450 per share at risk.  Use 1% of your available portfolio capital and divide that by the R4.50 to determine the amount of shares to buy.   Once the stock price is moving in your favour and you are in the money, you can increase your position as well to reap the benefit of a well planed and executed trade.

Also read How to find a reliable stock, not letting you down: more...

Remember: Money management is more important than to be right or wrong. more....

Your goal is to be around forever making money with trading, therefore the best way you can go about that is by making it hard to be knocked out.


Trade with caution as the markets are very unstable and uncertain.
@Duplo123 or join us on Skype
 

Thursday, 15 June 2017

APN

Aspen is a global supplier of branded and generic pharmaceutical products as well as infant nutritional and consumer healthcare products in selected territories.
 
The stock price has found some support at previous price levels and traded strongly back on high volumes (B). Now forming a higher low on the positive trend line (C).  The Stochastic indicator confirms the change in price sentiment.  Continuation may result the price back at the pivot point 29021 and the resistance R1 30900.
 
 
Trade with caution as the markets are very unstable and uncertain.
@Duplo123 or join us on Skype

Saturday, 10 June 2017

S32


South32 is a globally diversified metals and mining company with a portfolio of assets producing alumina, aluminum, coal, manganese, nickel, silver, lead and zinc.
 
Looking at this stock price chart the following remarks: The price has traded in a down channel (C & F) and has found support at point B. This is to note, spot-on the lower trend line of both long and short term trends, as well as the Pivot Point support.  The price has changed direction with confirmation of the Stochastic moving higher and the divergence (A & C).  A break at (E) can set the price to reach the next price levels 2700 and 2964, with a midpoint at 2830.



Trade with caution as the markets are very unstable and uncertain.
@JurgPieterse or join us on Skype

SLM

Sanlam is one of the largest established financial services groups in South Africa, providing financial solutions to individual and institutional clients. It has a primary listing on the JSE and a secondary listing on the Namibian Stock Exchange.
 
Current price action is supported with big, increasing volume (B) and a successful test of the trend line support (C). With the oversold Stochastic (A) start pointing upward and a break of the short term trend line (D), might result that the price will return to the Pivot Point at 6971 or previous highs at 7100 price levels.

 
Trade with caution as the markets are very unstable and uncertain.
@Duplo123 or join us on Skype

Saturday, 3 June 2017

MEI

The Al Noor Hospitals Grp plc - MEI is trading in a channel and currently the price at the lower trend line. On Friday, 2nd June 2017, the price has retraced and form a Hammer candle.  The Stochastic indicator is at over sold levels, but the volume still not confirming a trend change.  This is surly a stock to be watched closely.
 

Trade with caution as the markets are very unstable and uncertain.
@Duplo123 or join us on Skype

ANG

AngloGold Ashanti conducts mining operations in Africa, North and South America and Australia, and undertakes exploration activities in some of these jurisdictions and in other parts of the world. In addition, the company is involved in the manufacturing, marketing and selling of gold products, as well as the development of markets for gold. At certain of its operations, AngloGold Ashanti produces uranium, silver and sulphuric acid as by-products in the course of producing gold.
 
Looking at ANG share price action, we noticed that the price has tested the new monthly support S1 and retraced sharply back to point D.  This new low and in conjunction with the previous low (C), formed bullish divergence with the Stochastic indicator (A).  Looking at volume, we see an increase in volume (B) and the price Pivot Point confirmed by point E's volume peak.  With all these information, we just might start to keep an eye on this stock. Remember these are the triggers and we have to wait for more confirmation on a possible trend change.
 

Trade with caution as the markets are very unstable and uncertain.
@Duplo123 or join us on Skype