IT sector stage 1, gathering strength

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dydavo

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Post Number: 55
Registered: 12-2002

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Tuesday, August 19, 2003 - 10:46 am:

It is interesting that there has been little chat on this thread about sector performance.
Stan Weinstein says we should look for breakout stage 2 stocks in a stage 2 sector when the overall market is stage 2.

So I have been paying a bit more attention to this approach, and then use the "stalking" of stocks in the relevant sector to look for either breakouts or buy opportunities after the breakout.
Maybe this approach will be "higher probability" than looking for breakouts in any sector?

I am currently stalking the IT stocks. The sector is gathering strength, the nasdaq has resumed uptrend, and some IT stocks have already broken out, or so it seems to me (??Baycorp, Kaz, CPU). I have only gone long CPU so far (+10%), having missed the initial charge of BCA and Kaz). Plenty of others to watch.
Also watching the biotech stocks (because the nasdaq biotech index is looking like having its "bounce after stage 2 breakout"). Am long CMQ, novogen).

Any comments on the stalking of stage 2 breakout stocks in breakout sectors??

Most of my invested $ are actually in sector markets, rather than individual stocks. I manage my super and non-super $ by following sector trends. In small companies for the last 4 months, out of property a month ago, nibbling at asia funds now.

cheers, dave

snifter

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Post Number: 430
Registered: 11-2002

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Friday, August 22, 2003 - 10:18 am:

Hi Dave

I used to be a fan of sector analysis but since they changed the sectors around I've found that some sectors contain stocks that are unrelated to some other stocks in that same sector. On that basis I feel that sector analysis has lost some of it's relevance.
Nevertheless, if you get a stock that's shaping up well, AND it also happens to be in a bullish sector, then so much the better.

I notice that on the daily BCA chart the current pullback has dragged the ROC below zero...a fact which I'm sure hasn't escaped the notice of an ROC man like yourself.
One more day of retracement would produce the same ROC configuration in CPU.
CPU has strong overhead resistance at 236c that needs keeping in mind - a move through that level, then a pullback that ends above that level, would be a very bullish signal in CPU, and the upside potential could be considerable.

No shortage of good opportunities in the current market, that's for sure.

Cheers,
Snifter

dydavo

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Post Number: 56
Registered: 12-2002

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Friday, August 22, 2003 - 11:48 am:

Snifter,

Good to see you have survived the recent intensity of the MOS forum!

You are right of course. Weinstein talks about identifying trends in casinos, and mobile home sectors, and the current XAO sectors such as IT, Cons. Discr. include a grab bag of diverse stock types.

Have taken profits in CPU, and stop losses in CMQ and novogen. Now riding CSL (took a punt at $14 that we are watching it breakout)
In general though. following the ROC and 15 day slow stochastic with the established trend is doing a fine job for me, and I appreciate your contribution to my education. I am a uni academic, and feel that I have just scraped a pass in TA 001!

Have great day. I used to live in Canberra, and at this stage I was usually desperate for some warmth in the sun hanging over Burley griffin!

dave

snifter

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Post Number: 431
Registered: 11-2002

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Friday, August 22, 2003 - 03:34 pm:

Dave

Yep, no worries about the lads on the MOS thread LOL.
If you go public to try and help people, then sooner or later you're bound to rub someone up the wrong way and cop a bit of flak as a result....you can't please everyone all the time.
Last month I had lunch with a Queensland politician. I met this bloke 20 years ago when we sat at the same table at a wedding reception.
He was a wool grower in western Queensland at the time, in fact he still is. A few years later he ran for council and became shire chairman, then went into politics from there.
We've kept in touch over the years and we occasionally get together over lunch and a beer when he's passing through my area.
He told me that one of the toughest things to contend with in politics is the criticism you cop from some of the people you're trying to help.
In that respect I guess there are some parallels between traders' groups and politics!

Anyway, on to trading related matters.
I note that you're using 15 day Slow Stochastic.
Just a couple of points....
Firstly, you don't think a setting of 15 is too long?
I've started using SS myself as a replacement for ROC, because my software can scan for SS signals but not ROC signals.
I used 10 day SS setting for a start, but then noticed that it was a bit slow to react on the odd occasion. I changed to a setting of 7 days and I feel its doing a better job.
Don't you find that a 15 day setting makes SS a bit slow out of the blocks?
Anyway, check out a 7 day setting and see what you reckon.

The second point I wanted to make is that I feel one indicator will serve you just as well as two. Particularly when the two indicators you're using are as similar in their signals as Slow Stochastic and ROC.
I reckon that if you get rid of one or the other you'll find that it won't really affect the timeliness of the entry signals you're getting.

Anyway, I thought I'd run those couple of points past you as food for thought.
Good to talk to you again.

Cheers,
Snifter

dydavo

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Post Number: 57
Registered: 12-2002

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Friday, August 22, 2003 - 04:28 pm:

Snifter,
I do love the SS, (where did I read the phrase "fantastic stochastic"??) and I use the 15 day signal line because in IC I can do a search for the 20/80 crossovers. The 5 day SS gives a lot of whippy signals, and I find that the most reliable 5 day trends are those that are accompanied by the pullback, and then reestablishment of the 15 day SS trend.
Anyway, I'll pop the 7 or 10 day SS on the charts now and see what it looks like.
Good day today for SUN and CSL.

cheers

dave

kbarton

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Post Number: 11
Registered: 09-2002

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Friday, August 22, 2003 - 07:53 pm:

snifter & dydavo
Interesting to read your posts re sector performance. I have some positions in health care (MAY & GGL), and hold CPU, and looking for other opportunities in IT. I don't know much about SS, so will read up on it.

Ken

justice

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Post Number: 126
Registered: 01-2003

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Friday, August 22, 2003 - 10:49 pm:

Snifter,
I had to play with the ROC periods to achieve a result as you described above for BCA, CPU.
Are you using a 5 day ROC smoothing for BCA?
If so , is this a setting you would use for specific stocks or all? Is there a simple rule to help select the most suitable averaging period to use?

Cheers, Ice.

justice

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Post Number: 127
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Friday, August 22, 2003 - 10:54 pm:

Sorry,

I shouldn't have used the words smoothing or averaging in my last post. As the ROC equation appears to simply refer to the price [n] days ago, rather than an average of the previous [n] days.

ROC:
Momentum / Closing Price [n days ago] * 100

snifter

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Post Number: 432
Registered: 11-2002

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Saturday, August 23, 2003 - 01:15 am:

G'day Ice,

I've never heard of any way of smoothing the ROC.
I suggest a 5 day or 7 day ROC setting for use with daily charts.
Or if you're using weekly charts, try a 4 week ROC.
These figures are not set in concrete - do a bit of playing around with different settings and you'll soon come up with one that gives reasonable signals most of the time.
There are no simple rules for selecting the most suitable setting...its a case of trial and error.
I don't think its practical to use different settings for different stocks....just try to find a setting that does a reasonable job of signalling timely entries on most stocks most of the time.
Momentum based indicators obviously work best in trending stocks, so a stock needs to be assessed as to it's suitability for being traded with a trend following system.
I always look at not only the present behaviour of a stock, but also its past behaviour to find out if it tends to be a good trender.
If it has a history of choppy price action I prefer to leave it alone.

ROC is a handy indicator, but it's limitation is that it has to fall below or rise above the zero line to give a signal.
The retracements during strong trends are sometimes not sufficient to move the indicator through the zero line, in which case it won't always give you a signal at the appropriate time.
Nevertheless, it does a pretty good job most of the time.
Stochastic can give a signal just by %K crossing above %D (long signal) or %K crossing below %D (short signal) regardless of what level its at when the crossover occurs.
This is how I scan for Slow Stochastic signals - I base my scan on the crossovers of K and D, without making any reference to the level of the indicator at the time of the crossover.

Of course you don't need to look at an indicator to identify the retracements - you can see them
just by watching the price action.
But an indicator is still mighty handy as a visual reference guide, and is particularly handy as a scanning criteria.

My two main scanning criteria are Slow Stochastic K crossing through D, and Pivot Points.
These two signals frequently show up at the same time.
Either one or both of these signals will show up at almost every turning point in the price action.

Cheers,
Snifter

gundy

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Registered: 06-2003

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Saturday, August 23, 2003 - 06:36 am:

Dave&Snifter,

I have enjoyed your discussion on SS,I,m currently trialling Elders Triple Screen system using SS as the oscillator (second screen).Keep up the good work!

Cheers,
Gundy

williamat

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Saturday, August 23, 2003 - 09:39 am:

Snifter and DYDavo, I used to bemoan the lack of facility on IC to piont up daily crossovers of SS 20 day 70/30, but decided there had to be a moving on. To this end I now scan for 5 day but have 20 day chart on my screen, hence I occasionally get same day 20 day crossovers.(XO) For me, SS XO has to be accompanied with the first or second day rise of MACD Histgm.
Your recent discussion has moved me to study the shorter periods that you mention. I'd be grateful for your comments. Snifter if it's golf that is luring you I understand.
I really appreciate this forum, Best Wishes, Bill.

snifter

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Post Number: 433
Registered: 11-2002

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Saturday, August 23, 2003 - 10:03 am:

We seem to have wandered off topic a bit....this is meant to be a thread for discussion of sector analysis. Not to worry...the quality of the information is of more importance than ensuring that we always present it under the correct thread.

With regard to entry signals from SS etc, I guess I should have mentioned the obvious - that I take SS crossover signals and pivot point entry signals only in the direction of the trend, and only when weekly and daily trends are in the same direction, and only in stocks that are trending in the same direction as the All Ords (for Aussie stocks) or S + P 500 (for US stocks)

When assessing the trend of the All Ords and the S + P, I have the same requirements as I have for individual stocks, i.e. both daily and weekly trends must be moving in the same direction.

In summary...

* Identify the daily and weekly trends of firstly the overall market, and secondly the stock.

* Then use indicator signals to enter in the direction of the trend, and just go with the flow.

These things are of critical importance to your trading results.
If you can master these simple techniques, and combine them with good money management and sound exit strategies, you can trade very profitably with very little input of time and effort, and no reliance on outside information from brokers, newspapers, company reports or TV financial programs.

Snifter

stan

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Post Number: 61
Registered: 10-2002

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Saturday, August 23, 2003 - 01:53 pm:

Snifter, thanks for the write-up on ROC [even if it is in the Sector/SS/Elders Triple MacD Pivot thread].

Hi All

I'm trying to use ROC in a system now and found Colin's Help-Pages really informative. He suggests there are two ways to use ROC, one for Ranging markets and another method for Trending markets.

i'm hoping that using both methods will negate that problem of ROC not slipping below the zero line on retracement.

Here's the link (cut 'n' paste) from the horses mouth:

http://www.incrediblecharts.com/technical/rate_of_change_(price).htm

Also, an example of Ranging ROC in action

sig

Note the price-ranging in May '03 period, an oversold line can be drawn on the ROC at 5% [where the previous ROC trough was.]

The ROC goes below that line- and then crosses back up for a buy signal on 12th June, while all the time staying above zero.

My system will have two separate Indicators;
ROC Ranging and
ROC Trending

BTW, i haven't fully back-tested these, but the concept appears sound, fairly reliable with the trade-off of triggering only a few set-ups and missing the rest.
The SIG example is just that, i don't own it.

Thanks Stan

Tag....who's got the next "Sector" topic.