Tuesday, July 28, 2009

More on volatility

I wanted to expand a bit more on my volatility focus.  Again, this focus is new for me, but one that I’ve been employing with some success.  Below is a chart of SNEN.  I entered this position when volatility was low.  I’m looking at the %B (in light purple).  The scale in on the left.  You can see the unsustainability of moves above 1.  I marked the top of the %B along with the tops in the chart. 

Now, this is a cheap stock that any normal person ought not be trading.  But I’m not normal, and I like to find these. As you can see these moves (and these are daily candles) are huge as a percentage.  I sold this stock into the surge a day or so ago for $2.  I re-entered at $1.70.This chart is making to my eye a pretty decent basing pattern.  Further it is in the compressed natural gas (stations and converters) in China. 




SPRD is another name that I was in. I sold it today at $3.10 with a $2.62 basis.  @ 1.20 %BB, this move on huge relative volume is unsustainable (though it may show otherwise!).  These Chinese small caps are very much like Chinese firecrackers. 



Another example of a stock that made my year in 2007.  Against all sound advice, I do not diversify, but you wouldn’t expect me to, would you?  I was NOT using any volatility measures at the time.  I did have the presence of mind to sell into the rocket ship upwards.



Timothy asked a great question in the comments section about the interface of RSI with %B.  I wished I were as smart as the real technicians.  Admittedly I know enough to be dangerous, and perhaps these tools in my hands are the equivalent of a toddler handling a gun. 

I am a tenacious student, though.  And as I reflect, I’ve been dong ‘this’ consciously, now, for almost 4 years.  And…I’ve been 90% of the money managers in a difficult market. I’ll take that as progress.  (Admittedly, I do not know if the 90% is correct or not, but I suspect so).


Anonymous said...


So, now that it's Sunday night and the "TA" talk has died down, let me seek your opinion on the current rally.

Personally, I don't think it ends well for the bears. Which is to day it doesn't end until shorts are forced to cover at catastrophic levels.

I have no supporting data to back up my hunch. I have never witnessed such a large scale bear trap before. Nor have I seen such stubborness on the part of bears. (Of course, blogs have only been around a few years, and the level of participation in them has increased markedly recently. So that may account for part of my impressions.)

I don't like to come right out and state my sentiments on the larger blogs, as (a) I don't want to get drawn into long arguments, and (b) I may be wrong ;). But I'm concerned at the level of conviction traders have in a sell-off right now.


Anonymous said...

No option to edit comments.

Which is to [say] it doesn't end until...

Leisa said...

2nd....I'm going to write a post to answer your question.