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).