Thursday, April 29, 2010

Gold | Gold Miner Stocks

As the world wrangles with trying to determine what is "safe", gold is yet again in the spotlight. I don't plan to tell you what I think that gold is going to do...but it is worth noting that the USD is up and gold is up. That says much.

I do plan to help you scout for some opportunities. Let's take a look at the chart of gold with an integral window of the metal divided by the gold miner sector. As you can see the ratio is sloping downward: miners are performing better than the metal.

And, for your reading enjoyment, I prepared a chart book of the miners for you. It is in weekly format, so that you can see a longer term view. You can download it Some of these names (see SA for example) are extended, so prudent trade strategies (e.g. do not chase) are warranted.

Positions: No stocks mentioned, but author is long GBG.

Tuesday, April 27, 2010

Utilizing Price by Volume Bars for Trade Strategies and Ideas

I have simplistic charts because I have simplistic methods. I want to share with you a trade technique that I use that I've found to be very successful. One way to look at the complexion of a chart is to utilize volume by price bars. Before launching into more narrative, let me put up a chart:


A few key points:

  • The stock has made a significant relative high

  • The stock has traded in a 2-month range with very high volume during this time frame.

  • It has a 6% short float over the past couple of months.

When I look at this chart, I see instability in the current price range. If the chart were flipped, I would find that long volume by price bar as being very stable, and I've enclosed an example of that for you. At its current price range, this chart looks very top heavy to my eye. The short VbP bars are like an air pocket--a vacuum if you will. This stock price could hit that air pocket and fall to the $43 area quickly.

This might be a stock that you might consider putting on a watch list as it might be at or approaching an intermediate level to short. My point is not to recommend this stock as a short, but rather to demonstrate how looking at volume by price bars can give you a dimension of information that is not otherwise readily apparent.

Here's another chart, COST, that has another promising (VbP) configuration:


Remember, this set up works on the long side too. Here's a chart of FTWR, as stock that I have a long position in.


I want to share one last chart with you. It is a Renko chart. I posted a link to this chart back when I originally created it in September, 2009 of the NYSE composite. I believed the lack of VbP air pocket above would suck the price upward. (I note that I could have easily been wrong, but this chart was part of my 'weight of evidence.'


There are no sure things when we look at charts, but VbP information adds a dimension to your chart review that may help you see opportunities and/or hurdles that you might have missed without the volume profile

Position: long FTWR.

Sunday, April 25, 2010

Weekly Sector Update: 04/23/10

Below is the summary of the 24 Broad Sectors. You can find the detailed chart book here which contains:

  • A table of the 164 sectors sorted from best to worst performance
  • A graph of the 24 sectors (below), to show a visual of these sectors compared to the total market sector in blue
  • Weekly charts of the 24 sectors followed by
  • Daily charts of the 24 sectors

All data is courtesy of | Presentation is courtesy of me

Sunday, April 11, 2010

Weekly Sector Update: 04/09/10

Below is the graph of the Dow Jones (24) Sectors for the week ending 04.09.10. The broad market sector advanced 1.5%. For the Dow Jones (164) sectors, 136/164 sectors were positive--particularly strong were the basic resources sectors.

You can find the chart book of the 24 sectors here presented on a weekly and daily basis in addition to the full listing of the 164 sectors here. I want to encourage you to look at the individual chart books to include the ranking of all 164 industries because that detail has granularity that can be instantly absorbed. For example, the top/bottom 5 sectors were these:


(I see that I have 6 top sectors!)

By looking at the individual subsectors, you can pull charts of individual constituents and using your own TA methodology make some decisions about potential trades.

Market lore is replete with both wisdom and pablum. Unfortunately, some of us (me!) have to learn the hard way how to differentiate between the two. I subscribe to the notion that any stock pick that I have is going to be governed in general as follows:


This model is my mental model that serves as the core of my evaluative process. A few questions one might ask are:

  • The market and sector are weak, but this stock is strong. Why? (Could be exciting news such as an earnings report or a new product development.). There might be a long or short opportunity depending on your evaluation of the catalyst.

  • This stock is weak but the market and the sector are strong. Why?Maybe there is a short opportunity or perhaps it is in undiscovered gem. A cursory look into the matter might prompt you to put it on your watch list.

  • This sector is strong, but the market is looking weak. The market could be undergoing sector rotation. Indices may consolidate, but underlying sectors will shift up/down. Finding leaders within the sector might be helpful for identifying opportunities.

A very quick way to look a stocks is creating a ratio of the stock price to the sector that it is in. For the 24 sectors charts, I provide the sector information for you and it's relative performance to the broad market index.

Here's an example of a gold chart:


The bottom part of the chart shows THM's relative performance to all of the miners. Telling, isn't it?

I highlight these points is to encourage you to develop YOUR modality in looking at the markets and stocks within the market to make informed decisions that meet your risk tolerance and time horizons. When you have a well-developed methodology, then you are informed by the opinions of others, not influenced (read: derailed). I may be a slow learner, but it took me a few years to settle on my current methodology. It suits my style, and your mileage might vary. Test drive the cars that you need to and undertake the required care and maintenance to optimize your driving time.

Note: No positions in stocks mentioned by name.

All data courtesy of Stockcharts | Compilation courtesy of me.

Sunday, April 04, 2010

Weekly Sector Report: 04/02/10

With this report, I plan to migrate from a table presentation to a graphic presentation. I'm leading with the monthly change as we just closed a month. I have colored the total stock market index in blue so you can see that as an easy comparative. I hope you like this new format. Click on the image to make it larger.


You can find the detailed report here. It includes all 164 DJ Sectors, the weekly, daily and monthly charts.