# Novice ask of TAs/FAs re growth [non-resource] stocks



## Muschu (24 May 2008)

In such a volatile market it seems very hard to locate non-resource stocks that can "hang on", let alone grow.  I don't need to even mention those that have done the opposite and plunged to extremely low levels. 

Putting aside, for the moment, the arguments for holding cash:

I've had a layman's look at recommends [which don't seem to offer much value], target prices [which are often contradictory to one another or to SP performance], P/Es, dividends and basic charts in relation to a number of stocks.

On those grounds I can find little to consistently support companies such as COH, BXB, SHL, TSE, NWS, LLC, CTX - and a number of others.

I "think" I can find better evidence to support TLS, CSL, LEI, WOR and CPU.

Also I am wondering is there is any consistency of view between TAs and FAs [being aware that some of you may place strong emphasis on both] concerning the abysmal recent performance of TOL.  The charts would seem to suggest it's down the tube.  Does a fundamental analysis support this view?

Just posting my idle Saturday morning thoughts.

Thanks for any response and comments on these or other stocks.  

Rick


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## motorway (24 May 2008)

> Also I am wondering is there is any consistency of view between TAs and FAs [being aware that some of you may place strong emphasis on both] concerning the abysmal recent performance of TOL. The charts would seem to suggest it's down the tube. Does a fundamental analysis support this view?




Hi rick Following on from that e-book

here is a TOL chart

Can you see where the behavior changed ? ( important )

Also while I have marked some important aspects
I have left the chart fairly clear.

motorway

This chart would be just a starting point.

(I have had to reduce the size to fit enough history in)


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## motorway (24 May 2008)

> I "think" I can find better evidence to support TLS




TLS


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## motorway (24 May 2008)

CSL

So Three good examples 

motorway


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## motorway (24 May 2008)

COH

is this a growth stock ?

you would want the very interesting sideways congestion
to be re-accumulation

but is it ?

motorway


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## Muschu (24 May 2008)

Ouch - I really need you to sit down by my side to have any idea of these charts MW... I have almost done the Etrade tutorials, have read the first 20 pages of Weinstein's book and will have to go looking for the link you gave me before. [sorry].
Without going to too much trouble, and if you have time, are you able to tell me what each of these charts means to you?  
I can't pick the timeframe/s and am not sure what the numbers on the vertical axis mean - although I assume they relate to price [and volume?]...
Boy... am I showing my ignorance but who cares?
[Trying to remember what a histogram is...]
The continuous blue line  I gather is not a moving average in the 'normal' sense but an average of some other type?
The drawn in blue lines are support or resistance?
The red ones are not conventional trend lines are they, but trends of some other kind?
Obviously I don't know...
[Please don't think I'm asking you to send a huge reply because I'm not.  Obviously there is a lot of learning that needs to take place at my end.
I guess my question comes down to whether these or any of the other stocks I mentioned could suit a retired guy who doesn't want to change his portfolio every day.....


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## motorway (24 May 2008)

They are really very simple charts

But that does not mean they are not profound or deep..

Here is a tutorial exactly on this methodology


http://www.clayallen.com/e-book.htm

give you some nuts and bolts 

a quote from one of the  PDFs



> The most significant advantage of the  P&F approach is the fact that the charts do not track price vs time.
> 
> They record price movement up and down
> on the y-axis relative to alternations of trend across the x-axis. It requires a
> ...





Here is a link to the other e-book ( this is not the same as the link above )

best to download them

http://www.clayallen.com/Winning The Performance Game 12-16-2006.pdf

motorway


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## Timmy (24 May 2008)

Hi Rick

I think motorway may have chucked you in at the deep end ... sometimes thats not a bad thing as you can learn to swim real quick... but if you prefer to get your feet wet first here is a link with an introduction to the style of chart motorway has posted.

Motorway's charts are Point and Figure but have some added elements on them that may be unclear at first to a learner on these charts.

The numbers on the vertical axis are price.
The continuous blue line is a moving average - a moving average on a chart such as these responds a lot more quickly than one on a bar chart.

The histograms at the side are a representation of volume.

There is plenty to learn about these charts.  The link is only an introduction.  The best place (bar none) to learn more than the introduction can provide is right here at ASF ... just look-up the posts by a chap goes by the name of ... motorway.

EDIT: Since posting this I see motorway has already posted links to some intro material.


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## Muschu (24 May 2008)

Just checked your profile Timmy -- I think we share similar traits!
Also printed your link out [MW's were far longer so I saved them].
I also printed one of MW's charts.
Now I will attempt tp relate the two.
Maybe I should have just asked if the shares I mentioned were, in poeple's opinions, crap stocks or not .... 
Seems I've just created work for myself -- in retirement.... No justice anywhere I find.
And, importantly, I'm trying to watch the footy over here in the wild west...
_Thanks _
R
PS - Does MW [do you MW?] like to answer a question with a question?  [No that's not another invitation to do so.  I'm drowning.]


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## Muschu (24 May 2008)

Timmy said:


> .....The numbers on the vertical axis are price.
> ...........




OK - printed and read and needs to be re-read. May I ask:
- Do the vertical numbers really represent price?  On some there seems some compression of numbers and the May 23 figure doesn't match the SP does it?
- How do I gauge the timeline? On the CSL and COH charts I think I can read, in fine print, reference to 2004. On the others it loks more like 2006.  Hard to read.

However - assuming they're all current and over appropriate time periods: Is it only CSL of these that shows a reasonably consistent up-ward trend?

Another question if you can handle it.... Are these charts generated through purchased software by putting in the appropriate data?  (I read [thanks to you] that they can be hand-drawn.)  If so do you mind telling me what software please? I'd  be very interested in similar charts for LEI, WOR and CPU.

Many thanks - you are both a terrific help.

Rick


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## motorway (24 May 2008)

Hi Rick

These charts are very revealing and pertinent to your question

esp as I take it you are a longer term holder of good investments..

( good = performance ,investment relates to trusting of funds )

These charts are relative performance charts

They are charts of eg CSL Vs the all ords

This means that if XAO goes up and CSL goes sideways this chart will go down...

Because it is going down relative to the XAO

If CSL goes down and the XAO goes down even more

Than this chart will continue to go up

Because CSL is going up relative to the XAO..

The TLS chart is revealing that who has been holding this ,
Has been going backward at a great rate of knots compared to the index ,the XAO...

Nothing compared to "how much backwards" compared to CSL
which as been outperforming the XAO ! That means light years of performance compared to TLS..

I posted these relative charts because that is where analysis should start from... Before moving on to looking at the charts everyone else is looking at

eg TLS itself goes up  and down but in relation to the XAO it really has just gone down and down and down..

Guess what a BHP relative chart would look like ?

On these charts each X & O = a 2% move ( you want to make a 1000% not a 1000 cents  )

So they are all comparable

Now between UP and Down
are sideways areas where price has adjusted somewhat to , well everything

fundamentals , sentiment , etc ( remember they are relative charts...)


Guess what ? research shows that outperformance and underperformance

tend to sustain in and persevere in the form of trends ( BHP ? CSL ? )

and even on the downside (TLS ? )

fundamentals unfold business cycles etc

SO CSL has been a tremendous performer
price has outperformed the XAO for a sustained period and still looks good

TLS has underperformed the XAO for as long as it has been nearly listed

( it does pay a dividend ) And only Now is showing signs of stopping that underperformance....

But does that mean it will outperform ? .


The numbers on the side are how much percent the stock has out outperformed the index 

eg Holding TLS ( from listing ) means that you only have 31% of what you would have had if you were in an index fund

holding CSL  means that you have 1800% compared to an index fund 

( in terms of capital gain )

The difference between TLS AND CSL is enormous

This is what the ebook refers to as "Hidden Order"  

Time to hit the e-books Rick 



motorway


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## MRC & Co (24 May 2008)

Hi Rick,

What a world you have entered!  Such a daunting, but exciting time, learning all the methods and putting together your own plan in your own niche.

Not sure the exact reason for the thread, but I will give it a crack.

Yes, it is hard to find non-resource stocks thriving at the moment.  And for a very good fundamental reason.  

On the TOL example, I would not say it is down the gurgler and headed for $6.00 as of yet.  It is still around a support level.  Has not steamed through there _yet_.  It has now broken short-term support, but there is still long-term support around this level. 

On the F/A side, it is very vague.  You can really only get a basic range of _your _value of the stock.  Furthermore, many stocks oscillate around their "fair value", sometimes far below (JST is an example of this currently for me, bound by the worry of credit globally).  Some companies are WAY overvalued, I find, that a company can trade anywhere upto about 2 times it's fair value, before it will retrace.  That is, if the public loves the stock!  ASX, JBH and WOW were examples of this to me, darling companies of the public, and as such, overvalued. 

Consistency of view?  T/A is short-term, F/A long-term.  Other than that, they are generally used in isolation.  

One set-up I use, is wait for a company to become substantially undervalued (based on my quick valuation), consolidate, and then look for a breakout back to fair value.  I have seen excellent results with this method.  

Cheers and keep up the good work!

One question, are you looking to invest, or to trade?  I.e. Are you looking to manage your portfolio on a daily basis, or from what I gather, looking to buy and hold for long-term?


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## Muschu (24 May 2008)

"......esp as I take it you are a longer term holder of good investments.."

This is my "hope MW.. I have left managed funds, even indexed ones, behind me.  I want to set up a portfolio of, as you say, good investments - that don't need constant monitoring. 

"They are charts of eg CSL Vs the all ords"

I picked up on this but am not sure yet how to read it properly. Will return and look again.

"Nothing compared to "how much backwards" compared to CSL
which as been outperforming the XAO ! That means light years of performance compared to TLS.."

This comparative analysis is what I am trying to get to.

"Guess what ? research shows that outperformance and underperformance

tend to sustain in and persevere in the form of trends ( BHP ? CSL ? )

and even on the downside (TLS ? )"

That fits with me thanks MW.

" Time to hit the e-books"

Have you got a Chairman Mao size book please MW?  

"Not sure the exact reason for the thread, but I will give it a crack."

For a crack you got it spot-on.  


"Consistency of view? T/A is short-term, F/A long-term. Other than that, they are generally used in isolation."

Hmmm.. even with a BHP? 

"Cheers and keep up the good work!"

I will - especially as I didn't realise I'd done any....

OK - dare  I ask if you'll please do a chart for LEI and WOR?

Oh - and my question as to what software is used to generate the charts?

Time to watch the mighty Eagles "underperform"....

Grateful Rick


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## Muschu (24 May 2008)

Cripes - just checked what you mean MW in terms of % performance against the XAO -- how revealing....


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## MRC & Co (24 May 2008)

You are generating discussion on quiet a few topics, hence the good work! I also find it refreshing to see someone wanting to learn.  

How do you mean, in relation to BHP?

T/A can be long-term also, for example some EW analysis, but most T/A is purely used to create entry and exit signals for the current crowd behaviour.  F/A looks beyond this, and assumes crowd behaviour will eventually correlate with the intrinsic value.  You are basically, trying to use this crowd behaviour to your advantage.  Waiting for the crowd to turn on a stock, then pick it up on the cheap.  

T/A also requires a lot more money management and risk mitigation.  With F/A, you still need both of these, but not to the same extent.  

I'll take a look at WOR and LEI later and let you know my thoughts, FWIW (for what it's worth).  

Cheers buddy.


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## Gurgler (25 May 2008)

Rick, a big thank you for asking the questions that many of us are too shy/embarrassed to pose ourselves.

MW and MRC (amongst others), thanks for the time you are giving us; your input is much appreciated. 

As has been said, there is much to learn.


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## motorway (25 May 2008)

> How do I gauge the timeline? On the CSL and COH charts I think I can read, in fine print, reference to 2004. On the others it loks more like 2006. Hard to read.




rick , make sure you left click on the charts.. They will open in another window, sometimes you have to click them again  as well..

They should be easy to read .

motorway


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## Muschu (25 May 2008)

MRC & Co said:


> ... How do you mean, in relation to BHP? T/A can be long-term also, for example some EW analysis,...Cheers buddy.




First, thanks again MW. And thanks Gurgler for the comment.  I guess I'm old enough to not care if I ask a question that others might find simplistic.  So here I go again....

In relation to BHP: What I was getting at was whether a long-term holder would normally [unless the heavens fell in] allow TA to over-ride FA.  Or at least amalgamate the two.

EW = ?

As far as I know I can't access P&F charts at this time.  I did, however, play with Etrade charts.  
Hmm.. I just tried to copy and paste a chart from Etrade but couldn't.. Can someone please tell me how to do this?
Anyway as an example:
I looked at a 3 year LEI chart with SMAs of 100 and 200, and compared it to the ASX over that period.  Looked fine to me.  WOR looked "OK".  CSL was distorted due, I think, to a share split.  
A few others that looked OK [imo] [and remembering I'm thinking long term] were BHP, WPL, RIO, AAX, SGM, OXR, NCM, IPL, RIO, WOW, NXS, ORI...

BTW maybe, in starting this thread, I shouldn't have excluded resource stocks.  My reasoning was that I'm OK with the resource stocks I already hold. [Such as the first 3 in the list above].  If anyone wants to add comments about resource, or related stocks, then please do.

Still wondering why I can't copy and paste that chart....

Something else to learn!!

Rick


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## motorway (25 May 2008)

> In relation to BHP: What I was getting at was whether a long-term holder would normally [unless the heavens fell in] allow TA to over-ride FA. Or at least amalgamate the two.




Read at least the first chapter or two of the

Winning the Performance Game..

It is a good intro (imo) for what you seek
even if you do not want to use P&F



for some info


There are only  71 stocks in the XAO

on a simple buy signal on their relative strength P&F charts
(2%x3)

And also above a bullish Support Line..

motorway


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## motorway (25 May 2008)

> In relation to BHP: What I was getting at was whether a long-term holder would normally [unless the heavens fell in] allow TA to over-ride FA. Or at least amalgamate the two.




Read at least the first chapter or two of 

Winning the Performance Game..

It is a good intro (imo) for what you seek
even if you do not want to use P&F



for some info


There are only  71 stocks in the XAO

on a simple buy signal on their relative strength P&F charts
(2%x3)

And also above a bullish Support Line.. EOD Friday.


motorway


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## Julia (25 May 2008)

Muschu said:


> EW = ?



Elliott Wave (that's all I know, though!)





> Hmm.. I just tried to copy and paste a chart from Etrade but couldn't.. Can someone please tell me how to do this?



Rick, others may have a better way, but I just take a screenshot and save it to the Desktop.  Then after you have typed your post go to 'Manage Attachments' at the bottom of the page, this will let you access your files, click on the one you want and it should happen.
I'll try now in case I'm giving you wrong info.


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## MRC & Co (25 May 2008)

Muschu said:


> In relation to BHP: What I was getting at was whether a long-term holder would normally [unless the heavens fell in] allow TA to over-ride FA.  Or at least amalgamate the two.
> 
> EW = ?




Julia is right as far as posting charts.

You know my thoughts on WOR and LEI, the later stronger both fundamentally and technically IMO.

EW, yes, Elliot Wave.  Just another technique you may wish to look at.  It is not something I have gravitated towards, but I'm sure it can be used successfully if you enjoy it.  Nick Radge, Wavepicker, Tech/a use EW. 

Yes, you could amalgamate the two.  With your long-term fundamental holdings, you could use a longer term MA if you want to trail a stop or you could use a major support line as a stop, moving it up once another major support has been comfortably breached (good for situations like the recent crash).  This way, you will help reduce risk and can still catch large trends.  You can also sell once you perceive the company to be fundamentally overvalued or of fair value and buy in on it's next correction/retracement.

In the case of BHP recently, as discussed in the thread, I bought in after the continuation gap closing above previous resistance of $40. This also coincided with it's medium-term downward trendline of November through April, suggesting BHP was ready to buck that downtrend. The stop would be placed below this, around $39 or below the gap.  I had BHP fundamentally undervalued at the time, due to recent profit upgrades if I remember correctly.  It then gaped up over $42 where the gap was then filled and acted as support.  I moved my stop to just below $42.  It then ran to $50 and after failing to break, I would have sold.  Just one example of where you can use T/A and F/A.  Undervalued, got a good T/A entry signal with the gap up above resistance.  Usually a good sign, if volume increases and it closes near it's high, that enough effort has been made and momentum will cause it to run further.  

I find learning and using gaps one of the easiest and most profitable ways to trade.  Either looking for a previous gap to close, looking for momentum (continuation and breakaway gaps) or using them as support/resistance.  

I am sure I had something else to add, but it has slipped my mind!


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## Muschu (25 May 2008)

This is a test which in a round-about way seems to have worked - I think....
I ended up saving the chart to 'My Pictures'..... Thanks J & MW.
MW - thanks for the book reference - more work!  I was exceptionally quick on picking up on your qdvice on how to enlarge the charts you posted previously...
So - I charted LEI against the All Ords [ASX].  Is this not the XAO?  And where does a person find a list of these mystery 71 stocks?
Too many questions....


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## Muschu (25 May 2008)

What excuse can I create when I realised that, in struggling to follow some of these posts,  I have sometimes confused my thanks &/or responses to MW with those to MRC.  Couldn't be my fault could it?  Sorry....


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## MRC & Co (25 May 2008)

On another note, I remembered what I had to add above at the end.

You should seriously IMHO, consider looking into writing (selling) covered calls against some of your stocks once you are more comfortable with F/A.

With the strike price at 'fair value' or just above.  This is particularly useful in a bearish market (as per the current situation) and would probably be a good idea on stocks like the banks IMO.  

While it sounds complex, covered call options are relatively simple and a great method of producing income on stocks you want to hold.  Just make sure they are out of the money (OTM) options.  You will gain a smaller premium, but are far less likely to be exercised (afterall, you probably want to keep these long-termers). 

Just something else to seriously consider, and a very good 'option'  for retirees IMO.  You probably won't understand a word of that, check out WayneL link to his blog and book creation on his sig.  He is excellent with options and his resource is probably not just far cheaper, but far better than any book you will read!  Thoroughly recommened, especially in your case Rick.


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## nomore4s (25 May 2008)

Hi Rick,

Interesting thread you've got going.

I actually learnt a bit re relative strength P&F charts courtesy of MWs posts and I've been using them for a while. 

Here are a couple of charting software providers.

P&F - Unfortunately not free, but good value imo, if you are keen on using P&F charting. (You also need to find a data for this software - I use a program called MLDownloader with free data but the program isn't free)

Incredible charts - Free charting software with 18hr delayed data - can pay for 1 hour delayed data. Also has good educational info on charting. Provides P&F charting in the package but is quite limited.

PS - The Eagles went alright for a change, lol - Go the Hawks


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## Muschu (26 May 2008)

"...Just something else to seriously consider, and a very good 'option'  for retirees IMO. You probably won't understand a word of that..."

Spot on MRC -- and do I want to? Seriously you, and others, have offered great comments but I also think you're also gaining an understanding of my lack of understanding.  
But, at least, as someone said - I don't mind asking questions - even dumb ones.  [As long as there are posters with the patience to reply...]

Julia - I recalled after your post that EW = Elliot Wave. Know nothing else about it.  I did think my first reaction [East West] was an unlikely probability. Thanks.

 "PS - The Eagles went alright for a change, lol - Go the Hawks"
What's this 'for a change' bit nomore4s?  Can't you recognise a true threat?

Enjoy your day

R


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