ASX Momentum Trade Book - Part 2

peter2 · 4 March 2016

I'm back and ready to rumble. I'm not going to jump right in (today) because I've been away from the market for more than a week and I'm not in touch with what's hot and what's not. I'll scan the market over the week end and see what's been happening while I've been on holiday.

Naturally I'll see all the great BO trades that have triggered last week and I won't notice all the BO's that failed. That's normal and it's also history and not worth wasting time thinking about it. There will be great BOs next week. My job is to find them.

Taking a complete break from the market is important. When you notice that you're reacting to the market moves rather than anticipating what might happen.:nono: take a break.
If you feel like the market is beating you up :bonk: take a break.
If you don't know what to do next :dunno: take a break.
If the market conditions are unsuitable for your trading style take a break.

A few weeks ago the market was a highly volatile bear market, the start of another ASX reporting season and I knew that I was going to be away for a week. A good time for a break.

I'm back and ready to go. I've reviewed all my trading plans. My SFund trades the weekly charts. This thread trades the daily charts and I've been preparing another plan to trade other major world markets.

kid hustlr · 6 March 2016

Sounds good Pete. Will you continue with the same format here of daily trades based around break out strategies

peter2 · 6 March 2016

Trading Plan review: ASX Momentum Portfolio.

Goal: To grow our capital faster than the growth of our benchmark index (XAO).
How: To identify strongly trending daily price charts that seem to be pausing and buy into the resumption of the trend anticipating that it will continue long enough for us to create an edge over the long term.
Setups: Small trend continuation patterns (box patterns, triangles,123L patterns etc.)
Scans: Darvas box scans, 10d BO scans (every pm before close)
Money Management: Fixed fractional position sizing model that risks only 1% of our total capital in each trade. Maximum position size to be limited to 20% of capital.
Risk Management: Portfolio heat (total downside exposure) will be managed by a market risk filter. We will invest more in a low risk market (XAO going up) than a high risk market (XAO going down).
Trade Management: Price targets will be used In a high risk market. Trailing exit stops will be used in a low risk market. Prices must be allowed to get to +1.5R before considering an exit.
Entry: We will buy the break-out either by a conditional order or after the BO is triggered.
Exits: Sell orders for our price targets will be placed in the market. Other exits will be done at the next open following an exit trigger event (close below our exit trigger or a discretionary exit). A discretionary exit can break any rule/guideline provided the decision is made to protect the portfolio capital.

Disclaimer: I will be trading most (not all) of the trades posted in this thread. However I may manage my trades differently than this purely educational thread.

The main purpose of this thread is educational with a strong emphasis on consistency. Consistency cannot be achieved without a trading plan.

Newt · 6 March 2016

Peter you've mentioned before you trade at least one of your portfolios weekly. Any chance you could share pointers on what you perform differently for weekly timeframes? (only if you're using momentum principles there too, presumably with different trade plan parameters).

peter2 · 6 March 2016

The main differences in the weekly plan is the use of the weekly price bars. This means the initial stop loss is further away, out of the daily volatility and has a lower prob of being hit. The parcel sizes are smaller because the trade risk is larger. To overcome this disadvantage I am more likely to add to a winning trade until my max parcel size is reached.

The larger exit stops in each trade create a larger portfolio heat but this is offset by the lower probability that the portfolio will have to close everything quickly. There's plenty of time to action both the entries and the exits and I can use limit orders more than when trading the daily charts.

I use a momentum trading style on the weeklies similar to this thread and take profit (sell 1/2) at +2R or higher levels. The average trade lasts about 8-10 weeks/bars although some campaigns (buy, add, sell1/2, add, sell all) can last up to 30-40 weeks. Think of ALL, APO, BAL, BKL, SIQ type charts.

I use the three basic strategies, break-outs, pull-backs and reversals for trade setups. Break-outs get me into the start of a trend (from a basing pattern, think oil right now) or a trend continuation. To trade pull-backs in a strong weekly trend I wait for a bullish weekly price bar at a logical pull-back zone (support). Reversals require a HL and a break-out before I'll buy into them.

I traded the weekly charts while working and it is a much more relaxed style as you don't have to look at the market during the day. I have a sneaky suspicion that it's more profitable than trading the daily charts.

Newt · 6 March 2016

peter2 said:
I traded the weekly charts while working and it is a much more relaxed style as you don't have to look at the market during the day. I have a sneaky suspicion that it's more profitable than trading the daily charts.

Yes, although I've greatly admired your daily trades, the reality is I can't always must the time (or energy) every weeknight. Also have a suspicion the longer timeframe is suiting my personality better. Greatly appreciate those insights.

Telamelo · 6 March 2016

peter2 said:
I'm back and ready to rumble. I'm not going to jump right in (today) because I've been away from the market for more than a week and I'm not in touch with what's hot and what's not. I'll scan the market over the week end and see what's been happening while I've been on holiday.

Naturally I'll see all the great BO trades that have triggered last week and I won't notice all the BO's that failed. That's normal and it's also history and not worth wasting time thinking about it. There will be great BOs next week. My job is to find them.

Taking a complete break from the market is important. When you notice that you're reacting to the market moves rather than anticipating what might happen.:nono: take a break.
If you feel like the market is beating you up :bonk: take a break.
If you don't know what to do next :dunno: take a break.
If the market conditions are unsuitable for your trading style take a break.

A few weeks ago the market was a highly volatile bear market, the start of another ASX reporting season and I knew that I was going to be away for a week. A good time for a break.

I'm back and ready to go. I've reviewed all my trading plans. My SFund trades the weekly charts. This thread trades the daily charts and I've been preparing another plan to trade other major world markets.

Welcome back Peter and trust you've enjoyed your break.

Only new across this forum/thread and wish to point out the excellent posting by you and some other's that is so educational/informative etc. as a real eye opener to say the least.

Just curious about any 'potential trade set ups' for the week ahead 07/03-11/03 respectively that you may have come across (if you could be so kind to share your thoughts/ideas).

I have a few set ups on watch such as:

IBG (potential breakout @5c+ looming - have entered @0.045c avg but am looking to add to my position etc.)

PDN

DKO

CXO

IMF

BPF

DTX

PAN

please dyor as always (since not intended as investment advice)

Be interested to know your thoughts (as IBG caught my eye on last week's 'bullish weekly chart' funnily enough)

Happy trading for the week ahead!

Cheers tela

peter2 · 9 March 2016

Trading update:
We're not going to chase last weeks break-outs. We're going to wait for the small consolidations to form that we trade as trend continuation patterns in the strongest trends.

EGH: Bought todays BO at 0.61, iSL placed at 0.55. Our initial target is the old high at 0.69

JHC: Bought at last BO level 3.06, iSL is placed at 2.90 for this thread. This makes it a 50/50 trade. A more conservative iSL for a medium trader (me) is ~2.70.

Hi tela, I had a look at those codes you posted and reviewed them using the setups that we use in this thread (TC patterns).
IBG: Nice resistance at 0.05. I'll keep an eye on a second chance BO. Price rallied with last weeks commodity rally. Needs further follow through.
PDN: Good move up today. I noticed the the POU is also rising.
DKO, CXO Lithium explorers. The charts do look promising.
IMF: I'd rather be looking for Li than these guys. Not for me.
BPF, DTX: Prices going down. No
PAN and other Ni/Zn producers need more time to form more dependable base accumulation patterns (IMO).

A nice selection overall.

peter2 · 11 March 2016

EOW 54 update: Naturally the market rallied as I was on holiday. That happens and I didn't want to chase prices this week after missing last week's BOs. We'll start slowly and safely. I'm building a watchlist of charts with BO opportunities.

This weeks buys: EGH, JHC

Telamelo · 13 March 2016

peter2 said:
Trading update:
We're not going to chase last weeks break-outs. We're going to wait for the small consolidations to form that we trade as trend continuation patterns in the strongest trends.

EGH: Bought todays BO at 0.61, iSL placed at 0.55. Our initial target is the old high at 0.69

JHC: Bought at last BO level 3.06, iSL is placed at 2.90 for this thread. This makes it a 50/50 trade. A more conservative iSL for a medium trader (me) is ~2.70.

View attachment 66031

Hi tela, I had a look at those codes you posted and reviewed them using the setups that we use in this thread (TC patterns).
IBG: Nice resistance at 0.05. I'll keep an eye on a second chance BO. Price rallied with last weeks commodity rally. Needs further follow through.
PDN: Good move up today. I noticed the the POU is also rising.
DKO, CXO Lithium explorers. The charts do look promising.
IMF: I'd rather be looking for Li than these guys. Not for me.
BPF, DTX: Prices going down. No
PAN and other Ni/Zn producers need more time to form more dependable base accumulation patterns (IMO).

A nice selection overall.

Hi Peter,

Thanks very much for your response and analysis/insight given...... appreciate it mate. I like your trading style/analysis etc. so looking forward to your ongoing feedback on this thread.

Cheers tela

P.S. Only trade for me last week, bought ARC @50/51c avg (has only 8.9M shares on issue and top20 hold 85% of tight register so is illiquid (be warned) - market depth looks strong etc. in anticipation of a possible acquisition soon (please dyor though as not intended as investment advice) as I personally like uptrending illiquid stocks driven by potential positive news flow to come

P.P.S. Other stocks on my watchlist for week ahead are PPS, ORL and RNT respectively (please dyor)

Nortorious · 14 March 2016

peter2 said:
Trading Plan review: ASX Momentum Portfolio.

Goal: To grow our capital faster than the growth of our benchmark index (XAO).
How: To identify strongly trending daily price charts that seem to be pausing and buy into the resumption of the trend anticipating that it will continue long enough for us to create an edge over the long term.
Setups: Small trend continuation patterns (box patterns, triangles,123L patterns etc.)
Scans: Darvas box scans, 10d BO scans (every pm before close)
Money Management: Fixed fractional position sizing model that risks only 1% of our total capital in each trade. Maximum position size to be limited to 20% of capital.
Risk Management: Portfolio heat (total downside exposure) will be managed by a market risk filter. We will invest more in a low risk market (XAO going up) than a high risk market (XAO going down).
Trade Management: Price targets will be used In a high risk market. Trailing exit stops will be used in a low risk market. Prices must be allowed to get to +1.5R before considering an exit.
Entry: We will buy the break-out either by a conditional order or after the BO is triggered.
Exits: Sell orders for our price targets will be placed in the market. Other exits will be done at the next open following an exit trigger event (close below our exit trigger or a discretionary exit). A discretionary exit can break any rule/guideline provided the decision is made to protect the portfolio capital.

Disclaimer: I will be trading most (not all) of the trades posted in this thread. However I may manage my trades differently than this purely educational thread.

The main purpose of this thread is educational with a strong emphasis on consistency. Consistency cannot be achieved without a trading plan.

If there was a thumbs up button on this site, I would have hit it for this post. Great summary of the plan of attack. Hopefully some others looked at this post and are using the structure to create their own trading plan. You don't need lots of pages to create a trading plan, an outline like this is perfect.

Telamelo · 14 March 2016

Telamelo said:
Hi Peter,

Thanks very much for your response and analysis/insight given...... appreciate it mate. I like your trading style/analysis etc. so looking forward to your ongoing feedback on this thread.

Cheers tela

P.S. Only trade for me last week, bought ARC @50/51c avg (has only 8.9M shares on issue and top20 hold 85% of tight register so is illiquid (be warned) - market depth looks strong etc. in anticipation of a possible acquisition soon (please dyor though as not intended as investment advice) as I personally like uptrending illiquid stocks driven by potential positive news flow to come

P.P.S. Other stocks on my watchlist for week ahead are PPS, ORL and RNT respectively (please dyor)

ARC strong close today @58c (+13.73%) on reaching new 52 week high's!

Stochastic Oscillator
%K(14,3): +72.7 %D(3): +76.8

RSI (14) : +76.7

dyor

Cheers tela

grah33 · 14 March 2016

Hi Peter and others,

I'm finally back after a good while. and read all the posts i missed out on... I too would like to thank Peter for his contributions in teaching us. on a practical level i find it helpful, and read every post from when i started regularly following it. recently i have been very busy back testing, reading parts of different trading books (increasing my all round knowledge), developing an excel file, other misc tasks...i gotta say, by the time you get an excel file which incorporates all your different broker accounts and relates their open profit/losses all together etc, it's lots of work.

the market wasn't good for me this year, or any new guy wanting to learn how to trade. hopefully good times will be back.
my approach is somewhat of a classical approach, like what you get from the popular share trading books. i basically let all my winners run, use atr to trail my stops (don't vary the atr), and don't really cut positions until there done (although i do sell 1/2 if i get a good smash occurring...). i'm a 'trend trader' for now (taking a bite of trends), but i grab BOs from horizontal consolidations too, and will probably grab the odd triangle as well. for those new to the game i recommend manually back-testing your approach in different market conditions (rising, ranging). you'll see so many charts and you'll feel like you've learned how to do it. it's laborious but worth it.

anyway, hope to keep learning

if i could ask you something peter (no need to answer if you have your reasons, others welcome as well to answer after some time if not answered), about your recent egh trade. what do you think of it since you are buying near another old high at 0.63? i've been coming across a few of these (where the BO NH is next to an old high), trade looks good but have avoided them.the old highs can be a few months away, or even a few years away . it didn't stop you this time though, as you went in.

peter2 · 15 March 2016

grah33: Now that's a good question. It shows me that you've been thinking about the charts.

EGH: I'm not worried by the old high at 0.63. It is a minor swing point. The older high (0.68) would provide an acceptable profit if hit. I liked the fact that the gap provided support and anticipated price to go higher immediately. Hasn't happened yet. I'll get concerned if it doesn't soon as price likes to fill the gaps that are left. The other concern is that this price swing is a "b" wave of an "abc" corrective pattern. After the "b" wave comes "c" which would be another swing down.

I saw the bullish gap support and risked it, however if price turns down I'll exit quite quickly.

VSntchr · 16 March 2016

Navitas has a share buyback program going on at the moment which is adding to the demand side of the stock. Enrolment numbers in the northern hemisphere looking strong and presumably the contract loss impacts of SIBT are already price in.
Price action has looked pretty good since the results-day spike trapped a few traders.
To me it looks like a decent candidate for a buy on a close above $4.90 with a stop on a close below $4.68. Have used closing prices as it can spike around a bit despite pretty strong depth.

peter2 · 16 March 2016

Trading update: New trade

NVT: Bought break-out at 4.91, iSL is 4.60

Looks like a nice asc triangle on the daily chart. A bit spiky as you mention, so we'll use a close below 4.60 as our iSL. There have been a few disappointments in the past, another one and it gets put in my never to be traded again bin (3 strikes policy). There has been a lot of activity between 4.80 - 5.50 in 2014. This band may provide stubborn resistance and I'm expecting a bumpy ride on this one. Tight exit stops could be perilous.

peter2 · 17 March 2016

Trading Update: New trade.

JHX: Bought BO-HR at 18.45, iSL is 17.45. This was bought late pm after price traded above the BO level (18.50). There is an acceptable RR up to the old high ($20).

VSntchr · 17 March 2016

peter2 said:
Trading Update: New trade.

JHX: Bought BO-HR at 18.45, iSL is 17.45. This was bought late pm after price traded above the BO level (18.50). There is an acceptable RR up to the old high ($20).

I really like that chart...and a nice day to buy given the FED news overnight, especially since JHX has a large US presence.

Telamelo · 18 March 2016

VSntchr said:
I really like that chart...and a nice day to buy given the FED news overnight, especially since JHX has a large US presence.

Happen to mention ORL @$2.20 the other week.... since hit $2.85 yesterday!? PPS @35c other week ... last traded @37c

Agree that NVT, JHX and MYX all look good as well.. (great work/analysis there)

-----------------------------------

HZR with only 50M on issue.. breakout to new 52 week high's @35c!

17/03/16 HAZER GROUP AGREEMENTS FOR GRAPHENE AND DEMONSTRATION PLANT SCALE UP
● New agreement with UWA to develop Hazer technology for production of graphene
● UWA will identify conditions to improve quality and quantity of graphene
● New partnership with chemical engineering group Kemplant to assist in development and design of demonstration plant
● Hazer will continue to own all IP through both agreements

Stochastic Oscillator
%K(14,3): +72.2 %D(3): +59.0

RSI(14) : +70.1

33 buyers for 1,113,573 units vs only 8 sellers for 103,671 units

Please dyor as always

Cheers tela (disclosure that I bought on breakout to new high's)

grah33 · 21 March 2016

peter (and valuesnatcher): I see now , the swing point was minor. makes sense, thx peter.
i'm not sure though if i would have liked to get into MIN as valuesnatcher suggested. i bought another one like this and it got me thinking... my impression is that consolidations need to have a few points (at least 2) to form a trendline to breakout from. or to have several points at similar levels if they cannot be joined by a horizontal trendline. the MIN breakout snatcher suggested only has 1 point to breakout from, so perhaps that isn't regarded as a consolidation (though it did fly up nicely).

ASX Momentum Trade Book - Part 2

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