ASX Momentum Trade Book - Part 2

[Nortorious]

Trading update: Went berserk, for me that is. Break-outs galore in the large caps. Three new trades for this portfolio.

CAT: Bought BO-NH (1.25), iSL = 1.15. It's taken me two days to partially fill my order in this one. Supply was withdrawn and placed 0.10 higher.
JHX: Pre-empted the BO on this one knowing the overnight US strength (Bought the open).
CTX-cfd: Pre-empted BO on this one too, bought the open. Had to use cfds as we are running low on cash.

Now that the market seems to have started to move higher and opportunities are plentiful we won't be staying with any laggards.

Note: Trades in higher priced stocks (like the break-outs in JHX, ASX, CSL, BEN, CWN, CTX, HSO, WBC even WOW) are done to collect quick profits in a market rally (+1R to +1.5R). IMO they're ideal for cfd traders as the leverage helps start more of them. One still has to be mindful of proper risk control of course.

Yes, I'm disappointed that I didn't start an ASX200 long trade (for this portfolio) after the "aGreekment" on Monday evening. One trade can catch the rally instead of many.

Nice work Peter, you mentioned you were getting set for the rally and good to see the updates following the last two days.

I found yesterday quite profitable after setting some bets last week, noting that I don't usually buy in a dropping market but the set-ups looked good last week so went with some courage/foolishness and placed my trades. See EDE and CYY as examples of two micros that looked good on the charts... Only small positions though in order to limit total portfolio risk to 2% for each trade. Looking good at the moment.

I'm still not convinced in the broader strength of the market longer term but the short term burst is certainly helping push a few positions up to the point where I can be adjusting my trailing stops. Happy to ride the momentum for as long as it is there and jump out once the charts say it's gone....

 

[peter2]

Nortorius: Thanks for the compliment. I've enjoyed that past few days as well and it's nice to see the portfolio starting to rise. Once people feel happier with the performance of their large caps they will start buying small and mid caps. Keep on eye on Daffy's charts.

Thinking about it, when we see the value investors getting interested and a few chartists seeing lots of potential opportunities, that's probably a great indication of a market low.

Well done on CYY. I looked at it but I've stayed clear of resource stocks.

 

[VSntchr]

Thinking about it, when we see the value investors getting interested and a few chartists seeing lots of potential opportunities, that's probably a great indication of a market low.

Agree. I did some buying recently for the SMSF, but didn't expect it to be the bottom - although you have said "market low" not bottom, which is likely more correct.
One question on the large caps that you have traded this week Peter: They are slightly different in pattern to the previously identified "perfect" setups with the mid and smaller cap stuff. Do you therefore have different targets set for your exits? I think you touched on this, but would you be more concrete on taking the full exit at 1.5-2R profit when you get it? As opposed to the mid-cap stuff where you might just lighten up a bit at this level.

Bit of a recap with my BO trading as I've been quiet in here for a little while: I've been busy with some other trading so haven't entered too much in the way of BO this week, except for 1PG which was backed by a news catalyst.

Got burnt on UBN - in my trade review I realised that I held onto this one for far too long. I was strict with my exit stop, but I disregarded the situation and just let the stock meander for too long. It's fitting that the stock gapped below my stop, I think I deserved that punishment.

LOV - did get some off when it moved higher but the bulk of that got stopped out too.

VTG - still hanging on (was very close to dropping this) and its starting to look very nice again.

RIC - this was the BO-PB trade that I waited ever so patiently for. It has turned out pretty well, have taken 20% of the position off now that its above 1.5R and it has been testing resistance so watching closely. This one was certainly much more challenging psychologically at the beginning of the trade than most of the BO-NH trades have been, there's certainly nothing better than being in the green from day 1.

Happy trading Peter and other contributors - it's good to see the thread pumping along.

 

[peter2]

VSntchr: You understood my comments regarding the large caps trades correctly. They don't make large percentage moves, so I tend to use profit targets more often with these. I regard +1.5R as a good result with these and one can generally get a few of them at the same time (correlation). A quick +1R and a +1.5R, makes a good result over the short term.

re: the large cap setups, they're not small consolidation trend continuation setups. I didn't make that very clear, sorry to see you're the only one that commented on that. Most of the BO's in the large caps stocks I mentioned were break-outs at the end of a pullback. I classify them as PB trades, but I used a BO-NH as an entry trigger anticipating that the PB had finished and the weekly UP trend resumes. Their initial targets are the old highs, but I'll grab +1.5R when I can get it for this momentum thread. These setups are great for getting into larger weekly trends as well. In this case don't take the quick profit, hold them for as long as you can.

1PG: I'll admit to being a "dick for a tick" on this one. I didn't want to pay 1.99. I missed it and so did this thread.
UBN: You can't do anything about a gap down.
LOV: has bounced off support.
VTG: I like this chart and will be buying the next break-out.
RIC: going nicely. I assume you still like BAL and CZZ.

 

[peter2]

Please ask if you think I've done something different or deviated from the plan or just not certain what I'm doing. This thread remains true to the break-out entry trigger but the price action before the BO setup may be different to what we used in Pav's thread.

Pav's thread was all about using a small consolidation in a strong trend. The JHX chart shows this perfectly. This is a good chart with higher lows before the BO. In this thread I'll use them when I see them but I'll also be looking for something slightly different. This is what I'm calling a pullback in a weekly time frame. We're still trading with the trend, but sometimes what looks like it'll be a small consolidation turns into larger price dip. These larger dips generally send the daily chart watchers into a tizz. It's frightens them to see large red bars eating into their open profits. I know because I feel their anguish.

Of course, as soon as we sell, price goes back up. We need a re-entry rule to get back into the now blindingly obvious "why didn't I see that before" up trend. You won't see these trends unless you look at the weekly chart.

Pullbacks in strong trends are corrective price structures. They can be messy or to some eyes they can be a thing of beauty with a classic 3-wave abc structure. I like seeing the 3-wave structure, but I realise that if the price action is messy, it's corrective. It's my belief about market behaviour is that once the correction is over there will be a clean impulsive move in price. They're what I want to be in.

In this thread I'm using a setup with a BO trigger to get into (or back into) a strong trend. There aren't many classic BO opportunities after the messy market correction that we've just had. There are always some, like JHX, but there are plenty of pullback opportunities.

There's your introduction to my pullback trading methodology. Classic BO setups are my top priority, second is the pullback strategy and the third is the reversal strategy. I get into all my reversals using a BO setup as well. I don't know what the market will produce, but I have my team warmed up and readily available.

JHX chart: I've shown the familiar small consolidation BO setups using boxes. Right in the centre is a nasty red pullback in price that I'm certain scared a few retail traders into selling. My blue circle shows a 10d BO setup to get back into the strong weekly trend. Look at the weekly chart (on the left) and see where this entry occurred in the larger time frame.

 

[VSntchr]

VTG has now officially broken out.
Also, here's one of the most interesting charts from a BO perspective I've seen. Some excellent higher low formation going on in the recent pattern...but if you going to get into bed with a biotech...be prepared for a gap or two
SRX

 

[peter2]

VSntchr: You must be looking at my pending BO list.
Yep, SRX is on it (close >31.00) Don't think I'll trade it though. It's a butt ugly chart.

After a week we've had it's very satisfying creating the weekly updates. The market conditions over the past few months shows why patience is such a valuable characteristic for a trader. I'm savouring this feeling of immense satisfaction, as it's rare. I'm even drinking my coca-cola from a champagne glass. Ah, the serenity.

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

EOW Trading update: ASX Momentum Portfolio +8.5% ( 108% invested in 8 trades ) XAO -4.2% (20 wk)

This weeks sells: SEN, PPS, DNA (Don't forget about those re-entry orders)
This weeks buys: SEN (see!), AGI, DWS, CAT, JHX, CTX, missed 1PG (mea culpa)

There are some minor mods to some TSs. Remember they are not in the market.

The portfolio added 4.6% in open profits this week as the market (XAO) went up 3%. As you can see in the spreadsheet the portfolio is accumulating plenty of open profit. In case you haven't noticed this in your acount, this is a good thing.

Comments to the newer traders: Can you see the benefit in knowing exactly what I wanted to see in the XAO chart to trigger my bullish opinion and get me buying those break-outs (post #56). It doesn't matter what analysis style you use there is only one correct time and price entry. Our job is to know what that is and then act.

This thread has gone quiet. Have you all been stupefied by the recent volatility? Where's that passion?

 

[tech/a]

Luck = great timing

Back in 2001 Tech Trader was launched
7 yrs of excellent returns well in excess
Of the AXO

7 yrs of bull market
7 yrs of luck.

 

[Nortorious]

Nice work Peter in keeping the thread ticking along. I'm a bit passive in the contribution to this thread but do check-in on it regularly.

It is great to see the opportunities arising and this portfolio stepping up again with the level of activity.

My own portfolio this week was up a massive 14% aided by some trades that went crazy but also on a couple that I had been patient with during the drop and sideways movement of the broader market. It's the best week I have had in the market in a long time but still no time for complacency...

One book thread readers may enjoy (and it is probably the 400th+ book I have read on trading) is "The Mind of a Trader" by Patel. Really easy book to read (as in you don't get bored) and some great content...

I've found once I settled on my strategy, the biggest challenge comes from within.... letting profits run and cutting losses short. That is either dictated by your plan or your emotions.... Seeing a position that was up 40% in less than a week was gut wrenching to hold and not to sell out of (and pat myself on the back with a 40% gain)... that profit is now over 80% and was as high as 100% today... and I'm still in. The inner battle is ongoing but sticking to the game plan makes it so much easier....

It's a tough game, but you gotta love it!

 

[tech/a]

So if 100% isn't enough
What is "The Plan"
Is it the same for all holdings?

 

[Nortorious]

So if 100% isn't enough
What is "The Plan"
Is it the same for all holdings?

Good question and one that I am continuing to explore myself. 100% is an amazing result but why get off something that is rising? I would certainly get off a sinking ship quickly as that is consistent with my plan and the stop loss method.

When it comes to taking profits, what I am looking for is for the chart to start curling over... as with the Wyckoff method, distribution appearing. This means I don't get out at the top but I'm happy to get out near the top..... other times, re-accumulation happens and I get out, only to get back in later. HFA is setting up like one of these examples at the moment. I was in at $1.78, enjoyed a ride up to $2.30+, got out at just above $2.00 and now it's edging back to its highs... if it breaks again, I'll be back on.

The great thing about trading is that it is an ever evolving landscape and one that requires ongoing study. I love the game but at the end of the day, it's about making money and finding a way to do that consistently.

 

[peter2]

Trading update:

API and SIP came up in my scans recently. Both have bouncing off a recent low (support?) and equally likely to produce a winning trade. Cash is running low, I need to use cfds, selected API as it's been good for this portfolio.

new trade: API: Bought on close (bid 1.62, got 1.61) iSL - 1.40

[1] When cash is running out and there are plenty of opportunities, why waste it in a trade that's going nowhere. Look at your worst trade and make plans to ditch it if it doesn't go up. In our portfolio the worst trade is AGI (currently 2.71) which hasn't moved since purchase (2.75). I'll give it another few days to get above our entry. If it closes <2.69 then we'll sell it next open.

Obviously this sort of sell is a discretionary exit (DE). I mark them with a DE, so that I know when I review my performance.

[2] Our portfolio heat (downside exposure) has risen above the 10% limit. This is an indication to raise a few TSs and reduce some of this exposure. The following modifications reduces the heat from 11.3% to 9.2%.

JHX is using 20% of our account as it's not a cfd trade. I'm placing a limit sell in the market at 19.65 (+1.5%). TS raised to BE(18.30)
CTX-cfd: TS raised to BE (33.60)
DWS: TS raised to 0.68. Our best open trade.
CAT: TS raised to 1.25. Sell order in the market, due to thin depth.
FLN: Going sideways, but can jump higher at any time, not far from recent high.

 

[grah33]

it's great that your portfolio has gone back up again. maybe you should have just sat out during the downturn. i don't think i'll go long again when the market goes hurdling down. but it's okay (didn't lose anything i couldn't afford). i might be jumping in soon - gotta check my market indicators. i use hull's suggestions (when a 10 day ema crosses above a 30 day ema, both pointing up). very similar to what you are using. should be good.

 

[debtfree]

Peter2: Post #67 - 17th July
Closed Trades - SEN shows profit of $66.00 but was brought for .13 and sold for .13
What am I missing here?

Cheers ... Debtfree

 

[peter2]

Trading update:

DWS: TS raised to 0.70 (locks in +1R)
SEN: Sell on next open. I closed my personal trade at 0.19 today. To be consistent this portfolio should sell next open with a limit of 0.185.

[SEN: Spreadsheet not showing the third decimal place, sorry. Open price on the 13/7/15 was 0.132. ]

 

[debtfree]

Ahh, as simple as that, thanks Peter

 

[grah33]

Peter: just some questions: say the xao is in an upchannel (short term) and approaches the top channel line. technically it's still in an uptrend, but is predicted to bounce down off the top channel trendline, even just a little distance. would you still buy shares as the market is in an uptrend still? or wait till it bounces off the top channel boundary . also, i take it that we correlate share moves with the xao simultaneously, in that if the xao is going down e.g. 3 days in a row, that's a bad thing for all our long positions. just trying to explore this idea a little more.
thanks

 

[tech/a]

SEN: Sell on next open. I closed my personal trade at 0.19 today. To be consistent this portfolio should sell next open with a limit of 0.185.
[SEN: Spreadsheet not showing the third decimal place, sorry. Open price on the 13/7/15 was 0.132. ]

Where did you re buy it?

 

[peter2]

grah33: If the price of the XAO can be described in an up channel (short term) and is at the top channel line, then price must be making a new high (right?). If the index is making a new high I want to be fully invested long.

Can price go down from here, of course it can, but it can also stay near this level or go higher. If I anticipated a dip then I could short the ASX200 to offset some of my longs.

If the market is dipping but still classified as up then I'm still looking for buy setups if I'm not already fully invested.

If the market goes down for three days then the portfolio will lose open profits.

The market can dip and still be called UP, but if it dips and closes below the last HL then the up trend is in doubt.

The description of the XAO trend determines the amount of portfolio heat (downside exposure) I'm prepared to tolerate. It's a crude attempt to objectively determine the market risk and provide guidelines for what I should be doing in the portfolio. Should I be buying or selling, adding or reducing risk and how much do I risk on the new trades.

Let me show you a page from my SF trading plan. The time frames are longer because I'm trading weekly charts.

 

[peter2]

Trading update: (before close)

SEN: Sold on today's open (0.185). The re-entry was recorded in post #59.

JHX and CTX: Short term trades like these are great when the market goes up and but go down just as quickly when the market dips. I've moved their TSs to BE and as price is getting closer we may as well close these trades at today's close. This avoids an ugly gap down if the US market has another down day.

Note: They won't be closed in my medium term portfolio as their exit triggers are much lower and I can allow a HL to form here. A short term momentum portfolio like this can't or should I say doesn't allow this.

JHX and CTX to be sold at today's (22/7/15) closing prices.