ASX Momentum Trade Book - Part 2

[peter2]

Trading update: After only two days this 7-5 grind is cramping my style. I can't look at the ASX while it's open and now I'm too tired to stay awake for the US open (which is now an hour later).

CAJ: Price closed below our TS and triggered an exit. Sold today at 0.26. Result -0.4R
MND-cfd: Placed a limit sell at T2 and were sold on the open at 17.73. Result +2.2R.

Tightened TS on TPM, MND, ASL, NWH.

 

[xr06t]

Thanks for the dedication to the thread Peter. As mentioned earlier, you would be hard pushed to find another thread on the internet showing someone talking through their trading plan for 3 odd years and showing how profitable it can be. Thanks again.

 

[peter2]

Thank you for posting xr06t. I hope you and other readers are focusing on how to be profitable rather than how profitable this trading style is. We could make more profit if we took on more risk. This thread has shown how to be profitable with a small downside exposure (max draw-down 7%).

TPM: Sold today with a limit sell at 5.95. Result is a welcome +3.5R.
Pretty much a perfect reversal setup and follow through. A BO-NH following the 1st HL was accompanied by a rising TMF and strong relative strength RSC(XAO). Obviously the bullish market rally helped a bit. I suspect the high % of short sellers also helped as they had to cover their positions as the price went higher.

This trade should be used as an example of the criteria required for a good reversal opportunity.

ps: Longer term investors who recognised the potential in this company and took advantage of the reversal opportunity have no reason to sell here.

 

[peter2]

Notice: It's important to point out that the results obtained in this thread are indicative for the trading style used. I have not written this thread to show how to get 25%pa. I've written it as an educational thread to show how to be profitable trading an active short term system. The profitable edge is created over lots of trades. I've batched them into groups of 20, but even 20 may be too small or not appropriate for other trading styles.

Another important point to mention is that it would be near impossible to earn the sort of returns we've earned in this thread with a much larger account size. We started with a small account size of 50K. Yes, 50K is small if you're trading equities. It's much easier buying/selling small parcel sizes (<$10K) at the prices we want than trying to do the same with parcels of $50K.

Larger accounts are restricted to trading stocks with higher daily trading volume if they want to trade short term.

We've limited our max position size to ~25% in this thread. Would you be comfortable using this limit in a $1M account? I wouldn't. A lower max size limit would also reduce the profits earned by this trading style. You may offset this disadvantage by trading more positions (eg 2 x 12%ea), but this increases the downside exposure (2 x 1%).

 

[peter2]

EOW 141 update: ASX Momentum Portfolio +108% (51% invested in 4 trades)
Benchmark index: SPAX2F15 (Incl. divs and f credits) +16.8% (past 141 wks)

This weeks sells: CAJ (-0.4R), MND-cfd (+2.2R), TPM (+3.5R)
This weeks buys: nil

The market rally continued higher this week and provided further gains. I've started to take profits and raise a few exit triggers to protect open profits. We've done very well from this rally and don't want to let too many of the open profits disappear. If we're conservative on the downside we're also conservative on the upside once we've got above average profits.

On a larger account I'd sell half to grab some profit and let the other half run. We can't do that in this smaller portfolio as brokerage costs would increase.

My current impanelment has restricted the monitoring of other markets and I'll have to wait for that to end.

Outlook: WU DU. Bullish of course, but also cautious as this rally is over extended. We'll see what the week-end scans show.

Note: I'm recording the re-entry trades with a small "r" so that we can monitor their performance. So far so good. We've earned extra profits as we planned.

 

[peter2]

EOW 142 update: ASX Momentum Portfolio +108% (51% invested in 4 trades)
Benchmark index: SPAX2F15 (Incl. divs and f credits) +15.8% (past 142 wks)

This weeks sells: nil
This weeks buys: nil

I'm out. The sheriff has let me loose.
It's going to take me a little while to see what's been happening and notice the hot sectors. I know I'm going to see all the great setups that happened while I was impaneled and there'll be a tendency to chase. I'm experienced enough now to wait for perfect setups. I only mention it as an educational aspect.

The market dipped a little, probably due to some profit taking after it's recent rally. The US markets are also showing a rise in volatility. Our portfolio maintained it's value, but we only have a little exposure in the market at present. When life gets in the way of your trading, reduce the heat a little to remove the stress.

Outlook: WU DU. Remaining fully bullish, but the daily "line in sand" is at 6000. A fall below this would trigger a down grade of our market filter.



ps: I can once again appreciate the difficulty of trying to trade while working full time. After jury duty I was too tired to do the daily EOD scans and didn't bother monitoring the major markets. I'd recommend trading weekly charts if you are too busy during the day.

 

[peter2]

To celebrate my "release" I've created a graph to monitor the performance of our exits against the three objective exit strategies that I've described previously. Instead of waiting for a periodic update, I'll have it "real time" from now on. I'm doing this to get immediate feedback on the performance of my exits. I want to see it there is any deterioration quickly so that I can react quicker to fix it.

The other aim is to see if the re-entry strategy improves our edge. The potential for improvement has been identified (past post) and we instigated a change near the 230 trade mark. The re-entry modification is designed to increase our profits and get us closer to the performance of the best exit strategy.

The re-entry trades will be marked with an "r" so I can monitor their effect. So far it's been good. The recent re-entry trades in BPT, MND, MMS and EHL have reaped us an extra $3.4K in profits.

 

[PeterJ]

we may have to recapture you Peter !
I have been enjoying your thread immensely

thx
PS

 

[peter2]

My "release" refers to the jury duty I was impaneled for. The trial lasted two weeks and it felt like a 7 - 5 job. I was too tired to trade the UK session and asleep for the US open. I noticed that there was a lot of activity in the small resource sector over the past two weeks. Right up your alley, Peter.

I'm back (here) and it looks likely that I'll post the other market trades in the P2TB thread to keep this one purely for ASX trades.

 

[peter2]

I've been catching up with what's been happening in the ASX market over the past two weeks. There's been a few good break-outs but the real noticeable aspect is that there are a lot of strong price trends that continue to go higher without any significant pauses. Great if you're already in, but I find it hard to buy without a minor test of demand (small consolidation or pull-back).

Most of these strong price trends are now over extended and the RR is tilted towards risk rather than reward. However we know that these trends can continue much higher than we think is possible.

This chart shows most of the gains this FY has been in the small to mid cap stocks.

 

[peter2]

EOW 143 update: ASX Momentum Portfolio +110.7% (51% invested in 4 trades)
Benchmark index: SPAX2F15 (Incl. divs and f credits) +16.3% (past 143 wks)

This weeks sells: nil
This weeks buys: nil

The market ended up a little this week and our portfolio also thanks to MMS. The strong trends are continuing higher, rewarding those who can stick with their holdings.

Outlook: WU DU. Our market filter remains bullish with the line at 6000 (XAO). Although the market is bullish I'm finding it difficult to identify good opportunities with excellent RR characteristics. Many trends are overextended and I don't chase prices as they make new highs. My job is to buy them when the trend starts or soon after (1st pause). I will buy BO-NHs in overextended swings when the market is bullish across the board. This market is not bullish overall as the banks are weighing the index down.

The few setups I've found have been reversals and daily pull-backs in weekly up trends. These are second class opportunities, but in the absence of better I may start a few. I'll assess these during the week-end. I posted one example of a reversal setup in the AIA stock thread.

Even though we have plenty of risk capital available I prefer to wait for perfect setups. These setups have a good RR profile. I dislike having to play defence soon after buying. I prefer to be profitable quickly.

 

[peter2]

A few codes I've included in my daily "BO-soon" watch list.
3PL, ASL, BKL, CGF, CCP, DTL, EXR, OMH . . .

There will be others as I go through all the charts that are stronger than the XAO. I sort the interesting ones into BO's, trend continuation and reversal patterns.

 

[peter2]

Trading update: New trade

AU8: Bought today's BO-NH at 0.405, iSL 0.34.
A more conservative SL would be below the gap at 0.30-31.

Not much chart history to go on, but so far it's definitely bullish.

 

[Rosscoe62]

Hi Peter, great thread. I joined this site only very recently. I follow & use Technical Analysis myself.

I thought I’d throw another stock up with plenty of momentum behind it and one to watch closely ...

I bought into Lynas (LYC) quite a while back who report tomorrow at the AGM. The company has had a stellar run this calendar year.

Today’s +4.88% move makes me feel confident things are going to be optimistic in their AGM report shortly. I feel LYC has been consolidating in recent times but ready to break out of its most recent trading range.

Following the fundamentals of the company & particularly the Rare Earths price have a major impact on this company moving forward.

It will be interesting to see where this stock heads next!

 

[peter2]

Hey PeterJ, did you like that "boom" in AU8 today. Straight to our T2 level.
Looks like I have to watch the open tomorrow.

 

[kid hustlr]

Pete,

What's your thinking in au8 here? Will you monitor action in the morning and make a call or have you already got a plan in place?

 

[Rypieee]

Very bullish characteristics coming from AU8's price action, even intra-day action suggests inflow of demand from investors. Taking profits from this trade tomorrow could be cutting the legs of a runner!!

Likely to see some resistance around 60-70 cents from holders with 30-40 cost base.
Purely speculative in my opinion, difficult to value rationally at this stage and all based on what ifs (except for first movers advantage in that market).

I would probably wait for pull back to determine whether demand for stock is still there and may consider building a position on pullbacks.

Consolidation phase prior to breakout suggest consolidation so won't be surprise if we see another consolidation around 70 cents before the next run.

Ultimately, its up to your strategy i suppose
Disclosure: Held

 

[peter2]

Ultimately, its up to your strategy i suppose

I'm pleased to see someone mention this.

This trade will be managed in the same way that most of the trades in this thread were managed. Once a trade gets to T2 we're allowed to tighten the trailing stop to protect some of the profit while allowing price to go higher. The 2xATR(21) TS price is currently 0.475. At this price the trade is +1R. I may enter a limit order to sell at T3 tomorrow if there's more bullish exuberance knowing that +3R is twice the average win.

The primary aim of our trade management is to allow price to get to T2. The fact that price got there in one day doesn't alter anything (other than my emotional state ).

Trade management of AU8 for my own personal purposes. I know that I should remove the sell function from the trading platform or just go out for the day. My iSL was placed conservatively at 0.31, so the trade hasn't reached T2 yet and therefore there is no reason to tighten the exit trigger.

 

[peter2]

Trading update: Trade closed

AU8: Sold at T3 (0.61). Result +3R (+$3045) in 2 days. Next trade.

 

[tech/a]

Trade management of AU8 for my own personal purposes. I know that I should remove the sell function from the trading platform or just go out for the day. My iSL was placed conservatively at 0.31, so the trade hasn't reached T2 yet and therefore there is no reason to tighten the exit trigger.

While its the best possible exit today and at your limit order.
Had the trade NOT reached T3 what would have happened ---say 60c--hypothetically.
Just interested with such a large swing.