ASX Momentum Trade Book - Part 2

[VSntchr]

ASB.
Defensive industry if the market does keep collapsing (unlike today).
Great chart, good recent announcements, tight consolidation above the recent BO-HR...
What's not to like here?

 

[peter2]

ASB: Thanks. I looked at this at the 1.90 and 2.10 (BO levels), but declined to buy. I've traded this successfully in the past (huge trend up), but it's prone to large spikes down. Not suitable (imo) for a tight exit stop, but trending up solidly. Great weekly chart since the BO back at 1.00.

Unfortunately I do glance at the fundamentals occasionally and in this case I'm biased against it. I'm wary of companies that rely on one large customer especially when they are governments (or public service organisations). They can change their minds overnight or make a stupid statement that drives the price down significantly.

Do you find yourself consciously biased against certain companies?

ps: Bought BO-NH in ALU this morning. Haven't needed to look beyond the letter "A" yet for a BO opportunity.

 

[skc]

ASB.
Defensive industry if the market does keep collapsing (unlike today).

Defense Industry. Not necessarily Defensive Industry.

 

[VSntchr]

Do you find yourself consciously biased against certain companies?

I certainly do, sometimes they look like excellent candidates for investment/BO/mean reversion etc, but for whatever reason I don't want to take the trade.

ps: Bought BO-NH in ALU this morning. Haven't needed to look beyond the letter "A" yet for a BO opportunity.

Got that one too, but fat fingered the trade (well skinny finger) and left a zero off the order. Got filled and price zoomed off, leaving me with a small parcel and the remaining order lonely in the depth!

Defense Industry. Not necessarily Defensive Industry.

Yep. My argument would be that the multiple government contracts would tend to be more reliable than a few corporate or retail clients. However, thinking a bit more in-depth I can see how this is a bit naive. Governments can appear so reliable, until they aren't. I guess we only have to go back a couple of weeks to see how quickly a government can change it's leader let alone a few defense policy conditions. Contract, what contract!
In saying that, the company appears to be on it's way to diversifying revenue sources, with additional governments becoming clients, new regions and industries (European catamarans, Middle Eastern oil vessels etc). However these lines aren't exactly defensive either, in-fact they seem highly cyclical.

 

[peter2]

EOW update: ASX Momentum Portfolio +10.9% ( 95% invested in 7 trades ) XAO -13.7% (31wk)

The index ended the week +0.2% but was hardly calm. The retest of the Aug low on Tuesday caused a bit of activity that was documented as it happened.

This weeks sells: TPM, AAD, TGR, ACX
This weeks buys: IPL-cfd, ASZ, APO, ALU

Outlook: Have we seen the low? Does it matter? The XAO remains in a weekly and daily down trend. We've started more trades as the number of opportunites grew and we had capital to risk. We will monitor the open risk carefully and take protective action when indicated.

 

[peter2]

Trading update: new trade (UGL)

Raised a few exit stops, which reduces our downside exposure (portfolio heat), which in turn allows us to start another trade.

UGL: Bought BO-HR (2.08), SL 1.80 This is a second time has gone through the BO level (~2.05).



ASL: Chart shows a nice low risk setup, but can't bring myself to trade in this sector.
OML: This was also re-considered for a trade.

 

[peter2]

Trading update:

IPL trade closed at price target (4.10) +0.8R result. Not a great trade but it's still a good one to stuff in the bag.
I was aware that I entered late in this chart. IPL came up in my scans at 3.60 level (123Low pattern). This provided an acceptable 2:1 RR. I dismissed it at this time due to the bearish market sentiment, however when this sentiment became more bullish I bought the BO of the small consolidation (box pattern) overlooking the now poor RR.

We all make poor decisions at times and once I recognised this I was determined that it wouldn't cost us. Considering that it was a late entry, the increased costs of a cfd trade, I thought it best to grab the profit at the logical chart price target.

The chart shows the difference in the RR for each entry.

 

[peter2]

Trading update: Many trailing exit stops have been raised to reduce downside exposure (portfolio heat).

Many of our BO's have started well, but have not gone as high as +1R or +1.5R levels. So there is no thought of taking profits. We must let price do it thing, and this means letting it fall so it can make a HL if there is enough demand. Raising our TS's too tightly would not help us generate sufficient profits to offset our previous losses.

We can however raise them a little to reduce some "heat". Saving a little across many trades helps reduce our heat by 1%.

I should remind you that these exit stops are not in the market. They are used EOD as an indication of when to sell next open.

 

[peter2]

Trading update: GNE exit procedure (notice to sell)

GNE: Price has fallen after going XD and the trade has lost its short term upward momentum. I notice that the bid depth is becoming very thin for the sellers (us). It's time for us to sell our parcel (~4400 shares) and I'll do this at 1.65/66 over the next few days if the volume allows. We'll use the money to buy another BO (RIC, MNF?) when we get the cash.

As a medium term holder I'm not selling my position unless price fall further. I have dropped my exit stop by the amount of the div (0.09NZD) and I can be more patient with this NZ electricy/gas supplier. I'm always prepared to let price drop to that often seen 50-62% retracement level and my exit stops are below that.

Comment: Another example of the subtle difference in trade management between a short term momentum trader and a medium term trend trader. The trend trader has to allow price to fall back and form a HL while the short term mom. trader hates to see 50% of their profits disappear.

 

[peter2]

EOW update: ASX Momentum Portfolio +16.3% ( 75% invested in 6 trades ) XAO -10.0% (32wk)

It's been a good week for our market (+4%) and especially this portfolio (+5%). The portfolio's downside exposure has been kept below our max DD limit (<10%) by raising a few exit stops. We have cash (~15K) to start new trades and we'll do so next week.

This weeks sells: IPL-cfd, GNE (reasons posted earlier)
This weeks buys: UGL

Outlook: Moderately bullish.

Note: This good week has seen our portfolio hit a new high and this recovers the latest draw down (DD). This last DD has been our biggest so far at -7% and this recovery has taken 10 weeks. I've shown the graph of the portfolio's EOW DD. My goal has been to try and avoid a DD of 10%. So far so good.

Now think back over the last ten weeks. The market went straight down and we were selling to reduce losses and didn't start many trades at that time. We were patient (some of you would have been impatient and frustrated). This portfolio has gone sideways for 6-7 months. I felt the frustration and impatience too, but I didn't let them interfere with the execution of this portfolio's trading plan. We knew there would be plenty of opportunities in the future.

 

[peter2]

Trading update: A brief note to mention our re-entry (buy) into a BO-HR in ACX.

I like the recent HL and there is now a clearer ascending triangle pattern. I've pre-empted the BO by a few ticks and the iSL is at 4.00. This is our second attempt at this BO.

 

[tech/a]

Smacking along Pete.

Looks like a KING tide!

 

[peter2]

Thanks, tech/a.
Like you I'm grabbing a bit every time the tide comes in and not giving it all back when it goes out. Loved your recent +8R result in SBM. That one win covers 8 routine losses. Don't they feel good.

 

[grah33]

it's been a while since i was on here, but the market is starting to rise again... glad to be back. was learning about forex while away, but i regret that. it's WAY too much to learn too soon. seemed like a good idea before, but i feel like a fool now. anyway, i have to go through all the other posts yous wrote. main thing is i still got my money.

 

[peter2]

Trading update: A new trade and time to sell one.

REG: Bought at open after closing above BO level (5.50). SL = 5.20. This is a pull back setup as the weekly trend is up (HHs and HLs)
This is not a full size position as we ran out of cash.

ALU: Time to sell this one after so many down bars and closing < 4.40. I probably left this one a bit too long, but we could give it more time as the rest of the portfolio is doing well. Selling this will free up some cash for new opportunities.

 

[peter2]

Trading update: at the close. Two new cfd trades as we're low on cash (ALU sold earlier)

CGF-cfd : Bought BO-NH (7.52) SL - 7.25 Price target 7.95 (sell limit in)
MND-cfd: Bought BO-NH (7.32) SL - 6.70

These cfds trades must continue up immediately (next week) or we'll exit within 3 days.

SEN: Missed it as price "jumped the creek" and over my buy limits.
LSR: Missed it as Barney was late with his potential BO warning. Just kidding Barney.
I missed the sideways price consolidation as the average daily volume was below my scan limits.

 

[VSntchr]

Bought BO-NH (7.52) SL - 7.25 Price target 7.95 (sell limit in)

Hey mate,
Quick question on the execution of CGF. Assuming that the order was pre-meditated based on the new HL pattern and holding above the approximate resistance line - why exactly was 752 chosen as opposed to say...today's open?

I'll proffer my own response and say that you waited for the morning price discovery to get out of the way and then bought on the BO of the days high?

 

[peter2]

Thanks for the question.
OK first we had to sell ALU to raise some cash. That was done at the open price, while I was asleep.

2. Then I had to wake up and see what the market was doing. I was watching the late US rally so anticipated a good day for us today (= sleep in).

3. In the CGF trade I wanted to see if price was going to close >7.50 before buying. CGF can get quite volatile and now that it's finally closed above 7.50, it might race up to 8.00 next week.

I don't day trade ASX stocks, but I will day trade the indices. If a swing starts either in the UK or US sessions I'm onto it before the ASX opens.

 

[peter2]

EOW33 update: ASX Momentum Portfolio +18.1% ( 121% invested in 9 trades ) XAO -10.1% (33wk)

Another good week for the portfolio as the BO entries got us into strong stocks (RSC(XAO)). As we were low on cash we have used the leverage provided by cfds to start our new trades. We were able to start these trades as our capital risk level was well below our limit for the current bullish market conditions (daily trend is UP).

8/9 open trades in profit, with exit triggers >BE in 5 of them. We are well poised to profit if the market continues higher next week and if it falls, we'll protect our profits.

At the EOW our total portfolio heat (downside exposure) was above our portfolio limit (>10%) so we must raise a few exit stops to reduce this to <10%. Remember, our goal is to avoid a 10% DD, even if it's all profit. After these adjustments the portfolio heat drops to 7.4%. The current exit triggers are shown in the pic (latest changes with yellow background).

This weeks sells: ALU (price drifting down), realised the small loss and bought something going up.
This weeks buys: ACX, REG, CGF, MND

Note: The CGF-cfd postion has been restricted to our max size limit (20%). This size limitation and our tight iSL reduces the initial trade risk to 0.8%. This is a good thing as CGF can become quite volatile at times.

 

[peter2]

Trading update: Thoughts on short term management of our open trades.

JHC: We can sell it at 3.07 and re-buy at 3.17 OR give it one more day. I'm inclined to give it 1MD.
UGL: I gave this 1MD and price went up nicely. Our exit trigger is 2.20.
RCR: Headbutting resistance at 2.50, I'm giving it 1MD.
ASZ: Headbutting resistance at 1.10 and our open profit is not > average win, let it go.
APO: Attractive small sideways consolidation forming, pyramid opp if it's part of your plan, we won't as we're low on cash.
ACX: Let it go . . .
REG: Price testing BO level, we must let it go and see what happens next.
CGF-cfd: Near our initial target level (8.00), will sell this at 7.97 for an average sized win. No point selling it below.
MND-cfd: Price rose on good news today, let it go . . .

Personally: My medium term management will be to let them all go and see if they form a HL. We've bought them at lower levels and if price breaks higher that'll be great. We're seeing resistance where we expect it (at old highs). Nothing to do, other than buy more when they BO-NHs.

We've got 5K cash, so I might duck into Daffy's thread and see if there's a setup for us in the lower priced charts.

I've got no thoughts on shorting the index atm as it's forming a shallow sideways consolidation pattern. It could be an bullish asc tri pattern or bearish ending diagonal pattern. We'll wait and see.