CB (count back) Lines & Chart Patterns

[coyotte]

Moderator's Note: This thread had to be resurrected (after a mishap resulting from my ignorance) so please excuse some of the 'editorial' notes folks, my apologies! Thanks to Coyotte for such an excellent job, I'm sure we all very much appreciate the effort put into this thread.
RichKid, moderator

Hi Coyotte, I know you are an OXR "fan", Can you detail the way you "read" the chart for us uneducated....Cheers Barney.

OXR ENTRY

Chart is showing the use of COUNT BACK (Guppy/Wilson)

Count Back is used as a confirmation of a break out into a new tread.
eg: is not used with price target trading.

From the HIGH of the LOW bar : count back (in that tread) untill U hit the bar with a higher high = CB2 : from this bar count back untill U hit the bar with a higher high than CB2 , this bar = CB3 .

The price must CLOSE above CB3 --- that close is the trigger for a entry the next day ---- the STOP is from the new high bar -- from the low of this bar count back to the next bar with a lower low = CB2 , then the next bar with a lower low = CB3 -- CLOSE below is the exit.

For a safer entery U can wait untill there is a second CLOSE above CB3 (original) for confirmation .

May : Failed
June : Entry --the green line is the trigger ,the red line is the initial STOP.
July : Failed
Aug : Entry -- same as above
Sept: Entry -- As the trigger close was a manipualated price , I would ignore it and use the CB3 as the STOP

will follow up later with C/B & Indicater Divergence as a STOP in a Trend Trade:

 

[coyotte]

Re: Coyotte

OXR EXIT

Count Back STOPS are done the same way :
From the recent high bar count back untill U find a bar with lower low than the low of the high bar = CB2 -- from CB2 find the next bar with a lower low = CB3.

A close below CB3 triggers a exit.

Wilson explains how the use of the Average True Range indicater in conjuction with CB , can allow the STOP to be adjusted for the type of trade , Short to Long Term .

BUT I prefer in this the most VITAL part of the trade to use all predetermined STOPS only as a insurance measure -- basic analysis should see U safely out the of the position BEFORE the stop is triggered .

The graph of OXR shows some simple reliable techniques --- expessialy in stocks like OXR & LHG , these are volatil trading stocks .-- these are the type of stocks that short/med term traders thrive on :


First off notice the Bollinger Bands --- must be set at 20*2 simple .
When Price starts to break above the upper band , this is showing you that both speculators & short term traders are in this market , hence the trend at this pace is unsubstanable ---- early warning !!!

Second the ADX indicater -- set at 14d as the trend becomes steeper .
take particular note of the diverging D+ line (blue) -- this is showing that allthough the price is rising -- the actuall trend is weakening -- Specs & Traders are leaving .
The ADX line (grey ) -- this is showing the STRENGTH of the current trend .
The D- line (red ) --- this showing the down side strength.
The D+ Line (blue) ---- this is showing the up side stregth.


April / May clearly shows that price was breaching the BBs --- the D+ was diverging and D- was strengthening -- near the top the tails on candles where consistanly up & price was compressing .

Ample warning to exit long be the CB was hit.


July -- D+ diverging & ADX at a low point , again pointing to caution.


Sept --- B/Bs are breached ,ADX diverging & at a low level , along with upward pointing tails on candles.

Current --- a half mast bear flag is forming , along with up tails !!!

These along with Twiggs Money Flow are the only indicaters I use and only when Specs/Traders are in the market.

Will post a entirely different stock MBL next .


disclosure : SHORT position Thurs --- 1/2 Long Hedge Fri (cover weekend)

 

[coyotte]

Re: Coyotte

MBL EXIT

Different type of stock --- blue chip, banking sector:

MBL -- the same principles apply !

notice the up pointing candle tails April/May --- higher prices are being stronglly regected ---- buyers have dried up --- end of this trend.

Will post a current example of a STIRRUP pattern trade on Tues.

 

[coyotte]

Re: Coyotte

LHG STIRRUP

Stirrup Pattern of LHG current
After a stock has begun to rebound from a severe decline

Starts with the formation of a upward sloping triangle
Trade can be entered early as price target trade -- the depth of the triangle is added to the top line of the triangle = EXIT

If price continues past the target -- the new target becomes -- the Base of the triangle to the Top of the previous High x 2

Before this stage is reached the stock would probably have turned into Tread Trade and could be treated under those rules .

Disclosure: hold a long position, will add to if triangle target is exceeded.

Will show the same pattern with ROC tomorrow.

 

[coyotte]

Re: Coyotte

SBM

Example of a Bollinger Band Breach + Retrace Trade

SBM --- current


Note B/Bs MUST be set at 20 x 2 simple

The breaching of the lower band is indicating that SBM is over sold , But is NOT a entry signal (remember HIH )

The entry signal was the blue bar above the band ( SEPT 19 ) and the C/B was the blue lines -- NO ENTRY

The next signal was the blue bar ( Sept 22) and the C/B from the low is the green line -- there has been 3 closes above this line so it is confirmed


The current STOP is the lower red line , from the current high .

The upper red line is showing the first major resistance level .
Note : SBM chart shows constance resistance on any UP move -- hence the point I was making in a prior thread , in Tread Trading look for stocks that have few if any previouse highs.


At this stage as U can see from this chart , indicaters are useless , the new trend has yet to develop -- currently its Price Action ----- When/ If the D+ line crosses the D- line and the ADX line tracks the D+ ( but remains below the D+) in a up direction , then U have confirmation that a UP trend is in place and the ADX is changed to 21d ---- Trend Trading Rules would then take over from Break Out Trading Rules.

THE SEPT 19 C/B ARE NOT ON THIS CHART --- but nut out where they should be

Disclosure : Will not have a position in SBM

 

[coyotte]

Re: Coyotte

SHORT TRADING :
Below is where the ASX approved

http://www.asx.com.au/investor/education/basics/short_sales.htm
go to the r/h side of the page -- midway down -- >download(TXT 15 kb)

The Risk/ Reward Ratio of Short trading is far too against the trader compared to the R/R Ratio of Long trading --- your potential Risk on a Short is unlimited whilst the potential Reward is restriced , worst of all if the stock was suspended or went into liquidation, etc --- your stuck with a Stock that you have contracted to BUY .

On the other hand a Long Trade your potential Risk is retricted to the inital purchace price , whilst the potential Reward is unlimited .

I mainly use shorts as a HEDGE ie: I have 1/3 of my INVESTMENT PORTFOLIO in ETF GOLD , when the price of Gold futures breaches in the UPPER TREND LINE of its trading CHANNEL , I take out a 1:3 Short on LHG , this saves me selling the physical , whilst the Short covers any losses ( break even ) , when the futures start to rebound , I buy back LHG , but at double the amount af shares that the short was , so if things go right you end up making a profit .


You can apply the same HEDGE principle to Shares :
If you had a Long postion in OSH and crude futures are topping out you could either take out a Short on OSH or a Long on say QAN .
If using the same share , I set the Long Price at the STOP , then as long as I can SHORT the stock above the STOP , I'm in break even situation untill , price verifys the next move.


I only do a NAKED SHORT TRADE on stocks like LHG, OXR etc because I have followed and traded LHG for over 5yrs , OXR for just over a year , I Know these stocks and trade them UP/DN .

To pick a stock that you are not familar with as a Short , would far to risky a proposition for the vast majorty of small traders ---- get to know the stock first.
Be careful of high Volume on a short , it is often the final sell off ----- same when approaching a major support level , generally a good time to bail out.

Cheers

 

[coyotte]

Re: Coyotte

LHG STOP

Based on Rising Triangle
Stirrup is the same STOP

Lihir closed over 6% down in NY overnight
Same here would put LHG at 2.70
Looks like this will be a dead trade

---- LHG --- possible EXIT today

 

[RichKid]

Re: Coyotte

OXR EXIT

Count Back STOPS are done the same way :
From the recent high bar count back untill U find a bar with lower low than the low of the high bar = CB2 -- from CB2 find the next bar with a lower low = CB3.
...........
........
.......

Sept --- B/Bs are breached ,ADX diverging & at a low level , along with upward pointing tails on candles.

Current --- a half mast bear flag is forming , along with up tails !!!

These along with Twiggs Money Flow are the only indicaters I use and only when Specs/Traders are in the market.

Will post a entirely different stock MBL next .


disclosure : SHORT position Thurs --- 1/2 Long Hedge Fri (cover weekend)

Moderator's Note- This post is by Barney: Hi C, Some good insight in these posts. Very informative for those trying to learn more about this stuff .......Keep 'em coming, Barney.

PS Re the specs/traders mentioned above; Just to make sure I have this basically right Do you mean you ONLY trade when the specs/traders are involved? ie either they are just re-entering the market - Entry points using C/B + positive move on sp? AND look to exit soon after the upward momentum diminishes ie C/B with negative sp move and/or after an unsustainable uptrend as described with bollinger curves etc OR will you still "consider" a trade without any obvious volatility, but maybe based on other signals??

 

[RichKid]

Re: Coyotte

Moderator's Note- This post is by Barney: Hi C, Some good insight in these posts. Very informative for those trying to learn more about this stuff .......Keep 'em coming, Barney.

PS Re the specs/traders mentioned above; Just to make sure I have this basically right Do you mean you ONLY trade when the specs/traders are involved? ie either they are just re-entering the market - Entry points using C/B + positive move on sp? AND look to exit soon after the upward momentum diminishes ie C/B with negative sp move and/or after an unsustainable uptrend as described with bollinger curves etc OR will you still "consider" a trade without any obvious volatility, but maybe based on other signals??

Moderator's Note- This post is by Coyotte:

Barney :

Most of my trades now are initiated by either a " rising triangle " or a " bull flag " for a long position --- the reverse of these two patterns for a short position.

C/B is not applicable to these types of trades , they are usually entered around the 2/3 point of the pattern development . ---- this is short term price target trading --- C/B is used for confirmation when some other method of entry is signaled eg: Trend Line Retrace -- Bollinger Bands breach + retrace --- MA cross over ,etc, etc .
Those where the type of trades I moved on to AFTER coming to terms with TREND TRADING .

Will post a graph of SBM -- a " Bollinger Band Breach + Retrace " which has been confirmed by C/B .


When Bollinger Bands are being breached it is warning that a move in the opposing direction is on the cards (minor or major ) ---this can either be taken as a warning to start taking particular notice of the price action --- eg: Breach of the short term trend line , tighten the ADX from 21d to 14d , UP pointing tails on candles , mostly RED candles , daily price contracting --- I use these as a group for a Exit ---- the C/B exit is the LAST RESORT -- if that is hit, I have lost touch with this stock .

OR the Breaches can be used as the starting of a Trade Set Up in the opposing direction ---- The SBM graph will show this

As to opening a position when the B/Bs are being breached --- generally NO!
The Specs are Flighty Money and the Traders would eat me for breaky !
Much prefer to see the price action Tracking the Upper Band , without any breaches .


Cheers

 

[RichKid]

Re: Coyotte

Barney :

Most of my trades now are initiated by either a " rising triangle " or a " bull flag " for a long position --- the reverse of these two patterns for a short position.

C/B is not applicable to these types of trades , they are usually entered around the 2/3 point of the pattern development . ---- this is short term price target trading --- C/B is used for confirmation when some other method of entry is signaled eg: Trend Line Retrace -- Bollinger Bands breach + retrace --- MA cross over ,etc, etc .
Those where the type of trades I moved on to AFTER coming to terms with TREND TRADING .

Will post a graph of SBM -..............
..............
..........
.......
Cheers

Moderator's Note- This post is by Barney:
Thanks for the info C, The good thing is that I understood most of it!!

So basically you are looking for an average/medium amount of price action/volatility/trend etc. to signal entry/exits, but not to the point where the volatility creates unnecessary risk? As you say, after the "traders" have worked the stock over, it often seems to signal a potential downturn (even if only short term). I've noticed re the B/Bands; often they will gap open accompanied by a strong price/volume spike (traders?) and in a short space of time reverse well down under the M/A, and head for the bottom B/Band.......are there any stocks which are more prone to this type action?........I guess that Oil and Gold stocks are more influenced by the commodity price than other factors?? For eg. Oil is down o/night so stocks such as ROC and OSH will more than likely drop a little on their daily trend??

Cheers Barney.

 

[RichKid]

Re: Coyotte

SHORT TRADING :
Below is where the ASX approved

http://www.asx.com.au/investor/education/basics/short_sales.htm
go to the r/h side of the page -- midway down -- >download(TXT 15 kb)

The Risk/ Reward Ratio of Short trading is far too against the trader compared to the R/R Ratio of Long ...............
,.,,,,,,,,,,
........
........
Be careful of high Volume on a short , it is often the final sell off ----- same when approaching a major support level , generally a good time to bail out.

Cheers

Moderator's Note- This post is by Barney:
Thanks for the above advice C, Very helpful stuff............Cheers, Barney

 

[coyotte]

Saved by the bell
don't know if was a good thing or not --- but still in

 

[barney]

Re: Coyotte

LHG STIRRUP

Stirrup Pattern of LHG current
After a stock has begun to rebound from a severe decline

Starts with the formation of a upward sloping triangle
Trade can be entered early as price target trade -- the depth of the triangle is added to the top line of the triangle = EXIT

If price continues past the target -- the new target becomes -- the Base of the triangle to the Top of the previous High x 2

Before this stage is reached the stock would probably have turned into Tread Trade and could be treated under those rules .

Disclosure: hold a long position, will add to if triangle target is exceeded.

Will show the same pattern with ROC tomorrow.

Hey there Coyotte, Good to see the thread back in action, (Well done Rich for your efforts to get it back on track)

Excuse my lack of knowledge, but can you explain what calculations are used to plot the "rising stop".... I can see the "angle" of the triangle etc. Is the rising stop simply X% below the proposed target trigger line, or is there some other way it is calculated.............Also due to the fact that Gold was down substantially before open of trade today, do you recalculate your stop level at all, or simply say bad luck and exit if it is hit?? Cheers, Barney.

 

[coyotte]

Barney :

The STOP for a Rising Triangle is ussually calculated by measuring the "Base to the Top Line of the Tri " this gives the Target Price .

In LHG's case 2.61 to 2.81 = .20 = Target Price 2.81 + .20 = 3.01.

From any point along the Bottom Trend Line of the Triangle project down that .20 and place a parallel trend line -- that line is the STOP --- UNTILL the Target Price is reached -- in this case being a Stirrup Trade , if it pans out , and the target is exceeded then a riseing C/B STOP would take over.

Was about to to close the position today , as it became obviouse that the close would be around 2.78 (today's stop ) getting to risky; When I recieved a E-Mail Alert from Steve Saville , a Gold Analyst I hold in great respect -- that basically the down side risk to POG was far less than the up side potential , for the MOMENT --- so I'm still in there


Will be posting a interesting situation concerning OXR and patterns (current )-- had some feed back from HotCopper & IC forums on this . --- never seen this situation before in a stock .


Cheers

 

[tech/a]

Coyotte.

Most interested in analysis performed realtime like the LHG trade.

Fitting analysis into past price action is easy showing its performance in realtime is more difficult.
I would be suprised if you do better than 50/50 short or long.

You pick some interesting stocks to trade.

Still a lot of work done here.

 

[coyotte]

Yeap tech/a

I can't Bullsh*t here , this is the real thing !
Actually betweem Barney and myself

You may have noticed yesterday in another thread: in reply to a question you put ,that around 1min before the close I was ready to Close the position for a 4% loss --- but held in there -- your quite right , LHG has not turned out the way I expected , these trades generally have a 70-80 % S/R -- looks like this could be in the 20/30 % lossing Group -- but with TIGHT stops, as long as there is not a gap down -- it is inmaterial

What did I say Barney -- it certainly did not take to long did it ?

Cheers

 

[barney]

Barney :

The STOP for a Rising Triangle is ussually calculated by measuring the "Base to the Top Line of the Tri " this gives the Target Price .

In LHG's case 2.61 to 2.81 = .20 = Target Price 2.81 + .20 = 3.01.

From any point along the Bottom Trend Line of the Triangle project down that .20 and place a parallel trend line -- that line is the STOP --- UNTILL the Target Price is reached -- in this case being a Stirrup Trade , if it pans out , and the target is exceeded then a riseing C/B STOP would take over.

Was about to to close the position today , as it became obviouse that the close would be around 2.78 (today's stop ) getting to risky; When I recieved a E-Mail Alert from Steve Saville , a Gold Analyst I hold in great respect -- that basically the down side risk to POG was far less than the up side potential , for the MOMENT --- so I'm still in there


Will be posting a interesting situation concerning OXR and patterns (current )-- had some feed back from HotCopper & IC forums on this . --- never seen this situation before in a stock .


Cheers

Hi C, I'll need a bit longer on this to follow it properly, but the gist is there.

Re LHG (bare in mind I am V new to T/A so go easy on me ).............Just had a look at the last 6 months chart, Notice the sp has another resistance area of around mid $2.60's.........assuming that LHG is very dependent on gold price, would you consider "easing" your stop loss to say low $2.60's to give a little more flexibility ........the current pattern from mid September to present seems very similar to the pattern of mid July to mid August, where the sp drifted a little lower but recovered strongly by 5-8th September........

I know this is not "tecnical" analysis, but it would only take an average rise in gold to spark LHG up............Funnily enough, when I started writing this, Gold had opened up about $6 higher, and now is up about $11 ............this should obviously help in the short term.........Also , considering gold took a beating yesterday, and LHG held its own on good volume, that would give some hope I guess??.........The next couple of days will tell a better story I spose?.......

Just talking out a loud here, but if I make any sense let me know, and feel free to criticize incorrect judgements/asumptions, Cheers Barney.

 

[coyotte]

Barney :

NO !

If STOP is breached you should have loss of only 5% max --- unless there is a gap down --- KEEP YOUR STOPS TIGHT --- you can allways re-enter .

If LHG recovered and closed above 2.81 then buy back in .

THREAD CLOSED

 

[tech/a]

these trades generally have a 70-80 % S/R -- looks like this could be in the 20/30 % lossing Group

I would seriously question those figures. Where did you get them?

I'm not new to Tech Analysis (12 yrs) --- and when I see figures like this quoted to genuine newbie traders of course Ill query it.
Triangles at best are a 50/50 proposition.
Just have a look in "The encyclopedia of chart patterns".
The LHG trade I would question the formation of the traded triangle,to me its more a consolidation area---but as Technical analysis can be subjective----secondly you were trading against the immediate trend which would lower the chances of success.

THREAD CLOSED

WHY?

If your going to post analysis in demonstration you must be prepared to answer queries from both novice and experienced together.
Hell try running a fully disclosed trading system live on the nett for 4 years showing live trades for 4 yrs,the good the bad and the ugly,and see what sort of questions you need to answer.(Which I do).

There is nothing wrong with what you have posted.
I wouldnt trade it and I dont particularly like Guppy's CBL (In short term trading) due to the wide gap in most entries from entry to stop.I do like the use of pure price action.
I like the way you trade one stock (Or a few) as a strategy,you can develope some very good insights trading a few stocks.
I dont like ADX particularly your use as a confirmation in a trading range for the CBL entries in OXR. But thats me.

Ive done this long enough and tested zillions of trading Hypothesis (400 out of 1200 published Metastock trading systems once---how many do you think turned a profit?---ZERO didnt find one---but thats another story).and ideas to know that Technical analysis AT BEST supplies a "Possible" beginning and a "possible" end point.

Its use is very often incorrectly applied.(As a common example looking for over bought oscillator signals in a bull trend and V versa).

Its use is very often applied with no knowledge of success ratios,or and most importantly expectancy.Its simply blind application.

Coyotte Hotcopper full of could be's starting on their journey.

Keep posting your ideas,but dont get annoyed if and when I ask something---constructive.

 

[professor_frink]

Hi Coyotte,

Interesting thread you've started here. Would you be able to give me a quick run down on how you'd use the C/B line to trade BHP over the last few months? I was looking at it this morning and am struggling to figure out how you'd be able make any profit using the C/B line(although I may have been calculating it incorrectly )

Cheers