DES - Destra Corporation

[RichKid]

Anyone following Destra? It was my pick for the October Comp but has only consolidated after reversing trend so I wont win the comp!!! I hold it and entered at 12c (current price). It's a slow but steady mover, maybe I should have picked a faster one for October.

Is anyone checking it out? It looks like it's at the start of a new uptrend, so far a classic swing out of the 10.5c resistance, higher bottoms and higher tops, a rounding bottom has been completed. 15c seems the next major level. Info on DES below from my comments in the October comp entry thread:

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Okay folks,
I'm going for DES (Destra Corp) www.destra.com.au
It's a diversified IT company. Does web hosting and music marketing (ie like the Mac itunes concept). Has partnerships with major retailers and is announcing deals from time to time. Revenue expected to be strong in the coming months.

It suffered a sharp fall recently when it announced some one-off development costs but has now broken through resistance and looks like it's getting back to its original level after a re-rating. If it sticks to this uptrend I'll be very happy!
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[RichKid]

Re: Destra Corp DES

Well, I've picked DES again for the November tipping comp.

My only worry is that the volume isn't picking up- it may end up consolidating between 12c and 14c before continuing but as long as support holds at 12c it'll be ok. Still some way to go before reaching it's pre-fall level. Slow and steady wins the race this time!?

I rarely get to participate at the start of a rounding bottom recovery so this'll be good to watch as all the fundamentals appear good too- see the annual report and the DES website for a broker report.

 

[GreatPig]

Re: Destra Corp DES

Nothing like a nice rounded bottom to look at .

Of course the trouble with the stock tipping comp is that you not only have to pick a rising stock, but also its timing. It could be the best performer around over a few months, yet still fall during the month you pick it.

GP

 

[RichKid]

Re: Destra Corp DES

Yes, a nice curvy bottom!

Must read up more on rounding bottoms in the Edwards and McGee book, I understand more of the book each month as I lose and make money, nothing like the real thing to help me focus!

I was thinking of going with a faster horse for the comp but it was taking too long for me to decide on the next bolter so I went with one I had faith in, not every month sees stocks climbing 50%+ so maybe I'll win it on a modest gain.

My next months selection might be a speci, probably a tech or mining stock. Hope you do well in the comp, it's always good to watch. At least I didn't go backwards!

 

[RichKid]

Re: Destra Corp DES

Of course the trouble with the stock tipping comp is that you not only have to pick a rising stock, but also its timing. It could be the best performer around over a few months, yet still fall during the month you pick it.
GP

Hey GP, I know you're a beginner in TA like me, here's my Risk to Return method for DES, thought you may be interested- let me know if you use another method (it's from another thread, posted on 31Oct04 https://www.aussiestockforums.com/forums/showthread.php?p=3364#post3364 )

<<<<<<<<
......If I find a stock I like (various reasons) I look for support and enter above it or join the trend if it's strong. I will use DES Destra as an example since I'm following it and the price is at where I entered (12c). I saw a review at Aegis equity review, eyeballed the chart, noticed the reason for the fall (so a recovery in play), saw the rounding bottom and corresponding volume. Watched it break the resistance at 10.5c.

This is where I made a mistake (due to emotion). I saw it sail upwards that day and panicked (got greedy) thinking I'd miss out so I bought at 12c instead of waiting to see how it settled, as I normally do, there was high volume though. Anyway, the resistance at 10.5c held but I could easily have bought lower than at 12c. My target is about 15c.

This is how I work out my risk to return. I bought at 12c so the percentage risk is worked out via the change in the entry price. Hence if it falls from 12 to 10.5 (Support) It's fallen 1.5c which is a 12.5% fall. I would activate my stop loss and sell if it broke 10.5c or look to sell at that price if signs are bearish, I can always buy in later. As it was I held as I saw support continuing.

So that's the downside percentage risk for me according to price (ie 12.5% loss). Now for the upside. I see the next major resistance level at 15c. So I estimate a possible profit based on the percentage rise from 12c (entry price). Which is 3c divided by 12c x 100 = 25%.

My ratio is simply 12.5%:25% (which is 1:2).

Overall things which could go wrong include slippage (ie not geing able to sell at 10.5c once it was broken) and a stronger resistance level appearing before 15c.

Once the price gets to 15c I will most likely sell and wait for it to establish support above it and then decide whether to enter again.

I try to aim for a risk to reward ration of 1:3 but if a stock has other reasons for being attractive (eg fundamentals for Destra suggests a recovery as the reasons for the sell down wont continue, stable business model and cashflow is to increase next quarter) then I may enter at 1:2.

So basically I don't expect to lose all my money, just a bit of it and I try to have 3 times as much upside as downside on a percentage basis. Liquidity is also important to ensure I have takers for the price I want......
>>>>>>>

 

[GreatPig]

Re: Destra Corp DES

RichKid,

Yeah, I read that message, but haven't really had time to study it much.

At the moment I'm playing around with backtesting on charts, experimenting with varieties of MAs, stops, and what-not to generate buy and sell points that give an overall profit (I'm developing my own plug-in DLL for AmiBroker to do this). At the moment I'm mainly focusing on stocks for longer-term gains, meaning they have reasonably good up-trends in them (at least in their past). I'm not really looking at short term trading yet.

For my current paper portfolios, I'm still making decisions based primarily on trend lines and occasionally other chart patterns. They're mostly doing pretty well right now - once I gave up on all the speculative penny-dreadfuls - but then I don't think it's been that difficult to find stocks recently with good up-trends. Many of the better stocks seem to be booming.

At some point I'm going to have to compare the two methods. The automated system will be easier and involve less effort, and could potentially be handled by someone else (perhaps my wife). However, if I find I can get significantly better results using trend lines, support/resistance, and other chart patterns, the extra effort would probably warrant it.

Attached is a sample of what I have so far, applied to the stock ASX. The thick blue and orange lines below the prices are the stop-loss plots while the share is bought (I alternate colours to highlight sell and buy points better). The up green arrows are buy points, the down blue arrows sell points. The profit at the top is based on starting with $10K and always reinvesting the full amount (whatever's left after the previous sale), including some brokerage but excluding taxes (which could have a significant impact in reality). The given figure doesn't include the original 10K, and also assumes a sale at the closing price on the last day to count the unrealised gain.

I should stress that this does not just use simple MAs and stop losses. As I've worked on it, I've added smoothing to the MAs and can also ignore buy and sell points based on the slope of other MAs. In this particular case, the stop-loss plot is just a percentage below one of the MAs, as I'm not using any other form of stop-loss (although I have built in ATR and Guppy Count-back, I usually find it better without either turned on). In the vast majority of cases, sell signals come from MA crossover rather than the stop.

And of course this is still under development and constantly changing.

Cheers,
GP

 

[RichKid]

Re: Destra Corp DES

Hi GP,

Sounds like you've done a lot of work! I don't have an automated trading platform but I probably haven't been paying enough attention to moving averages eitherway. It'll be good to see how it works out. You'll probably have to spend some time watching the stocks (even with your wife's help) even if it is computerised but the best thing is you get experience while you're backtesting.

If there's anything I've found useful it is to cut losses real fast. Past results help but in the end it's the management that keeps me in profit rather than the trend line or the resistance level. Hope you can make some money while the bull run is on, it'll probably get a lot harder once things start going sideways, but again, there are always strongly trending stocks, just have to find em!

I've joined Destra a bit early so I'm taking a higher risk in the expectation of a higher profit, because it's a growing co there's more bluesky if it's zooms up and as you'll notice the moving averages probably wont help much with a stock like this as it may whipsay, I rely on other indicators instead.

As for ASX I'd probably have only traded the stronger moves and stayed out during the mid cycle moves, so fewer trades but hopefully lower costs too and less time spent- but that's because I do most things manually.

Check out my other thread on 'bottom drawer stocks' for some stocks I think are trending well for the next few months at least. You may even have tested a few of em.

I still watch the penny 'hopefuls' but only select ones, I dont' consider Destra to be one of them for the fundamental reasons I mentioned above. But I still think there are some short term gains to be made over the next month or two out of oil, gold and iron ore. I'll be wiser in a few months so let's hope I don't blow all my capital!!

Happy testing!

 

[GreatPig]

Re: Destra Corp DES

RichKid,

Sounds like you've done a lot of work!

Let's just say I haven't lacked for things to do with my time .

If there's anything I've found useful it is to cut losses real fast

For longer-term trend trading, I'm finding that is not the best idea as it generates too many sell signals. Usually I'm finding it better (with the backtesting) to ignore small corrections and try and only catch the end of the main trend.

it'll probably get a lot harder once things start going sideways

Yes, from what I've seen so far, what gives the best result for stocks with good uptrends doesn't work well on stocks going sideways with relatively small oscillations or stocks with strong downtrends. In fact, without fairly long periods of uptrend, MAs don't work that well at all because of the delay they introduce.

I've done a little experimentation with RSI signals for that sort of situation, but have a lot more playing around to do before I try and trade those sorts of stocks.

As for ASX I'd probably have only traded the stronger moves and stayed out during the mid cycle moves

Trouble is, you don't know if any move is going to be a small one or a major one until after the fact, and if you ignore price increases until it's an obvious large move then you've already missed a fair amount of the gain. I can test that by using longer term moving averages for buy signals, but almost invariably the profit is lower.

The other thing I'm finding is that there are no best values for MAs, etc. that work well with every uptrending stock. What gives good results with one stock might give poor results with another. And many stocks are sensitive to the MA periods used. A small change in the period of one MA can make a major difference to the profit value. So since this is all effectively curve fitting to historic data, it's hard to know if the best values to date will continue to give good results into the future.

Oh well, it will at least be interesting finding out . I might have to run two portfolios, one traded with this method and one using other methods, and see which one gives the best results over time.

Cheers,
GP

 

[RichKid]

Re: Destra Corp DES

Hang in there with your testing GP! My only observations is it'll still take some time to tend to even if you get a good 'automated' system going.

I've just read a bit on rounding turns in Edwards and McGee (1992), looks like this is a classic pattern with a significant reduction in volume towards the centre of the volume and a consequent increase. They say that this bottom reversal pattern, aka saucer pattern, is uncommon and more likely to be in low priced stocks (such as Destra). It also notes that prices appreciate considerably once the pattern is confirmed but they rarely skyrocket (as with mining stocks). There are also false breaks upside (as with Destra IMO (ie went to 14c) after which it consolidates before it climbs again in line with the rounding turn.

So far so good, I'll keep watching. Good to see decent volume at the end of the pattern too. If there had been a bit less activity over the last few months (ie like a 'fly specked' pattern as E&M like to say) then it would have been a 'dormant saucer bottom'- still a rounding turn but less pronounced and flatter.

 

[GreatPig]

Re: Destra Corp DES

RichKid,

with a significant reduction in volume

I'm not sure what's in the 1992 edition, but I read that you have to be careful with volume comparisons between current Australian stocks and older US stocks (my Edwards & Magee is from around 1984, with most examples using stocks from the 20s and 30s) as the markets are quite different.

In particular, the current market is supposedly more volatile and the US market in general more liquid. This apparently means the volume patterns can be very different.

Leon Wilson notes in his book "The Business of Share Trading":

A word of warning though - be careful if you purchase American trading books on volume analysis because it will be based on trading the US market. Compared to the US stock market, the Australian market is very illiquid. Volume analysis based on American activity can, therefore, be inappropriate when applied to Australian conditions. Try to locate articles, books, or magazines written by local authors where possible.

Cheers,
GP

 

[RichKid]

Re: Destra Corp DES

Hi GP,

Thanks, I'll keep it in mind. But as far as this pattern is concerned I don't think it matters as this is the type of low priced stock that E&M keep talking about for rounding bottoms (ie DES fits the profile). I have a feeling the cautionary word may apply more generally to bluechips.

I think you'll find even Aussie TA authors will say the same as E&M about this pattern, this is one of those easy to recognize formations. Only problem is that they aren't that common so I'm glad I spotted it in DES.

I have double checked the volume and you can almost pinpoint the big drop in volume to the centre of the bowl pattern (see chart in post above).

(I haven't compared the earlier ed's to the 1992 ed- there was a revision for the later ed which may have modified what is said in the earlier ed's but I doubt it as TA is often back tested into the 19th century and it still holds up. But it isn't an exact science but everything confirms for DES at least)

 

[RichKid]

Re: Destra Corp DES

GP, I've been trying to find Aussie TA authors who have written on a rounding bottom in small cap stocks. Haven't been able to find anything yet but I bet Guppy has some as I know he cites E&M in his work. Will post again if I find something contrary to what E&M say specifically.

 

[GreatPig]

Re: Destra Corp DES

RichKid,

I bet Guppy has some

In one of his recent TA newsletters (which I've subscribed to) there was an article by a P. Rak about a saucer bottom in RDF. As it happens, I'd picked up a rounding bottom in that stock, but the one he showed in the article was many times bigger, and personally I found it difficult to visualise the whole thing as a rounding bottom. However, it did fit in nicely with his price projections, as the stock broke just after it reached the projected value (the month when I'd picked it for the tipping comp ). This was after the fact though, and I would have liked to have seen the chart with projections before the price started to drop.

And with the rounded bottom he drew, the volume did indeed drop right off in the centre of the saucer.

GP

 

[RichKid]

Re: Destra Corp DES

Hi GP,
It isn't the most obvious saucer pattern (Rac's one) but price does correspond generally for the larger saucer. you're little saucer is more rounded price-wise and I prefer it- I probably wouldn't have picked the larger formation.

The overall pattern looks more like a triangle moving into a saucer pattern (ie your small saucer), it all looks clearer on a two year weekly OHLC bar chart IMO.

I'm glad DES is easier to spot! If only I could predict that it would rise that far! Also timescale is different as DES is moving faster but the pattern is the same.

How do you find the guppy newsletter- does he give tips based on TA?

 

[RichKid]

Re: Destra Corp DES

Hey GP,
Also forgot to mention, the end of the small saucer indicates a break through the downward trend resistance line. I definitely would have looked for that and together with the saucer it would have been a no brainer to enter, especially with rising volume.
So it goes to show that there are many patterns which can confirm the same change in trend, hence my move into DES but patterns aren't 100% accurate so I still have to be watchful, so far so good.
Nice to discuss individual examples like this, I'll see if I can do some research on saucer bottoms for next week.

 

[GreatPig]

Re: Destra Corp DES

RichKid,

How do you find the guppy newsletter

I haven't actually had a chance to read much yet. I've glanced through a few editions, and read that one article on RDF since it was of interest at the time, but not much else. Looks quite good though, with a variety of authors talking about a range of different things using real stocks as examples. However, it does cost.

Anyway, as I get time I'll go through them again in more detail.

Cheers,
GP

 

[RichKid]

Re: Destra Corp DES

Looks quite good though, with a variety of authors talking about a range of different things using real stocks as examples. However, it does cost.
Anyway, as I get time I'll go through them again in more detail.
Cheers,
GP

Sounds good GP, look forward to hearing from you once you get around to it. Maybe we can discuss it on the Tip Sheets Thread, there may be others who've used Guppy's newsletter, they might join in the discussion.

Not sure if you've come across Chris Tate's book- The Art of Trading. I find it really helpful for risk management ideas- looked at it to find a rounding bottom too but no luck! Alan Hull is another one that sticks out. They both seem to zero in on things with little pearls of wisdom that I find are sometimes missing in generic books like Bedford's. But as you start out Louise Bedford's books are more accessible. Anyway, better not get off thread here.

 

[RichKid]

Re: Destra Corp DES

Okay, thought I'd just tie up a loose end. Got out of DES at 16c in line with the plan described ealier. Yes, I know I set 15c as the exit earlier but on measuring the steps up I saw that a jump to 16c was predictable so went with it- luckily the sp helped out but I'll be more careful next time in my initial measurements as it is no good to change exit levels after entry. DES did go to 18c but that has now formed a resistance level.

DES is now gyrating around 15c on low volumes. I notice now that the three 'step' or wave like pattern may fit the elliott wave theory- might be a good combination with the saucer bottom to predict prices. I know very little about elliott wave and fibonacci retracements so will stick to the basics till I know more.

Thinking of starting up a thread on saucer bottoms so we can all benefit. Keep an eye out for it and help me out if you folks are interested.

 

[RichKid]

Re: Destra Corp DES

Here's the thread on rounding bottoms mentioned above. Suitable candidates are hard to find but are well worth the rewards if managed well--> https://www.aussiestockforums.com/forums/showthread.php?t=761

 

[Chief Wigam]

Yes they removed it from their web site recommendations.

Wow that was a good investment. Bought at 30.5c sold at 25c.