Hamfisted chart reading TA exercise

[Paladin]

Hey all!

One thing I'm finding really useful to learn from is people's feedback/interpretations of current charts. In the spirit of this, am having a stab.

Basically, I'm trying some different chart reading strategies, and any critical input on this take on things would be appreciated. I've removed the stock code from the chart, because I want to try this as a pure TA exercise. One note only is that the selling down on the 21st was due to a distressed major shareholder needing to dump a lot of shares due to a margin call.

Probably quite a few people know this stock, but please don't spoil the fun!

I'm only including a month's data, because anything before that is to an extent irrelevant for this stock due to a major share repricing. It hit what I read as a head and sholders in March and has been trending downward Mar-June from about .80 to .60 over that time. Then there was a trading halt, and then the data I'm giving.

Clearly this is a volatile, distressed stock - which is one reason I'm interested in paper trading it. So here are the charts.

Raw chart, candlesticks and volume only:

And with bollinger bands, MACD and fast stochastics:

Now I'm happy to say I read the almost perfect dumpling top on this between the doji on the 22nd (market indescision after the drop and when the circumstances were revealed to the ASX) and the gap down on the 31st, so I paper traded out at .29 after buying in at .26. That pattern to me was a clear bearish signal and has been borne out. I'm finding candlesticks and gaps to be pretty good in combo for reading some of these trends.

On the very tetchy information I've given, would people agree or disagree with the following (or perhaps there's just not enough info to tell based on the charts alone):

1. That this is going to need to demonstrably break resistance at .31 before it's terribly viable.
2. That it may have a possible support at around .25, albeit shaky, and if intraday data showed a white candlestick was going to be likely then it might be a faint buy signal - in a very cautious way.
3. That the risk/return on this stock isn't favorable at the moment (I would read possible return to .305, and possible risk at lord knows where if it breaks .25 downward)
4. That, given the quarterlies etc are out for this stock and that there is no further news on the horizon, it's likely to trade sideways for a while even if it returns to its support at .305

Out of interest also, what indicators would people favour to read a monthly chart like this? I'm finding the MACD pretty useless, but the MACD histogram useful. The narrowing of the Bollinger bands is interesting to me, as was the clear candlestick pattern - but any other indicators that would help (price envelope seems pretty poor) read this would be really interesting to hear. Also, any suggested modifications to the defaults on the indicators I've gone for here to get more granular data would be lovely!

Just throwing this out there: but a regular chart reading 'exercise' would be really useful for me to participate in - somewhere where I could have a stab at reading a chart, and also see how brighter minds than mine have read it. Is there a spot here somewhere that would be appropriate for that?

Thanks for wading through all that. Any random feedback also appreciated

 

[Uncle Festivus]

If it's going to be a 'blind' TA excercise then you'd be looking for a double bottom to form otherwise I would be praying to a particular 'saint' to deliver some devine intervention

I think the fundamentals would explain most of the action on the daily candles so far - share placement, director selling, then no news means share price drifts lower? Now it's a waiting game so not sure if TA could even enlighten us to what is to come?

 

[Paladin]

If it's going to be a 'blind' TA excercise then you'd be looking for a double bottom to form otherwise I would be praying to a particular 'saint' to deliver some devine intervention

I think the fundamentals would explain most of the action on the daily candles so far - share placement, director selling, then no news means share price drifts lower? Now it's a waiting game so not sure if TA could even enlighten us to what is to come?

Hey unc! You may be right. So say a double bottom forms at around 25c (which I reckon it might) and rose back to around .30c what would be your guess? It's my understanding that double bottoms aren't the most reliable pattern - and also look terrible in cutoff shorts. Also, wouldn't the timeframe be too short to call it a genuine double bottom rather than a correction? I ask, because I'm really trying to get the first lens in my pattern recognition glasses installed right.

I had a feeling that blind TA might be a big ask, but do know that some people are comfortable with it.

Even feedback of "if the chart moved to position x from here, I would draw the following conclusions" would be spiffy If only to save me the social embarrasment of making a long post only to discover it was not only long but idiotic.

Dumb-questions-r-us Please consider me for all your stupid question needs!

No news = SP fade is an interesting pattern in itself that I've twigged to with a couple of stocks recently. I wonder if anyone here takes positions influenced by this phenomenon?

Again, even random feedback is appreciated Please do pull me up on all my false assumptions.

 

[saiter]

What's the 52 week low?

IMO I don't think it'll pass below the low on Jul 21st (if it's lower than the 52 week low) because a few buyers went in thinking it was a pretty good deal, so no one else is willing to sell for lower than that price. If that's true, then a double bottom could be completed sometime this week.

If it then shoots upwards with enough momentum after this bottom then I'd go in with a stop loss at the Jul 21 low price. Of course, the stock could always go back to retest the support and breakthrough to a new all time low, but I don't think any seller would be willing to get that close to $0.00

That's my newb interpretation.

 

[Paladin]

What's the 52 week low?

IMO I don't think it'll pass below the low on Jul 21st (if it's lower than the 52 week low) because a few buyers went in thinking it was a pretty good deal, so no one else is willing to sell for lower than that price. If that's true, then a double bottom could be completed sometime this week.

If it then shoots upwards with enough momentum after this bottom then I'd go in with a stop loss at the Jul 21 low price. Of course, the stock could always go back to retest the support and breakthrough to a new all time low, but I don't think any seller would be willing to get that close to $0.00

That's my newb interpretation.

Thanks Saiter! The 21/7 low is well and truly the 52 week low.

I'd buy on the up, but set an initial stop at 25 (because if it breaks that it's cactus) and then if the price consolidated set a trailing stop at previous day's low minus 7%. Is that too tight for this volatile stock do you all think? For me, I like the idea of trailing stops based on previous day lows rather than closes - is there a flaw in this?

I'm not factoring brokerage in that sum, but of course that's also a major consideration if it's a smaller parcel.

And forgive me all if I'm wrong - but we'd not technically be looking at a double bottom would we? From what I've read the ideal timing to call a double bottom is circa three months (but probably not less than a month) from the first bottom and dependant also on volume.

 

[tech/a]

SBM its dead in the water.
There is nothing technically showing anything positive for this stock.
Anything you find is fishing to support your case.
Let the trade and the analysis come to you.

 

[Uncle Festivus]

SBM its dead in the water.
There is nothing technically showing anything positive for this stock.
Anything you find is fishing to support your case.
Let the trade and the analysis come to you.

I think this is where the pure techo's miss the big opportunities - the fundamentals are not indicated in the current share price, along with many other gold equity stocks - oversold. What your value point is is another thing.

Is this correct - the 'dead in the water' conclusion is based on the chart?

The techo's are having a hard time in this bear market - not conforming to the textbooks?

 

[tech/a]

Its conforming perfectly.
4100 to 4200 has been the target for sometime now.
Those trading short would be reaping the benifit of trading with the trend.

Those swimming up the river are well up the river.
SBM will show soon enough whether its ready to buy.
Why sit in it and wait.

 

[motorway]

maybe near the purple line ?

And then only IF !

and maybe not...

But what GOOD reasons now ?


motorway

 

[motorway]

3 reversal chart


motorway

 

[Uncle Festivus]

But what GOOD reasons now ?


motorway

That is the question from the TA angle - what does it say - sell off not supported by volume analysis???

Biased by 'special' one off trades?

 

[motorway]

There is an obvious top on the 3 rev chart

easy in hindsight

But where is it now and what is happening ?

If that chart of fluctuations
was a distribution
of heads and tails

I would say you had a biased coin
and I would not want to play heads against you..

Until the coin was changed

..........This is where the purple line comes in ( and it is only one good suggestion ) The fluctuations can reach that line in one day, or one decade

So it is not a matter of waiting for a period of time

But waiting for the biased coin to be switched and changed

WHEN EVER that happens

more to it than that.... Of course

( for interest the use of the blue line in that manner dates back to possibly1881 )

WHOSE the expert Me ,You ???

Someone ? No one ?

shhhh "they"

The probability distribution of the coin toss will tell us
what the real experts think

Or the TAPE in other words

We don't need to be the expert , in most (all ? ) cases we never can be .

We just need to bet in harmony with the bias of the particular coin.

and the character of action ( the volume and spread )
is important too

I happened to have been discussing SBM
in the last few weeks

motorway

 

[Uncle Festivus]

I happened to have been discussing SBM
in the last few weeks

motorway

On ASF???

Can 'we' tell what 'they' are up to from TA? Some like Guppy say so? Who's selling & why - who's accumulating & why?

The 'value' investor has a price so do they ignore the few cents either side of the entry knowing it is still far below their 'value'? ie a bargain, or do we get cought up in a corporate dump & get tossed by the roadside, like SBM picked up SGW in the first place?

 

[motorway]

On ASF???

Can 'we' tell what 'they' are up to from TA? Some like Guppy say so? Who's selling & why - who's accumulating & why?

The 'value' investor has a price so do they ignore the few cents either side of the entry knowing it is still far below their 'value'? ie a bargain, or do we get cought up in a corporate dump & get tossed by the roadside, like SBM picked up SGW in the first place?

No not on ASF.... But it was why I responded to the theme of the thread

I was looking at the chart already
and TA exercise was the theme


Can we tell is what P&F charting was all about and still is all about...

The 'value' investor , backs his judgement with patience..
He is one who can "tell"

This is problematic ( I guess everything is )
How much patience , How much conviction.

How slippery is the value
and what could stuff it up..

Accumulation
involves
Buying before ( something )

This will change the way
the tape chatters
or in the analogy
the bias in the fluctuations of the coin toss
It will change various aspects of the pattern of
those fluctuations when they are charted .
These aspects are both in terms of time and space

eg congested dullness

I do not hold the stock
and know little of it's fundamentals

Where I know nothing
I have to give due respect
to the 45 degree movement

and wait till the chart urges action
by displaying "footprints"

The Boxes
are made from three ingredients

Price , Volume and Time

The chart can not move with out all three
and how it moves is the pattern
that reveals ( something )

I have looked and tried
many forms of investing

Overtime I have found it wise
to look for verification
because no one can know everything

Is Warren Buffett
A Secret Trend-Follower?

Many readers will have read that the world's best known investor, Warren Buffett, is well-known for shunning stock price charts. His apparent disdain for "Mr Market" is well-known.

On the face of it, requiring 'market verification' of our stock choices may sound blasphemous to a dedicated Buffettologist.

So why go against Buffett? The answer is, in this case, we're not really going against him. In looking for market verification, we're doing something rather similar to Buffett.

One of the rules Buffett sets before he buys a stock is "increasing market value". This rule requires that for every dollar per share a company has reinvested in itself, the share price should have increased by at least one dollar too.

Buffett, therefore, does require "market verification" of his stock-picks. Buffett is insisting that, long-term, the trend of a stock's price should be upwards. In fact, we would say Buffett's increasing market value rule is a long-term proxy for trend-following.

Of course if you are prepared to back you judgement
By buying the whole company
it becomes a different game.

And I have written before that it is not Mr market that matters
But who is on the other side

This is just for discussion
I don't necessarily endorse Buffet or Trend following
or contrarian or anything...

OR SBM


The thing of real value is

Information....

And one place where we can see that information flow ( and pool )
is on a P&F chart

We also see it on bar chart.

motorway

 

[Paladin]

Hey all!

Sorry for going a bit quiet on this thread. To be honest, I was disappointed that tech/a named the stock after I asked that not happen. I felt that the results kinda became meaningless from that point for my 'pure TA' purposes.

Anyway, by way of a follow-up, here's what the stock has done since:

We now know (as of this evenings ASX announcement) that not only was the 52wk bottom on the 21st caused by Ed, a director, needing to sell as his margin loan was called, but that the subsequent bottom on the 6th was also as a result of this. He's had to sell out an extra 7.9 mil shares at an average of 20c a share (ouch) this week, hence the dip.

There have been several big sells sitting in the queue. The last of these was at .23 which finally sold through today, after which Ed announced that it was him dumping. So it seems a lot of the panic etc reflected in the chart was flow-on from this.

Closely watching this stock on an intraday basis has been invaluable for me - and thanks all who chimed in here with thoughts. From watching the buy/sell queues it's been very apparent that there was some dumping going on that temporarily has impacted on the stock. I was lucky enough to fill my boots at between .19 and .225, so even if my stops are hit now I'm nicely in the green.

Lessons learned: TA has been really helpful in predicting some of the short term volatility around this stock. Watching the force index and the fast stochastics have been the most meaningful indicators here for me, as most of the trend lines and envelopes were returning fairly useless data. The stock has been manipulated by factors not publicly known until after it had been reflected in the SP (the director's need to dump shares), and so the only real data for an investor like me was to see what the market was doing and try to buy/sell accordingly. So the adage of the market automatically factoring in bad news (sometimes when the news isn't even announced yet) seems to be somewhat true in this instance. In the end TA, and particularly candlestick/volume analysis, has been moderately successful in helping me buy in at a good time. I would say that there are a couple of bullish days left in this stock given that the market now knows both bottoms were induced by one large holder's poor state of affairs. I'm more sceptical about if it will break resistance at .30 again and find that support level once more (because I think a lot of people like Tech/a have written this stock off as a dog - and they may be right). It's harder to win support back than it is to lose it.

That said, TA was not the be all and end all here. A lot of other thinking was required on an intraday basis (ie: evaluating why there might have been big parcel sells clearly depressing the price, evaluating what levels they were at and speculating into the reasons for them) that charts alone didn't cover.

The rally may yet be heavily sold into, and I wouldn't be surprised to see larger volume tomorrow and then weakening volume and movement (and perhaps a doji) as it nears .27 or so. But in whatever case, I'm quite happy with the trades I've made here and can be out with a tidy profit in a flash.

Thanks to all who respected the original intent of my question.

 

[Paladin]

That is the question from the TA angle - what does it say - sell off not supported by volume analysis???

Biased by 'special' one off trades?

In hindsight, you nailed it perfectly, Unc. Except in this case there was an unexpected second 'one off'

 

[Paladin]

I happened to have been discussing SBM
in the last few weeks

motorway

Thanks heaps for your input, by the way, Motorway. From reading your style, I daresay you'd write a mean Haiku

 

[motorway]

Thanks heaps for your input, by the way, Motorway. From reading your style, I daresay you'd write a mean Haiku

Reality is beyond any models we might have of it

Here are some updated charts

We seem to be focusing on the very small time frame ?

So what sort of move are your trying to catch ?
What sort of magnitude ?

What has been the result of the volume action you have been taking note of ?
Volume is very important, It is a very real thing !

But so far I see very little result
and only a little amount of a "cause"
to bring about a very small "effect"

I would not like to lose site of the larger scale dynamics !

When did the behavior change ?

The stock has been manipulated by factors not publicly known until after it had been reflected in the SP (the director's need to dump shares), and so the only real data for an investor like me was to see what the market was doing and try to buy/sell accordingly.

ALL STOCKS are manipulated
They are not worth bothering about
if they are not

Because the opposite of manipulated is random !

So the "character" of manipulation I would judge changed
in November 07...

You will notice how this chart
moves under the influence of manipulation

hence why as well as the diagonal lines
the "count" helps qualify.

eg the chart tends to move along a 45 degree angle

But not any particular 45 degree line ( reality is not that mechanical )

A 45 degree angle = the same space across as ( in this case ) down..

What are two things ( only to name two )
stock charts ( manipulated charts ) have that random coin toss charts do not ??

one concerns the "theory of runs"
the other the presence of "trading ranges"

A horizontal zone on a bar chart is not necessarily a trading range
( it could just be empty space)

Only for discussion

motorway

 

[tech/a]

Paladin.
Your justification of your interpretation of your technical analysis is self supporting.

Your obviously long and looking for anything that supports your view.

SBM is a dog.

 

[Sean K]

SBM is a dog.

Grrrrooooffff!

Going the way on BDG.

Hope not for long term holders.

But I anticipate these two companies being wound up and sold off into little bits.

Sorry, not really on topic.