Pavilion103's LIVE ASX Momentum Setup Trading Thread

[peter2]

Trading update:

XAO closed below the May15th high negating any thoughts about changing the trend to up and we remain cautious. No new trades started even though there are many good setups. I'm respecting our market filter and we currently have enough at risk. If the XAO falls I'll start raising the sell exits to reduce risk and protect the portfolio value.

OZL: Gold took a hit last night with the strengthening USD. If the XAUUSD closes <1190 tonight then I'm selling OZL on the next open. As I type this the price is 1190.

QBE: Bracket sell orders OCO (13.70, 14.94). This is just in case QBE spikes up to that level.

API: Will add to our position if it trades back at 1.88. The iSL for the combined position remains at 1.70.

In case you were wondering I prefer IT to shoes (HSN > RCG).

 

[Woosha]

Ok I made a trading mistake. The API setup wasn't perfect. We should be trading only perfect setups. As this is an educational thread I have to do something to fix this source of inconsistency.

I printed a small card with a checklist for the setups in Pav's Momentum thread. This is now on my desk and I'll have it when I go through the charts from the scans.

View attachment 62669

ps: If you think this is corny and it won't help. You're right it won't help you.

newbie question - great thread.

On your scorecard post:

What is AT scan?
You look for stocks trading $120K/day - is this just on the day prior to buy day or over a period of time (week, month, 3 months)?

 

[peter2]

Woosha: Thanks for the compliment.

AT = Ascending triangle ( I love these. ) Check out: AHG CAJ and the micro ATs in CNU JBH JHC

I use a 15 day exponential moving average of value > 120K.
This doesn't get some small cap stocks that have just started to move on increased volume after long basing periods, but I don't want them personally.

 

[peter2]

Trading update:

OZL: Gold drifted lower last night but ended back near where it started. However it did close <1190 and we sold on the open as instructed. This discretionary exit was due to the failed BO (3 days ago) and loss of upward momentum. It would have been on plan to treat this as another trend trade and either leave the iSL or raise it a little (2.70) to reduce risk.

Do we really need another trend trade? Collecting trend trades inflates the portfolio risk. This is not the best time to be increasing the portfolio risk.

QBE: Bracket sell orders OCO. TS raised to 14.10. This removes the cap risk (now at BE). Limit sell raised to the old gap fill 15.44)

CMP, SIQ, VTG, API: All low volume pullbacks to test the last BO level. We must allow these tests as price didn't charge higher immediately.

We can start one or two trades if they are perfect setups. I considered the recent BOs in AMA and CAJ but stuck them in my own portfolio. :

-----------------------------

Time for another chat: Lately the results have been mixed and our portfolio has been stuck in a rut. Over the last 11 trades we have realised losses totaling $1650 (3%). Small losses are great, but too many small losses add up.



IMO a discretionary trader should be quick to review their performance when results aren't as expected. I know most of you will say the market conditions have been crap. Yes maybe, but don't be too quick to blame the market. Review your own performance first. Have you been overtrading? Have you been taking less than perfect setups? Have you made a few too many mistakes?

Reviewing our portfolio manager's (PM) performance. Overtrading is not an issue and there have been only a few mistakes. None of the mistakes have caused a loss larger than planned. The ave loss over those last 11 trades is only $150 (-0.33R). I would have to give the PM a pass mark (Don't take that sentence out of context please).

Now, I think we are justified in saying that our trading plan is not suited to the current market conditions. We have to remain patient and maintain our open risk within a limit that is appropriate for the current conditions. We've got a few open trades that have started well. Things will get better, but I don't know when.

Important point: Don't be too quick to blame the market conditions. Review your performance first.

 

[Woosha]

Woosha: Thanks for the compliment.

AT = Ascending triangle ( I love these. ) Check out: AHG CAJ and the micro ATs in CNU JBH JHC

I use a 15 day exponential moving average of value > 120K.
This doesn't get some small cap stocks that have just started to move on increased volume after long basing periods, but I don't want them personally.

It is really is a fantastic thread - fantastic learning and would love more of these perhaps with non discretionary set up like tech trader from past.

Checking charts

 

[sinner]

Trading update:

OZL: Gold drifted lower last night but ended back near where it started. However it did close <1190 and we sold on the open as instructed.

Out of curiosity, how come you are watching Gold priced in USD rather than Gold and Copper priced in AUD?

 

[tech/a]

Pete
Just a few observations.

Good minimization of losses
Your not getting any luck with trades continuing into profit.

While I understand your reason for minimizing exposure
It is minimizing your opportunities.
Personally that's fine but sitting in trades doing bugger all like
One of mine in the other thread----and some here---limit opportunities
In others like those you included in your personal portfolio.

You are certainly doing a great job making it clear that
Trade and portfolio management play a big part in discretionary
Trading

 

[peter2]

sinner: An astute observation and a thought provoking question for me. I keep on eye on a dozen futures contracts including GC, HG, CL and don't look at their prices in AUD. This is probably why I'm confused by some moves in gold stocks. Some go up and some go down on a day where the GC(USD) hasn't moved but the AUSUSD has. Obviously I don't trade gold stocks very often. If I did perhaps then I'd take the time to find out how each individual gold producer prices their mining costs and P&L. I'd then find out who is hedged, how much and at what price. I'm not interested in the corporate fundamentals. I concede that it should be an advantage using the correct currency based commodity market when trading commodity stocks. It's a good point and worthy of further discussion.

tech/a: Maximising opportunities is a delicate balancing act between too many and too few. While I'm trying to trade the optimum number of opportunites the market conditions are constantly changing. I prefer to start several trades and cull the losers before adding more. I've had sixteen short term trades open at once when the market sold down suddenly. It's not a nice feeling scrambling for the exits in ten trades as fast as you can. It's much easier collecting winning trades using a trend trading management style than a tight momentum mgt style.

I could lower the average loss even more by exiting quicker and could start more trades but that would mean more work. During the day I'm looking for setups in other markets that might trigger in the UK and US sessions. I look at the ASX after 2.30pm or 3.30pm.

 

[sinner]

sinner: An astute observation and a thought provoking question for me. I keep on eye on a dozen futures contracts including GC, HG, CL and don't look at their prices in AUD. This is probably why I'm confused by some moves in gold stocks. Some go up and some go down on a day where the GC(USD) hasn't moved but the AUSUSD has. Obviously I don't trade gold stocks very often. If I did perhaps then I'd take the time to find out how each individual gold producer prices their mining costs and P&L. I'd then find out who is hedged, how much and at what price. I'm not interested in the corporate fundamentals. I concede that it should be an advantage using the correct currency based commodity market when trading commodity stocks. It's a good point and worthy of further discussion.

Worth keeping in mind that OZL isn't really a gold stock. But in general my guess is that the explanatory power (r^2) of cash or front month gold on individual gold miner returns would be relatively low, and the relationship is probably slightly more complicated than you might think (doubly, or triply so for nonproducers, hedged/unhedged, etc).

See for example

https://marketsci.wordpress.com/2008/12/29/trading-strategy-oil-stocks-vs-oil/

which outperforms the benchmark (XOI) by only being long XOI when the ratio between cash WTI and XOI is falling (i.e. betting on mean reversion in the ratio). Keep in mind that in this case XOI is priced in USD so no FX considerations needed to be taken into account. If you wanted to try this with Woodside, you might need to look at the Singapore Tapis price.

 

[sinner]

Although, admittedly, as it turns out, replicating that strategy using OZL and gold ratio does pretty good (all things considered):

Since 2003-03-27:

OZL

Annualized Return                0.0178
Annualized Std Dev               0.4943
Annualized Sharpe (Rf=0%)        0.0361

Gold (using ASX GOLD ETF as proxy)

Annualized Return                0.0828
Annualized Std Dev               0.3620
Annualized Sharpe (Rf=0%)        0.2288

Long OZL when RSI(9) of OZL/GOLD ratio < 50

Annualized Return                0.1745
Annualized Std Dev               0.3523
Annualized Sharpe (Rf=0%)        0.4953

 

[sinner]

oops sorry, late night posting, the returns for above are actually for RSI(9) of the ratio > 50. ignore me!

 

[peter2]

Thanks. I've been thinking OZL was gold, but it's definitely copper. The OZL price rally from 4.00 to 4.80 coincides with the rally in copper. I've put a note on my chart.

I'm reminded of a time long ago when starting out trading break-outs and my scans repeatedly brought up a stock with a name of a young girls fashion brand (PMM - Portman). I refused to buy the break-outs in a clothing company and a year later learned that it was a WA miner which was in much demand and eventually bought by the Chinese.

 

[peter2]

EOW13 Update: Pav Portfolio +7.6% ( 77% invested in 6 trades ) XAO -2.1% (13wk)

This weeks sells: OZL
This weeks buys: none

Our portfolio retains it value again this week as the index finds some support. The XAO has closed once again above the May 15th high, so we can change the daily trend to up. This means we can start a few more trades and try to earn some profit if the market rallies next week. If the market rallies, setups become plentiful and our trades start well we can replace our non moving trades.

Our first task is to get into a few trades that might move immediately. I'll look for a few setups over the weekend and post them here before Monday.

Obviously I'm cautiously bullish, but if the market falls next week, we'll protect the portfolio quickly.

Only four more weeks for me and this thread. I'm considering another thread "Collecting Winning Trades" where I'll accumulate a portfolio of medium term trades based on chart patterns with the aim of thumping the index.

 

[debtfree]

Thanks for the updates Peter.

I've got a couple of good scans going now and they seem to picking up quite a few of the potential candidates. I'm also picking up quite a few of Tech/a's selections as well, so it looks like I'm on the right track with them in regards to Momentum trades.

I for one will be following your new thread "Collecting Winning Trades" and I know there would be plenty of others very interested as well. So I'm keeping my fingers crossed. You've given a lot over the last few months besides your time, tips, clues, advice and a bit of homework, all in a calm respectful manner at the same time, unbelievable. A lot of other people have chipped in as well with their valuable input and questions which has made it a great thread for anyone to look back on and study for a long time into the future. I can't see your new thread being any different.

Cheers ... Debtfree

 

[Porper]

EOW13 Update: Pav Portfolio +7.6% ( 77% invested in 6 trades ) XAO -2.1% (13wk)

This weeks sells: OZL
This weeks buys: none

Our portfolio retains it value again this week as the index finds some support. The XAO has closed once again above the May 15th high, so we can change the daily trend to up. This means we can start a few more trades and try to earn some profit if the market rallies next week. If the market rallies, setups become plentiful and our trades start well we can replace our non moving trades.

Our first task is to get into a few trades that might move immediately. I'll look for a few setups over the weekend and post them here before Monday.

Obviously I'm cautiously bullish, but if the market falls next week, we'll protect the portfolio quickly.

Only four more weeks for me and this thread. I'm considering another thread "Collecting Winning Trades" where I'll accumulate a portfolio of medium term trades based on chart patterns with the aim of thumping the index.

View attachment 62757

This is the best thread I have seen on here...full stop, and I have been on here for Donkey's years. All beginners...and for that matter unsuccessful traders (90%) should read all of the posts over and over. With the correct attitude you will be on your way to joining the 10%. Good stuff Peter and I hope all appreciate the time and knowledge you are giving for free.

 

[PeterJ]

Thanks. I've been thinking OZL was gold, but it's definitely copper. The OZL price rally from 4.00 to 4.80 coincides with the rally in copper. I've put a note on my chart.

I'm reminded of a time long ago when starting out trading break-outs and my scans repeatedly brought up a stock with a name of a young girls fashion brand (PMM - Portman). I refused to buy the break-outs in a clothing company and a year later learned that it was a WA miner which was in much demand and eventually bought by the Chinese.

Gold !
When i first put my toes into the waters of trading, there were so many breakouts i could not believe it:dance:
It was difficult to decide which stocks to buy.
I culled many by name , WORLEYPARSONS, i did not like that name,
however i was constantly reminded in many future scans of my stupidity.
I learnt pyramiding and re entry rules much later.
This stock peaked at just over $ 54 , within a four year period.
Peter you are not alone.

 

[debtfree]

Peter2:
Scanning, I'm just using Incredible Charts at the moment. A quick scan I set up to try to catch potential candidates.

Price: Percentage of Price Movement: 1 month (21 day) (min 15%)
Price: Closing price today is >= .03 dollars.
Value: Filter where 20 day moving average of value is not less than 200,000 dollars

Thoughts behind this scan:
The 15% movement is the minimum amount I want to prove there is momentum upwards in the last 21 days.
Closing price has to be 3 cents or over and I wanted it to be this low to have a chance of catching some of Tech/a's
shares to view as well.
I put in an average traded amount of $200K over 20 days as I didn't have much option to the selection area of 10 or 15 days so I thought the amount should see me ok to get in and out of a trade without too much slippage as I'm only trading small amounts.

This scan has brought up 58 candidates to view which is a big reduction from over 2,200 stocks without the added scan of mine.

Peter2: Post 325, you were talking about assembling a list of IF/THEN scenarios if you had time, have you any to throw in at this point. I have now pulled all the info out of this thread and compiled it into a word document and now doing a very shortened version (IF/THEN) to come up with my plan and to see if it suits me which I'm sure it will and this is why I asked about your IF/THEN scenarios.

Cheers ... Debtfree

 

[peter2]

Yes, I was thinking about posting a list, but wouldn't it be better if you created your own? My role here is to suggest a course of action and a reason why it should be considered.

It's taken me years to assemble a list of trade management guidelines. Now I'm noticing that the list that I use to manage all my medium term trades is not exactly right. There are times when I'm confused and unsure what my correct course of action is. This could be due to a sudden change in market conditions, an increase in volatility, unclear guidelines, even a news announcement.

hence . . . IF I'm confused about what to do THEN sell and work it out later.

I've found out that I need slightly different guidelines for each of my three basic entry strategies (BO, PB, Rev). For example buying a daily reversal setup in a weekly down trend is a low probability trade, but if I can hold on to the trade (with appropriate guidelines) until the weekly trend changes to up then the rewards are much bigger than my average.

Obviously, the most important aspect of trade management is to create a profit over a number of trades. We are not going to earn this profit without applying our trading plans consistently. Our emotions influence our decisions and are the main reason for our lack of consistency. A written set of management guidelines should minimise this emotional interference.

Can you imagine the emotional turmoil experienced by the SRX traders over the past three months? They've been tested.

 

[debtfree]

Yes, I was thinking about posting a list, but wouldn't it be better if you created your own?

Hell no Peter, I'm here to help you in your confusion and unsureness and this homework would be good for me, I mean you.

Ohhhhh Ok then ...... I think your probably right and having to do a bit of work myself over the duration of this thread has been good for me and my understanding, so .... so be it.

Thanks Peter

 

[peter2]

Trading update: Today was a strong selling day and the daily trend is definitely down.

QBE JHC API are close to their exit stops. We can sell on the next open or hope for an overnight change in the bearish sentiment. I'd rather be proactive and save money (sell on the open) than rely on hope and if we're wrong take a slightly larger loss.

I used to think that I could watch the market and see what happens after the open. If prices go up, don't sell and if they go down sell. It didn't take long for my stats to show me that I was crap at doing that and it was better to sell on the open. If they have a huge up day, we can buy them the following day.

Note: My personal exit stops on API and JHC are further away than this portfolio, so I won't be selling tomorrow.

#debtfree: I'll admit that I don't have them written down for this thread and it would be better if I did. However as there are only four weeks left I think I'll manage OK without them. The falling market has stymied this thread and someone "put the mockers" on us with their extrapolation of our past results (see quote).

NO, you can't and shouldn't infer future performance using past results especially results from a discretionary approach. This is an important point. We don't know what is going to happen in the future. It's possible that the market goes down for another 8 weeks. The portfolio is unlikely to earn more profit if this happens.

Arrgh, did I post that. There are plenty of trading opportunities out there but not for this thread's strategy of trading trend continuation break-outs in ASX equities.