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New High New Low Data

June 29, 2009 by 10 Comments

I am once again focusing my energy on the New High New Low (NH/NL) data as it is historically the most accurate indicator in the market. No indicator is as valuable as this tool. What I have done today is charted the 10-d/30-d MA Diff to show you a major crossover that occurred in March 2009. The exact date of the crossover was March 18, 2009; the NASDAQ is actually up more than 26% since that day. Not a bad trading strategy but I will admit it’s not one that comes around often. The second and third charts show the NH/NL differential and the NH/NL 10-d ma diff.

As I said in the post NH NL Picks Market Tops and Bottoms:

Consistent Nasdaq readings above 100-200+ will be the official confirmation to grab and add shares for trend traders!

That’s what I am looking for! Until that happens, a “true” up-trend is not sustainable. The up and down whipsawing of the past several month is what we can continue to expect until we see consistent readings in the triple digits.

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Filed Under: NH-NL Ratio

Summer Reading 2009

June 16, 2009 by Leave a Comment

Learning about Stocks (Fundamental and Technical Principles):

System Development and Market Psychology:

Great All-around Reads:

All Others:

Filed Under: Books

My Twitter Positions are Up Big

June 8, 2009 by 7 Comments

I have been using Twitter and StockTwits for approximately two months and have highlighted 18 different stocks. Of the 18 stocks, 15 are currently showing a gain and 3 are showing a loss for an average gain of 20% per position. I only analyze stocks that I am about to buy/sell or would possibly buy/sell. I don’t talk about any old stock for the sake of posting tweets and wasting people’s time.

The average gain of the stocks showing a profit is 26%.
The average loss of the stocks showing a loss is 11% (-5%, -8% and -21%).

The top performing position is DXO, currently up 65% with a peak gain above 70%. Following DXO is EJ at 56%, STAR at 50%, RVBD at 40%, FRPT at 32%, ARST at 26% and V & VMW tied at 25%.

Visa (V) has appeared the most with a total of eight mentions (I may be biased since it’s my largest personal holding). DXO has also been an active play of mine since 2008 so it has been the second most popular ticker in my tweets, appearing five times over the past two months (DXO first appeared on this blog last November as a speculative oil play).

I would like to emphasize that the stock down 21% (APEI) would have been cut for a smaller loss using simple money management tools but for purposes of this update, we’ll assume everything is still being held.

Below is the list of stocks highlighted on my Twitter account, listed in date order (starting on March 31, 2009):

  • HTS: +7%, $26.15 from $24.35 on 3/31/09
  • V: +25%, $69.28 from $55.60 on 3/31/09
  • VMW: +25%, 32.59 from $26.12 on 4/1/09
  • RVBD: +40%, $21.52 from $15.37 on 4/2/09
  • STAR: +50%, $22.45 from $15.00 on 4/5/09
  • CXO: +14%, $31.90 from $27.96 on 4/5/09
  • DXO: +65%, $4.48 from $2.72 on 4/20/09 (1st posted on 4/6/09 at $3.07)
  • EJ: +56%, $16.78 from $10.79 on 4/9/08
  • ARST: +26%, $18.19 from $14.46 on 4/9/09
  • FRPT: +32%, $9.36 from $7.09 on 4/13/09
  • WMZ: +12%, $19.85 from $17.70 on 4/14/09
  • CTCT: +10%, $20.14 from $18.36 on 4/20/09
  • TNDM: +15%, $30.78 from $26.81 on 4/20/09
  • CFL: +11%, $30.60 from $27.50 on 4/26/09
  • PAR: +3%, $11.27 from $10.94 on 6/2/09
  • APEI: -21%, $34.56 from $44.00 on 4/2/09
  • MDAS: -5%, $15.90 from $16.79 on 4/23/09
  • MELI: -8%, $23.62 from $25.60 on 5/12/09

If you haven’t joined already, take the few seconds to follow me on Twitter as the bulk of my analysis appears there weekly, if not nightly.

P.S. – the bragging title of this post probably signals a short term top in the market! As I wrote yesterday:

“The main purpose of the stock market is to make fools of as many men as possible.” – Bernard Baruch

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Filed Under: IPO, Stocks, Technical Analysis, Twitter Updates, Uncategorized

Cumulative Advance Decline Line

June 1, 2009 by 9 Comments

There are always several ingredients that can tell the story of a possible market bottom or tools that allow us to spot a new up-trend even if it is only a bear market bounce (a sustainable bounce). As you know, I have been monitoring the NH-NL differential very carefully over the past few months as it has turned positive for the first time in well over a year. It remains weak and has not screamed buy but it is still etching higher, ever so slowly. The charts in the post titled NH-NL Picks Market Tops and Bottoms show clearly how weak the differential has been since 2007.

A secondary indicator, the cumulative advance decline line, is one I have been studying since late last year. I didn’t use this tool in past markets because I wasn’t too familiar until I picked up a book by Justin Mamis, The Nature of Risk (which I highly recommend – quickly becoming one of my personal all-time favorites).

Several ingredients that can signal a bottom include:

  • The initial market breakdown: 2008
  • Bear market bounces: late 2008 and early 2009
  • An investor “give-up” phase: Increasing market pain that seems to never end and will get worse
  • When bad news fails to carry stocks even lower
  • When new lows dry up and new highs creep up

In addition to the items above, some secondary indicators can work alongside price action, volume and the NH-NL Differential. This is where the Cumulative A-D line and divergences can help confirm the main indicators.

The lesson is that indicators exist in a real, everchanging world. They are not so definable that you can put them in a computer, with parameters that ring bells, because a human being still has to interpret their subtleties. But a few indicators do still work, the most important of which can be described as the divergence pair. – Justin Mamis

As Mamis notes, they work because they are statistical summations of what the individual stocks are actually doing. Essentially, this is exactly what price and volume tells us (real time information of what the market is doing). Lastly, the NH-NL ratio packages that information and lets us get a true reading for a possible trend (the NH-NL does lag price and volume slightly).

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Looking at the 2009 NASDAQ Cum A-D Line, we can see that an up-trend is forming but it is not in new high territory yet. However, the NYSE line is in new high territory, which Brian Shannon of alphatrends pointed out last week in this chart.

The point of this post is to show you the similarities of the 2002 and 2008 markets versus 2003 and 2009 markets. It’s very interesting to see that the 2003 market had a bottom in Cum A-D line in March and made a new yearly high in late May. Well, this year’s Cum A-D line made the low in March and is trying to make a new high here in early June, very similar.

The same findings were true when I posted up the charts for the differential last month. Only time will tell what’s going on but things are slowly changing from 2008. Let’s keep watching and get ready to pounce if and when the ultimate buy signal appears.

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Filed Under: AD Line

Visa Cup with Handle

May 26, 2009 by 2 Comments

Visa (V), $65.75: As I mentioned on Twitter last week, the stock is building a cup with handle pattern. A down-sloping handle is currently forming with a pivot point breakout at $68.55. I will be looking to add shares on a breakout. FYI: I currently own shares from 2008.

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See the post Visa, from December 17, 2008 for further details:

Why do I like VISA’s potential?

  • $1o Billion would represent the second largest IPO ever!
  • Revenues are expected to grow steadily as consumers continue to use their cards
  • VISA processed 44 billion transactions totaling $3.2 trillion in 2006 (Mastercard processed 23.4 billion transactions totaling $1.9 trillion)
  • VISA has made $771 million on $3.7 billion in revenue during the first nine months of 2007
  • VISA makes their money from the fees it charges to card users and merchants using its network

BEST OF ALL:

  • Because it acts as an intermediary, Visa doesn’t sustain losses when consumers don’t repay the debts run up on credit cards bearing its brand. Those liabilities instead fall to the banks that issue the cards and set the terms of repayment
  • Most of Visa’s major stockholders are banks. They include: J.P. Morgan Chase & Co., which owns 23.3 percent of the company’s Class B Stock; Bank of America Corp., 11.5 percent; National City Corp., 8 percent; Citigroup Inc., 5.5 percent; U.S. Bancorp, 5.1 percent; and Wells Fargo & Co., 5.1 percent.

Let’s see what happens. The gov’t here in the US scares me these days when it comes to credit cards so pay attention to what they are doing. I wish they would just butt-out and go back to doing what they are meant to do.

Filed Under: IPO, Stocks
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