Wednesday, 29 February 2012
Last night I threw in the towel on ALVR where I was nursing a 15% loss. As ever you tend to give up just as the bottom has been reached and today we see a small recovery. Makes you want to spit.
With less pressure on my cash I have bought some more from my patented strategy filter. I bought VP. BMY and upped my stake in LAM. ISA's don't let you buy AIM shares and I still don't have sterling cash to spend in my SIPP. As a result I've had to give the AIM shares that came up as candidates a miss till I can free up some more cash.
Tuesday, 28 February 2012
78% of my portfolio is in equities some doing well and some doing badly. In the UK I have three strategies.
- The first looks for shares that have a low prospective pe ratio; a high prospective earnings per share; positive revenue growth; have out-performed the market in price movement and that out-performance is accelerating; they must generate cash flow more quickly than earnings. Picking shares on that basis has generated a profit of over 4% in a week.
- The second is my surfing strategy which I have been running for about a month, this has generated just over 3% in a month with most of the profit realised
- Finally I seek out high valued stocks in growing sectors and these have generated 1.8% in about three weeks
I also did well in Hong Kong where I sought out shares with a decent value profile but which had suffered a collapse in price. Here I made almost 3% in a little over a week while the market made 1.5%.
The big disappointment was the US where I looked for high valued stocks in growing sectors and for small cap stocks that have suffered bad price reversals and they have left me with a loss of 9%. I am holding on because these selection strategies have worked well in the past through thick and thin. If they do not start to perform I will have to do a serious debrief to see what went wrong.
Using my surfing strategy in the US was also a failure. I lost about 1.5% in a month.
Today's graph shows how my surfing strategy works at its best. I look for shares that are trending upwards - shown by the middle blue line. I then pick those which are at or near the bottom of the channel representing a movement of 1.5 standard deviations (the dotted blue lines). I like to see a high percentage movement back up to the trend line. In this case it was 9%. I bought at 125 on 25th January and sold at 133 to realise a 5% profit after costs in ten days. I could have held on to the top of the channel but I had no way of knowing it would get there - it did not before. I think I am happy with this type of trade and will increase my stake to reduce the impact of costs
Sunday, 26 February 2012
|Red line represents 200 day MA|
I like Richard Koch's book because it gets you to look at yourself and choose an investment style that matches your personality. For me the best approach was finding value shares. Jim Slater's Zulu Principle was invaluable in getting me going on that road. Benjamin Graham has written several more advanced books on the same topic.
Going back to moving averages, Terry showed interest in moving average crossovers as signals for getting in and out of trades. I did a quick test on Unilever and found that simple MA xovers would have lost money consistently. (details in the comments on the last post).
I mentioned that I almost always show a 200 day moving average on my charts. I don't use this as a signal but as a guide to where the instrument I am looking at is going. 200 day MA above the price indicates a downtrend. A big and growing gap suggests that there is a good chance that a recovery in price is likely in order to narrow the gap. In an uptrend the opposite is true.
|Red line is 200 day MA|
Looking at the second chart we can see that the 200 day MA has been a helpful guide for the past 5 years with consistent price movements that demonstrate that the MA acts as a magnate for the price, always pulling it back when it strays too far. I don't know if you find this helpful. I do but I do not see it as a reliable signal. Choosing your entry and exit point is a matter of judgement. Hope that helps Terry. Remember I recommend nothing. I just point shares out that might be of interest.
Wednesday, 22 February 2012
The DJI remained above the resistance level that was established by a price peak back in May last year. But the movement in the market remains steady and subdued on a day to day basis. It is amazing how hard I find it to pick up on a change in the mood of the market and respond appropriately. I have completely failed to respond to the smooth upward trend which emerged in December, hugely to my cost in missed opportunity. I now am fearful that my response is too late. This feeling is not helped by the fact that my share picks have been poor. So, even now that the market is still bowling along my returns are dismal.
No point in bleating about this. I am making some money and these periods when nothing you do goes right happen from time to time. It's just a case of being strong and holding on for the moment when luck returns. In the mean time you just keep going and checking to see whether perhaps there is something you have missed and could be doing better.
In the mean time I have taken profits on PG and VZ in the US, both meagre. In the UK on WEIR, decent.
I have filled my boots with HK shares 3360 410 1128 1068 and 2342 - so far so good. These were purchased on the basis of decent quality shares that had been beaten down.
I am also in the process of buying battered shares in the US that I plan to hold for a week. More news about these in my next post.
I have had two comments and have been delighted to reply to each one. Ian recommended MA crossovers as a method for getting in and out of shares. I tested Unilever and found that they were too slow as signals for getting in and out.
Dave wants an understanding of this trading business and I have recommended two books:
Jim Slater's The Zulu Principle and Richard Koch's Selecting shares that perform.
Sunday, 19 February 2012
On the other hand there was spike in volume. As you may recall I have demonstrated that, in the past, almost every spike in volume predicts a change in direction in the market. I show this again on today's chart. However, the last volume spike signalled nothing. Also there has been a radical change in the character of the market ever since the 21st December. The violent movements, both up and down have subsided and we seem to be following a smooth upward path.
Betting that that will continue, for a while at least, is where my money is. I wish my strategy was yielding better returns at the moment but I am not losing faith. I will have to wait till Tuesday for the first inkling as to whether I am right or not.
Thursday, 16 February 2012
We went with a friend who has been a very successful am dram producer and director and she thought its simplicity and range of characters would be very appealing to amateur companies. But please, Mr Ayckbourn spare people who pay full price for their theatre tickets from this dross.
Wednesday, 15 February 2012
So I embark on my new approach. I bought shares using the best performing strategy in the UK on 7th of February. They are slow movers (mostly in the mining sector which is notoriously volatile and is currently having a few days of weakness), nevertheless they have covered trading costs. I bought another batch on 13th February and they are already in modest profit (GSK BKG SXS AMEC BRBY). - as ever these are not recommendations but shares you might like to watch to see if my strategies are working. - The batch of shares I bought in the US on 6th Feb are also in profit with SPPR leading the way with a 13% rise. And finally I bought shares in Hong Kong last night and they have delivered a little bonanza straight away (3360 410 1128 1068 2342).
I am still running my wave theory shares. (I guess a better name for the system is surfing - I pick shares that trade in a channel and at or near the bottom.) I cashed in profits in the US on MDP (8.5%since 25 January) and am holding on to the others pro tem until I find myself some better prospects - I said on Sunday that I had screwed up when picking these shares, but until I find something better I might as well stick with them till they recover some of the losses already incurred. I have put limit price orders on all of them to reduce the emotional toll of deciding when to sell.
In the UK I cashed in ROR (2.9% since 25 Jan) and MRW (loss of 5.3% but luckily I only bought a very small stake so the cash loss was minimal). I have now refined the surfing system so I now by shares which have very good potential over a relatively few days and I only buy one which are in an uptrend. My latest buys in the UK are POLY and EVR (which has made 5.7% since Monday. I am hoping for over 8.5% and over 6% from POLY.
There is always a danger that some ghastly news will spook the market and I will have to beat a rapid retreat but I'm making hay while the sun shines. Today's picture is not a chart. Instead I show you Elk. The Aberdeen Angus bull who lives in the field at the end of our garden along with two of his sons and his mother. I think it is appropriate that he is rather muddy. My feeling about the bull market that he represents is rather muddy too.
Sunday, 12 February 2012
I have reviewed the US wave purchases and have concluded that their poor performance is down to bad judgement on my part. In an excess of enthusiasm, I bought too high up in the range. I now need to decide whether to cut losses and move on to better prospects, or to wait to cash in the meagre profits that I now believe is the best I can expect from this miserable batch.
I have used up most of my US$ so I have none left to try out new strategies. I have now found good VectorVest selection criteria for buying into reliable profits on the US market and I am anxious to try them out. The first group that I bought on Monday are already showing a modest profit. One of the picks is up 4% in a week.
It continues to be hard work digging out good UK strategies since I have no mechanical aids. I have to do all the work manually. I am half way through the task and have five promising candidates. I bought shares using the first one that came to light on Tuesday. At present the selected shares are struggling because all but one came from the mining sector which took a hit on Friday. But it's early days, I will keep the faith.
As for the market, commentators are suggesting that it is overbought and due for a tumble. I don't listen to commentators, preferring to watch the charts. So back we go to the old Dow chart which shows that Friday's fall tried to touch the top of our old rising wedge but pulled back at the end of trading. A promising sign for us bulls. On the other hand, if that wedge gets broken to the downside I'll be out of there like a shot and will rejoin the bear camp.
Thursday, 9 February 2012
|I put a lot of money into this one so the 2.2% in 10 days was well worth it|
|Let's hope this one works|
You may remember how it works. I look for shares that are trending and are sitting at the bottom of the 1,5 standard deviation confidence line. I am now tweaking the strategy. I only working with the shares where the distance back to the middle of the channel is at least 4%. I am also favouring shares where the trend is upward. Rather than going for a large number of shares with small investments in each I am putting more money in fewer shares.
US shares bought using this strategy have been sluggish so far.
I am working hard to find good VectorVest strategies for the UK. It is proving a long and tedious search because it cannot be automated. I found one search which perform well consistently through last year's troubles. It picks out shares in rising sectors that have a good fundamentals. The selections made were mostly in the mining sector ANTO KAZ LMI MIDD and XTA. My plan is to hold them for a month and then to refresh the portfolio. The shares are already making some headway.
My life has been blighted in the last couple of days. Someone hacked into my Skype account and made a whole bunch of phone calls, mostly to Africa. The sum of money I lost was not great and Skype seems to have put most of it back. But I needed to find out if my computer had been compromised. A scan revealed that some infections had slipped past the firewall. I called the security company (ESET) and they assured me that nothing really bad was sitting there and the hack must have occurred at Skype's end. ESET spent half an hour doing a thorough clean of my computer through a remote link. Nevertheless I thought it sensible to change all my passwords. Another tedious task.
Monday, 6 February 2012
|Behaving as expected|
- a market timing system, with which I have yet to come to terms
- individual stock analyses which need some getting used to but are fine if you accept an element of black box technology. I do but I would prefer a more transparency so I could do a more of my own analysis
- almost three hundred systems for picking stocks that match the criteria that you think will find future winners in the market
- a back testing facility for those stock picking systems that is truely amazing and which is what has made me all that money
I use the back testing to look at periods in the past which are similar to the one I expect for the market in the near future. I then identify stock picking systems that match the circumstances. For example in the past few months I have looked for systems that work well in recovery markets. They have generated fantastic percent gains in short bursts.
I am now looking for systems that do well month in and month out. Again I am looking for good returns inside a month. I have found several which over the past 15 months have generated 4.5 to 6 percent each month. Think about it, that's 60% in an indifferent year. They don't make money each month, and you have to refresh your portfolio once a month but for 60% in a year it's worth it.
I'm working on the principle that there is a bit more of this bull run to go even if we get a bit of a pull back in the short term because the market is overbought. So I'll buy the shares and hope for the best. Worst case scenario is that I will be stopped out.
I have an automatic system for picking the best search systems in the US. It cost a lot but it is worth it. So I have bought the top 5 shares that are becoming more attractive to investors and are in sectors of the market that are rising. The shares I picked are SPPR OPXT ALVR SILU (Not recommendations remember, just shares you might like to watch).
I have to do the backtesting for the UK manually so it will take me a while but I will report on my progress.
In the mean time my shares from a week or two ago struggle on (shares that have touched the bottom of a range). I offer Weir as today's chart to show that sometimes these shares behave as expected. I have plenty of cash so I can wait. But this plan has not been a red hot winner.
Friday, 3 February 2012
|The system works even in a down-trend|
My reason for trying this is partly my friend's success and partly my continuing nervousness about a market that is closing in on recent highs.
I am also about to do some work looking for share picking strategies that will work in a consolidating or rising market. Although there is still the prospect that the market will go into sharp reverse I am getting tired of living with a relentlessly bearish outlook. But so far holding such an outlook has served me badly. So now I plan to try and make some money from shares that have some oomph. I will report on my progress.
I hope I am not making the foolish mistake of coming in too late.
|Here comes gold|