Wednesday, 29 February 2012


I've started to lose my nerve. Only a bit, and it was the result the sudden fall in the gold price. It should not have come as a surprise because it has had several failed attempts at the $1800 level. The silver price has followed. I snatched profits as the fall began. By then the various mining stocks were wobbling. I was too late to grab profit except in LMI where I managed to take 4% accumulated since Feb 7. I've held onto the remaining miners where there is a reasonable chance of recovery since they do not specialise in precious metals.

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.

Back to the panic. The DJI is stuck. It's hovering just above a resistance line and if you add in the days it hovered below it has been sitting there for a month. Will it make the break or is 12875, the high reached last May, going to be a step too far. Yesterday it closed above the 13000 mark and it keeps nudging that level but it needs to move convincingly above it before I will feel confident that resistance has been broken. I wonder if that fall in the precious metals price is a break in the link between gold and Dow. I've just put my money on that bet. But I'm nervous as I walk away from the bookie's counter.

Tuesday, 28 February 2012

Busy days

Since the last week in January I have been active. I have gone from a portfolio that was half empty to one that has almost no cash. I have a rump of my gold and silver, which is doing very well and represents 9% of my portfolio. I still have that position in cattle which is languishing. I had the opportunity to take a small profit a few days ago but didn't and am now showing a small loss. A big part of the problem here is currency loss. I shall not keep this much longer.

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 am happy with these returns since the bulk of the profits were made in a period when the market went up by less that half a percent.

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 am delighted to have had a couple of comments from readers. The topics are moving averages; and how to get on top of this trading business. In response to the latter I recommended two books which were instrumental in getting me going on a largely successful path many years ago now. (See last post)

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
Today's chart is chosen to show the value of the 200 day MA. I've chosen IRobot Corp. A share which I bought because it had demonstrated a big fall from its trend. It had just announced excellent results for the past year but had also issued a profits warning for the fallowing quarter and year. I bought it on 21 February several days after the big gap down and when some recovery had already taken place. It is a risky trade because there is nothing to guarantee a recovery, but a potentially profitable one. A recovery to the top of the open on the first day following the profit warning would represent a 12% return. The share price dove through the 200 day MA and there was what looked like mass panic. A classic opportunity to make money as wiser heads begin to prevail and see that the market fall has been overdone.

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

Laid low

Laid low by a cold for the past couple of days.  Since Monday was a holiday in the US the interesting action happened yesterday.

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

Conflicting signals

A short post today. Tomorrow is President's Day and the US market is closed. It left us on Friday with conflicting signals. On the one hand it clearly broken through the 12875 resistance level I have bee watching for several days now (see Thursday's's post). It was not a dramatic rise, just 46 points, giving no suggestion of a climactic end to a rally.

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

Will we, won't we?

Just look at the charts. The Dow is struggling. Why? Greek debt, unemployment levels, inflation, quantitative easing? Perhaps? Or none of these things. The answer is that it has hit resistance. And that resistance goes back to the 2nd May 2011, nine months ago. There was a lower level of resistance that was established in July 2011. In theory it was a stronger level because the market had two goes at breaking it before it gave up and collapsed. But when the market recovered to that level (12750 on 23rd January) it took ten days to break through. We are now on day seven of the effort by the market to break through the higher level of resistance (12875) - established in May. There have been no days of exceptionally high volume. So I am holding faith. That does not mean I am right but I think the odds are on continued upward movement. I've put my money where my mouth is and have my fingers crossed. That's what this business is like. The next day or two will tell me whether I was right. My current portfolio distribution is gold and silver 9%, commodities 5%, equities 74%, cash 12%.

Last night we went to see a miserable play. It was called Neighbourhood Watch and is Alan Ayckbourn's not quite latest offering. I also saw Life of Riley, his previous play. All I can say is that he has lost his touch. Both plays were a waste of time and effort. This last had everything wrong with it and since Ayckbourn directed it, no one else can possibly be to blame. The plot did not hang together, the characters did not make sense, the period of the action was ambiguous, the set was dismal and the costumes were drab or, in one case unbearably Essex. The final moment of the play was laughable. The only positive thing I have to say is that the actors played their parts, dreary as they were, well. If it was an attempt to cock a snook at Cameron's Big Society it needed to be a lot better constructed to make its point convincingly.

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


My switch in approach from bear to bull is paying dividends. The strategies I have adopted are paying off and I now have evidence that if I had been less lilly livered through the past year I would have made lots of money  instead of losing some. I have back-tested share picking strategies, using Vector Vest, in the US the UK and Hong Kong. With the right strategies in those three territories and picking shares at the beginning of each month and selling them at the end I would have made profits of at least 50% on my capital. I also know that I would have made money in more than half of the months but the profit in the good months would have more than made up for the losses in the bad months.

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

Just hanging

Keep watching
The markets took a tumble on Friday and my new portfolio took a step back. Nothing terrible just losing a little of the ground that had been made. One more of the UK wave trades hit its target and I took profits. There are just four left to go plus the new ones I bought on Thursday. They continued to do well despite the pull back in the market showing that the strategy is good as long as you are careful.

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

It seems to be working

I put a lot of money into this one so the 2.2% in 10 days was well worth it
I've had a couple of good days despite the market being weak. I am continuing to take profits. For the first time in my life I am using automatic limit sales. Yesterday I came home to find the stockbroker (Selftrade) had netted me profits of £700 and the shares sold (TATE and TALK) had pulled back from the peak . I have now put limit sales on all my wave trades. And I have opened new trades in SDL and SGC. SDL has risen by 1.2% since I bought it at lunch time.

Let's hope this one works
My initial reaction to this strategy the profits were poor. A friend pointed out that I had been holding the shares for days and the percent gains made in those days were exceptional. Looked at that way the strategy does seem to be working. (2% in 10 trading days works out at about 50% per year, if you can keep it up).

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

The buying continues

Behaving as expected
I have not mentioned it before but I subscribe to an American service called VectorVest. I have been a subscriber for about eighteen months and it has paid for itself many times over. In the early days of my subscription the market was running along nicely. An ideal time to use its remarkable data bases and tools and I made loads of money. The more tricky conditions of the past year has meant I have held back and not used it so much. It offers a number of tools to help the investor:

  • 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
They also provide a user education system which is delivered by easy to follow videos - one a week and they are available for ever so you can always look back.

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

Work in progress

The system works even in a down-trend
I've been making money for a couple of days. In the US on Tuesday and in the UK yesterday - a lot. I've taken profits as shares have risen to hit targets. So far I've cashed in SVS - where I subsequently missed a hefty continuation - and PZC and QQ. 6.5% and 4% and 2.2% on each in just about a week. More to come I hope. I had hoped for a quicker return from the strategy of buying shares that are sitting near the bottom of a range and selling them when they rose to about half way up that range. But it is an experiment. Next time I try I shall concentrate on shares which have bigger amplitudes in their wave motion.

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
Gold and silver seem to be coming back. My taking of profits on silver seems to have been badly timed and I am now back in that market. Gold is progressing too.