Hold onto your hats

Hold onto your hats.

Amazingly the Lloyd's purchase is paying off - so far. I am sitting on a net profit of 1.7% after four days despite yesterday's pull back.  I guess it will all vanish tomorrow. I need to monitor carefully because it is a share with no fundamental virtue. Its price is subject to political interference - this does not make for a happy holding. It will be a case of take the money and run. I might have done that yesterday but was out all day with our Australian guests. For the time being the price is being pushed and pulled by the market and that is why I think the paper profits will disappear today. We are still in that ghastly channel

Hong Kong is much the same. Price fell to the level where I had made the judgement that it would bounce back and in a valiant effort to put my money where my mouth is I put in an order to buy a batch of shares on Thursday night. Since I expected a strong rebound I put the buy limit at 1% above the closing price of the previous day. All my orders, with one exception were filled. The exception was a share that sprinted upwards and made a 4% rise on the day. That share (330) has continued to rise The shares I did buy made no money the first night but with the big rise on the Dow the next day they made money on Monday. The money was lost on Tuesday overnight after the Dow had lost ground.

It is beginning to look as though the new resistance line that I had failed to spot previously (I have marked it on the chart above) is the important one. With that new line in place I'm beginning to wonder if we are going to have a repetition of the last pattern of consolidation. If this happens the next move is a sharp fall to the bottom of the channel and support at around 11500 with the risk of a breakdown. This is guesswork but I still think it's time to hold on to your hats.

I was not at my desk yesterday because I took my guests to Swindon. Swindon? you may well ask. But Swindon has used part of its old railway workshops to create a massive cut price retail outlet - boring but big and lots of ladies like it - and another part to create an amazing museum dedicated to display the story of the building of steam locomotives from the nineteenth century up to the 1960s. Over 20,000 people lived and worked there for several generations. The museum is called Steam and whoever designed it did a fantastic job. There are short film clips that show interviews with men and women who worked there as well as pictures of the frightening machines they operated. Those machines are there and there are massive examples of the locomotives they built. I have taken two lots of visitors there and in both cases they were enthralled.

Patience is a virtue

Patience is a virtue, a virtue is a grace, Grace is a little girl who wouldn't wash her face. A nice little rhyme which I could do well keeping closer to my heart. I have done it again. I correctly forecast the top of the channel for gold. Indeed when gold got to the top I sold half of my holding. Then it poked its head above the channel and I promptly bought back. Then it dithered at the top of the channel for a couple of days and plonk, down it dropped to about three quarters of the way towards the bottom of the channel.

Take profits before its too late

My trading error with silver was worse. I actually stocked up with an extra holding when it pulled back to the bottom. Did I take my profits when it rose? I did not. It's greed and it's impatience. These market conditions are brutal because the moves are so violent, even when they are inside a channel, and it is hard to judge the moment when there is going to be a break out.

At least with gold and silver I had the excuse that we were at the bottom of the channel. The stock markets were a fair way from the top and still I could not sit on my hands the way I should.  I have a good friend from Australia staying. He is an econometrician. We used to work together and he has much greater forecasting skills than mine, but he has less knowledge of stock market trading. I have been showing him the techniques I use and have introduced him to the VectorVest service and its various share picking tools. It is great working on something like this with a friend because you can stumble on new ideas. I had a 'conversion on the road to Damascus' moment when we used VV's portfolio backtesting system and applied stop losses over a period where I would not have expected them to make a difference. I was backtesting a bottom fishing strategy over the period 10th August to 12th October - an unpromising period for trading and found that it worked very well and the stop lossing at 10% loss or 20% gain. The stop loss almost doubled returns.

I then explained that I found VVs market timing system unhelpful. Instead I use the methods that readers of this blog will recognise. I try to identify areas of support and resistance based on price action during earlier periods. I also use a very few chart patterns to help nail turning points. Finally I mentioned the  importance of volume spikes.

We were looking at the chart for Lloyds Bank and noticed that the price was approaching a support level and that there had been a volume spike a few days ago. There are two resistance levels - one 14% away and the other 34% away. The support level is just 3% away - a natural point at which one can review the situation and bail out if necessary. Terrific risk reward ration. So I bought Lloyds Bank on a whim.  So now I have the uncomfortable decision to make. Do I just pull out of Lloyds or do I wait for the market, which is now approaching the bottom of the channel much faster than I could have hoped, deliver a new buying opportunity and make Lloyds a part of that stock purchase alongside new bottom fishing candidates that I find.

Patchy service this week

Missed opportunity on the Hang Seng

This week and into next we have house guests so the service is likely to be patchy. I will endeavour to ensure that any crucial developments will be covered promptly but there may be gaps.

I am writing this post on Tuesday morning, a day after the markets did very little. The Dow was modestly up. These days 83 points counts as a modest move! And the FTSE was modestly down. So the FTSE may play catch up when it opens, though its move may be subdued because the futures market is currently pointing to a 60 odd point fall in the Dow at the open. We continue to sit on the 200 day moving average. See Friday's chart.

Gold and silver look more interesting and, from a trading point of view, worrying. Gold had a good run yesterday and overnight has risen sharply to touch its next resistance level at 1793. So big decision: do I take profits or will it power through. My inclination is to take part profits as soon as London opens and then repurchase if the price moves on upward. On the other hand there are no volume signals to suggest that a reversal is about to take place, so I may just hold on. There is no good news on the Euro Zone crisis and gold is the only protection against an ugly end to that political saga. Silver has cleared the downward diagonal that I pointed out on Thursday's chart, and so it looks set to move on to the next resistance at 3570 2.5% up from here.

Today's chart is the Hong Kong index - the Hang Seng. I put it up to show how I missed an opportunity by watching the world with blinkers on. I was sitting fiddling about with gold and silver and fretting about movements on the Dow and the FTSE while the Hong Kong market moved up 25% in a month. I am set up to pick shares in Hong Kong and to buy and sell them easily. I have a stock of HK$ sitting idle in my brokerage account and I take my eye off the ball. This blog is doing its job in reminding me how stupid I can be. My guess is that the opportunity has passed since we have hit resistance. But I will keep my eye on this from now on. There remains a gap to be filled so another run up is possible. And there is a potential support line around 19050 which could provide a sensible entry point.

Mid channel doldrums

We're back in the doldrums. It feels even more boring now that I only have gold and silver. There are no shares to watch. Silver is continuing with its pull back, respecting the diagonal resistance line I spoke of yesterday. If it continues on this course I may have a chance to buy a bit more - if I dare. In the mean time it weighs down on my portfolio.

I am showing the Dow chart again today to show how it is stuck at the level of the 200 day moving average having bounced off the 11720 support line. I believe it is working its way along a broad channel between 11520, the top of the previous channel, and 12284, the high reached on Thursday 27th October. That's about 750 points  - not much different from the width of the previous channel. I wonder whether it will take another two months to break out?

A favour please. I notice that I have a number of regular followers. If you enjoy reading the blog why not share it with friends. There is an envelope symbol at the bottom of each post which makes it easy to email your friends. Good luck in your trading.

Silver stairs

And now the silver stairway?

Another early post because of a busy evening. I managed to sell my Hong Kong shares, without technical problems, as prospects for the market deteriorated. There was one glitch of my own making - one of my holdings I sold 4000 shares instead of 40000. D'oh!

I'll fix that tonight and then I'll be out of equities with the exception of AFC on the London market. I'm holding for the long term on the recommendation of a very good friend. I sit and wait with no strong feelings about it except for trust of the source and a consequent willingness to hold with a 20-25% stop loss.

The weakness in the futures market overnight has been transformed into a continuing rally, up to the 200 day moving average so far. We're still mid range and we still haven't fallen to touch the 11520 support level. Everything remains up for grabs.

Gold and silver, on the other hand are on the move in a gentle sort of way. Gold seems to be climbing up to the next step on its stairway. (see yesterday's graph.)

Silver, (today's graph) has touched the bottom of its current step so I upped my stake as I said I would yesterday. I can always take some profit when it reaches the top of this run. However, there is a triangle, which brought today's rise to an end. Let's worry about that tomorrow.

My portfolio breakdown is now: gold and silver 21%, commodity 5%, equity 3%, cash 71%.


I did a quick and easy duck a l'orange for my wife and I last night. Sainsbury's was selling duck breasts at half price.

I fried the duck breast in lard at high heat on the skin side (skin salted) for about 8 minutes then turned it over and fried for 3 minutes the other side. I then finished it off in the oven at 195 deg. for 6 minutes.

The sauce consisted of 3 oz sugar dissolved in 1.5 fl oz of vinegar. To this I added the zest grated off one orange. I find the best way is to use the coarse side of the grater (though I did grate my thumb). I then peeled the orange and sliced it. I added this to the liquid together with about 5 fl oz of Cointreau. I simmered all this for about 5 mins and then a bit while I served up the rest.

The sauce was quite liquid so I served it with brown rice which I always cook with frozen peas (added at the last minute so they only just cook). I sliced the duck breasts before serving and they were a lovely pink. Leave them longer in the oven if you are queasy about under done meat.

Golden prospect

Golden stairway to heaven? 

The Hong Kong saga continues. I attempted to sell my remaining shares at about 2am and again the system failed. But system failure does not always work against you. The market had fallen at the open and with it my shares so I wanted to cut my losses. By the morning there had been a big recovery and prices were back up to the levels where I would have sold them on the night before. TDW offered to put the trades through manually but I decided to hold on. The futures situation looked good. They would not have owed me money anyway. They say they have fixed the problem and we may see tonight. But with the recovery in the markets I could hold on. (They're fading a bit as I write.)

Apart from this I am doing nothing. The 11720 support level is holding so far and the Dow has had a good day despite the best efforts of the Greeks. By now you will know that I give little credence to the notion that such announcements have much long term effect on the market. It was due for a correction and that's what it got.  We are in for a period of uncertainty until the market decides to continue its rise above 12284 or to dive below 11520. Best to sit on the sidelines until it is clear what the next move will be. During the last run inside the channel, I thought that down was the most likely outcome and I lost a lot of money betting that hunch. In this phase I am agnostic about the direction of the breakout so the temptation to fiddle is not strong.

On the other hand I am glad that I stuck with gold and silver They have recovered and are showing promise. Both are climbing up stepwise from their sharp fall. A courageous strategy would be to build my stake each time the price reaches the bottom of its channel and taking profits each time it gets to the top. I wonder if I can manage that?

Trials and tribulations

DJI 1st November

At 2:15 I was woken by the dog slurping up his water so I went to look at the Hong Kong market. It was displaying weakness but nothing terrible. I placed my orders to sell my Hong Kong stocks and went back to bed. In the morning they were still showing as pending and the market had dived. You have to put in limit orders on the HK market so I thought that I had screwed up on the limits in a falling market. A bit of investigation revealed that this was not so. I waited till 7:30 when the TD Waterhouse staff started answering their phones. It was then that I discovered they had a problem with their systems - because of the change of clocks of all things. Computers take time too seriously and screw up.

Anyway it seems that TDW were inclined to do the right thing and roll back to check whether the trades would have gone through. And if they found that the trades should have gone through they would honour them. Big sigh of relief. Until in the afternoon I discovered they had accepted three trades but had cancelled three others. Luckily for me the HK Exchange has a reasonably nifty web site that tracks prices and trades. I had a look and accepted that one of the trades would not have gone through, a second was debatable, the third was clearly in my favour. The Exchange data is not crystal clear so I am now waiting to see what TDW make of it all. It did not help that the people who were making the corrections thought that 2:56am GMT was 13:56 HK time (It's actually 10:56). I have sent in my complaint and await the result with interest.

All this stopped me fretting about what was happening on the market. I had been right to pull out it seems. Most of that euphoria that had pushed the DOW up to 12284 has smashed into the shards like a broken Hellenic urn (I turn my hand to the purple prose when I feel like it. And I have been stressed all day.). But I am keeping my anxiety in check. Remember all those support lines that I pointed out yesterday. They are still there and the 11720 seems to be doing its stuff as I write. It was the thought of those support lines that stopped me from buying shorts - that and the speed of the fall. But it's a long time till 8pm when the US market shuts and things may change. The important support line is still 200 points lower.

In the mean time gold and silver have been thrown out with the bath water once more. And that hurts because I still have big holdings.