[badcharts]

Hi again!

More questions about the Mansfield Relative Strength Indicator. What index do you use to compare?
These are the scenarios, with my guesses:
1- aapl would be compared to NASDAQ:IXIC (composite) OR NASDAQ:NDX (non-finance top 100)
2- ibm would be compared to NYSE:NYA (composite) OR SP:SPX (top 500)
3- cnr.to would be compared to TSX:TSX (composite) OR ???
4- znx.v would be compared to TSX:JX (composite) OR ???
5- grek would be compared to INDEX:XAX (composite) OR???

Regards,

Patrick

Personally, I think you need to choose one as the main one that you use, as you need a constant to measure all stocks against each other on first glance, or if you were putting the Mansfield data into a relative strength spreadsheet table. For me this is the S&P 500, as roughly over the years it has averaged around 7% a year, and covers the 500 major stocks in the US market, so I found it very good for the Mansfield RS. But you could choose something else, as long as it's representative of a decent portion of the market imo.

That way once you know how your stock compares to everything else. Then you can do secondary comparisions against the index it is in, the major sector, sub sector or commodity etc. And then versus the other individual stocks that are it's competitors.

Hi Isa,

You are right. I'm setting this up right now.. will do some podcasts dedicated to Stan's "Forest to Trees" approach.

Then try to focus analysis of stocks that are in the strongest sectors in the strongest index... (inverse that for Stage 4).

Getting there...

Regards,

Patrick

[arkyuan]

Hi Guys,
I bought some facebook stock on April 5th. It had a great run of 37% or so, until yesterday it crashed by 20%ish...I rechecked the technical and there is no negative indicators. What could I have done to prevent it from happening? I'm think maybe sell half at a target price. But how do I determine the target price? if I use swing rule in stan's book it's around 223+
Current Highest point + (Current Highest point - Next Lowest point) = approximately near term target price
In Apirl 5th, 186.1+(186.1-149.02)= 223.18
and the stock crashed at 218.62....
If I use closed high and closed low I get target 215, maybe that's better?
another possible solution is to sell half before their earning report if it reach approx to 223.18 with a +/- predefined range?
let me know what you guys think,
thanks,
ark,

[StageAnalysis]

Hi Guys,
  I bought some facebook stock on April 5th. It had a great run of 37% or so, until yesterday it crashed by 20%ish...I rechecked the technical and there is no negative indicators. What could I have done to prevent it from happening? I'm think maybe sell half at a target price. But how do I determine the target price? if I use swing rule in stan's book it's around 223+
Current Highest point + (Current Highest point - Next Lowest point) = approximately near term target price
In Apirl 5th, 186.1+(186.1-149.02)= 223.18
and the stock crashed at 218.62....
If I use closed high and closed low I get target 215, maybe that's better?
another possible solution is to sell half before their earning report if it reach approx to 223.18 with a +/- predefined range?
let me know what you guys think,
thanks,
ark,

Unfortunately, anytime you sit through an earnings report with just a stop loss you are taking a gamble, as the chance of a stock gapping on the open the next day are virtually guaranteed. If you hold it through the earnings then you are gambling that the result will go your way. But it's always a coin toss as to which way it will go imo. So in this case, the reaction to the report was terrible, and nothing in the technicals before it could have helped with that.

One of the hardest aspects of trading imo, and I’m not sure how you can mitigate against it, except some kind of options strategy maybe where you sell puts or calls (not sure which) against the stock that you own, so that you are basically hedged through the earnings. Or some sort of thing like that. But don’t quote me on that as I know nothing about options trading. But I think that’s the kind of strategy that I’ve read about in the past as to how to limit your risk through earnings.

[badcharts]

Hi Guys,
  I bought some facebook stock on April 5th. It had a great run of 37% or so, until yesterday it crashed by 20%ish...I rechecked the technical and there is no negative indicators. What could I have done to prevent it from happening? I'm think maybe sell half at a target price. But how do I determine the target price? if I use swing rule in stan's book it's around 223+
Current Highest point + (Current Highest point - Next Lowest point) = approximately near term target price
In Apirl 5th, 186.1+(186.1-149.02)= 223.18
and the stock crashed at 218.62....
If I use closed high and closed low I get target 215, maybe that's better?
another possible solution is to sell half before their earning report if it reach approx to 223.18 with a +/- predefined range?
let me know what you guys think,
thanks,
ark,

Unfortunately, anytime you sit through an earnings report with just a stop loss you are taking a gamble, as the chance of a stock gapping on the open the next day are virtually guaranteed. If you hold it through the earnings then you are gambling that the result will go your way. But it's always a coin toss as to which way it will go imo. So in this case, the reaction to the report was terrible, and nothing in the technicals before it could have helped with that.

One of the hardest aspects of trading imo, and I’m not sure how you can mitigate against it, except some kind of options strategy maybe where you sell puts or calls (not sure which) against the stock that you own, so that you are basically hedged through the earnings. Or some sort of thing like that. But don’t quote me on that as I know nothing about options trading. But I think that’s the kind of strategy that I’ve read about in the past as to how to limit your risk through earnings.

Hi Ark,

Had some fun doing an exercise of revisionist history using this Facebook case...

   

Also, for the swing rule, I use monthly candle open and closes to define breakout line, then add implied mesured move to that break line. I see the wick as "noise". Gives closer, more probable targets.

See this post on twitter https://twitter.com/badcharts1/status/10...5785325569

Let me known if that's how you see it!

Regards,

Patrick

[arkyuan]

Hi Guys,
  I bought some facebook stock on April 5th. It had a great run of 37% or so, until yesterday it crashed by 20%ish...I rechecked the technical and there is no negative indicators. What could I have done to prevent it from happening? I'm think maybe sell half at a target price. But how do I determine the target price? if I use swing rule in stan's book it's around 223+
Current Highest point + (Current Highest point - Next Lowest point) = approximately near term target price
In Apirl 5th, 186.1+(186.1-149.02)= 223.18
and the stock crashed at 218.62....
If I use closed high and closed low I get target 215, maybe that's better?
another possible solution is to sell half before their earning report if it reach approx to 223.18 with a +/- predefined range?
let me know what you guys think,
thanks,
ark,

Unfortunately, anytime you sit through an earnings report with just a stop loss you are taking a gamble, as the chance of a stock gapping on the open the next day are virtually guaranteed. If you hold it through the earnings then you are gambling that the result will go your way. But it's always a coin toss as to which way it will go imo. So in this case, the reaction to the report was terrible, and nothing in the technicals before it could have helped with that.

One of the hardest aspects of trading imo, and I’m not sure how you can mitigate against it, except some kind of options strategy maybe where you sell puts or calls (not sure which) against the stock that you own, so that you are basically hedged through the earnings. Or some sort of thing like that. But don’t quote me on that as I know nothing about options trading. But I think that’s the kind of strategy that I’ve read about in the past as to how to limit your risk through earnings.

Hi Ark,

Had some fun doing an exercise of revisionist history using this Facebook case...



Also, for the swing rule, I use monthly candle open and closes to define breakout line, then add implied mesured move to that break line. I see the wick as "noise". Gives closer, more probable targets.

See this post on twitter https://twitter.com/badcharts1/status/10...5785325569

Let me known if that's how you see it!

Regards,

Patrick

Hi Patrick,
      The main reason for FB to drop by 20% is because of the earning reports. The way I see it is if they announce their earning reports a month early (let's say in June 25) then the stock would still crash by maybe ~10% regardless of the swing rule. I like what stageAnalysis said about the options strategy puts, you pay a premium of 2-4%, worst case you lose 2-4% out of the 30%+ gain, which is well worth it I find.
Ark,

[pcabc]

In prorealtime I've created this indicator which gives a value for each stage
Stage 2 = 1, stage 4 = -1 and stage 3 and 1 =0
the code is attached also. It allows for a screener for a stage 2 or stage 2 continuation. let me know if you need anything for the screener

also, if anyone would like to make any suggestions, then i'm all ears
such as refining the entry, exit etc

OK, I've rolled a simple stage estimator and tried to plot it against the S&P500 for the same period.

The stage estimators are the two coloured bars, one stacked above the other labelled A & B.

Green = Stage 2
Red = Stage 4
Grey = insufficient data or stages 1 or 3

Pseudo code for A:

  stage = 1/3

  Loop:
      slope =  sma150 (days) - previous sma150d (days)
      if (slope > 0) and (close >= sma150d):
          stage = 2
      end if
      if (slope < 0) and (close <= sma150d):
          stage = 4
      end if
   
Note, once it has gone from stage 1/3 to 2 or 4 it never goes back to 1/3.  This seemed to whipsaw around a fair bit when the price was going sideways.

Pseudo code for B:

This is an adaption of the above.  However, it has additional tests such that if the 50 day moving average is below the rising 150 day MA.  The idea was for it to whipsaw less, which it seemed to do, but that is not apparent on the posted chart.

  stage = 1/3

  Loop:
      slope = sma150d (days) - previous sma150d
      if (slope > 0) and (close >= sma150d):
          stage = 2
          if (sma50d < sma150d)
              stage = 1/3
          end if

      end if
      if (slope < 0) and (close <= sma150d):
          stage = 4
          if (sma50d > sma150d)
              stage = 1/3
          end if
      end if
   
This code seems seems to result as a slightly more complex version of a golden / death cross based indication.  I also note that mid stage 2 or 4, comparing the 150 and 200 day SMAs is good mid stage.  I'm coming to the conclusion that the devil is in the detail, that mid stage is trivial but it is the stage entries and exits are more tricky.  I will play with some logic based on channels to see what the effect is.

[malaguti]

OK, I've rolled a simple stage estimator and tried to plot it against the S&P500 for the same period.

The stage estimators are the two coloured bars, one stacked above the other labelled A & B.

Green = Stage 2
Red = Stage 4
Grey = insufficient data or stages 1 or 3

Pseudo code for A:

  stage = 1/3

  Loop:
      slope =  sma150 (days) - previous sma150d (days)
      if (slope > 0) and (close >= sma150d):
          stage = 2
      end if
      if (slope < 0) and (close <= sma150d):
          stage = 4
      end if
   
Note, once it has gone from stage 1/3 to 2 or 4 it never goes back to 1/3.  This seemed to whipsaw around a fair bit when the price was going sideways.

Pseudo code for B:

This is an adaption of the above.  However, it has additional tests such that if the 50 day moving average is below the rising 150 day MA.  The idea was for it to whipsaw less, which it seemed to do, but that is not apparent on the posted chart.

  stage = 1/3

  Loop:
      slope = sma150d (days) - previous sma150d
      if (slope > 0) and (close >= sma150d):
          stage = 2
          if (sma50d < sma150d)
              stage = 1/3
          end if

      end if
      if (slope < 0) and (close <= sma150d):
          stage = 4
          if (sma50d > sma150d)
              stage = 1/3
          end if
      end if
   
This code seems seems to result as a slightly more complex version of a golden / death cross based indication.  I also note that mid stage 2 or 4, comparing the 150 and 200 day SMAs is good mid stage.  I'm coming to the conclusion that the devil is in the detail, that mid stage is trivial but it is the stage entries and exits are more tricky.  I will play with some logic based on channels to see what the effect is.

what you've done is given yourself a "trend filter" so that you wean out those fakeouts. I used the linear regression, which would work in the same way, likely you and i would have similar results if we just used those.
however as you say the devil is indeed in the detail and yes that tricky part of the right entry, stop and exit are not going to be easy.
in fairness however i'm coming to the conclusion that the benefit of an indicator that gave us our stages would if anything only really be useful in finding the entry

I don't think the drop in 2016 is a stage 4, but at the end of the day who cares?
we would have been taken out with our stop loss anyway. so it all becomes pretty moot to be honest trying to worry about a stage 3 or stage 4 exit as we should have taken our profit by then. and the stop loss is going to be nigh on impossible to really get right, so all we're doing it for is the entry

now, if i could code a double or triple top breakout where the SMA on the candle chart is sloping up, i'd be an extremely happy man. and my coding skills are just not good enough. you will be the first to hear by the way if i do manage it!!

[pcabc]

what you've done is given yourself a "trend filter" so that you wean out those fakeouts. I used the linear regression, which would work in the same way, likely you and i would have similar results if we just used those.
however as you say the devil is indeed in the detail and yes that tricky part of the right entry, stop and exit are not going to be easy.
in fairness however i'm coming to the conclusion that the benefit of an indicator that gave us our stages would if anything only really be useful in finding the entry

I have several motivations. To see if I can do it well, to see if I can get an indicator that helps me not make bad entries, possible use in screening and perhaps help with market breadth estimations. I did wonder whether I could use such an indicator with an index / sector ETFs using the investors method? I'm trying to whittle down the subjectivity, but man-in-the-loop is required as noisy data, or patterns you did not have in mind designing the filter always seem to get through.

I don't think the drop in 2016 is a stage 4, but at the end of the day who cares?
we would have been taken out with our stop loss anyway. so it all becomes pretty moot to be honest trying to worry about a stage 3 or stage 4 exit as we should have taken our profit by then. and the stop loss is going to be nigh on impossible to really get right, so all we're doing it for is the entry

The close was below the falling MA, there are lower highs and lower lows. On this basis definitely stage 4. However, stages 2 and 4 are well defined, whereas 1 and 3 seem more subjective. Since any MA will only be perfectly flat (not rising or falling) using a simple decision based on the position of the close wrt to the MA and its slope will whipsaw around 2 & 4.

now, if i could code a double or triple top breakout where the SMA on the candle chart is sloping up, i'd be an extremely happy man. and my coding skills are just not good enough. you will be the first to hear by the way if i do manage it!!

Yes, how that works is quite tricky to conceptualise from a coding perspective. I have a couple of screeners. One which ranks stocks based on a number of parameters including volume, breakout from channels, MAs and another which detects breakouts from manually entered trendlines. I usually set the trendlines based on the output of the first filter.

I think the core of this would be detecting whether the price today was higher than the upper limit of a channel yesterday / last week. Effectively automatically setting a flat breakout level. Won't work for sloped breakout levels. OTOH I think the flat approach hits many.

I don't think there is a perfect screener. The best we can do is to use several good screeners.