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+--- Thread: Stage Analysis Beginners Questions (/Thread-Stage-Analysis-Beginners-Questions)
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RE: Beginners Questions - MalcolmSm1th - 2014-03-16
Would the initial breakout be the one before the end of November last year?
![[Image: smtx.png]](http://www.ukhorseracing.co.uk/images/smtx.png)
If I may make a comment or two? Whist that is a breakout of sorts it's rather close to higher values which were in April of the same year. And before that in March there is a higher set of prices and so on and so forth until about April 2012.
What is happening is that each time you are matching one of these peaks then those who got in at these prices are getting out 'at evens' so the price tends to fall again.
At the moment the price is still trying to get past those who got in May of last year.
My screen gotes back until March 2011, this was on recommendation of ISATRADER here who explained that three years back is enough of a window to see the higher highs. In this screenshot above one can see that there is a highest high of about 400 US Cents. That is the figure which the price really has to pass before this can be considered a 'breakout'.
This is, of course, my own viewpoint on the matter and I could well be easily wrong.
- Malc
RE: Beginners Questions - isatrader - 2014-03-16
(2014-03-16, 06:22 PM)boondock Wrote: Hello again, Had a question about buying the pullback after a breakout. Easiest to use a couple of examples from the investor method watchlist. Would a volume validated breakout that then substantially pullsback on low volume be generally viewed as a nice discounted secondary entry point for an investor or is it considered somewhat of a failed breakout? SMTX had high volume breakout followed by 4 of 5 days of low volume pullback where price dropped below breakout price, put in the context relative to down week for the market. Or would seeing a consolidation pattern like SIMG and looking to enter above consolidation range be wiser? Essentially at what point is a high volume breakout considered failed?
Thanks
Hi boondock,
SMTX attempted to make a Stage 2A breakout back in January, but failed to close the week strongly above the breakout level, and formed what is referred to by some as a squat, and so remained in Stage 1. It then pulled back sharply the following week back into the Stage 1 range. I highlighted it again on the 7th March as it was once again testing the upper part of the Stage 1 range, and so would have been given a Stage 1B rating. However, it once again failed to make the Stage 2A breakout and pulled back sharply again into the Stage 1 range. So I'd give it a Stage 1B- rating now, as the technical pattern isn't as good now. It could still make another attempt at moving into Stage 2A, but would now need a weekly close above the January high of 2.66 imo.
Malcolm, asked whether the initial breakout was the one before the end of November last year, but that breakout would only be considered a breakout within Stage 1, as SMTX was still trading below a lot of near term resistance at the time, and there wasn't much of a base to speak of, and so in this case it's formed a higher Stage 1 base which often happens in stocks with a lot of near term resistance, as they need time to work off the supply. Attached is the weekly chart again, but with the ichimoku resistance cloud overlaid, so you can visualize the potential resistance area.
boondock, to your question about the Secondary entry point following a Stage 2A breakout. This never occurs in a matter of days, as price often rises for a month or more on increasing volume before beginning to pullback towards the breakout level on contracting volume. So it can often take many months and wipe out the entire initial advance, which is why the Stage 2A entry point is mostly for investors, as traders should focus more on continuation breakouts already in Stage 2.
So to be a successful Stage 2A breakout you'd want to see price rise for many weeks on increasing volume following the breakout, but if it immediately reverses the following week and falls back into the range then you've likely got a failed breakout, and so would dump it immediately.
RE: Beginners Questions - Tryst - 2014-03-16
(2014-03-12, 04:54 PM)isatrader Wrote: Personally I don't use buy-stops and don't know many that do on here as you have a much higher risk of a false breakout, but one suggestion that might be of use is to set up alerts, that will be triggered when a price level you are watching is reached instead, as that way you can enter a partial position manually once you've checked the chart, and then monitor it until near the close, which if still strong and hasn't run too far above the breakout level then you can do additional buying as Weinstein said in his answer.
A question, when you say 'if a stock hasn't run up too far...after monitoring it near the close...' are you implying that if a stock has a surge on increasing volume and never returns back during the day of breakout, then an opportunity is missed? Only stocks that don't breakout aggressively during the day of breakout, but do stick a landing/close above the breakout level should be invested in?
A great chart to look at which had a breakout on strong volume, with a low volume retracement to support (prior resistance) and then a breakout after a retest of support is LSE:FCCN.
RE: Beginners Questions - isatrader - 2014-03-17
(2014-03-16, 11:49 PM)Tryst Wrote: A question, when you say 'if a stock hasn't run up too far...after monitoring it near the close...' are you implying that if a stock has a surge on increasing volume and never returns back during the day of breakout, then an opportunity is missed? Only stocks that don't breakout aggressively during the day of breakout, but do stick a landing/close above the breakout level should be invested in?
No definitely not, ideally you want the strongest breakout with a huge increase in volume, but unfortunately that makes getting in near the breakout level much harder and you'll often have to make compromises.
Weinstein's advice was referring to a trader entry. So he said to setup a buy stop order for a partial position to capture the exact breakout point, and then to do additional buying near the close it hasn’t run too far from the breakout level. I was suggesting a similar method, but using alerts instead of a buy stop order to access whether to open a partial position or not. You could of course open a full position straight away, but early intraday buying has an increased risk of a false breakout. But if it did close weakly on the day then you could immediately dump it.
He didn't give any guidance to how far is too far, but any additional buying at a higher price near the close would move your average entry price higher, so I'm assuming that you'd need to assess whether if would still be within your risk tolerances i.e. the distance to your stop loss point, as too whether you could add or not. Or you might need to reduce your position size in order to keep your risk at the correct level.
RE: Beginners Questions - Tryst - 2014-03-18
ok, understood.
I can agree with setting the alert, and that is exactly what I do. But there has to be some initiative there to buy at some point if the price hasn't broken out to aggressively so that you can can the price as close to the breakout point
as possible. So providing the price hasn't faked out and has reversed fast, and you have you caught the price at a good time just when it is nudging up ahead but not too aggressively (LSE:HHR is good example of this).
I guess the point I am making is, you have to take that chance with a breakout and start to buy at some point (obvoiusly not too far into the breakout), So if the main market is good, and the sector is good (although there are stocks that breakout nicely in bearish sectors), and initial volume is good then it would be wise for traders to start dipping their toes in the water.
Thanks
RE: Beginners Questions - boondock - 2014-03-18
Hello All,
Had a question about setting up a momentum index which was shown on page 14 of this thread. I have a membership at stockcharts. Wasn't sure how set up the chart to plot a moving average without charting the price, and how to set the 0 line.
Thanks
RE: Beginners Questions - isatrader - 2014-03-18
(2014-03-18, 03:59 PM)boondock Wrote: Hello All,
Had a question about setting up a momentum index which was shown on page 14 of this thread. I have a membership at stockcharts. Wasn't sure how set up the chart to plot a moving average without charting the price, and how to set the 0 line.
Thanks
Hi boondock, it's fairly simple to do. Attached is a screenshot with the settings to copy.
RE: Beginners Questions - Keir value has dropped below MA30 - pcabc - 2014-03-20
Probably need to bone up on posting charts.
Anyway, question about stops. I'm an investor. Keir (KIE.L) is currently below the MA30 and the recent minimum of 1681 is close to the previous minimum of 1670. The book states that it is OK for the price to drop below MA30 provided it is higher than the previous minimum and the MA30 is rising. Ref page 189.
On this basis I've put a stop in at 1669 - if it hits 1669 it has violated the previous correction low and the above statement means I should sell. Do I appear to have interpreted the book correctly?
Thanks in advance.
Yahoo, KIE.L