The Student Loan Ranger

A red day across the FTSE today as yesterdays gains were wiped out. SOLA and SHI the only ones on my watchlist in the blue. I use Pro Real Time (prorealtime.com) for charting, and today noticed a new feature: auto-trend lines.

I was reading a book called the Investors Guide to Charting (not sure if it's any good yet, the guy that wrote it is not a chartist at all), so was messing around with some charts last night, but, strangely, just as I wanted to practice some new moves - this auto trend gadget popped up.

Anyway I ran it across my watch list and it's quite interesting. For the most part, my trending TA is pretty good. SHI is one exception, there was some resistance I hadn't spotted earlier:

Now, like I keep saying "tomorrow is the day", at least according to this. Today was literally on the trend line and the 9 day EMA. RSI says oversold, and it crossed the signal line this afternoon. So we could be in for a run.

My exit strategy entails the following: The resistance is at 878. I will watch for signs of weakening in the days leading up to a potential hit at 878. If I see any, I predict the SP to drop. If it still looks strong, I will hold and see if this line is broken. However I must also be exercise caution with the second angled red line on the chart.

If the SP fails at this first trend line, my loss exit will be at a break of the green support line.

This could be another failure, but I'm interested to see how this does. Potentially SHI could slump to support at 700.. or worse. A bounce off 700 is a buy signal for me. I should also add, as a postscript, that there is significant potential for a head and shoulders formation on the recent data. The volume is worryingly low on what could be the right shoulder.

Well I'm into SHI from this morning at a price of 791p. I've just uploaded this chart for a little bit of justification. I'm planning on being in this trade with an exit point of around the resistance point at 884p. My exit point will change depending on it's strength leading up to the break, we might see a false breakout like last time so I'll probably keep a close eye on it in the lead up.

I am out if this triggers a 773p stop.

I don't envisage this rally to last too long (if at all!) so hopefully it will be a nice quick and clean trade. I'm guestimating that some other stocks, mainly ADN/BKG/MGCR might be ready for entry when I close my position in SHI.



A mid-week recap on my predictions for this week (from Saturdays/Sundays post) blue is good and in line, red is bad and against my prediction.

ADN DOWN 6.94%
MGCR UP 0.11%
AZN UP 6.22% NEWS of patent resolution and cancer cure.
BG GROUP UP 6.31% NEWS of "... biggest oil find in 30 years" lol.
CBRY DOWN 0.36%
LONMIN UP 1.71%
SDR DOWN 5%

Think the rest were unsures, but have now formed enough for amateur predictions:

SOLA is mental, will continue up, potentially unchallenged until 490 - UP 25.86%!
VPC broke the resistance I was checking for and is up 6.54%, should steam on, watch for 750.
BKG's downtime looks over, I predict northwards to upper trend line, by then around 1200 before reversal back down.

PMO up 7.92% since Monday, including some seriously bullish candlesticks, however it is still below my upper trend line. 1554 and 1558 are the resistance points for Thursday and Friday. a break of these will see continued bullish movement. A bounce off these and I expect the SP to drop to support at 1460. A failure of 1460 may lead to lower support at the lower trend line. NB this stock is looking very, very strong today, and I believe is a good for tomorrow morning.

Discipline is a hard nut to crack, and it's proving a bizarre barrier for me to overcome. Maybe I'm just running to fast with this but not sure. It's starting to look like basic human psychology makes 80% of the decisions with these stocks!

I need to realise that for now, I want to be a swing investor - not a day/week trader. I can't sit all day and look at Quotestream and be like, "ok, I might sell some of this for a few quid". Or cut losses on an intra-day basis. That's not what I'm in the game for.

But I can't help it! Level 2 is a gift and a curse. It provides me with some good insight into the market, but also provides me with excuses to enter and exit trades a lot more frequently than I should.

I'm back in DES - I shouldn't have sold in the first place, even though I made a profit. And I have on order for tomorrow, another IEC ticket. I spent about an hour comparing IEC with SHI, debating which one to buy. Blatantly it should be SHI, not one reason points towards IEC - except this huge gap after the drop, and the fact they have a billion oil barrels in reserve.

The tricky part for me is this: IEC may or may not close the gap, and, like Severfield, it may take a long long time to do it - and I will know when it does. SHI provides a probable to likely 10% profit in the next 2 weeks. On paper it looks like it is beginning a new reversal in the channel and could be set for a run - it's broken the recent downward trend.

The one thing that is the most frustrating: It's always the next hour that counts. Literally, nearly all the stocks I look at will make their mind up the next day. And it could go horribly wrong. I could get into SHI for 778 tomorrow morning, but it could go down to around support at 690..

I guess what I'm doing here is talking myself out of the IEC trade and into SHI. I think I'll cancel the morning order for IEC. Instead of replacing that with one for SHI I will wait to see what it does tomorrow.

Yeah I think I'll do that..

But £100 says IEC is up over 5% tomorrow.

What is it with afternoons on the FTSE? Stocks just stop moving. It's frustrating if you're in a trade, or if you're just sitting back watching stocks. Two examples from my portfolio this morning:

DES continued it's run from Friday and ran up to 91.5. I sold out at 87.25 for about £40 after brokerage. I've bought back in at 86.5 expecting some more movement - but alas it's gone sideways for the past 3.5 hours. I'm still looking for some medium term gains (this week or next week) on DES and it still looks good. After having the capital after the sale, there wasn't anything on so a little play on DES with a view for another £40 or £50 by Friday?

IEC dropped 4.5% this morning then recovered to -2%, but, since midday again it's done nothing worth noting.

This isn't really an issue for me at the moment, as my positions are all medium - but in the future should I ever decide to trade on an intra-day basis or hold for only 1-3 days, this flat-lining could become annoying. On the upside, I guess your trading day is done and dusted by lunch time, giving you more time to do whatever people do.

Looks like a dull day across the board, the range on my watchlist is -2% > 0%. Tight.

My internet seems to be working again, about time. Anyway, some TA for next week. The following shares are on my watchlist for the next 2 weeks with the current price in brackets:

UP
Lonmin PLC (LMI 3,219p)
Tate & Lyle (TATE - 510.50p) * but not sure!

DOWN
Aberdeen Asset Management (ADN 144p) *still looking to fall to lower line from last week
AstraZenica (AZN 2,011p)
BG Group (BG- 1,220p)
Morgan Crucible (MGCR - 234.75p) *same situation as ADN
Cadbury Schweppes (CBRY 563p)

You will notice a continuation on ADN and MGCR, both have responded well to my TA from last week and are in line with my expectations. ADN is down 6% from first mention, while MGCR is down a slight from 234.75 to 231. I am 100% confident on ADN, and 85% on MGCR - there seems to be some dilly-dally between 232-228 and the stochastics have taken a slight turn.

BG Group
This is a great swing trading stock (I think..) with high gains and losses in a relatively short time frame, backed up by this strong upward trend. I'm looking for a confirmation of a reversal at the top trend line sometime early next week, I think the bullish engulfing on Friday may have provided this reversal signal already. I will short this on paper if the candlestick is backed up with a drop on Monday. The bottom trend line should provide support, and I think we're looking at a fall of around 15% from 1250 - so maybe a long buy signal at around 1100-1175 depending on the bounce off the bottom trend line.

Dumping my short position will be indicated by the first sign of negative divergence on the MACD, as well as a sub 20 RSI which looks to bottom out then make a move upwards. This is also a buy indicator for anyone going long in the trouser.

Lonmin PLC
This stock is currently positioned in an excellent sideways channel providing good rolling short and long opportunities. The support and resistance on this chart is pretty obvious, however, there is also a minor line at the 3300p mark which you could also trade off if you were lucky enough.

Obviously this will go one of 3 ways soon, and I think the first few days of next week will tell us where. It could drop from the current price like December, fall to the support at 2850p and bounce up, it could go sideways and then up, or it could continue up to the resistance at 3650p.

Divergence has been a good indicator in the past but nothing clear for this next move yet. RSI indicates a possible overbought, and therefore drop, but MACD/MA say buy. Either way don't buy it now, wait for close on Tuesday for evaluation.

The sell point is around 3600p here which is also a shorting position. The buy point/get out short price is the support at 2850. Get in and out before these prices, as apparently these represent psychological barriers in the minds of traders (their targets). Sell at 3595 then!

Tate and Lyle

OK, this one is a little trickier for me, but I'm putting it in. TATE seems to be quite indecisive about trends so forms a series of small ones. The only real identification of a trend I can find is on the 5 year chart, which says up, just not very convincingly!

Anyway, I'm not too sure what to do in a scenario like this so have speculated - and hopefully I'll learn a bit more about charts like these with this play. I'm predicting a movement up next week off the lower trend line, but I'm not 100% on this. My reasons for pessimism are that all of the moving averages have cut through the price and the MACD looks unhappy. The RSI seems to have bottomed out and may make a move though.

One thing about my drawing here - I think the lower trend line should be a little higher, if this is the case then I believe TATE has already broken the upward trend and therefore is in line for a move south.

Portfolio News

I'm still looking for get out oppor-chancities on my current holdings, as they were all bought for the wrong reason.

Stanelco sways gently in a wave of consolidation following last months tsunami. The day traders and market makers are out, and people holding this are investors, shorters, or those who nearly drowned in the waves of excitement. The trading statement and AGM take place on April 28th, where I will be waiting in the wings with a finger over the sell button. Hopefully they are either in profit or working towards it - which should kick the SP up a bit so I can reduce my losses.

Desire had a very interesting Friday afternoon, where it shot up 9% in the final hour of trading. Rockhopper, a fellow Falkland Island oil company, was up 14% for the day. Both of these rises were on no news, which leads me to believe there has been a news leak somewhere along the chain. I am now up 9% on this stock, and will be looking for an RNS on Monday. If there is no news forthcoming I may dump the shares.

Stirling have announced the planned sale of it's US assets for $150mn, which is more than the value of all their stock listed in London. These funds will wipe out their debts and provide capital for ventures elsewhere. The stock was up briefly but is now in the old range. Looking to sell soon.

Imperial Energy Corp is slowly, and I mean slowly, moving up. But these are dangerous times for the holder as these could plummet any time now.

I am also covering with interest the following stocks, whose patterns will be confirmed this week:
ARM, BKG, PMO.

SMDR, SDR, SOLA and VPC are still under watch pending some moves. VPC looks to have broken resistance and could be in for a very interesting few weeks.

You can check the charts of the other stocks at http://uk.finance.yahoo.com

Back to school tomorrow after the 2 week easter break, which sucks a bit. Been getting well into the stocks during the holidays - but also looking forward to getting back into a routine.

Anyway my internet was wrecked earlier today, so I was sitting around working on some capital management systems for trading. Nothing special, just devloping some financial rules for my portfolio and profit taking etc.

It's fast dawning on me that money management is just as important as the stocks themselves. Until now I've had no rules, which has really hampered my development as an investor.


My old rules/mistakes:

1. Pick stocks based on fundamental research, give the chart a glance with a very uneducated eye.

2. Don't set profit targets. I wanted as much as I could get, so wasn't happy unless the number was high.

3. Look at monetary gains over percentage gains. Big mistake!

4. No automated stop losses, which destroyed me on ASG and has led me to go long.. long.. longer on SEO.

5. Tying up my cash too quickly, and for too long.

6. Buying small holdings <£400, brokerage costs are just too much if it goes wrong, and often right!

7. Buying stocks based on them "looking good", and not trading the trends.

8. Cluttered trading journal getting confusing with so many stocks on watchlist etc.


So there's 8 parts of my game I have identified and am now currently working on stopping them out.


New rules for old mistakes:

10. Be realistic about the type of gains, and losses, that I can achieve.

9. Studying stocks thoroughly using in-depth technical analysis and my preferred indicators of MACD, RSI, EMAs, Stochastics. Then skimming over some fundamentals and research on what the company is doing, but focusing 90% on TA.

8. My technical analysis should provide me with sell indications just before or as the stocks run out of steam. I don't care if it's £5, £50 or £250, it's money in the bank if I sell it right there - allowing me to reduce my exposure.

7. Guaranteed stop losses as part of my trading strategy. Depending on the stock, they may be as tight as -3.5% to 7%. I will use trailing stop losses based on Parabolic SAR or EMA.

6. Wait for at least 3 signals before making a buy decision on a stock. I will also not buy a stock unless I have gone through it in detail on a yearly, monthly, weekly and daily basis and have checked all possible trends and resistance/support lines.

5. Invest >£1000 in each trade, unless a sell CFD. Reduces net purchase price per share, buy and sell targets met quicker.

4. For profitable trades, I will re-invest 35% into my trading account, and withdraw 75% of the profits as capital gains/petrol money.

3. Focus on a smaller number of shares each week and get a sounder understanding of their movements.

2. Buy UK300 companies or £50mn market cap stocks with >500,000 average volume per trading day. Liquidity, lower volatility and easier trend identification are 3 important new factors in my potential targets.

1. My number one rule: THE TREND IS YOUR FRIEND!


I will hopefully be able to integrate these new rules into my game quickly. Time will tell, but I will have to be commited to my rules and show no weakness in any trade, if it looks bad, get out - if the goings good, get out.

In other news, I continue, on paper at least, to indentify stocks due for losses much easier than those for gains. I have opened a paper account at IGindex.com, and I will begin to practice CFDs with play money later next week. Should I ever get into the Contract For Difference game, it will only be for shorting stocks, as I like to actually own stocks when I buy them. I will also try to pick <0.5% of stocks for this practice, as you really have to be right to get any gains. I will use ultra-tight stops on CFDs. They offer a good opportunity to gain exposure to money using 10% of the capital it would cost to own the stock outright. However, you can lose a hell of a lot more by the looks of things. Anyway, I figure £1000 in a CFD account, looking for initial margins of around 50 with a 2 CFDs at a time could be ok.. Anyway, I will treat the 100k like it was 1k and divide all gains by 100 to give me an indication of how I'm doing.

More TA, this time featuring the predicted misfortunes of Morgan Crucible (MGCR) and Aberdeen Asset Management (ADN).

First up MGCR:First I'll say that this is in an upward trend, so the predicted downturn won't last much longer (I guesstimate around 4 weeks). This will creep down until it hits the lower trend line and then bounce back up. By my amateur and unbackupable calculations, the buy range will be 202-210 around May 5th. Buy then and wait for continuation of the upward trend, to around a price of 255-265.

ADN:
No denying the downward trend on this one, but there are some interesting chart formations on this one. First up is a double bottom quickly followed by a double top which has failed the downward resistance and receeded nicely. This will go down, it's just a case of waiting for the right signals, as there is some forming support at 117, which will be above the support of the downward trend. Also, the RSI indicates a sale, which is much quicker than MACD and the moving average cut through from a few days ago. This will be interesting to watch.

I did these charts last night, this morning the stocks have done the following:
MGCR: -3.36%
ADN: -2.08%

As an interesting side note, VPC is down 3.32% this morning, indicating that it failed confirmation of the resistance break set at circa 658 and has settled currently at 640 pending further movement. I do still have a good opinion of this stock despite the retracement today and will wait for another signal before I buy into it.

Also a postscript from last weeks TA on SHI, CHTR, INVP, BLT (I've covered VPC). I predicted downward movement from SHI and CHTR, up on INVP and BLT:

SHI was 875, now 850 so good
CHTR was 857, now 850 but on the up, so ok
INVP was 380, now 380, also up and down, so not good, it hit 390 and went down at resistance
BLT was 1550, now 1650, so pretty good

I have also learned to be more patient when looking at a potential stock, hindsight is 20:20, but I will buy off 3 or 4 signals instead of just thinking, "hey, that's a good price". I'm also looking for simple chart and trend patterns that catch my eye straight away.

It's sad but I'm all about TA, here's some analysis of my current "would love to own right now" stock, VPC.
Yet again blogger sucks again with image quality, which is something I'll have to work on. Anyway, trend spotting all over that one. Double top, went down, set new low support, rallied back up but broke that trend, then formed a double bottom. I'm expecting this to get back to around the point of resistance set after the big drop.

I watched quite a lot of videos last night on technical analysis - mostly from informedtrades.com and alphatrades.net. They were very interesting and insightful, and at the moment I'm a little shocked at my earlier trading tactics. From now on I will definately be mostly technical analysis with only a little fundamentals. The tutorials I watched more specifically were MACD, RSI, Bollinger Bands, Parabolic SAR with a few also on trend spotting and moving averages.

The guy from informed trades recommends a program called ProRealTime, which is an analysis suite which you can use for free with end of day data. The charting is a lot better on this than at iii or on QuoteStream so I'll scan these at the end of day looking for some signals.

Anyway, I have a look through last night and tried to put what I had learned into practice and picked out 5 stocks that stood out more than the others. They were SHI, BLT, CHTR, VPC and INVP. SHI and CHTR looked like they were in for a fall, so I thought that I'd watch for a drop in those today. I will start to CFD stocks going down as for me it's easier to see potential downward movement rather than upward.

INVP, VPC and BLT looked like they were in for some bullish behaviour this morning. VPC in particular looked quite good as it crossed all but one box on my criteria - the MA. Anyway here they are at the moment:

SHI -2.15%
CHTR -1.22%
BLT +1.64%
VPC +1.51%
INVP -0.72%

INVP had some decent movement up at the start but it's looking weak so my analysis didn't work for that so obviously some more work needed. I'm pleased with how the other 4 look and I'm looking for some continuation on those tomorrow.

I applied the same analysis to my portfolio of DES, SEY, IEC, RWA and SEO. I bought IEC yesterday after it dropped 25% - which I thought was a little overdone. It's up around 4% today so far so hopefully it's a gap closer and I can make a decent short term profit.

2 stocks on the list were decent enough to look at: SEY and RWA. SEY looked had some strong signals for a reversal, and it's up 10% today. RWA looks pretty bad I must admit, and it's declined steady throughout today to -5.81%. I will be out if it breaks -6.5%, but I would like to see what happens with it, as "the trend is your friend" and generally speaking this is in a good but slow upwards trend and has been for quite a while after a big drop earlier in the year.

Brokerage fees are my main nemesis at the moment, and I'm looking to cut down on them. I think I will group my cash together after I exit some trades and trade off that, instead of having fewer and smaller holdings. Also, by spotting potential reversals for downward movement, I might start trialing CFDs on paper with a view to using them later in the year.

Not what you think - technical analysis. Been doing a lot more charting stuff lately as I've just signed up for streaming L2 market depth on iii.co.uk. It's brilliant to sit and watch the movement of stocks, as you can make better calls when you're live. Anyway, I read a charting book so have started some very amateur technical analysis.

My brother is all about TA and won't even sit down to read a report. But Warren Buffet and Peter Lynch don'tlook at charts, they are fundamentalists which is what I have been up to this point. I do like TA but I just think it has to back it up with either strong balance sheets, good products, contract wins or a booming sector. My stock picks were ratio searches, followed by fundamental research and then looking at the chart. At the moment it's based on RNS>chart>balance sheet, but only because I've got level 2.

Anyway, like I keep saying I really really (..like for real really) hate not having cash at disposal when you're sitting watching the market. It's all tied up still in stocks I've bought a few weeks ago that just mosey along, which is fine really so long as they move north. Anyway, I realised Tullow might not have been such a good buy at the moment and sold out for a £20 loss and had a look around the markets.

I've started to check market losers instead of gainers now, because more often than not, in the next day or two they're on the market gainers list. One company was down 25% today despite a 62.5% profit growth on the last year, the market depth was good: 3:1 buys vs sells and constantly ticking up so I figured I'd buy that just to see what happens really. Strong fundamentals and they've arranged for some funding, just hope the debt levels reduce and they get some revenue in the next few months. Oh it's Imperial Energy Corp - IEC.

Anyway, I did some (if you know anything about TA you will say "..some bad") TA for Savills (SVS), Vectura (VEC) and Bowleven (BLVN). On paper I love Savills and Bowleven, my brother pointed me towards Vectura after some heatmap analysis.

BLVN.. wow I just realised how crap images look on blogger..
Well because it's all distorted I guess you can barely see the 3 little coloured squares giving my buy/sell indicators. Anyway it's in the top and black bottom line in an upward trend, but there is also a second support resistance line (the grey one). The red line indicates recent resistance. I did it last night with the blue square meaning buy if it goes above, points along the top black line are sell indicators and if it bounces off the purple square and passes the red line - definate buy. Anyway today it's above the recent resistance (buy signal) and I'm going to see if it hits the upward trend line.

SVS
This is a little simpler, seems to have established an uptrend in a definite little channel there, but has encountered historial resistance (red line). It bounces back to the bottom trend line and then makes another move. The blue square is a buy, as it represents the lowest buying price in the trend, purple square is indicative of a resistance break and possible new support line towards the top trend line. The yellow square indicates a possible break, if not, then open a CFD until it retraces to the support line - or if it fails that, the lower trend line.


VEC
Really simple here, stock is really low compared to past prices, looks to be on sale. It's broken out of its downtrend and has made a short burst upwards along 2 trend lines (the thin one also lines up with the big red candlestick). The squares are self explanatory this time because you can read it. Today VEC hit the blue square indicator, indicating it is looking to break the resistance and find some new support at that price.

OEX
This is just for a laugh. My brother keeps harping on about Oilex being a crap company - but going by independent research, contracts and prospects, this stock has great potential over the long term (18 months+), especially if you can get in at the support at 56. I did this graph in about 2 seconds, and I'm not even sure you can call it TA except for the resistance at 6 and formation of an upward trend in the past 2 weeks. The one problem with OEX is the total and blatant resistance at 60. This was 2 days ago, and the stock is still below resistance, but interestingly still on the last upward trendline in the wedge - indicating to me that there is interest in the stock, just nobody wants to make a move. I'm waiting firstly for continuation of the lower upward trend, followed on a break of 60 which would indicate a buy.

Also, as I write this IEC continues to recover on L2.