What a difference a few days make.
Prices as of the close on Thursday, January 12, 2023.
Another Stock Market Indicator
January 10, 2023 by
In the past, I have illustrated a few ratios that have measured investor sentiment on future stock market direction.
In this post, I will add another, the relative strength between the consumer discretionary sector (XLY ) and consumer staples(XLP).
Historically when the consumer discretionary sector (XLY) outperforms the discretionary sector(XLP), the overall market (SPY) has been bullish.
The relative strength swap doe not always indicates a change, but the trade-off is always worth noticing.
The following is the relative strength of XLY vs XLP with the SPY as of the close of Monday, January 9, 2023.
As illustrated, XLP is still doing better than XLY.
SHOPify in news
May 9, 2022 by
SHOP has been in the news lately regarding the acquisition of a logistic company.
Prices are as of the close of Friday, May 6, 2022.
As in all previous illustrations, Green lines are periods of LONG, Red lines show periods of SHORT, and Blue lines are periods of NO POSITION.
The weekly is the dominant signal. So in this example, the only possible daily position in the year 2022 is SHORT.
ARK Innovation ETF ARKK
April 26, 2022 by
Like many investors, I was impressed by the incredible upside performance of Cathie Wood’s ETF ARKK in 2020.
The holdings include Tesla, Zoom, Roku, Teledoc Health, and Coinbase Global.
With the exception of Telsa, most are down a considerable amount this year.
Despite the large underperformance of ARKK, many investors are staying the course, according to Monday’s (April 25, 2022) Wall Street Journal.
The following Monthly and Daily chart of ARKK portrays the recent price decline.
Price is as of the close today, Tuesday, April 26, 2022.
AbbVie Earnings coming next week.
April 23, 2022 by
“Wall Street expects a year-over-year increase in earnings on higher revenues when AbbVie (ABBV) reports results for the quarter ended March 2022. While this widely-known consensus outlook is important in gauging the company’s earnings picture, a powerful factor that could impact its near-term stock price is how the actual results compare to these estimates.
The stock might move higher if these key numbers top expectations in the upcoming earnings report, which is expected to be released on April 29. On the other hand, if they miss, the stock may move lower.” Zacks Equity Research, April 22, 2022
The following pictures of ABBV Daily and Weekly show that some expect lower results than projected. Prices are as of the close of Friday, April 22, 2022.
The weekly chart is the dominant position. The green line indicates BUY. The RED line indicates SELL, and the BLUE line indicates CLOSE position.
As in all past posts, When and only when the Weekly indicates BUY, then if the daily is also Green, the position should be long. The BLUE line indicates CLOSE position.
SHW revisited. Swing Trading at its best.
March 13, 2022 by
As many of my readers know, I have been following Sherwin Williams for many years. It qualifies in most metrics as a solid company financially and has been an outstanding holding in many portfolios.
The caveat is that if you have the ability to adjust your potfolio when certain stocks are not gaining at price but declining, then SHW has been in and out of your portfolio many times in the past few years.
Using the weekly price action as the guide and the daily price action as your trigger, the following charts are a good example of good timing in SHW.
As usual, green lines represent the time of being long on the weekly, if only the daily agrees.
Long-only from April of 2020 until the end of January 2021. Then long-only from April of 2021 until Mid January 2022. Short only from February 11, 2022.
The daily charts are the actual trade trigger.
This is an example of how swing trading is supposed to work. Prices are as of the close on Friday, March 11, 2022.
AMC, one of the “meme” stocks in the news.
June 1, 2021 by
There has a lot of news recently regarding so-called “meme’ stocks.
Last Thursday, The Wall Street Journal on B1 stated “Meme Stock Rally Resumes”. The article mentioned GameStop, AMC Entertainment Holdings, and Express Inc.
Meme stocks are those securities that have been discovered by a group of individual investors. The stocks have unusually large short positions, are usually overpriced, and share spikes of rapid growth in a short time period. Actual valuations are not important. The fear of missing out (FOMO) is a large reason to purchase, Volatility increases during times of panic-selling.
One of the most recent mentioned is AMC which recently completed a $230 million capital raise.
The following graphs show the recent price activity of AMC. The last price is as of 12:15 PM on Monday, June 1, 2021.
15 Minutes followed by daily.
Green lines represent times of purchase. Blue lines represent times of closing out positions.
Basic Swing Trading Strategy
January 18, 2021 by
I have been asked by many viewers of this blog for more information on the basic swing trading strategy.
As is true in day trading, a multiple time frame analysis will lead to better success than just looking at an individual time frame.
The longer-term, in this case, weekly, is the signal that determines which way the security is going, i.e. the long term direction.
The shorter time frame, in this case daily, is the signal to follow in the same direction as the longer time frame, weekly.
I am using FedEx (FDX) for this example. The up arrows indicate long, down arrows indicate short. Blue vertical lines indicate neutrality.
We can see by the above chart, that FDX was in an uptrend starting on July 10, 2020.
Swing trading decisions from that date until January 1, 2021, should only be on the buy-side.
The chart below is the daily chart of FedEx, the shorter time frame that should be used to make the actual decision.
On July 11, 2020, the opening price of FedEx was $160.00 and a buy decision could have been made based on the weekly signal.
The initial long position could have been closed, October 28, the day after the neutral signal, at a price of $262.73, the opening price.
As in any trading decision, proper trade management should be used, such as stops.
This is only an example of what could have been done, not any kind of recommendation on FedEx or any security mentioned in any of this blog. Illustrations ONLY.
Relative Strength
January 12, 2021 by
In the many past posts, I have recommended that to be successful in swing trading, one has to be aware of the individual securities relative strength as it compares to some index of its peers.
The following chart is an example of OIH which is the oil VanEck oil services ETF. I have compared this ETF to SPY, which represents the Standard & Poors 500 index.
The prices are as of the close yesterday, January 12, 2021.
The rules are very simple, and the action indicated by the up and down arrows reflects the result of following the rules.
- Buy when the target security is stronger, on a relative strength basis than the index.
- Buy ONLY when the target is stronger, has positive momentum, and the index is also going up.
- Close the position when any condition is violated. Shown by blue vertical lines.
- The rules apply to shorting when the actions are the opposite of the buy rules.
High Volatility versus Low Volatility
October 5, 2020 by
There is a fascinating article in today’s Wall Street Journal in its quarterly “Investing In Funds & ETFs on page R3.: The Time to High-Beta?
Once a Quarter.
The thesis is that new research conducted says that: “high -beta stocks tend to outperform in just one week per quarter. Only in that week, therefore, does it make sense that traders bet on high-beta stocks. That week occurs in the quarterly earnings season.
The article goes on to that to test the theory, one would invest, during the first week of earnings season in a high-beta stock ETF while shorting an equal dollar amount of a low ETF.
Their example in the article regarding a high-beta fund is the Invesco High Beta ETF. (SPHV) That ETF contains the 100 highest beta stocks of the S&P 500 index. The 100 selected have the “highest sensitivity to market movements, or beta, over the past 12 months. The fund and the index are rebalanced and reconstituted quarterly in February, May, August, and November.”
The example of low beta is the Invesco S&P Low Volatility ETF(SPLV) which contains 100 S&P 500 stocks with the lowest realized volatility over the past 12 months. It then weighs each stock based on its volatility(well, lack thereof).
I assume it is rebalanced every month, but was unable to speak to anyone at Invesco to give me that information.
The article begs the question of whether a strategy of ALWAYS having a position in being long/short SPHV versus the reverse in SPLV would be successful?
The following illustration says YES!
The green vertical lines indicate long SPHB and short SPLV. The red vertical lines indicate long SPLV and short SPHB.