Scans - Aug 1 2007

Here is the scans spreadsheet for Aug 1, 2007.

I'm still working on the Stockbee scans, a few are done but all are not finished yet. I may include some component of his "market monitor". The market monitor is used to determine if it is appropriate to enter long or short or stay in cash.

In addition, I am starting to code the back testing for all these scans. My goal is to use the market monitor with the scans to find the best combination for the market at any given time. This will hopefully keep me in long trades for bull market, short trades for bear markets. What about sideways markets? I just finished reading about pivot points and it looks like a good method for sideways markets. Weekly pivots seems like a sound approach but testing should give me more insight. Once done some testing, I'll post the results.

More to come later...

Investing in Canadian Securities – Consider Natural Gas

I believe that market conditions dictate the longer term strategy one must orchestrate independent of opportunistic (perhaps momentum driven) daily trades that we must execute in order to make a living every day. This bull market has been alive for a more than 4 years now, so that there will be a time it moves into a decelerating phase Three to six months later, it will be confirmed by an economy that is “contracting”. We may be in that higher risk zone right now. But market timing is beyond the scope of this article. Besides, the “market timing” community is so full of “experts” that I prefer to avoid that crowd and focus on something else.

Investing in Canada means that you are investing in natural resources. Natural Gas is such a resource which is very different from most others because its price is not determined by World consumption but by North American supply and demand. Fundamentals may not be favorable to higher prices in the very near future (the storage count is up, where are the hurricanes and major heat waves this year?), but technicals do lead you to think outside that box. When I reviewed commodities this week-end, I came across this old friend who had a story to tell me.

Legend:
Dark Green line = Long Term Bullish Up trend line sloping upwards at a 45 degree angle
Light Green line = Short Term Bullish Up trend line sloping upwards at a 45 degree angle
Red line = Bearish Long Term Down trend line sloping downward
Light green horizontal line = Support line
Blue horizontal line = Resistance line

The price of gas is trading around $6.00 right now and that is a very important price for a Point and Figure (P&F) analyst. It establishes a double bottom, but wait a minute, perhaps it’s the right shoulder of a Head and Shoulder (H&S) pattern with a neckline of $8.00! The three green arrows depict de S/H/S formation. If this is true, then the price must not trade at $5.50 or below because that would be a breakdown which would negate this H&S formation. However, we know that two specific events could happen. The first one is that if the price trades at $7.50, we will have a “Reversal into a column of X”, a suitable entry point for an investor. Next, if the price hits $8.50, we then have a H&S neckline breakout and P&F measuring techniques would provide for a minimum target price objective of $12.50 (Orange lines). As of today, that looks like a nice “Value” proposition.




Now that I have identified a longer term potential investment, the next step is to look at a traditional chart. Below we have a weekly chart. You should not be surprised that it also shows the H&S formation. But for me, it is clearer on the P&F chart. Using traditional price objective techniques, a breakout would project a price of $12.52, the same as the P&F projection.

The second most important factor that I use in my investment process is relative strength. Typically, I will own a security only if its performance is better than that of the TSE Composite Index. I may write about that in a forthcoming article. In this chart, I use relative strength (see low panel of the chart) to be aware of the critical natural gas to oil price relationship. As shown on the chart:

-1- Natural gas has been underperforming Oil since December 2005 and,

-2- The relationship is currently at a three year low!




We are smack in the middle of earnings season, so we must address the “fundamental risk”. There are two that we must be aware of.

-1- The first is earnings surprise risk for gas companies. The best way to evaluate that, is to use a 12 weeks moving average of price in order to figure out the average price companies received during the past quarter. The blue vertical lines correspond to the end of the quarter for most companies. The intersection between the vertical lines and the blue moving average (blue arrows) is a good guesstimate of the price companies received during the quarter. It appears to me that the average price was higher this quarter compared to the 1st quarter. If the cost structure has not increased, other things being equal, earnings should at a minimum be equal to last quarter or slightly better. In fact, natural gas prices increased 16% while oil prices decreased 9% during this 2nd quarter.

-2- But we all know that the market is looking at future earnings. It is clear that the average price this quarter is lower than the second quarter and that is what the market is focusing on right now. The right shoulder needs an urgent upswing from now to September 30 in order to reverse the average price received by companies. If that happens, on volume, hang on to your hats because both fundamental and technical analysts will identify the opportunity at the same time!

Earlier I mentioned that the investor’s entry price might be at $7.50. If you are more short term oriented, then you should use other “techniques” to figure out your entry price. The legitimate question might be: How do you participate in such a potential recovery? That should be the subject of a forthcoming post. Let me give you a hint: Income trusts anyone?

The Word
therealword@gmail.com

Buys

I decided to make some small purchases in the following, on the TSX;
NEM, TKO, QUA, EQN.

All of these have held ground on the recent puke by "Mother Market". Some even advancing while the market was tanking. I'm looking at these as longer term hold than a swing trade, so this is the time to pull the trigger.

Is anyone interested in a "Short Interest" spreadsheet for the Naz? If I get enough comments, I may post it. You can see a previous spreadsheet I posted for the Naz short interest here.

Why you need Point and Figure Charts as an essential tool of the trade

The answer is because the long term trend matters. Knowing where you are on the road to prosperity is the first step to any strategy. Whether or not you are a long term investor, a daily trader or a swing trader, you need to know how the fundamental law of supply and demand is influencing the price of any stock you wish to trade. If you believe that you can make decisions using price and volume as the main ingredients for your technical analysis, then you must believe that they are caused by simple supply and demand pressures.

Once you know “the condition” of the stock you wish to trade, you will have a different strategy based on its current status. I decided to use two securities picked from Another Brian’s Canadian screen. They are Miranda Techno (MT.TO) and Mega Uranium (MGA.TO). Why? Perhaps I like to be in the Middle of the alphabet. Or maybe the recent uranium price collapse is of interest to me.

I have to assume that you know the basics of Point and Figure Charting (P&F). If you don’t, I strongly suggest you Goggle it. I know that Stockcharts has a good tutorial written by Arthur Hill on that.
Click here for this tutorial

Also, Dorsey Wright & Ass have made it a business and they have some free information available on their web site.
Click here for this tutorial

The advantages of P&F are numerous:
-1- There is no guessing as to what the appropriate trend line is.
-2- The supports and resistances are easy to identify.
-3- Some techniques can be used to make price objectives, but that’s beyond the scope of this article.

Miranda Technologies (MT.TO) is the first stock that I want to review.

Here is the Legend:
Dark Green line = Bullish Up trend line sloping upwards at a 45 degree angle
Red line = Bearish Down trend line sloping downward
Light green horizontal line = Support line
Blue horizontal line = Resistance line
X in a green square = Breakout
O in a yellow square = Breakdown



If your prefer an Excel version to download, here it is

In my experience, drawing trend, support and resistance lines is very straight forward with P&F. Doing the same with a mainstream chart is more of an art and often subject to your interpretation. I prefer the objectivity of P&F. That means that my emotions will not enter into the equation when I must make rational investment or trading decisions.
There are many stories illustrated by this chart. But the main one is shown on the “H10” and “H11” squares. First we had a breakdown from support of $16.50 which put the stock right on the up trend line. Then we had another and more significant breakdown of the up trend line of $16.00. The bull market for this stock was over. That meant that the game was over and from that point on, bull market tactics had to be replaced by bear market strategies. A wise trader would have put a stop loss at $15.50, regroup and realizing that the game is going to be different, take out the bear book and apply the recipes for such an environment. As soon as the breakdown occurred, a new long term trend line appears. It is the Red bearish trend line which will be the new line in the sand. I could go on with this story, but suffice to say that later on in column “I” and “K”, wise traders recognizing the bear would twice short the stock as it attempted to touch and exceed the red down trend line. Yes, shorting at or near the down trend line is often executed by the pros.

So if you trade MT.TO in the near future, please be aware of its current trend. For example, buying into a bear rally is quite different than buying into a bull trend.

Finally Mega Uranium (MGA.TO) is quite a different sight.

If your prefer an Excel version to download, here it is

This stock is still clearly in a bull market trend, so bull market strategies are still in force even after a drop from a top of $8.50 to its present price of around $5.00. Depending of the type of trader that you are and of your risk aversion, there are different trading strategies available to you at this point. Whatever your choice, I find it comforting to know the following points before I trade this stock:
-1- Because we are in an uptrend, I generally should not try to short this puppy until the price has broken the uptrend line at $4.00, the suitable stop loss price for the long term investor by the way.
-2- The stock is currently at double support at $5.50. This is a very likely spot for buyers to come in. Depending on the way you evaluate a target price for this stock, it may be a low risk/high reward trade at this point given that the logical stop price is just under support at $5.00 (T11 is the red square). We could have a loss of $0.50 for a gain of $(...put your estimate here…). I typically require a minimum of 2 for 1 ratio to be worth my while. But 3 to 1 is more to my liking. Of course if we have a breakdown from support the next logical support would be the up trend line at $4.25.

So the moral of the story is that P&F analysis allows you to identify the prevalent trend and using support and resistance it also allows you to evaluate the most likely trading ranges within that trend. I could not do without it

The Word

therealword@gmail.com

News - The Word

A new contributor is on his way. Once we work out some details, "The Word" will be posting on TSXTrends blog. The only thing I can tell you right now is that he has long term induustry experience and is eager to share his experience.

I'm trying to create a blog that traders can come to and contribute without all the sign up, advertising, and crap that seems to be present in most web sites out there (except blogs). To me, it appears that Canadians are more greedy than Americans when it comes to "free" websites and data access. I use the word "greedy" because everything was free at one time, on the net. I was cruising the interent at a time when the typical internet access was to phone the local library to get an interent connection, or "freenet" as it was called. It sucked. Remeber Win 3.1?

Are there any readers that are daytraders on the TSX (or other CDN markets)? If so, spit me a comment. Would anyone find a chat window on this blog of any use?

UPDATE: "The Word"may be posting "Point and Figure"charts, among other traditional types of technical analysis. In addition, we may be reading something on Income trusts in the future.

Scan for July 30 2007

Given the recent activity, I'm taking the advice of AlphaTrends and sitting on the side for the most part. If I trade I'll put in a tight stop and profit target, and i won't hold overnight until things get less volatile.

So, I thought it would be interesting to run the scan this weekend and see what comes up.

Here is the spreadsheet for the NASDAQ for those of you who want to see results of a market that you are familiar with. I don't usually post scans of this market but it is interesting to see the results since the market has been hit by a freight train.

Here is the scan results spreadsheet for the TSX.

If you are interested in contributing to this blog, send me an email. Click the envelope at the bottom of this post.

Today's trades

I didn't make any trades today, other than selling some of a position on the NASDAQ that still had some profit left. I need to raise cash for making trades on the TSX now. This blog is basically marking my switch to the TSX as a higher percentage of my trades. I think I will still trade the US market for longer term stocks since the day trading rule wont have any negative impact on those trades.

Tonight I evaluate my other positions and shoot the losers in the head and sell them tomorrow. I came to this realisation today while reading another blog. It was nothing new but reinforced the point. The advantage we small investors have is that we can bail out in a whisper, and nobody notices. we can be in and out of a stock as we like, and don't have to explain it to anyone. Since I use Interactive Brokers, the commission is not even worth thinking about. If a stock breaches my stop, I'm out. Maybe I'll buy it back the next day. I don't really care what these companies do, the short term holders anyways, as long as I can take some many out of the trade.

I wonder if professional traders ever have thoughts like they are legally stealing other peoples money? Crazy.

The market is still churning right now, so I am taking a time out to work on another scan that I recently discovered that looks like it has potential. it finds stocks for longer term growth. I have to program it and back test it. Then I will expose it to the world via the internet.

Is anybody reading this blog? Spit me a comment.

I am looking for someone to do some commentary or provide some other content. If you have ideas and want to do some blogging, I'd pay you the same as I pay you right now, status-quo, nothing, which is more than some made in the market today!

Today's trades and a list

I set entry triggers for AEN and HF and did not buy due to the stocks dropping. The whole market shit today, except for MVIS, which I own stock and options (NASDAQ). It took off after a deal with Motorola was announced.

Here is the list for tomorrow. You can also view and download the spreadsheet by clicking the image.

Scan Results for 7/23/2007

The scan results are available in spreadsheet format, you can get the spreadsheet here. The volume filter is set a little high for this exchange to limit the number of hits I get.
Let me know what you think, comments please.....

Filter details, and explanations

Many of the filters / scans listed and described below are taken from authors of other blogs, in the public domain. These blogs typically apply the strategies to the US markets. The results of the ‘TSX Trends’ filters are for stocks listed on the Toronto Stock Exchange (TSE). Care should be taken when trading these stocks as some can have very choppy volume, although I do use a volume filter to some degree. It should be noted that inter listed stocks exist and have higher volume that is spread out over many markets, due to higher participation that includes US markets. These stocks are not great in number though.

The spreadsheet has many columns. Each column has a ‘1’ or ‘0’. A ‘1’ indicates that the stock meets the scans criteria for the day. Here is a brief explanation of what the scans are looking for.

Up Trend – This is not actually a scan but an indication of trend. It uses the 10, 20, and 50 day MA’s. On a weekly time frame, the 10 must be above the 20, the 20 must be above the 50, and the close must be above all MA’s. On a daily time frame, the close, 10, and 20 must all be above the 50 in any order, and the 50 must be rising. The purpose of this is to indicate that the stock is in a clear trend, this may or may not be relevant to the type of trade you are looking for. Using just the price squeeze, for example, looking for a quick price move, the direction of the move would most likely be in the direction of the main trend. I also use this to identify stocks to trade similar to the way AlphaTrends trades.

Down Trend - This is not actually a scan but an indication of trend. It is the opposite of the Up Trend description above.

Price Squeeze – This is a comparison between Bollinger Bands and Keltner Bands, as a ratio. The ratio has to be greater than 2 to trigger this. Price usually moves strong, short term, once the range is broken.

The Rocket – This is a bounce off the bottom filter. Looks to buy stocks that have come down hard finding buyers to quickly take it for a ride up. This scan is from Stockmonster. Basically it looks for a low rsi(2) after an 8% decline over 2 days. The blog has descriptions and results of trading with the results of this scan.

The Crash – This is the opposite of the Rocket, you could say this is a bounce off the top filter. From Stockmonster.

BOBv32x – This filter finds pullbacks, go long. BOB = Blow-off-bottom. There is a good post at Woodshedder’s blog on this filter.

3C – This uses a custom cumulative TSV indicator thought up by Bull Trader of Trade Guild. I only use it as a confirmation of money flow into a stock. TradeGuild uses his 3C indicator in other ways. I have attempted to copy the indy since he will not give out the formula, it is close but not quite there yet. Don’t bother asking me for my version, until Bull Trader releases his.

MA Crossover – This uses a 4, 8 and 21 day EMA. The filter looks for stocks that hove crossed all three in one day with the close above all 3 EMA’s. The MA cross was posted on FilteringWallStreet. The link above gets you to a post where he explains how the cross over works.

Filter 1 – Read about it here. A high Average Day Range 30 (ADR30) and a low rsi(2) works best. Muddy also tells me that a very high rsi(2) also works well. He buys as soon as the price “goes green” which means above the close of the prior day.

Filter 4 – Read about it here. This looks for an 8% rise in price, then waits for the price to pull back into the “Muddy Zone” which is the area between the SMA10 and EMA30
Wait for green and put in a 3% stop, you don’t get taken out too often, according to Muddy.

Rise – This one looks for a 25% increase in price in the last month. These stocks can be held for the longer term. When used in conjunction with another filter, it gives a good entry for a long term hold for your portfolio. Muddy, Green on the Screen, used this and I understand he originally got the idea from Stockbee.

Total – A tally of all the other filters.

Another filter to add from "Filtering Wall Street"

Another scan I will include is the MA cross over offered by FilteringWallStreet, now retired, who post(ed) on the cross over and the BOB (bounce off bottom). The link above gets you to a post where he explains how the cross over works.

Basically, it uses the 4, 8, and 21 EMA. When the open is below all three and the close is above all three, it's a buy signal, with the stop below the trigger candle.

Bullish Jim commented "I've been spending some time this weekend on backtests of a bunch of filters over the past two years. Your EMA 4, 8, 21 crossover is the only one worth beans over the two year period. Incidentally I'm starting to think the past six months is too low a hurdle for testing. It seems like everything I come up with tests well over that period."

Here is the stock fetcher code;
show stocks where close is between 15 and 35
and average volume(90) > 500000
and open <> ema(21)
and close > ema(4)
and close > ema(8)
and close > open
and close 3 days ago < ema(21)
and close 5 days ago < close 3 days ago
and close 5 days ago < ema(90)
and add column atr(10)and sort on column 5 ascending

Short Squeeze on the NASDAQ, what about the TSX?

I asked ShortSqueeze how he finds his selections, "it's a manual process", he says. So I automated it.

So, just for kicks, shits and giggles, I ran a scan to find the highest percent short interest and highest number of days to cover for stocks on the NASDAQ. You can view the Spreadsheet online.

The Fly is looking for squeeze plays in MCHX and CORS (and others), these two are high on the list.

Here is an interesting article on short interest for Canadian stocks. It basically concludes that highly shorted stocks are more likely to decrease in price for stocks listed on the the TSX. There is not much mention of short squeezes though. There is also no mention of inter-listed stocks, leaving this report with a fairly weak and lame conclusion. Needless to say, I have been unable to find a free source of short interest data for the TSX, other than the top 20 the exchange provides for download. The squeeze is probably a better play in a larger market like the NASDAQ, more participants, more emotion.

Stockalicious

Stockalicious allows you to enter your trades and monitor your portfolio on the web as well as some other nice features. They do not currently support options or Canadian markets. I emailed them asking if and when they plan on supporting the TSX. The end of August is their target. When they provide this service, I'll put the link up for my portfolio, much like Woodshedder has done on his TradeWhileWorking blog.

They say options support is on the "to do" list but no date for implementation at this time.

Additional Screeners

I'm working on incorporating a few new scans. Some of these are based on scans described on "Green on the screen" blog. Once these are done I'll post some results. If you have any screeners you find profitable, I am willing to include them if they make sense. I'm also looking at adding a weekly screener for longer term hold. This would be posted on the weekend.

Risk Management

Risk management is a big part of trading, after all, if you lose your capitol, you don't have anything to trade with. Brandt over at Trade-Guild has a great blog entry on methods of managing risk. There are books and resources available on the net that you can also read on this topic. The Canadian markets are not as liquid as the US markets, so extra care should be taken.

I was entering my trades as Stockalicious but they don't allow options or Canadian markets so I don't have much use for it since I have now begun to incorporate the Canadian markets. It's great for us "at work" traders since it allows you to quickly check your trades performance, even from your blackberry.

BTW, if you read this blog and you think you might find it useful, please drop me a comment.

The Post's - What to expect ....

Here is an example of the scans I'll post. Each column is a separate scan, all but one is from some other blog (Price Squeeze).
A '1' in the column means that the stock met the screening criteria.

The "UpTrend" and "DownTrend" are my take on what AlphaTrends looks for in a screen. Apex Trader is another blog that looks for similar set ups.

I created the next one called the "Price Squeeze". It compares bollinger bands to keltner bands as a ratio. See the example chart, the red area is the price squeeze.

"The Rocket" is a scan that Stock Monster came up with. It looks for stocks that have suffered a rapid dive, he looks to enter on the bounce. Read about it at his blog, "What is the Rocket?".

"The Crash" is basically a reverse "Rocket". This one looks for rapid increase, looking to profit on the quick pullback. The code for both rockets is run on StockFetcher by The Stock Monster. The code for both is also available on his blog so you can run your scan yourself, or do as I have done, use it for your at home scans for whatever market you want, and make any adjustments you want. I have my own back tester that I use as well, since you need to subscribe at StockFetcher to run back tests.

The next column is the BOB by FilteringWallStreet who is not blogging any longer but Bullish Jim is still blogging about this screener.

The last column is just a total of the number of screeners the stock has met. At this point I don't know how useful it is but it was easy enough to code.

To find out details on how to trade these set ups, you'll have to read the blogs and do your own homework.

Here is a sample showing the Price Squeeze:

And here is a sample of the scans I'll post. Click the image to get the latest excel spreadsheet for Monday's trading session.

Something new in Canada

Why?

I decided to do this blog after I got frustrated with the pattern day trading rules that govern the US markets. Basically, it does not allow excessive day trades for account under $25,000. I'm not there yet so I decided to stick to the TSX. Canadian markets are not faced with such craziness.

Who?

I'm not a big time trader expert trader but my belief is that emotions drive the market and the individual. Technical analysis can be done by anyone with a monkey brain. My approach to this blog is not as eloquent as "The f'n Fly" or pornographic as the Trading Goddess, or as technical as Alpha Trends, or as insightful as Trade Guild, or as torturous as Suck My NASDAQ. Don't get me wrong, I read all this shit every day.

What?

I'll post a screen shot of my scans every night. You do the thinking. I'm not providing target or stops, just the stocks that fit the criteria. Why is this of any value to you, the poor trader who doesn't have 25K? Because there is limited resources on the net to scan the TSX. You can't scan for "The Rocket", "The Crash", the MA breaks without passing out money to some billionaire firm.

Even Stockolicous doesn't allow Canadian stocks, what are we, the USA's red headed step brother?