Lines of Support and Resistance

See the previous posting's chart and commentary as I charted lines of resistance and support for AEM. I was looking to try to set up a system or method to pick these lines out easily and plot them in some useable format for morning daytrading and was having some difficulty. The lines were good, historical lines would follow through with some relevance for future moves but I could not come up with any good method other than just charting them in.

I seem to stumble over things while working on my plans that are relevant so often it is almost un-natural. I think it has to do with the fact that I am looking at a plan and see something similar so I pursue it. Often it clarifies or simplies what I was trying to get to. This was no exception.

I ran across somone using Pivot Points (PP) since plotting that last chart. I have used them yesterday and today during my fake trading and have very good success. I'm not certain if the prices follow these lines or the lines follow the prices but they verge on being a leading indicator...somewhat prescient and at least as reliable as my historical resistance and support lines.

Monday I pulled $1.43 per share out of the market and today I pulled $1.23. I stopped at four trades Tuesday to track but I went ahead and faked two more while on the phone and pulled another $1.06 per share out. I made one losing trade (-6 cents per share).

NOTE: I didn't get this post done until Thursday night so this was as of Tuesday.

Total net gains this week based on 100 share trades = $196.00 or 3.9% portfolio gain

Total net gains for last week = $523 or 10.4% portfolio gain (no trading on Friday)

Total net gains since starting this plan = $719.00 or 14.3% portfolio gain


Keeping in mind that I eliminated variances between real trading and fake trading by testing the trades and losing money in the testing to determine how these get executed. These are fake trades but very accurate fake trades. This would not work the same for 1000 share trades but will for 100 or 200 share trades in a liquid stock.

Even so, assume the worst and this is twice what I might expect.

Total net gains this week based on 100 share trades = $98.00 or 1.95% portfolio gain

Total net gains for last week = $261 or 5.2% portfolio gain (no trading on Friday)

Total net gains since starting this plan = $360.00 or 7.2% portfolio gain

Either way, if the trading proves half as consistant as it has I would be happy with the results as I am trading with half of my available buying power right now. So doubling the trade size can result in slightly better than double the returns (commission only paid once) which puts me back to where I was with the firts calculations. Considering that this could be an income replacement strategy, at a 1% to 2% return daily (quite doable) based on a $20,000 trading account that could produce $200 to $400 per trading day which adds up to $40,000 to $80,000 per year. Using the new TFSA and adding the full $5K per year allowance that makes this a 4 year plan with no tax implications, the downside is no margin is available in a TFSA so it may be a toss up...lose 30%+ to taxes or loose the 3x leverage power of the margin account. I really like the tax free aspect.

But I digress, this is my personal hope that the trading is profitable enough to turn into a real "business" sometime. I may have alluded to that in the past on this blog, I cannot recall.

JD.