Pivot points and the 200sma

When I first started trading I tried to set up semi-mechanical systems with limited success. I liked the idea of having the indicators make the decisions to buy and sell for me, mostly. The trouble was I did not trust it as well as perhaps I should have, I was new. I do not believe that mechanical systems are a great idea but they can work. One of the key factors is that they have to change according to the market, as any plan must.

So this is as close to mechanical as I am likely to get as I notice some correlation between the pivot points and the 200 sma line in my charts that perhaps can help to set the trade bias for the short term and perhaps even be used for some lazy trading.

Actually, this is not so much for lazy trading as it might be to let me track a few stocks at the same time. This comes back to the fact that I cannot use short sells in my trading and I will therefore need to watch more charts in order to be able to keep money active while things are turning down.

Pivot points and the 200sma are not so much points or lines as they are zones of support and resistance. In this sense they are areas to watch for activity that may indicate a good time to enter or exit a stock based on other indicators such as the quotes, volume, time and sales and correlating indices.

Here are two charts for today, the first fo SU and the second for TLM.
Blue is the previous day close
Red are the R1, R2, R3
Green arrows are buy points and red are sell points
Green line is the 200 simple moving average



For SU the primary pivot point is below the chart.

The mechanical idea here is that the pivot points and closing price will act as triggers for opening a trade long. Closing the trade is given more leeway but these points will also play into this as well. I did watch these this morning and know that the trades as indicated were definitely possible and would look just like they do on the charts, nice clean setups. A few of them I tracked but most I did not watch that closely.

Buy $26.60 Sell $27.40 Gain 80 cents ps Return 3%
Buy $27.40 Sell $28.00 Gain 60 cents ps Return 2.2%
Buy $27.75 Sell $28.10 Gain 35 cents ps Return 1.3%
Buy $27.80 Sell $28.10 Gain 30 cents ps Return 1%

$2.05 gain per share or 7.5% overall return on trades

Here is where the 200sma relationship keeps the trades capped. As the price drops below 200 the best next trades would be short, but I cannot trade short sells so this just keeps me out of the action here which is where the ETF comes in, but that is another story.

TLM followed a very similar idea, as it should as it also follows the capped energy index reasonably well, although today was a bit off as I couldn't really rely on the strong sector as an indicator.

Buy $12.90 Sell $13.10 Gain 20 cents ps Return 1.6%
Buy $13.02 Sell $13.22 Gain 22 cents ps Return 1.7%
Buy $13.16 Sell $13.24 Gain 8 cents ps Return 0.6%

50 cents gain per share or 3.8% overall return on trades

Keep in mind that I plan on having a certain dollar amount committed to these trades so SU might be a 100 share position and TLM would be a 300 share position. In those cases the net gains would be $165 and $120 respectively.

It is a shame that short selling will no longer be available to me as there were as many opportunities to short as there were to go long even with the strong rally over the day. I consider the fact that there will be no taxes on any of the profits and that will make up for a large part of this minor restriction.

Jeff.