S&P TSX Capped Energy Index, playing with charts

I didn't do any trading or even tracking of this today but while I was doing some other work I thought that I would see what a chart from Esignal would look like here.

So this is the S&P TSX Capped Energy Index for today with a little trailer from yesterday.

All of the lines are automatically plotted for daily and monthly pivot points, open, high, low and close from yesterday as well as a 120 period linear regression with 1 standard deviation brackets. The down side for blogging is the lack of flexibility for notations. I think with my fairly minimal trading over the course of the day now that should not be a big deal, I can just plot numbers on the chart and reference them below.

Even though I did not trade this let's take a look at the setup and possibilities.

Based on the gap down at the open I might consider a gap fade to the pivot point but there was no clear bottom to the start so I would not have actually traded it until the 30 and 50 were both crossed... even then the 200 is pretty close so I would have skipped it in favour of waiting for the 200 test.

1000h gives the first test, (anything within 50 cents is a test to me), 10 minutes later is the failed rally, in at the pivot point short. The stops may have been tricky on this but with the slow price action down I would use a combination of the 50sma and rally peaks so the peak after 1100h would be my new stop...deciding to stick to that until it is tested again of following the 50 would be tough at the time...I like to think that I would hold out as I am in the money already and wait for the next peak.

I checked the HED (Energy bear fund) and I would have held through those peaks as the sma's are lower and I do acknowledge them in the fund now, not just the index ones.

The second test gets me in at $11.73ish, the next peak does not break the 50 sma in HED and is over the 200sma as well, the third set of peaks breaks the 50 but the 200 is so close that I would be using it primarily. I would have remained in until about 1415h using stops on the HED chart but I would have bailed when the 30 and 50 went horizontal on the index chart regardless...puts me out at about $12.13. So about 40 cents, not bad.

I do like checking other charts to see if my PP200 holds, so far it does so I could be tracking a few indices with their related ETFs at the start to see who is setting up at any given time...but I would need proper stop loss orders to do this without undo complication.

I think that I may be forced into the US markets soon. We'll see where that leads me another time.

Jeff.

January 26th, looking back a day.

Talisman Energy chart.


PP200 firm rule following today.

I checked the pre-market and figured that a run for R1 was in order, it made it sooner than I anticipated as the price opened above 1/2R1, hit R1 and hovered for 15 minutes then climbed again. I got taken by surprise as there was no pullback to test R1 so I did not get my entry. I think the long waver just under R1 might indicate that my PPs are a little high today. That and the quotes looked too heavy in the asks to comfortably enter a long position hoping for a quick R1 break. So the price made it to 1/2R2.

There were some small target possibilities over lunch as the 200 rose and crossed the price. At shortly after noon it looked like the 200 was setting up as nice support with 1/2R2 as the target. As it fails on the fourth test it becomes resistance. This is were I would just tkae a break as the targets between the 200 and the two closest pivot points are just too small.

I did make a trade at 1253h off of R1 as I figured that was as high as the 200 was likely to get, so I tested my entry plan.
R1=$12.11
Limit order filled at $12.12 (target is to be within 2 cents of the PP price)
Price reached $12.21 and I closed at $12.20
8 cents per share. Certainly nothing to write home about but still a $24 trade with 300 shares.

I almost made a second similar trade at 1257h but with the dropping 30 and 50 sma lines together I figured my target was no longer the 200sma. That and with the price under the tendancy might be towards a continuation of the down trend so I would be trading against the trend big time.

Speaking of trends and moving averages. It could be argued that there were a total of three trades this day.
Long form 0930h to 1130h
Short from 1130h to 1430h
Long from 1430 to 1530h.
For a rough total of about 90 cents per share

At 1330h there is a really nice example of why I like short selling so much. R1 gets broken on the way down, hesitates just enough for an entry and topples 25 cents in about 15 minutes. For curiosity sake that is about $5 per minute at my 300 shares.

This is the point where I should be entering HED long as capped energy peaked twice very near it's 1/2R2...Trying to follow PP200 I was watching for HED to hit 1/2S2. The relationship between it's pivot points and price are probably not as firm as it realy follows the index rather than it's own trading, so they are guidelines only. I know this but am hesitant to trade it until I get a firm foothold with TLM and the long only trades.

Horizons Betapro chart

I have been concentrating on a single stock trade for some time now and I have a hard time tracking two, especially one that inversely correlates. This may take some getting used to.

Jeff.

January 13th, final tweaking

Still no account setup yet so another day of fake trading. Yesterday was a learning experience due to the short range, today was one just due to the mediocre range. Market is still under 9000 so still uncertain. It needs to either head down or up before there will be much large volatility again...but that is fine, perhaps I will start trading cash when the market picks up it's heels and I can start on a good day.

No matter.

TLM chart for the morning. I added dashed lines to represent the mid range of the pivot points, specifically the ones that are off the chart so this gives and idea of where they will be AND provide another possible zone of resistance and support. I have known that these can be as relevent as the PPs themselves sometimes, in their own way, I just didn't plot them or really use them.

I did a bit of swing style trading as the price moved up, I could have just held the first trade but I wanted to see some profits after yesterday's poor performance. The bluse circles are trades that I considered but waffled on so missed the entries...I refuse to chase a price as it is quite likely to retest the entry price level before moved the way I anticiapte it...that just puts me behind more should I be wrong. This has proven to be a very useful strategy by keeping me out of some losing trades altogether and letting me exit gracefully and without fear.

Buy $12.00 Sell $12.18 Gain 18 cents ps Return 1.5%
Buy $12.12 Sell $12.25 Gain 13 cents ps Return 1.1%
Buy $12.27 Sell $12.27 Gain 0 cents ps Return 0%
Buy $12.16 Sell $12.23 Gain 7 cents ps Return 0.3%

$0.38 gain per share or 2.9% overall return on trades

HED privided one decent trade. I kept plugging away at TLM until the SPTEN looked like it was going to give out for a bit...chart at the bottom.

I entered earlier...or later than I ought to have. I would not have go in on the early trade as I was just exiting TLM so waiting for the better setup would have been more prudent. I think I should have exited this trade at S2 in order to have folowed some of my plan. I held through and let it ride up to S1 though and madea decent gain.

Buy $17.25 Sell $17.65 Gain 40 cents ps Return 2.3%

$0.40 gain per share or 2.3% overall return on trade

The following SPTEN chart shows the ideal timing for HED in blue and the actual timing in red circles. This shows the inverse correlation between the S1 and S3 on HED with the PP and R1 on SPTEN. Had I had the dashed halfway point between PP and R1 it would have been clean support and would have corresponded with S2 from the HED chart. I marked the relationship between SPTEN PP and HED S1 as the prices crossed them at about 0945. This led to the assumption of other correlations and makes it easier to follow the concurrent charts.

Total tally was $144 net for a portfolio return of 3.6%.

January 7th, "could have's"

I did not trade or even look at the market today but I decided to see what it could have had in store for me. Sticking to my PP200 strategy, which is pretty much just using pivot points for entry determination and the 200sma relativity for bias and sprinkling in a little market timing for the exits, I plotted out the most likely trades of the day.

Both Suncor and Talisman had down days and that is the bias for the day based on the price starting out the way that it did. Watching for the support to appear at the primary pivot point the entry occurs upon the PP test as the price heads back up. Exit is pretty standard as the price gets near the R1 and a classic candle pattern looks like a peak. If this had been in the middle of a range I might let it go. Perhaps a 40 cent trade for 100.

Talisman didn't pass the PP so just entry right off the bounce...either the second or third minute following the test. Exit is a classic volume depletion. About 20 cents.

Both of these trades are against what would be expected for the day but at this point the actual trend is not really established, so I would be trading the opportunities. There appears to be another long trade just after 1030h except that the next pivot point, S1, is much lower so it would not have followed the PP200 strategy. If I chose to stray I might have entered this one on the second dip and may have seen a 30 cent gain...a lot would depend on the setup at the time though. SU had a very similar opportunity but again, without being there ...

Now, the Capped Energy index is basically the exact same pattern and is the "control" for trading these stocks...see the fourth chart for the HED bear ETF.

This is where the money was today. Considering that I expected a down day I would have my eye on this one more so than the others. Considering that I can only trade one stock at a time as I am going "all in" for each trade I do have to make some decisions about where to focus. I am more comfortable with the stocks at the very beginning and they bounced nicely so one of those would have been the primary trade. Then, shortly after 1000h the slump starts so shift to HED in anticipation of the trend setting.

After trading SU or TLM the second trade on this chart is the first real candidate. Second test of the S1, maybe a slow entry. The little hesitation midway to the PP corresponds with the SPTEN index testing it's PP... given the bias I would hold that through as there is not much of a pullback on HED. It then screams up past PP as SPTEN drops like a rock. 85 cent gain.

The wrap up:

This trade takes me to about 1045h so I would stop having met my goal for the day and it being near my time cutoff. If I had to choose between SU with it's larger swings or TLM and it's larger position sizing I think I would tend toward TLM. SU's trade was 40 cents ps at 100 shares for $40 based on $5K capital but TLM allows 300 shares. So a 20 cent ps trade profits $60. It goes back and forth as to which is better on any given day with this ratio so I am probably best to just pick one and go with it. TLM is close to being able to trade 400 shares so It would be my focus soon anyway.

HED also allows 300 shares traded so an 85 cent gain is $255...nice. If I traded the rest of the day and followed PP200 there is another 50 cents overall as the price of HED bounces along the 200sma...kind of the norm for afternoon trading so i eventually want to be able to take advantage of some of these long rides. I just plain do not have the time right now and I don't think I want to play with VTSOs jsut yet.

I don't go on much about losers as I have about 5 losers for the last 30+ trades and they are for pennies a share...so extrapolating that here might reduce the possible overall gain by say $20. Even if it was $100 I would still have met my goal but I would not allow a $100 drawdown ... anymore.

I have to keep in mind that my goal per day is 1% return on portfolio... $50 right now so all these larger numbers are almost pure gravy, like today's $315 or yesterdays live trading at $366. I like to keep myself grounded so I do not get carried away when the money is on the table. I also do not want to slack if I do have such nice days as I do not want to get lazy or over-confident and lose my edge.

I will probably post a wrap up for the last round of trade testing later. It looks better than any of the previous tests even though I was hard on myself.

Jeff.

January 6th trading plan, PP200

Yesterday's plan was to use the new idea of the Pivot Points as entry and exit and the 200sma as a genreal bias indicator...although I could not trade for the whole day it turned out that most of the good moves were in the monring anyway and I was done by 1030h.

So here are the charts for the trades of the day, Suncor with two trades.



Buy $28.60 Sell $29.40 Gain 1 dollar ps Return 3.5%
Buy $29.63 Sell $29.60 Gain (-3) cents ps Return (-0.01)%

$0.97 gain per share or 3.3% overall return on trades

First is a bounce off of the R1 for a early entry. I may have considered selling as the price hovered just below R2 but these were live trades, not historical speculation and I decided to hold it through and was rewarded by another 25 cent move. The second trade was placed as the price bounced off of R2 but was exited at 100oh due to weakness in the overall market as seen by the decline in price on the following Capped Energy index.

This index chart gives me my signals for trade exits and worked well yesterday. I will be following this index even more closely now as the last two trades of the day were on HED, the Energy bear ETF, chart follows:



Buy $14.31 Sell $14.64 Gain 33 cents ps Return 2.3%
Buy $14.65 Sell $14.85 Gain 20 cents ps Return 1.4%

$0.53 gain per share or 3.7% overall return on trades

The strong inverse correlation between the Capped energy and the HED ETF make for a nice combination as the index tends to lead the ETF by enough time to make the trades and enough time to place a good exit. The only factor is that the quotes tend to move ahead of the actual price more so than a regular stock, partly due to the low volume and difference method used for valuation. This one could be a decent vehicle to perform some true scalping...but I don't know how the low volume would affect such a strategy.

The Energy index dropped through R1 nicely, and would have been a great short sell trade on SU if I could short. Instead I look at the HED and see the corresponding gain in price. Using the PP200 plan I would not enter until R1 was broken on the way down which equates to S1 broken on the way up on HED for about about a 20 cent gain (conservative). Enter at 1055h exit at 1110h as the index stalls but the ETF doesn't drop off as quick.

Realistically I would have placed a more aggressive position trade at 1050h and exited at the same point for a gain of 38 cents. Both of these are just "could haves" though so I don;t count them as anything but a bit of chartwork.

Jeff.

ETF's HED and the Capped Energy Index

Here is a sample of a down day and what an ETF trading might be able to do in place of short selling the regular stocks.

December 22nd, 2008.
SPT/TSX Capped Energy
Dark blue is the previous day close
Light blue is the Primary Pivot point
Green are the S1, S2 and S3

Yup, definitely a down day as the index lost close to 6%. The S1-3 did not mean a whole lot here but there were some bits of support as the price fell and some definite resistance around the $199 mark.

Suncor for the same day

Support fell in some key points and would have been nice setups for some short selling. Too bad I was not watching for these that day. I did trade it and had five trades 3 long fighting the trend and two short. 65 cents gained long (I captured the first big move from $24.40 to $24.90) and only 52 cents gained short as I did not watch the market at all after the first long trades, I got busy with other stuff and came in later in the afternoon when everything had already done most of the dropping.

HED, Horizons BetaPro S&P/TSX Capped Energy Bear Plus ETF, same day

Buy $21.33 Sell $21.64 Gain 31 cents ps Return 1.5%
Buy $21.91 Sell $22.27 Gain 36 cents ps Return 1.6%
Buy $22.61 Sell $23.01 Gain 40 cents ps Return 1.8%
Buy $23.11 Sell $23.31 Gain 20 cents ps Return 0.9%

$1.27 gain per share or 5.8% overall return on trades

This would fall under my multiple lot position sizing as well.
I need to actually make some ETF trades to know how they will behave. The volume is a little low bit the price is more dependant upon the underlying index than the bids and asks. It can indicate a sentiment but not a definite directional move. One thing that I noted today while watching a few ETFs is that the quote spread can be substantial. They just don't feel the same as a stock. It might be partly due to the reverse movement as well as the non-stock quotes.

I think this will be a reasonable substitute for short selling, though it may only be used on those definite downtrend days as I don't think it a great vehicle to attempt to use for those quick drops in price that I might normally try a short while in between long trades.

Jeff.