Today's game update, LNR deconstruction

Ahhh...the stats are not looking as good today. My three positions are pulling back a bit (or rallying in the case of the short trades). I widened the stop on one to give it more room for tomorrow's movements, although I don't think it is needed I don't want to lose the trade for the sake of a few cents.

I decided to can the EFX/UN trade altogether as it really doesn't fit my plan and the target is not really all that large unless I wanted to hold it throught the next intra trend pullback (the price usually drops after each successive climb, this is called a pullback, the price going up is a rally).

I do like the setup for SW so I will watch it and buy some shares if I still feel comfortable with the potential.

LNR regained some of the lost price but is still looking like it may continue down slowly or it may rally up after establishing a new low for the lower trend boundary to be set by. I am keeping my eye on this one to see which way it goes to re-enter a trade when the time is right as any stock traded successfully is worth watching for another good trade.

This is a four month chart that shows the important timeframe for the trend reversal, prior to this the price was falling then formed this nice curved shape, the teacup. I could have been bought anywhere along the bottom red line but I didn't get in until the last days of April. I could have seen up to $1 more had I been watching this one earlier...but I wasn't. I think that I bought it the same morning as I found it as the pattern was just to classic to not trade and, in hindsight, it fit my current plan nicely.

Notice that once the red line is started mid-March that the price lows follow the line very closely as if they were bouncing off of it. It only took two weeks to establish this line and it held as a line of resistance right through.

Also worth noting, the upper horizontal red line was established in late 2005 and has been significant three times since not including the brush on May 9th.

The "handle" that has formed over the last weeks is also a classic part of the shape but it doesn't really indicate which way the price might go next. The purple line was my stop setting. The green line is the Trend Within a Trend (TWT) line for the small downtrend. The blue right hand boundary line is still moving as the price continues horizontally...once the price breaks up the line stops moving as it remains touching the last low price.

Should the price break down then I would have to wait to establish the new trend lines.

JD.

Today's game, SW and EFX/UN

After yesterday's LNR selling I put some effort into adding another position to remain at the four minimum. None of my picks were an ideal trade so I looked at my list of uptrenders to see if any would make a decent addition even without falling precisely in my CTP plan.

Two came up, EFX/UN Enerflex and SW Sierra Wireless.

EFX I placed an order on and missed my price so I let it go for another day. Nothing fancy, just an attempt to snag an already in process uptrend.

SW is approaching a critical point where resistance, trend and moving averages are approaching a confluence...should be interesting. According to the trend it would have been a good buy May 28th but the price seems trapped in a triangle.

I circled the "zone". I traded this one prior to setting CTP in motion and got stung for my full loss allowance in April, you can guess which day that happened on...look for the big red day. I did investigate this company in the past and I do feel they would be a good long term holding.... but that doesn't matter.

Here is a tighter shot of the "triangle":

Interestingly this produces a better image.

The blue lower trend boundary, the red horizontal resistance line, all the waving moving averages (ignore the gold bands) and the price are all headed, roughly, for the $17.50 mark shortly. The important thing to watch for is what the price may do at the apex as it will go somewhere other than horizontal. I anticipate a steep rise in price but I am willing to wait for this resolution first as the uptrend really has not been confirmed yet. I might buy if the price convincingly hits $18.

Had I been following CTP all along, or at least since December I would be up $15.50 per share...somewhere north of 85% realized gains...so I would just buy today(actually on the 28th) and hope for the jump. If it reverses and I loose I would not be too concerned as my gains are already well into the green and it would amount to $0.60 to $1 per share loss. As I am starting this one without any gains already in my pocket for this stock I will play it very conservative as this trade does not really fit my plan...it just looks like a good setup.

I am treating each stock as it's own entity as it would be too easy to squander yesterday's $2.40 per share gain on this trade...I will keep it tracked with LNR for future trades for that stock. I'll expand on the thinking behind that another time.

JD.

LNR - Linamar

I sold my shares of Linamar today. The price dropped to my stop setting and sold.

Realized profit for the trade: 16.3% net

Duration: 5 weeks and 2 days


I re-plotted the trend lines to see if there is a good re-entry coming up. It appears as though the last two weeks were a very shallow downtrend, which I realized but never plotted. I still would have left the stop where I did as I could have sold two weeks ago for 23% and chose not to. Looks like it's time to wait this one out and look for another stock to trade.

I won't post the chart tonight but it looks like it may continue up after finishing with this little consolidation phase...basically the price action remains mainly horizontal while traders re-position themselves, kind of an equilibrium. There was a rather large jump in price in one day a while back and a previous long consolidation and shallow uptrend. For those who follow the MACD (I'm not going there in the posts yet) it displayed a classic positive divergence pattern that pegged a good entry point almost anytime in April. For pattern traders the cup and handle is now pretty much complete so we need to see where the price goes from here. I suspect it will see $14.50 to $15 and that would be a good re-entry point for a long position...but I won't bank on the drop from here to there. For me, the CTP trader, I will wait for the next trend to emerge then position accordingly.

JD.

BVF - Biovail

This is a Short position that I entered on May 21st

Ticker symbol - BVF

Company - Biovail

Ex-Dividend date : May 20th.

Note about the Ex-dividend date: if I had shorted this stock one day earlier I would have been responsible for paying out the dividend in cash at $0.375 per share. Got to watch for those dates when shorting. Income trusts have monthly dispersements so they are best to just not short at all.

Unlike the HF example, I don't have a clue about what these guys do or where they are based. If anyone feels so inclined to look it up leave a comment if you have time. I don't intend to.

This is a classic swing trade for a downtrend but forms an important part of my strategy. Swing trading is basically trading with the trend. In a downtrend you short sell on the price peaks and cover or buy back in the valleys. You would keep doing that until the trend changes then you change your strategy to follow the uptrend. It really isn't fancy or all that difficult but the key would be to recognize the trend and enter many trades to increase the odds of getting the price movement that you want.

green dashed vertical line is my short sell date ( I use red for a typical purchase)

green dashed horizontal is the purchase price.

pink dashed horizontal is the Stop setting.

In a short sell the stop line below the purchase price means that the trade is In The Money (ITM), if the price RISES to the stop line it sells and there is typically (but not always...that's another story) a profit realized. So right now if the price went up I would still make about $0.15.

I expect the price to follow a similar pattern as in March which would have gained $2.50 per share had I traded at that time. Notice that trading for the price drop in a downtrend allows a much longer drop or a larger target to aim for than the price increases by about 2 to 1. This is why I believe it is important to short sell in order to follow the Counter Trend Positioning strategy. The regular long position, or the typical "buy" has a much smaller target which makes the trade riskier and I would like to have more profits to act as a cushion to be able to enter the long trades with confidence in order to be there when the price breaks the tend. I'll maybe expand on this another time.

JD.

Morning fun

I played around with the order this morning to see how I could affect the selling prices. It was interesting to see my order amongst the rest and what happened as I changed mine at certain times (this is through my trading software supplied by my broker).

A little morning fun.

I couldn't do this with a stock that is traded on very high volume as my piddly order would mean nothing in the general fray. Other than a little fun it shows me how it is very possible for a larger volume trader to influence the prices during the day.

For me the few cents that the stock moved meant little as I was trading 100 shares so a $0.01 per share move = $1. For someone with a few thousand shares (say 6000) the same $0.01 move could equal $60.

JD.

ATD/B - Alimentation Couche-Tard Inc

Ticker symbol - ATD/B
Company - Alimentation Couche-Tard Inc

I entered this trade today, Short sell at $14.55 for a possible $3 or so target.
Profit vs risk ratio = 6:1

I think they are some sort of food chain or other. OK, that's it for the research part of this post. Glad I've got that part over with...

I tried short selling them just last month but the price jumped on a super high volume day (they average around 300,000 shares per day and on the 21st they hit about 2.5 Million, I didn't anticiapte that). As a result of the price jump my Stop setting was activated and I automatically covered for a small profit.



















(I've really got to figure something out for these charts)

I circled my last trade in red. My current stop is $15 marked by the purple horizontal line and my price is marked by the horizontal green at $14.55. I see that the low in late April never made it to the lower trend line so I might expect that the next low may only go as far as $13 for a reduced target of $1.50 of which I may only get $1.25 per share. That is OK as my loss allowance was $0.45 so the profit vs risk ratio is still about 2.5:1.

To get more complicated I could draw two new trend boundary lines that would look like the trend is shallowing or getting less steep. It would make the target about $12.75 or so. See the following fuzzy chart:

The blue dashed lines would be the possible new trend boundaries, I also added the red line to show the shallowing of the "Trend Within a Trend" TWT (Yah, I dropped the A...you can figure out why) compared to the previous two. Perhaps this would have given me some warning as to the last trade well in advance as the price bounced off this red line on the 20th, the day before the big volume day. Note that this line would have been established on May 5th and confirmed on the 20th. It is also worth noting that the previous two TWT lines would have also been established, and held pretty close, after only one week following the bounce off of the trend low boundary. At the very least this should have been my indicator to leave a wider margin when placing the stop setting, it only needed to have been $0.20 higher and I would still have this trade active.

Lesson, draw the lines as early as there is a possible trend to see. I keep finding that these lines are more important than one might think initially and they can be adjusted along the way if needed.

JD.