Forum Archive Index - July 2001

["Grant Keymer" <grant@jenlogix.co.nz>]

Hi Snoopy,

 

Thanks for pulling me up on a few points.

In my elated rush, I didn't quite tie up the loose ends on some of my paragraphs:

 

>I must admit that at first I thought it WAS snake oil, having been swayed by
>statements from others on this forum that charts could not predict
>the future.
>

Read Phaedrus's posts again.  He never said charts could predict the
future, and they can't.

 

What I meant was:

a)  Obviously charts can't predict the future

BUT

b)  They are useful in making informed trading decisions e.g. Once a stock has passed the test according to Fundamental Analysis such as TLS appears to have in your excellent work in FIG

THEN

c)  Observe Trends and Support Levels to avoid buying a stock that is still in the process of falling

d)  Wait for the start of an uptrend and thus lessen the likelihood of making an initial paper loss

 

Nothing's guaranteed in this game, but the more tools in your arsenal the better.

 

> However, there are others such as TEL/TELCA/TELA which I have
> successfully traded a few times now, and come away with 50% profits
> each time.  All has gone well on shares which have RISEN in value...

You will find most strategies work on shares that rise.

 

What I didn't finish saying here was:  Shares which ROSE AFTER I PURCHASED THEM THEN FELL AGAIN

 

Had I held onto TELCA last year, I would have made a large loss.

However, buying in at $3.40 in Oct 99, and selling at $5.00 in March 00, I made almost 50% profit.

By the time TELCA converted to TELCB in September 00, they were worth around $1.90

 

Elementary chart analysis using the best tools I had at the time (namely Access's chart), led me to make this trade.

 

Ring fencing your failures, and only counting the shares that you
have traded successfully does not constitute a successful
trading system.

I'm well aware of that, which is why I want to look at some sort of stop-loss system.

The losses on shares that have so far been failures, are mostly due to lack of a stop-loss system.

 

Obviously, there are some times stocks fall so suddenly on bad news, that only an automated stop-loss system would save you (e.g. the recent profit warning from TLS).  I'm not sure I want to commit to that just yet.

But there are others e.g. Frucor which gave some warning before the recent drastic fall.

THL would be another in that category.  I believe it has a future, so I've stuck with it.

But it would have made more sense to sell, then buy in again at a lower price.

 

Ahem, Telstra and Telecom NZ are *not* cyclical stocks.  Cyclical
stocks are those where the performace is tied to particular commodity
price cycles.  Anything from products off the land to cars.   But not
the use of communication lines.   Telcos may have taken on a
bit of a price wobble over the last 12 months, due to being
hitched into the dot.com boom, but that is over.   I predict you'll
find things a lot more stable from here on out, for both TEL and TLS.

Yes, technically you're quite correct.  However, you know what I mean.

I should have said VOLATILE.

 

If you look at the chart for TLS over the past 12 months, there have been several oscillations with a period of between 2 and 2.5 months.  At each of those peaks, I was in profit, yet on each of the dips I was in a loss situation.  So a more sensible strategy would have been to trade the stock, instead of buy and hold.

TEL has been similar, and to a lesser extent so has CAH.

 

As long as you remember charting is only a tool and not a magic box
that will feed you solutions, you should be fine.  

 

Yep, no magic boxes in this game.

The keys are continual learning, patience and a little luck!

 

Cheers

 
Grant Keymer
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