Spydertrader's Jack Hershey Equities Journal II
- Thread starter Spydertrader
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I cannot help you on this one, anyway on the subject of stops , have you had the opportunity to read this doc.(If I remember correctly , it was posted by SpyderT)
I found it really interesting and easy to understand (you know ,English not being my language and Mr Hershey can be quite cryptic sometimes
) .What's more , I think the rules description for stops can be coded in WL.
This weekend if I have time I'll try to code them and I'll post the script here.
Don't hold your breath though.
I didn't have REDF in my list until yesterday, so any opinion provided here should be viewed from a perspective of 'hindsight' analysis. Looking back over the past six months, we see that REDF normally completes its natural cycle quite quickly. Most of the cycles complete the upward portion of the cycle within 4 days or less. Although REDF quickly moves through the different phases of its natural cycles in a relatively short period of time (compared to a normal 6 - 8 day cycle), the equity has continued to trend upward remaining in the channel for the last 20 or so trading days. (See attached Daily Chart.)
Two days ago, REDF completed the downward trend in price appearing to flatten out by EOD. REDF evidently reached an area of support as we see price bouncing off any attempt to drive the price lower. The appearance of the relatively long 'tails' (compared to actual candle body size) on the final few bars of the Monday (2005-12-05) chart indicate to me buyers coming into the market each time price attempted to fall. The following morning (Tuesday, 2005-12-06) we see an increase in volume driving a rapid increase in price. In addition, we have our confirming indicators (MACD Histogram, and Stochastics (14,1,3) turn positive. Early in the morning (almost immediately) we see MACD turn positive, and we see Stochastics showing positive divergence. Anyone following this stock at that point in time would have recognized this chain of events as a clear signal to go long. (See Attached 30-min chart). REDF easily achieved FRV levels of volume by EOD. In addition, volume also exceeded Peak Levels possibly creating a concern over to hold or sell.
From around noon EST through late Wednesday (2005-12-07), we see price take a pause and trade within a range. Although price did trade within a relatively tight range, we see attempt to drive price lower, but once again we see buyers come in to support the stock at a lower price. As a result, we see price bounce off the 20 period SMA and continue to trade within the earlier established range. Once support had been established, we see additional buyers come in near the end of the day to drive price even higher.
Based on the history of REDF and the decrease in volume from the previous trading day, we can anticipate a short term trend reversal. As mentioned above, REDF runs upward in price in a relatively short period of time (often less than 4 days). However, rather than attempt to 'predict' the future outcome of price, remaining cautious, looking for the telltale signs of pending price reversal, while at the same time, continuing to ride out the current wave of price increases may prove to be the most prudent choice.
I hope you found the above helpful.
- Spydertrader
<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=919184>
<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=919185>
Chart for Above Post
I must stress what follows is only my opinion, and I do not claim to speak for Jack Hershey. I interpreted the quote regarding 'inexperienced' fund managers in the following manner. Experienced fund managers do everything possible to disguise their desire to purchase large numbers of shares. After all, they do not wish to significantly effect price before they obtain the vast majority of their position. Think of it like this: Would you want to play poker with all your cards face up so all the other players could see your hand? Of course not. Nobody would. Well almost nobody it seems....
The 'inexperienced' fund managers send large block orders and don't care (or aren't smart enough to care) who figures out their intentions. We used to see this quite frequently with TASR - multiple large orders driving the price one way then another. An 'inexperienced' fund manager might dump a few 10,000 share blocks and rapidly drop the price for a brief period of time. The stock would then resume its trend before the brief selloff. Jack doesn't want these 'spikes' to take him out of the trade before the cycle has completed. HE therefore sets his stops far enough away to render these spikes as 'non-events' and provides a little wiggle room (or fudge factor) in case he erred with his calculations.
I hope that helped.
- Spydertrader
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