Prompted by a Robbbbbbb, I am going to take a look at a specific stock, bit of a retrospective, to see how my analysis shapes up when applied to a single equity.
My "system" has been developed over a couple of years and I use it fairly successfully for intraday trading on indices and forex, and for some freaky analysis of same as well... The analysis is still better than the trading but the trading is starting to catch up :))))
'Kay... Robbbbbbb asked me to have a look at WBC and ANZ...
'cos this is a fairly detailed post, an hour or so's worth of analysing n writing, I am just gonna have a look at WBC first, note that I am pretty time poor as I do the same sorta stuff on a daily basis on the spi and a couple of forex pairs when I am trading, as well as the trading itself and a pretty much full time job as well (proof that my trading is not yet up to scratch or this and trading is all I'd do, LOL)
So poor excuse for not doing ANZ as well, but we'll see how the reaction is to the following and if positive I'll give a bash at putting some analysis up on other stocks here in time... i have to say this has been a great exercise and is opening my eyes to other opportunities in the market other than the current ones in which I play.
Part of the time cost in this post is that I have tried to explain my methodology a little as I go... I do have a blog (in my sig) which is packed full of this kinda stuff on forex and indices and does give a better explanation, but will probably be a bit of a hassle to wade through...
I am going to get my website up so I can keep explanations seperate but sorry just don't yet have the time resource to do it right now.
Note, you can click the charts to get a bigger version... right-click them and choose "open in a new tab" or "open in a new window" to keep this post open while you look at an enlarged chart.
WBC
Starting on the Daily from December ish 2009
first thing to note is that we had an extrem on the MACD moving averages on this timespan, something always to look for when trying to determine if price will turn, as turns tend to happen at the extremes of this indicator.
this extreme is marked by a thick green ellipse.
During the following period of congestion of price, the MACD Histograms showed some marked divergence, between the punultimate and the ultimate low, also marked by green ellipses on price. The MACD histogram divergence is marked by a red line segment, showing the histogram clusters became smaller in magnitude, despite price's apparent congestion, and the forming of a further low.
During this time the MACD moving averages also showed marked divergence (highlighted by a green line segment) and again the ultimate low on price at this time, had a correspondingly markedly higher low.
Though not marked here by me, the system I would use for entry would suggest an entry at the first holdof price with a clear candle above the 21 period moving average.
this would have given an entry somewhere between 16 and 17 dollars, and a stop below the lowest low.
As often happens on the instruments I study and trade on, price made a faking move towards the stop, then recrossed the 21 period moving average to power on up.
An Ideal Trade
The following stuff is all fantasy as I have not bought this share and I seldom use my analysis on single equities.
How high would it go from here? well according to the system I use I'd have two targets, and a parcel of shares divisible by three.
The first third of this parcel I would take off at the 200 period moving average, shown by the thin dotted red line on price, at around the $19 mark.
I would normally try to get a target vbased on histograms... looking for the level of price at the most extrem histogram cluster at the start or beginning of a decline.
Interestingly enough in this situation , the most extreme histogram clusters are actually around the marked areas, and so my second target would have to be in the congestion marked around the blue line. Fibonaccii extensions of the intial rise would probably give us far better targets here where my histotargetting methods "fail"... however during this run up, they do show some useful attributes.
A zoom into the first congestion
in the first part of the congestion, we can see the MACD moving averages are gshowing divergence as is the downsloping green histogram cluster, whilst price is figurning out what to do.
Taking the point of price at the most extreme of the histogram bars at the beginning of this congestion, and looking back historically to the previous resistance, we get the thick red cross hairs, suggesting that price could drop back to this level.
Price does so, and respects this area... note the red arrow pointing to a specific winkinatcha "found phenomenon" where at the low point of price, the MACD moving averages bracket a histogram bar, the slow line at the base of the bar and the fast line at the head of the bar.
This often provides a clue to further price movement, and in this case, the bar following the bracketed bar is of less magnitude, suggesting that price will continue up.
with the target here being respected, the ideal trade would see a stop on the remaining two thirds of the initial parcel moved to just beneath this lowest point in the congestion, with price being left to run, until Divergence once more begins to show in the MACD sub indicators, the histograms and the moving averages.
Moving to the next point of interest on the daiy chart, the timespan between August and November 2009.
In this area the first ellipse on price shows the beginning of marked divergence in the mACD moving averages and also in the histograms... At the very start, around mid August, price reaction is actually very volatile and were I holding I would be nervous indeed and tempted to raise stops, but again as this is a fantasy trade, I can dream I held fast as price decided to continue up.
Note the blue dotted cross hairs this time, which give the historical support to price previous to the level of the most esxtreme histogram cluster... perhaps a good level for stops.
Finally with divergence becomeing somewyat extreme, price breaks below the 21 period moving average, around the area of the red arrow on price, and this is the preemptive sell.
Further failure of price to get above the 21 period moving average here suggests perhaps that tis would be a good time to hedge with shorts, or mayge takes another third off leaving one third of the shares to hold whislt a downtrend is not yet established.
The target blue cross hairs have been respected agin in prices subsequant fall.
Note however that like in the intial upswing, the most recent bracketed POSITIVE histogram bar has been foloed by a markedly less magnitude bar, suggesting caution is actually warranted here.
Okay so that is how the daily would play out... still okay to hold, but to enter new positions going long her not so certain, and to enter shorts? possibly worth considering, or adding to ones intiiated by the red arrow sell.
Now I will focus in on recent price action looking at the intraday timespans more from a day traderperspective I guess
Intraday timespans
Hourly
On this timespan, as price dropped down into late November 2009 low, we can see that once more MACD moving averages are showin signs of divergence suggesting upside and we have a very similar situation to the inital upside indicators discussed on the daily timespan.
Althogh the utimate low was at the same level as the penultimate, the MACD moving averages were markedly higher. a break and hold above the 21 period moving average would have seen an entry around the $23.25 mark...
The 200 period moving average as a first target was easily hit enabling one third to be taken off the table at $24.30. and then divergence began again in the next price high, enabling a target cross hair to be palced this time at $24.65...
As yet this target has been respected though price may yet wish to visit it, and how price reacts here will be something one wants to consdider for holds or shorts based on the higher daily timespan, methinks.
Of note here though is the stochastic, marked with a green arow... this actually is suggesting to me the potentil of rapid upside is there... as this approacy to an over sold area is oft the precursor to a rebound, or a fall if the approacch is at the other exterme.
Okay... moving down to the next valid timespan , the 10 minute.
10 minute
Mmmm as I feared on this timespan there are gaps and noise aplenty so figuring stuff out will be a little more difficult.
However, holding fast to the methodology, knowing that we are on a higher timespan (the hourly) approaching a target area, indicators at this level are important, as upside indications could help strengthen resolve with holding or help tighten ones attitude to profit gained from shorts, and vice versa.
I suspect, looking at this chart and with the marked potential target, horribly uncertain because of gaps and noise, but with some quite strong divergence appearing on the MACD Moving Averages and Histograms, that perhaps the hold or even an entering of longs/closing of shorts today could be avalid thing.
All conjecture but interesting how hindsight backs my thories here and an adherence to an index and forex built system would seem to be fairly robust in this single equity.
