Category Archives: Uncategorized

Weekend Strategy Review Part II – Sun, Feb 10th, 2013

February 11, 2013Uncategorizedadmin

by Hank Swiencinski, AIQ
TradingExpert Pro client for over 20 years, founder of ‘The Professor’s One
Minute Guide to Stock Management’.

AIQ will be hosting a full day seminar with ‘The
Professor’, March 9, 2013 in Orlando, FL. More info CLICK
HERE

Earlier this morning, I had some time to run a few algorithms that I don’t ordinarily check on a daily basis. With the Dow looking like it wants to test the all-time high this week, I was searching for clues that might tell me how high it could go IF the October 2007 highs were broken.

That’s pretty tough to tell at the moment, but I did notice something that could shed some light on the issue.
The past two weeks of sideways trading has served to develop all sorts of Blades on most of the stocks I watch. As a matter of fact, most of the stocks on the Member’s Watch List have this Pattern. But there’s something missing from most of them: Narrow Bollinger Bands.

There’s no toothpaste to squeeze out of the tube. As you recall from Class, one of the things that I like to see when I buy a stock is a Band Squeeze. When I see a stock pull back and develop the Blade of a Hockey Stick, I always look for a nice tight set of Bollinger Bands to form around the Blade.

Right now, I’m seeing a lot of positive Hockey Stick Patterns, but the Bands are anything but tight.

To give you an example of what I mean about ‘tight bands’, take a look at Wyndham Worldwide, WYN, last week’s Big winner. Notice how the Bollinger Bands tightened for 4 days just before the earnings announcement. That squeeze enabled the stock to pop 4 points. It was an easy trade if you placed a Buy Stop just above the recent high.

Same for CNI in early January. Look at the Band Squeeze. This is what enabled the stock pop and propel it to its target of 97.

But now, although I’m seeing a lot of stocks with HS Patterns, the Bands are a lot wider. This doesn’t mean that stock prices can’t push higher …they can, and most likely will. But they probably won’t pop higher. And pops are always a good sign for even higher prices.

Last week I told you how I plan to trade during the next few weeks as the market tests its old highs. I’m doing it mostly with stocks from the Honor Roll that have developed nice HS Patterns with tight bands.

On Friday, I highlighted a few of them for you. They included HERO, VALE, VRTX and SLV. I also added HPQ this weekend. On Friday, HERO moved past its recent high of 7 and triggered an entry.

The Bands on VALE, VRTX and HPQ remain tight as the HS Pattern continues to develop. If any of these stocks start to move above their recent ‘Blade Highs’,they could see a nice moves.

Same for the silver stocks and ETFs. This week, I will be watching SLV for a move above 31.41. IF SLV starts to pop, I’ll look to see if my favorite silver rabbit, Silver Wheaton, SLW, trades above 37.58. IF it does, I’ll do some initial buying, to be followed with additional Buy stops on the rest of the colony. Remember, we need to see silver pop here. With a BANG, not a whimper. If I’m correct about the wave count, silver should be ready to start a Major Wave 3 up. Wave 3s are impulse waves. They start with a BANG!!! And the tight Bollinger Bands could certainly help produce that initial BANG.

That’s what I’m doing,
h

All of the commentary expressed in this site and any attachments are opinions of the author, subject to change, and provided for educational purposes only. Nothing in this commentary or any attachments should be considered as trading advice. Trading any financial instrument is RISKY and may result in loss of capital including loss of principal. Past performance is not indicative of future results. Always understand the RISK before you trade.

IF a correction has started, I know that it should have multiple legs – The Professor’s perspective

February 5, 2013Uncategorizedadmin

by Hank Swiencinski, AIQ
TradingExpert Pro client for over 20 years, founder of ‘The Professor’s One
Minute Guide to Stock Management’.

AIQ will be hosting a full day seminar with
‘The Professor’, March 9, 2013 in Orlando, FL. More info CLICK
HERE

The Dow fell 129 points, closing at 13,880. Volume on the NYSE was relatively low on the decline, coming in at only 94 percent of its 10 day average. There were 128 new highs and 11 new lows.

So now we wait. Yesterday’s decline was expected, but now we need to be patient to see how the correction will develop. Chances are that the markets will rally today, forming some type of retracement wave. I wouldn’t get too excited about trying to figure out which wave this is in the wave count. That’s because there is no way to tell.

All we know for sure is that the Dean’s List remains positive and all of the PT indicators are positive. The only cockpit indicator that is negative now is the Coach, our Money Flow indicator.

Also, all four of our breadth indicators are currently negative. The A-D oscillator came in with a reading of -73 last night, telling us that most stocks on the NYSE have started short term declines. In addition, the Summation Index, Hi-Lo Oscillator and the Up-Down oscillator are also negative. So some type of correction is underway. Once these indicators start to turn positive again, they will get my attention.

The question of where the correction will stop and where to re-enter a few trades is now on the table. Hmmm? What to do, what to do?

OK, here’s what I’m looking at. First of all, as I said before, I’m not worried about wave count at this point. That will come later. Right now there is only one wave to count. Yesterday’s decline.

My breadth indicators are telling me that the Dow has started to correct. But the Dean’s List and all of the PT indicators remain positive. Also, the 2-period RSI Wilder is not in oversold territory yet (only -35) so I can’t be looking for Eating Cake.

And IF a correction has started, I know that it should have multiple legs. As a minimum, a wave 2 needs to have three legs. So it’s likely that yesterday’s decline was only the first leg down of any corrective sequence. There needs to be at least one more down wave if it’s a wave 2, and several more if it’s a wave 4.

The other thing I know is that each one of the corrective waves should take the shape of an a-b-c pattern. Yesterday’s decline was almost straight down. So IF we retrace today, the move could be a small ‘b’ wave to be followed by another decline for wave ‘c’. If this happened, I would label it Wave A.

If you’re confused, don’t be. My point in discussing the above is not to confuse, but to help you understand that we will likely see all sorts of choppy trading during the next 1-2 weeks as the market forms the small a-b-c waves. Just be patient and realize that the market needs to do this to move higher. BTW, IF a wave 4 is forming, we’ll see even more a-b-c corrections develop, because we know that most of the time, wave 4s form triangles. And triangles have 5 waves.

Anyhow, be patient. I’m going to watch to see IF we rally today. IF we do, I will be looking at my volume and breadth indicators to measure the strength of the rally. If they lag, chances are the rally is a small ‘b’ wave that would set-up another decline later this week.

That will be the first place where I will look to re-enter a few trades…on the second decline, especially if volume dries up.

BTW, speaking of volume, it was a good sign that yesterday’s decline took place on relatively light volume. Low volume declines after the market hits a target are always nice to see. They tell me that the rally is not over, and to expect more upside once the market takes a breather.

I should also mention that there is a small possibility that the rally from early January is not over, and yesterday’s decline was the wave 4 correction of the first wave up. I don’t believe that it was, but there is a very small possibility that it could be. If this is the case, then the rally that I expect today should exceed Friday’s highs. But don’t get too excited…IF this happens it would only increase the odds that we’ll see another downside correction start next week.

Watching.

That’s what I’m doing,

The DMI Stochastic

January 29, 2013Uncategorizedadmin

The AIQ code based on Barbara Star’s article in January issue of Stocks & Commodities, “The DMI Stochastic,” is provided at www.TradersEdgeSystems.com/traderstips.htm.

To test the author’s DMI stochastic indicator, I used the NASDAQ 100 list of stocks and AIQ’s Portfolio Manager. A long-only trading simulation was run with the following capitalization, cost, and exit settings:

Maximum of 10 open positions
Size each position at 10 % of mark-to-market total capital
Take no more than three new positions per day
Compute the mark-to-market capital each day
Three cents per share was deducted for each round-turn trade
Select trades based on the highest ADX reading
Exit trades only with a system exit; no loss-stop or profit target stop used.

I coded three similar test systems. The first is the basic system that uses the author’s parameters of 10 (buy signal) and 90 (sell signal) on the DMI stochastic indicator. A stock has a buy signal when it has both a positive DMI oscillator and the DMI stochastic is below the buy level.
In Figure 6, I show the resulting long-only equity curve compared to the S&P 500 index for the basic system with the 10 buy-level parameter. For the period 12/30/1994 to 11/9/2012, the system returned an average internal rate of return of 11.6% with a maximum drawdown of 68.7% on 2/6/2003 and a Sharpe ratio of 0.50.

FIGURE 6: AIQ, BASIC SYSTEM VS. S&P 500. Here is the long-only equity curve (blue) for the basic system compared to the S&P 500 (red) for the test period 12/30/1994 to 11/9/2012 trading the NASDAQ 100 list of stocks.

I also tried increasing the buy-level parameter up to 70, which improved the return somewhat. I added a trend filter using the 50-bar moving average of the S&P 500 index, but it resulted in a reduced return without improving the maximum drawdown very much. The equity curve for this test is not shown. For the period 12/30/1994 to 11/9/2012, this system returned an average internal rate of return of 8.5% with a maximum drawdown of 46.1% on 10/2/1998 and a Sharpe ratio of 0.46.
Finally, I tried adding an ADX filter such that the ADX level had to be above 30 to allow a signal. However, I also left the buy level at the high value of 70. In Figure 7, I show the resulting long-only equity curve for the basic system versus this modified ADX system. For the period 12/30/1994 to 11/9/2012, the system returned an average internal rate of return of 12.1% with a maximum drawdown of 56.1% on 2/6/2003 and a Sharpe ratio of 0.46.

FIGURE 7: AIQ, BASIC SYSTEM VS. MODIFIED SYSTEM. Here, the long-only equity curves are compared for the modified ADX system (blue) versus the basic system (red) for the test period 12/30/1994 to 11/9/2012 trading the NASDAQ 100 list of stocks.

The code and EDS file can be downloaded from www.TradersEdgeSystems.com/traderstips.htm, and is shown below.

!THE DMI STOCHASTIC
!Author: Barbara Star, TASC January 2013
!Coded by: Richard Denning 11/05/12
!www.TradersEdgeSystems.com
!INPUTS:
wLen is 10.
sLen is 3.
buyLvl is 70.
exitBuyLvl is 0.
sellLvl is 55.
exitSellLvl is 0.
!CODING ABREVIATIONS:
H is [high].
L is [low].
C is [close].
C1 is valresult(C,1).
H1 is valresult(H,1).
L1 is valresult(L,1).
! NOTE: Wilder to expontential averaging the formula is:
!  Wilder length * 2 - 1 = exponential averaging length
eLen is wLen * 2 - 1.
!AVERAGE TRUE RANGE: 
TR  is Max(H-L,max(abs(C1-L),abs(C1-H))).
ATR  is expAvg(TR,eLen).
!+DM -DM CODE:
rhigh is (H-H1).
rlow is (L1-L).
DMplus is iff(rhigh > 0 and rhigh > rlow, rhigh, 0).
DMminus is iff(rlow > 0 and rlow >= rhigh, rlow, 0).
AvgPlusDM is expAvg(DMplus,eLen).
AvgMinusDM is expavg(DMminus,eLen).
!DMI CODE:
PlusDMI is (AvgPlusDM/ATR)*100.  
MinusDMI is AvgMinusDM/ATR*100.
!DMI OSCILATOR:
DMIosc is PlusDMI - MinusDMI.   !Plot as historigram
!STOCHASTIC OF DMI:
HH is highresult(DMIosc,wLen).
LL is lowresult(DMIosc,wLen).
DMI_STOCH is (DMIosc - LL) / (HH - LL) * 100.
DMI_STO_SK is simpleavg(DMI_STOCH,sLen).
DMI_STO_SD is simpleavg(DMI_STO_SK,sLen).  !Plot with 90/10 lines   
!SYSTEM TO TEST INDICATOR:
!BASIC SYSTEM WITH AUTHOR'S SUGGESTED PARAMETERS:
Buy if DMIosc > 0 and DMI_STO_SD <= 10.
ExitBuy if DMIosc < 0.
Sell if DMIosc < 0 and DMI_STO_SD <= 90.
ExitSell if DMIosc > 0.
!SYSTEM WITH TREND FILTER AND MODIFIED PARAMETERS (LONG ONLY):  
SPXc is tickerUDF("SPX",C).
SPXma is simpleavg(SPXc,50).
BuyT if DMIosc > exitBuyLvl 
and DMI_STO_SD <= buyLvl 
and SPXma > valresult(SPXma,10).
ExitBuyT if DMIosc < exitBuyLvl or SPXma < valresult(SPXma,10).
!SYSTEM WITH TREND STRENGTH FILTER AND MODIFIED PARAMETERS (LONG ONLY):
BuyADX if DMIosc > exitBuyLvl 
and DMI_STO_SD <= buyLvl 
and ADX > 30.
ExitBuyADX if DMIosc < exitBuyLvl.
!SIGNAL RANKING( use ADX):  
ZERO if PlusDMI = 0 and MinusDMI = 0.
DIsum is PlusDMI + MinusDMI.
DX is iff(ZERO,100,abs(DMIosc)/DIsum*100).
ADX is expavg(DX,eLen).
List if C > 0.

—Richard Denning
info@TradersEdgeSystems.com
for AIQ Systems

‘The Professors’ weekend update 1/27/2013

January 28, 2013Uncategorizedadmin

by Hank Swiencinski, AIQ
TradingExpert Pro client for over 20 years, founder of ‘The Professor’s One
Minute Guide to Stock Management’. AIQ will be hosting a full day seminar with ‘The Professor’, March 9, 2013 in Orlando, FL. More info CLICK HERE

_____________________________________________________________________________________

The Dow rose another 70 points on Friday, closing at 13,896. The Dow was up 246 points for the week. The Nasdaq was up 19 points on Friday, and the rise kept the index in the Green for the week, closing up 15 points at 3,150. Volume was right at its 10 day average. There were 347 new highs and only 12 new lows.

Big Picture Strategy: So where are we now? Hmmm? Back in the beginning of January, when all the worrywarts on CNBC were talking about falling off the ‘fiscal cliff’, we talked about how ridiculous this was. I said that it was not gonna happen. On the last trading day of the year, we saw the Dow dip down to the 12,884 level and I mentioned that the Dean’s List was still positive. I said not to worry. That was over 1,000 Dow points ago.

Back then I was talking about a rally that would take the Dow back up to the 14,000 level. And now we’re just about 100 points from that target. How did I get so close to the target? By watching a Hockey Stick develop. By NOT listening to the talking heads.

We saw the rise from the November lows, and then the pullback towards the end of December, when everybody in Washington was ‘cliffing’it. We didn’t care about the ‘cliff’. What we were interested in was the Hockey Stick Pattern that was developing and the Dean’s List. That’s all that mattered to us.

We saw that the November to early December rise was just shy of 900 points, and that if we added it to the low on 31 December, it projected a target just under the 13, 800 level. And that’s where we were on last Thursday. Friday’s 70 point pop was a bonus.

Anyhow, that’s how we got to where we are now. But that’s ancient history. You guys are always interested in what’s next. You always want to know we do we go form here?

But before we talk about this, we need to understand a few things. Remember, this is a teaching web site. I’m not like Lou. I don’t just give you a bunck of stocks on a list, and tell you to buy them. That’s NOT what I do. I try to help you understand why they might go up (or down). I give you my reasons. I try to walk you through a few scenarios, and help you understand why your stocks are performing like they are. And IF you make mistakes along the way, or didn’t sell something when the indicators turned against you, perhaps you’ll learn the next time. Trading is a learning process. It takes time and requires discipline.

You just can’t go to the Lists and buy things. Not from my Lists, not from Lou’s, not from any one’s list. If you just use Lists, you’re gonna lose! You need to pay attention to the SIGN: .The SIGN consists of three things; Lists, Patterns and Indicators. So if I’m going to buy something, it needs to either be on the Dean’s List or the Member’s Watch List. Then I need to see a pattern. No pattern, no trade. We need to see a pattern so it can propel the stock higher. And then finally, we need to see the indicators turn positive. We need all three conditions. You all know the drill.

And IF we’re buying something from the Lists that is pulling back with an overslod 2-period RSI Wilder, we need to know where it is in the original Pattern. That way we’re NOT buying something at the top of the pattern. Like with CNI that I’ll talk more about below. The reason I’m buying CNI on pullbacks now is because I have higher targets. Many of the stocks on the Lists now are getting very close to their projected targets. We’re NOT interested in stocks that are near their projected targets now. If a stock is near its target and completing its HS Pattern, It could be ready to start a decline.

OK, now let’s get back to what we could see happen in the markets next week.

Firstly, there was a small change in the A-D oscillator on Friday. The small change was less than 7 points, so we should see a Big Move within the next 1-2 days.

Also, the rise of the last few weeks has driven all of my oscillators into EXTREME overbought conditions. Can they remain this way? Sure. But odds are high that they will not. The odds favor a pullback now. At least on the Dow. At 13,900, we’re about 100 points above the projected target from the HS pattern. And we know that stocks do not go straight up. They go up in waves. So now that we have reached our target, it would be perfectly normal to see a pullback.

If the Dow does start to pullback next week, it would tell me that current wave is likely the first wave up of the 5 wave sequence for Major Wave ‘E’ up. Next would be a wave 2 down. On the other hand, iF we continue to push higher, then we’re likely in the impulse wave or wave 3 up in the sequence. A Big Move to the upside early next week would confirm the wave 3 scenario.

While the Dow has been steadily making new highs, the forgotten Nasdaq has not. Held down by the ’crash’ in Apple, the Nasdaq100 has basically traded sideways for the past month. BTW, did any of you see that Apple traded down to EXACTLY 435 on Friday? EXACTLY!!! I hear that some old geezer with a Hockey Stick pattern was saying 435 several weeks ago. Hmmm?

Anyhow, with Apple likely to bounce from its lows, and the Nasdaq having traded sideways for the past month, it sets up a rather favorable condition for that market. I don’t see money leaving the market now, but with the end of January approaching, the institutions might be looking to shift out of some of the overbought big cap stocks into the smaller sisters. The NDX closed the week at 2737. If the NDX starts to move higher early next week and breaks 2760+, it could lead to a nice rally.in the small caps. The rally could see the index approach the 2850+ level. So watch the small caps and technology next week.

As long as the Dean’ List remains positive, I will remain positive. If we start to pullback, I will view the pullback as a buying opportunity.

The kinds of stocks that I want to be trading now are stocks in well defined Up trends, where the 50 is above the 200, and forming railroad tracks. Stocks that are in the Free Willy Mode. Not the ones ‘In Jail’ being held captive by their moving averages. If the market pulls back, I will be looking to buy these stocks when their 2 period RSI Wilder becomes oversold on the Daily Charts. Once I see this condition, I’ll look to buy them using the shorter term bars. Jut like we did two days ago with CNI. Two days ago, CNI was sitting there at 93.40 with it’s two period RSI Wilder buried in oversold territory. One day later it was trading over 2 points higher. CNI is a Free Willy stock. Just about everybody in the stock has a profit!

BTW, during CNI’s recent pullback, it formed a small ‘Blade’. The low of that Blade was 93.3, so if the 6 point ‘Stick’is added to that low, the stock now projects a target near the 99 level. About a month ago, I mentioned that the transports appeared ready for a breakout, and that the way I planned to play the move was with CNI. So far the move is right on track. So now, the HS patterns on CNI have three targets: 97, 99 and 105. The stock closed at 95.41 on Friday..

Now I’m just using CNI as an example here. There are many stocks in the Free Willy Mode now that should be looked at on pullbacks. Just take a look at the Member’s Watch List.

American Express, AXP, is another example of a Free Willy Stock. Two weeks ago, the stock hit an new high of 61.97. The previous high of 61.42 was made in May of last year. So now almost everyone who owns AXP is a happy camper. In the past week, the stock pulled back to the 59 level, where its 2 period RSI Wilder became oversold. The stock is currently trading less than a point from that oversold condition..

Also at some point last week, I think I mentioned how Green Mountain Coffee Roasters, GMCR, had a nice HS pattern, with narrow Bands. The stock was trading close to 40. Now its 46 and moving higher. Take a look a the ‘stick’ on GMCR and make your own projections.

So basically I’m doing two things now. As I mentioned above, I’m looking to buy stocks in up trends when they pullback, stocks like CNI and AXP. And I’m looking for stocks or ETFs from the Lists that have nice HS Patterns. Stocks like GMCR.

I am NOT looking to buy stocks that are ‘In Jail’. This is NOT the time for ‘Hope’ stocks, project stocks, turn around candidates, or junk. Junk like Apple. No matter how you slice AAPL, right now it’s still JUNK! The 50 is below the 200, and the PT indicators are negative. That’s how I define JUNK!

Have a wonderful weekend.

That’s what I’m doing,

The Webinar Room opens in 60 minutes for Hank Swiencinski and AIQ session

January 24, 2013Uncategorizedadmin

DON’T MISS OUT

The
Webinar Room opens in 60 minutes for Hank Swiencinski and AIQ
to bring you

“The Professor’s One Minute Guide to Stock Management: The Basics”

We will be
starting in less than 90 minutes, at 4:30pm
ET

So make sure to reserve your seat now.

Click here to register for
the webinar

Today at 4:30pm ET:

The Professor will reveal some of his hallmark strategies that have
helped create many successful traders and investors.

“Hank has been an AIQ client for over 25 years. We met over lunch late
last year, and I was immediately struck by his erudite approach to trading and
investing.

His knowledge of technical analysis and the practical application of wave
theory, moving averages, and DMI is impressive.”

Click
here to register for the webinar

Stephen Hill,
President
AIQ Systems