The Traders Journal

Charts I'm Stalking: Action Practice #4

I’ve annotated the six charts I presented to you in my September 20, 2016 blog which was an exercise in Selling.  If you missed that blog, I suggest you review the un-annotated charts first, and then mark them up yourself before you peek at my annotations.  Here’s the link to the September 30th blog.

http://stockcharts.com/articles/journal/2016/09/charts-im-stalking-action-practice-3.html

Prior to my presenting my annotations, I want to remind you that this “3-Peaks Selling” methodology which we described in our book, TENSILE TRADING, is offered to investors who have no specific selling methodology.  Its attraction is based on its simplicity.  Most investors can visually grasp the pattern of a price peak followed by two lower price peaks.


http://store.stockcharts.com/collections/stockcharts-university-reading-list/products/tensile-trading-1

It also has the benefit of being easily implemented in the timeframe most appropriate for each individual investor.  For example, on the Novo Nordisk (NVO) chart, you’ll see that I’ve marked the three peaks which occur in one month.  If you are a more long term oriented investor, you’ll find the larger three peaks over four months to be more appropriate for your investment horizon.  

On the Abercrombie & Fitch (ANF) chart, the three peaks occur relatively tightly bunched.  I’ve inserted a red arrow at my suggested sell trigger.  If your timeframe is longer term, I also marked a second series of three peaks (in blue).  In reality, when price breaks below $27.00, I could make the case that you’ve received a “4 Peaks” signal to sell.

Most experienced investors will have more sophisticated selling methodologies much like I do, but having said that, I would encourage all investors to apply this exercise to 50 charts of their choosing.  Call it homework.  At the very least, I believe you will discover that this 3-peaks approach is a visual bellringer which demands your attention.

This week’s Action Practice captures a real time trade that I’m stalking.  Over the years, Biotech has been a very profitable investment pool for me.  Even going back to the early 1980s when Genentech went public.  I recall Bob Swanson coming to talk with students at Stanford years earlier and how my radar was on for all things biotech beginning back then.  Your Action Practice assignment for this week is to identify the best of these ten Biotech ETFs and to ascertain if the time is right to buy.  

Hint #1:  Use websites such as ETF.com, ETFdb.com, XTF.com and your own broker’s website to understand the differences amongst these ten candidates.  

Hint #2:  Unbundle key ETFs and chart their largest holdings separately.

Hint #3:  Consider historical distribution dates and dividends.

Trade well; trade with discipline!
- Gatis Roze, MBA, CMT

 

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