Janko, The "6-2" pattern.
I'm going to be talking with my brother manana and I really will try to get this speadsheet to you and the others.
First, the disclaimer -- As I noted to Steve, I haven't taken this concept through a fast moving, non-trending market. It is a work in progress.
The basic concept is that stocks move through six patterns on the MACD chart: 1) bullish signal, 2) bullish trend, 3) bullish trend, possibly changing bearish, 4) bearish signal, 5) bearish trend, and 6) bearish trend, possibly changing bullish.
These trends occur at the weekly level and the daily level. But, generally the weekly will, by its nature, follow the daily. While this may seem simplistic, it's really more complex.
The "6-2" refers to a weekly chart that is bearish possibly changing bullish, and a daily chart that is in a bullish trend. However, I also consider what the long-term and short-term trading channels look like, as well as where I think the support, resistance and retracement levels are. I've got this for all the Big Boyz on the one spreadsheet. Again, it is a work in progress.
For the Big Boyz, the current median is "5-5"; both the weekly and daily charts are in a bearish trend. Not a time to bet the bank.
This week's "6-2" stocks are: TOYOY, AIG, MSFT, MO, CMB, AIT, GE, ZEN, JNJ, BCS, BEL, GLX, SBH, BTY, and LLY. I think several of these (TOYOY and AIG) are involved in the peculiar circumstances of Rubin intervening in the Yen. Not sure I want would want to bet on the success of that outcome.
Again, I also look at the trading channel. BTY is a bloated whale and I don't like bloated whales. Won't bet against it, but surely not going to bet on it. MSFT, AIT, and BCS are above "my" sell targets, not going to bet for or against them. Several others are just too close to "my" sell target: MO, CMB, GE, and JNJ. Thus, I'm left with ZEN, GLX, BEL, SBH and LLY. Drugs and telecom. The theme continues.
In a bearish market, the "3-5" (or even "4-5") may be of more interest. The "3-5" group includes: UN, ERICY, WMT, AEG, UL, and EK. Of these only UN/UL are out of or close to the top of my concept of their channel. I love both from an FA perspective and you really should look at the brands they control. But, fidelity was buying big in May and I believe bid them up too much. We'll see!
The "4-5" group is even more interesting. It includes: GM (I love my put), IBM, E, and TEF. Of this group, I would bet on TEF going down. However, I don't really have enough experience on the down side equation yet.
But, there is another side to this equation. I've got bunches of stocks that are at or near my target buy price. The stock just needs to demonstrate stability. Its MHO that the busted stocks in the Big Boyz represent a great short-term possibility.
A friend and I had some fun this week past using this concept. We used the 15 min stochastic to time our entry. We don't have the exit issue down yet, but it was an interesting exercise. Moreover, it worked. Let me work with this one some more and then I'll share it. As you know, this is the direction I intend on going. Hit and run, buy the pizza, and go home. Just need to build my bank.
Hope this answers your question.
Berney |
