You're awfully nice, Eric. Believe me, I learn from you and Jan and Wizzie, and other posters on this thread everyday. I've gotten such great pleasure from a daily study of p&f charting and my desire to learn at get better at this craft grows stronger each day. Now, let's talk relative strength for a while before I head out to the pool.
For me, RS has a great influence on how I view p&f chart patterns and the sustainability of up side advances and the severity of down side moves. Relative Strength helps to keep my head on straight with regard to chart patterns and does a lot toward helping me weed out misleading chart patterns.
>>>I think short term and longer term investing (yes they are relative terms) make a difference as to what you do when trends change if your in a stock. I further think all purchases, long or short term, should be
taken as much as possible with an up trending RS.<<<
My time horizon for all my stock purchases, outside of DRIPS, are 1 to 2 years. My usual holding period for a stock usually works out to somewhere in between, at about a year and a half. Again, Chartcraft's teachings have exerted their influence in that I'm looking for a 50% gain in that time period. With this mind, it's no surprise that with regard to RS, that I place the most emphasis on the actual RS signal itself. Since the average RS Buy signal will last for 2 - 2 1/2, for me, the signal is the thing. I try to buy a stock within the first 3 months from when the original signal is given. The stock's I buy are the type of stocks that Shirley Lazo writes up in her Speaking of Dividends Barron's column. The stocks I buy often pay a nominal dividend, however, the payment of the dividend is indicative of a company with certain attributes and those are the stocks that I'm drawn to. Some stocks that are in my portfolio that fit this description are CMB, TJX, WLA, PFE, and BSC to name a few. From the time I originally purchase the stock, I will take profits along the way pretty much as Tom has outlined in his book. To time the profit taking or cutting losses as they occur, I'll use the change within the RS trend and look for topping patterns (HPT's, HPB, bull traps, etc) and watch for Buying Climaxes which I have found to be a great signal. If things continue to work out, of course, I will average up and will use moves on the RS chart to further enhance the timing of the purchase.
>>>If a stock of interest is on a RS buy signal but in O's, do you sometimes pull the trigger? Does it matter how long it's been in a trend? Does it matter what risk status the NYSEBP is in? What if a stock of interest is on a RS sell signal but in X's, what then? Does it make a difference what the investment time frame is? That is, short term versus long term?<<<
I'm always on the lookout for stocks that have a great run of X's on their RS charts that reverse into a column of O's. This usually spell trouble. For evidence of this type of move, one needs only to look at the moves in the oil service stock's RS charts in November.
Another area of interest to me is the High Pole and Low Pole formations contrasted with a stock's RS signal. High Pole Tops with bearish RS are a deadly combo. While a HPT in a stock with bullish RS will usually mean a correction and a more limited down side move. Conversely, Low Pole formations in stocks with bullish RS or stocks with recently bullish RS charts are a great combo, while a low pole formation in a stock with bearish RS will usually not lead to a sustained up move.
ETH is a stock to watch that moved into a low pole with still bullish RS. The low pole came right after a reversal into a column of O's after a 2 year run of X's on it's RS chart. It is trading 30% off it's highs and above it's bullish support line which is at $40. The stock is not without risk, however, as the retailing sector is bear alert and ETH is trading below it's Bearish resistance Line. The ideal here would be to see an upturn on the RS chart into X's to go along with the Low Pole formation, however, the risk/reward situation seems good with good support in the mid $40's.
I know i didn't answer all your questions, Eric, but I tried to give you an idea of how I use RS and a bit of an idea of the kind of stocks I like and how RS helps me stay on the right side of the trend.
Enjoy the rest of the weekend.
Your pal,
Bruce |
