Pascal
12-24-2013, 05:25 AM
Mike's list has been updated here:
http://www.effectivevolume.com/content.php?1723-Mike-s-Watch-Lists
As you can see, there are four trade ideas.
I will comment on these ideas, in order for you to see how it is possible to combine Mike's trade ideas to the EV tools.
LVS
LVS is in a tight trading range, after a break out that occured about three weeks ago.
Mike suggests to buy a break-out above the current range.
Indeed, a "tight-range" indicates that churning must occur so that stocks change hands.
New shareholders with higher profit expectations must replace current shareholders whose expectations have been met. This takes time. The consequence of this churning will be to slowly move the NB to the right side of the Supply curve, pulling the whole curve with it. The NB is the price at which active shareholders carry on average 0% profit. this is very stable, because nobody wants to sell at 0% profit. Some shareholders are ready to sell at a higher profit and others must sell to cut losses, but at 0% why would you sell?
In a trading range, it is not the price that comes back to the Neutral zone (and within the stable 10% Supply zone,) but it is the entire supply curve that moves to the right.
In other words, as the NB approaches the current price (due to churning,) any small news will push the stock higher to a new base because the price has come back to its stable supply zone where sellers do not offer enuogh shares to satisfy new buyers. Hence, a purchasing price above the past high will catch most of the new break-out, without risking money during the churn.
You will note that in the past days, EV was very negative. This in no way shows that the stock will break down. It simply shows that churning is not over. It is an image of the level of resistance that the stock faces right now.
21512
21513
21516
Another way to trade LVS is to buy a pull-back below the 5MA, but only if EV is positive. This is the way I trade, because with a positive EV pattern, a trading range has good chances to break on the upside and hence I like to capture lower prices (For LVS, this is not the case.)
However, there is a big negative aspect to that specific strategy: I need to commit money on a stock that could "continue to churn." The strategy to buy a break-out just at the level where the price will move out of its base allows you to only risk money when momentum is on your side.
FB and HLF
These two stocks broke out and Mike's suggestion is here to buy a pull-back.
EV is a good additional indicator, because you can see if a pull-back attracts buyers.
In the current price/EV condition, no pull-back appears to be under way. But the whole markets are extended here and hence it is only natural that they reverse at some time. Patience is required.
2151121514
2151021518
VNCE
VNCE is more difficult to trade, because it is a recent IPO.
In a recent IPO, we can find many momentum investors, but also early buyers who want to take a quick profit and will get out if the stock does not break-out fast, which is the VNCE case.
It is difficult to select a good purchase price for an IPO. We can see that the stock tested its lower range yesterday and then bounced. This is positive and EV seems to point to a successful bounce.
2151521517
http://www.effectivevolume.com/content.php?1723-Mike-s-Watch-Lists
As you can see, there are four trade ideas.
I will comment on these ideas, in order for you to see how it is possible to combine Mike's trade ideas to the EV tools.
LVS
LVS is in a tight trading range, after a break out that occured about three weeks ago.
Mike suggests to buy a break-out above the current range.
Indeed, a "tight-range" indicates that churning must occur so that stocks change hands.
New shareholders with higher profit expectations must replace current shareholders whose expectations have been met. This takes time. The consequence of this churning will be to slowly move the NB to the right side of the Supply curve, pulling the whole curve with it. The NB is the price at which active shareholders carry on average 0% profit. this is very stable, because nobody wants to sell at 0% profit. Some shareholders are ready to sell at a higher profit and others must sell to cut losses, but at 0% why would you sell?
In a trading range, it is not the price that comes back to the Neutral zone (and within the stable 10% Supply zone,) but it is the entire supply curve that moves to the right.
In other words, as the NB approaches the current price (due to churning,) any small news will push the stock higher to a new base because the price has come back to its stable supply zone where sellers do not offer enuogh shares to satisfy new buyers. Hence, a purchasing price above the past high will catch most of the new break-out, without risking money during the churn.
You will note that in the past days, EV was very negative. This in no way shows that the stock will break down. It simply shows that churning is not over. It is an image of the level of resistance that the stock faces right now.
21512
21513
21516
Another way to trade LVS is to buy a pull-back below the 5MA, but only if EV is positive. This is the way I trade, because with a positive EV pattern, a trading range has good chances to break on the upside and hence I like to capture lower prices (For LVS, this is not the case.)
However, there is a big negative aspect to that specific strategy: I need to commit money on a stock that could "continue to churn." The strategy to buy a break-out just at the level where the price will move out of its base allows you to only risk money when momentum is on your side.
FB and HLF
These two stocks broke out and Mike's suggestion is here to buy a pull-back.
EV is a good additional indicator, because you can see if a pull-back attracts buyers.
In the current price/EV condition, no pull-back appears to be under way. But the whole markets are extended here and hence it is only natural that they reverse at some time. Patience is required.
2151121514
2151021518
VNCE
VNCE is more difficult to trade, because it is a recent IPO.
In a recent IPO, we can find many momentum investors, but also early buyers who want to take a quick profit and will get out if the stock does not break-out fast, which is the VNCE case.
It is difficult to select a good purchase price for an IPO. We can see that the stock tested its lower range yesterday and then bounced. This is positive and EV seems to point to a successful bounce.
2151521517