Article: Comments for January 12, 2017

[Pascal]

You can view the page at http://www.effectivevolume.com/conte...anuary-12-2017

[stharp]

Pascal,
In this institutional driven surge, for however long the climate is sustained:
If you are long investor, wait for a -3 to -4% pullback, buy AMZN, FB, NFLX, GOOGL, NVDA, ADBE. Sit still for the runup and be ready to sell before the 10 to 20% pullback.

If you are a trader, trade around in those long stocks with taking a small position on a -1.5 to -2% pullback (like FB today, STZ last week), in 3 to 5 days sell at the 5 to 6% rise (typically breaking to the new high) previous to pullback. I'm looking for the 4 to 8% delta. NFLX can be banked on, cautiously. NVDA is like Pecos Bill riding a tornado. Repeat as necessary until day before 10 to 20% pullback. I guess maybe, March? EV analysis can give the clues. Ride through the earnings reporting period.
Steve

[Pascal]

Hi Steve.


Thank you for posting your trend following trading method. It sure will work in the current environment. The equities markets look more and more like crypto-currencies where underlying valuations do not matter as far as we can find greater fools to buy.

Now, who could post an alert message just the day before the 10%-20% drop? Any reader living living in Hawaii? They seem to get real news rather early...


Pascal

Pascal,
In this institutional driven surge, for however long the climate is sustained:
If you are long investor, wait for a -3 to -4% pullback, buy AMZN, FB, NFLX, GOOGL, NVDA, ADBE. Sit still for the runup and be ready to sell before the 10 to 20% pullback.

If you are a trader, trade around in those long stocks with taking a small position on a -1.5 to -2% pullback (like FB today, STZ last week), in 3 to 5 days sell at the 5 to 6% rise (typically breaking to the new high) previous to pullback. I'm looking for the 4 to 8% delta. NFLX can be banked on, cautiously. NVDA is like Pecos Bill riding a tornado. Repeat as necessary until day before 10 to 20% pullback. I guess maybe, March? EV analysis can give the clues. Ride through the earnings reporting period.
Steve

[Pascal]

Pascal,
In this institutional driven surge, for however long the climate is sustained:
If you are long investor, wait for a -3 to -4% pullback, buy AMZN, FB, NFLX, GOOGL, NVDA, ADBE. Sit still for the runup and be ready to sell before the 10 to 20% pullback.

If you are a trader, trade around in those long stocks with taking a small position on a -1.5 to -2% pullback (like FB today, STZ last week), in 3 to 5 days sell at the 5 to 6% rise (typically breaking to the new high) previous to pullback. I'm looking for the 4 to 8% delta. NFLX can be banked on, cautiously. NVDA is like Pecos Bill riding a tornado. Repeat as necessary until day before 10 to 20% pullback. I guess maybe, March? EV analysis can give the clues. Ride through the earnings reporting period.
Steve

Steve,


I calculated the Risk/Reward ration for two types of trades on FB: buying Oversold levels and Shorting a bounce after a breakdown on volume.

We can see below that FB had a breakdown on volume on Friday. The most recent BDV patterns have been buying oversold opportunities.

FB_TA.gif

Buying at this level has been a good idea in the past 300 days:

FB_T.gif

The sensitivity analysis shows that we can buy between 177.78 and 184.3

FB_S.gif

On the other hand, shorting a bounce on Tuesday to 186.13 should also work well.

FB_T_BDV.gif

Hence, the strategy could be to buy low and sell on Tuesday if FB bounces back to 186.13, or keep the long trade otherwise.