First Uranium Corp. (T-FIU)
On most charts that I will be looking at there will most likely be found arrows. The large black arrows will indicate the location where my Weekly Table first rated a stock as POS (or BULLISH) on the intermediate term (an up arrow) or rated the stock as NEG (BEARISH) on the intermediate term (down arrow). The slightly smaller red arrows indicate the buy and sell locations using the moving average technique briefly described here. Other smaller and/or colored arrows will indicate other things defined in the appropriate commentary.
Today’s chart is that of First Uranium Corp. (FIU). I do not intend to define the technique used to determine the POS or NEG ratings today. They are a result of the technical information presented in the tables and are, to some extent, proprietary. However, today will be a discussion (one sided of course) of the benefits of using two moving averages to determine buy and sell points. My preferred time period is the intermediate term and unless mentioned otherwise all information is relative to trading or speculating with that time period in mind.
The two moving averages that I use for this technique are the short term 15 day weighted moving average (15 DMAw) and the intermediate term 65 day weighted moving average (65 DMAw). Most stock chart sites and technical software offer the weighted moving averages. If not then the simple 10 day and 50 day moving averages may be substituted for results that may not be that much different. Do not use the Exponential moving average. I will highlight why not at some other time.
The basic technique is to buy when the short term moving average line crosses above the intermediate term line and sell when the short term line crosses below the intermediate term line. Additional continuations buys may be made as long as the short term line remains above the intermediate term line. Very good continuation buy points are when the short term line goes into a reaction trending lower and then turns back to the up side. A continuation buy in such case would be once the price is above the short term line AND the line has turned upwards once more. That’s all there is to this simple technique. Oh yes, there are additional rules to prevent whip-saw effects but I’ll get into those during another stock example.
Using this simple technique FIU went bullish on the 30 Dec 2008 (red arrow) while the Weekly Table turned POS on that Friday 02 Jan 2009 (black arrow) (the Weekly Tables only use the Friday Data). Additional continuation buys were given on 16 March 2009 and 29 April 2009 (additional red arrows). The performance from the original buy to Friday’s close gives the moving average technique a gain of 234% while the Table technique gives us a performance of 178%. Not bad either way.
There is a blue arrow in the chart at the $4.73 level on 09 Feb 2009. This is when the Table rating went POS on the long term. The long term ratings occur further into a stocks move thereby limiting potential profits and one of the main reasons I prefer to concentrate on the intermediate term.
In a future analysis I’ll show how this simple method is not as perfect as it shows here and offer some ways of protecting from the errors it could cause.
On most charts that I will be looking at there will most likely be found arrows. The large black arrows will indicate the location where my Weekly Table first rated a stock as POS (or BULLISH) on the intermediate term (an up arrow) or rated the stock as NEG (BEARISH) on the intermediate term (down arrow). The slightly smaller red arrows indicate the buy and sell locations using the moving average technique briefly described here. Other smaller and/or colored arrows will indicate other things defined in the appropriate commentary.
Today’s chart is that of First Uranium Corp. (FIU). I do not intend to define the technique used to determine the POS or NEG ratings today. They are a result of the technical information presented in the tables and are, to some extent, proprietary. However, today will be a discussion (one sided of course) of the benefits of using two moving averages to determine buy and sell points. My preferred time period is the intermediate term and unless mentioned otherwise all information is relative to trading or speculating with that time period in mind.
The two moving averages that I use for this technique are the short term 15 day weighted moving average (15 DMAw) and the intermediate term 65 day weighted moving average (65 DMAw). Most stock chart sites and technical software offer the weighted moving averages. If not then the simple 10 day and 50 day moving averages may be substituted for results that may not be that much different. Do not use the Exponential moving average. I will highlight why not at some other time.
The basic technique is to buy when the short term moving average line crosses above the intermediate term line and sell when the short term line crosses below the intermediate term line. Additional continuations buys may be made as long as the short term line remains above the intermediate term line. Very good continuation buy points are when the short term line goes into a reaction trending lower and then turns back to the up side. A continuation buy in such case would be once the price is above the short term line AND the line has turned upwards once more. That’s all there is to this simple technique. Oh yes, there are additional rules to prevent whip-saw effects but I’ll get into those during another stock example.
Using this simple technique FIU went bullish on the 30 Dec 2008 (red arrow) while the Weekly Table turned POS on that Friday 02 Jan 2009 (black arrow) (the Weekly Tables only use the Friday Data). Additional continuation buys were given on 16 March 2009 and 29 April 2009 (additional red arrows). The performance from the original buy to Friday’s close gives the moving average technique a gain of 234% while the Table technique gives us a performance of 178%. Not bad either way.
There is a blue arrow in the chart at the $4.73 level on 09 Feb 2009. This is when the Table rating went POS on the long term. The long term ratings occur further into a stocks move thereby limiting potential profits and one of the main reasons I prefer to concentrate on the intermediate term.
In a future analysis I’ll show how this simple method is not as perfect as it shows here and offer some ways of protecting from the errors it could cause.
5 comments:
Hi Merv,
Could you please provide a site where we can draw the 15 and 65 day weighted moving average.
Thanks in advance
Cyrus
Cyrus,
I do my own charts using data from a data vendor and do not really check out web sites for charts. Most of my friends use the charts available via www.stockcharts.com. I just checked them out and noticed they provide dual moving average capability but do not provide the weighted moving averages. As mentioned in one of my comments, if you need to use simple moving averages then the 10 and 50 day simple moving averages are quite acceptable.
Other sites that provide simplified charts are yahoo and the Toronto Stock Exchange quote network.
There are probably many other sites out there but I do not keep track of them.
Thanks for that Merv. I sure like the entry side of that strategy. It appears to provide an aggressive enough entry, and immediate notification on a breakdown to get back to the sidelines. Excellent.
However, in the current environment that the U's are operating from, waiting for that 50day to catch up, could sure give up alot of gains.
Do you recommend shorting the slow time down on a big run-up to protect profits?
If so, what kind of time frame would be appropriate? Even though Im bullish on the sector long term, I hate giving up such big moves, only to confirm that it is going back down?
Thanks as always Merv,
BF
As you mentioned "to protect profits". Shorting on the short term moving average line reversing slope may be a good protection as long as you are quick on the move and buy back to protect your short capital as soon as the average turns up again. I would use the short term moving average as a very simple protection technique. Nothing is perfect but it's as good as any.
Oops...I meant short term, thanks for catching that. As always thanks for sharing a little bit of your education with us.
Always love the P&F charts, starting to look like something might get accomplished to the upside for a welcomed change!
BF
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