Market Curiosity: Exploring Markets And Systems

September 20, 2013

The “IBD Bounty”, a very simple breakout system. Watching AWAY.

Filed under: IBD Bounty — Tags: — Jeff Fitzmyers @ 9:57 am

There will likely be significant volatility, but stocks are headed much, much higher. Specifically…

The lists change weekly, and who wants to go long 100 stocks, sometimes at a local top? So select those that have been resting a bit (month or 2), and buy when they leave that base.

  • Enter when Trader Vic’s near or medium term down trend line is broken to the upside. This is the catalyst. Trading above a significant reference point tends to “show” price wants to go up more than down.
  • Buy shares, or in-the-money 6 month calls. These are momentum stocks. If they haven’t gone up after a few months, something is not right.
  • Initial stop loss below nearest low, or rising trend line, or EMA’s.
  • Exits. 50% at first resistance, or a big gap up, etc., the rest with a close below the 20 EMA.
  • Postion size: Risk/use 5% of available capital.

AWAY sep 19 2013 daily

Update 1, October 5:
Illustrations:
– Entry: Why wait until the trend line is broken? Buying the stock around point 1 would have resulted in a 15% drawdown. And if the overall market had gone lower, this stock could have gone much lower. Note that because a new low was made the trend line is redrawn (blue).
– The ABC correction is ubiquitous. It flushed out the weak hands. Chances are about 50/50 the correction is over. AWAY’s correction so far seems to be a complex correction. That’s okay. Not breaking the trednline to the upside kept us out of the position.
– Initial stop loss: Note price never closed below lower support (point 2).
– Options verses shares: Shares would have resulted in a 15% drawdown. For 100 shares, that would be about $450. (Maybe much more. Stocks like this can drop substantially.) A JAN 2014 30 call options would have cost about $450  and right now is worth about $285. In other words, long dated at or in the money options can reduce risk.

AWAY daily oct 5 2013

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