NYA Oct 31st

How long is long in overbought territory?

Just wanted to share a quick example of what Chris means when he says that we should remember that the market can stay overbought for long periods of time, but generally stays oversold for a short period of time. Here's a comparison between the NYSE BPI and NYSE over 15-16 months. You can see the period of Jan through Feb 07 as well as Apr through June 07 and how long they stayed overbought, 2 months and 3 months respectively. I remember asking myself a few times in the course, how long is long? Now I know and so do you.

Osisko Exploration a BUY?

Ok, this is a company I've been watching for a while, here's what I see.


-Full feasibility study to be released in Qtr 4 2008 with production in 2009.
-NI 43-101 released in July with 8 million oz inferred resource which at $1000 gold is an 8 Billion resource with continuing drilling and exploration through this year and the future.
-It's been trading in a flat channel for 1 year and 3 months between $5 and $6.50.
-It's at the RSI overbought line which has marked significant bottoms previously.
-As its trading flat, there's no significant data from RSI or MACD as far as divergences aside that it had a huge run last year and has been consolidating ever since. ($0.15 in 2005 to $5.00 in Jan 2007)
-10wk MA is above the 40wk MA
-BPI recently moved from below to above 30 and is currently at 38.37 (on stockcharts.com)
-It's trading flat in RS against $nya(New York Composite) and RTM (Equal Weight S&P Metals Sector ETF)

NOW two questions...
1. It looks like it's making a sort of "year and a half long ascending triangle" formation, does it count when its over that long of a period?
2. daily chart volume spikes decline, but the weekly is flat right across, what should I take from that? Feedback?

Pre-Trade Evaluation Form

Here's a look at the complete form I put together for the Pre-Trade checklist.

Negative Divergences in Gold

Here ya go, Cuadra G. They're slight, but they're valid, I'm pretty sure. Gold has been charging ahead. With the latest breakout $1000 is in reach by the measured move. Being a pretty large psychological barrier, I wouldn't be one bit surprised if it hits $1000 and then has a $50-100 correction. You can see how in the Weekly RSI it barely dipped back into the regular range before the next breakout sending it back into overbought. I expect it's not done yet, but it's good to be aware of at the same time.

I took some time to look for an article Chris wrote once. I thought it was in the Start Here section of CRISS, but I didn't find it. In it, he was commenting on how a recently run through correction had brought the indicators close to oversold which was good, but the Weekly RSI only got to the 50-line and I forget what the MACD was doing. Anyways, the dailies looked good, but the weeklies were cause for concern, that's why I found the weekly gold so interesting.

Hold, Close, or Buy?

Hi ccrane, I don't mind putting the name out there of the TTR trade since the sell to close order has already come out and no one is going to make money off of Chris's recommendation now. It's difficult to comment on your idea to hold because I don't know what prices or when you got into the COG calls or turned it into a spread. I sounds like you did it all just yesterday which is a little scary. If you did, I'm sorry. The RSI was already in overbought territory and it would have been better to wait for the next opportunity. If I'm understanding you right, you want to hold onto both the long and the short call hoping that the call will become worthless (or just less) so you can buy it to close for a profit and then sell to close your long call. All I can say to it really is Chris gave the sell and you should follow it. Anything beyond that is your own speculation and risk. You're capped on your gains anyways because the short call will eat up any profits (or at least some) from its strike price upward that your long call would gain. If you wait for it to drop, your long call is losing, too, so you might as well close your positions. That's my advice.

I'm going to throw a little sidenote in here though just for "huh, look at that" value. In looking at the 3 year chart I noticed that every single time the RSI moved into OB territory and back out while the price was making a NEW HIGH, the stock price retraced to previous resistance, but when it only got close to OB but not through, it had an increased tendency to break back below previous resistance and return to previous support or near to it. SO, what I'm calling (depending on the next day or two's price movement relative to its new high) is a return to the $42 to $43 price level after which we'll see what it does. To be honest, I'm tempted if the price holds to a new resistance that it would be neat-o to buy a put and make money on the way down, but I'm just going to watch it. Reason being is, buying a put on a stock in one of the strongest sectors with strong relative strength is completely against the CRISS method. So I'll watch it and be amused if it does what I think or it'll do the opposite and I'll be glad I didn't act on it. The odds are against me in this one, or at least not stacked enough. I'll wait for the next opportunity...

Point & Figure Pointers

By no means am I an expert on P&F, but what I understand I will share. The main point of P&F charts is to take the "noise" (less significant regular fluctuations in a stock's movement) out of the way so you can get a clearer picture of the current condition of the stock. When you're looking for buy or sell signals, you don't want your settings to be too sensitive or the P&F chart won't filter out the noise and you'll get a lot of buy and sell signals. On the other hand, you don't want it to be too INsensitive or you could miss significant moves to which you should be paying attention. You can do this in two ways, either by adjusting the amount of boxes needed for a reversal or by adjusting the value of each box. Sometimes a mixture of both might be better. Below I'm going to compare two different line charts of Goldcorp Inc displaying the buy and sell signals given by a P&F chart with box values of .5 with a 3 box reversal, then of .7 with a 3 box reversal.

You can see obviously how a .5 box value generated many B&S signals and would have had you buying high and selling low if you went solely on P&F while the .7 box value identified the significant resistance break and trend reversal. The same thing can be done with adjusting the # of boxes needed for a reversal signal. First a .5 with a 4 box reversal and below that a .5 with a 6 box reversal.
You can see how adjusting the reversal achieved the same result. The downtrend was identified in June of 06 and the buy signal was in the same place as for the .7 with the 3 box reversal. I would always recommend looking at the line chart also to see the daily activity along with the various indicators that we've been taught, but this at least is one way to use P&F charts.

I'm using them in a sort of a broad way. I'm looking to identify LT trends so that when I see a signal, it's more significant to me and I can reasonably rely on it for possibly months on end. With the buy signals here, I could watch for "touchdowns" to trendlines as entry points, but I could do that just by looking at the line charts. I haven't really used these a lot and haven't found a lot of use for them yet. If anyone else relies on them heavily or has insights that I've missed, please help me (and mario) learn by sharing them with us...

Extra Tools from Michael O's toolbox

Courtesy of Michael O:

Gold's breakout

Well, it's finally happened. Gold has broken its numerical historical high of $850/oz. Teeka wrote an article about it for the Tycoon Report called 'It's time to buy gold' that they just reused because its a good time to stress its points again. Be sure to check it out. Anyways, by the chart below you can see the symmetrical triangles I drew. The first taking six months and the latest taking only a few which broke its trendline resistance last week and now has broken it's price level resistance. By this pattern you can create a price target of about $940. I'm not investing in the metal, but I do have some positions in near-production, early production mining companies. They're just starting to create their revenues right now which should be reflected on their earnings reports throughout this year and onward. Just wanted to point the opportunity out.

When NOT to sell

Ok, so as I was saying, there's this chart that just makes me want to spit every time I look at it because I hit a GOLDEN opportunity and didn't know it. Sometime last spring when I was early on "experimenting" in the market, my greedy self started playing with momentum. I would check the gainers list every day to see what moved. One day, I saw a company named Timminco (symbol TIM) that had moved 100% in one day from $1 to $2, so I took a closer look and found that they had just signed a $50 million dollar contract over 3 years to supply Tire rims to a European company if I remember right. So I said to myself, "Self, this is a big deal. I think it's likely this isn't done moving yet. We should put in an order." So I did the next morning. When I checked at the end of the day, the stock was at $3 and I'd made 50%. Fearing (bad reason) losing my gain, I sold the very next morning. I'd check it every now and then to see what it was doing and so began my bitter experience of watching it continually break new highs. Dec 31st, 2007, Timminco closed at $21.95 (excuse me while groan). That could have been a 1000% gain. Experience would soon teach me that momentum was more often going to lose you money than make it. Looking back, I can only shake my head because I was so green. I had no idea what I was doing and basically I was speculating which was equivalent to gambling in my opinion. I followed NO indicators. I didn't know how to read charts or draw trend lines. I was pretty much looking at different terms and reading the news releases and guessing to its potential. I held on through support breaks, trendline violations, and tried to call bottoms (without indicators, how do you do that?) Now for the interesting part, the charts. Below you'll find a daily and then a weekly 1 year chart of Timminco.

I drew these charts with 10wk, 20wk, and 30wk MA's. I wanted to go back and take a look because I wanted to see what I didn't know then as well as get some clues as to help me not get shaken out of other strongly advancing stocks I may find. You can see the daily RSI is frequently above the overbought line, but for an advance like this it doesn't really matter because it's doing so much while its up there. This is such an obviously trending stock that it should have been, well, obvious not to exit. In the whole advance, it never touched the 30wk MA even once. All in all, I'd have to say I'm most impressed with the weekly MACD as it has only had one sell signal in November, but coupled with the MA's and RSI, it wasn't ever strong enough to warrant actually selling. I came across it on tv last month and apparently, a lot of their appeal is they're a supplier of solar-grade silicon which is in huge demand with the alternative energy movement coupled with the fact that there aren't a lot of suppliers. I googled and found a couple of companies that are preparing to produce solar-grade silicon in 2008, but they both trade on the Frankfurt exchange if I recall correctly. Anyways, I just wanted to share my story and if anyone has any tips about how to know when to stay in when sell signals are given, that would be great and beneficial to all. I do know that in a strong uptrend, the first MACD sell signal should be taken as a warning and not a definitive sell signal. Also, that during consolidation and flat trading, the RSI & MACD will both trend lower to the oscillator line, but should not be taken as weakness, just healthy consolidation. Any others?