Skip to main content

Updated Swing Signal approach yields three Strong BUYs

I wanted to call readers attention to a new feature that I added to the Alert HQ Swing Signals yesterday afternoon.

As you may know, the TradeRadar Swing Trading Signals are generated by identifying those stocks or ETFs that have exceeded their upper or lower Bollinger Band and then reverse back in within the Bollinger Band envelope. We also use Williams %R to help avoid whipsaw.

What we instituted yesterday afternoon was a simple trend detection method. For example, if our usual analysis generates a BUY signal, we now check to see if the 50-day exponential moving average is at least 1% higher than it was a week ago. If it is, we assume the trend is up-ward and we designate this signal a "Strong BUY"; otherwise, it will be listed as regular "BUY".

Similarly, in the case of SELL signals, we look for a down trend and if we have one we designate the signal a "Strong SELL".

Using this new approach, we expect to be able to separate Strong BUYs from the situation where we are getting a dead cat bounce that may possibly fail at the 20-DMA. For example, a stock can be doing well. Then it announces a bad earnings report and provides poor forward guidance. The stock gets killed, falls below its 50-DMA and the lower Bollinger Band sinks downward. If the stock is suffering a serious decline, the 50-DMA will begin to roll over. Then the stock begins a move back up from a multi-month low. We will still show it as a simple swing trading BUY but it should be interpreted as a more speculative BUY.

In the case of stocks in a downward channel that are beginning to turn up, we will continue to designate these stocks as simple BUYs also. They may move back up to the top of their channel, providing a good swing trading opportunity, but we would have less confidence in the extent of the move.

Our first three Strong BUYS --

This weekend no Strong SELLs were detected but we have three stocks that qualified as Strong BUYs. Here they are:
  • Arc Sight (ARST)
  • The Dress Barn, Inc. (DBTN)
  • Kirkland's Inc. (KIRK)
All are in up-trends, all are small-caps, all are free cash flow positive and all have little or no debt. Of the three, The Dress Barn and Kirkland's seem more attractive as they have modest PEs, trade at low Price to Sales ratios and have PEG and Price to Book ratios that are not excessive.

So keep an eye out for our Strong BUY and Strong SELL signals at the Alert HQ Swing Signals page. Just click the "Signal" table heading and they will pop to the top of the list.
Labels:

Comments

Post a Comment

Popular posts from this blog

Time to be conservative with your 401K

Most of the posts I and other financial bloggers write are typically focused on individual stocks or ETFs and managing active portfolios. For those folks who are more conservative investors, those whose main investment vehicle is a 401K, for example, the techniques for portfolio management might be a little different. The news of stock markets falling and pundits predicting recession is disconcerting to professional investors as well as to those of us who are watching our balances in an IRA or 401K sag. What approach should the average 401K investor take? Let's assume that the investor is contributing on a regular basis to one of these retirement accounts. There are two questions that the investor needs to ask: 1. Should I stop putting the regular contribution into stocks? My feeling is that investors making regular contributions are being handed a present by the markets. Every week the market goes down, these investors are lowering their average cost. When markets reco...
7 comments
Read more

Brazil - in a bubble or on a roll?

A couple of years ago, no one recognized the real estate bubble even though it was under everyone's nose. Now, analysts and bloggers are seeing bubbles everywhere they look. One of them, they say is in Brazil whose Bovespa stock market index has doubled in the last 12 months. Does the bubble accusation hold water? I don't think so and here are 7 reasons why Brazil is by no means a bubble economy: Exports have held up over the past year thanks to demand from China for Brazil's soya exports and iron ore. This was helped by the the Brazilian government's drive to improve trade links with Asia and Africa. Export diversification, spurred by a more active trade policy and increased focus on "south-south" trade under current president Lula, helped mitigate the decline in demand from OECD (Organization for Economic Co-operation and Development) countries A "sensible" economic framework has been in place since the 1990's. This has included inflation ...
4 comments
Read more

The Trouble with Trend Reversal Indicators

Many of us use various trend reversal indicators to time our trades. Our desire is to determine when prices have changed direction so that we can ride the new trend. Why doesn't it always work out? The first reason, of course, is that unforeseen events often drive prices in unexpected directions. That is something we can't change and it often makes all of us technical traders crazy. On the other hand, sometimes an unforeseen event is a prelude to a new trend. A stock spikes up on a what seems to be a one-time piece of good fortune and soon falls back. Does it start making its way back up or does it resume a previous down trend? The conflict within trend reversal indicators is that, though they can definitely tell when prices change direction, they suffer from two problems. One, they often can't determine how significant that move in prices actually will be. Two, they are often lagging indicators. As such, they can be late in providing a signal, sometimes leading the investo...
1 comment
Read more