I want to start periodically sharing my retrospective analysis of market leaders, that made triple digits gains during bull markets in different time-periods.
The purpose of this analysis is to find commonalities in price patterns and behaviour among the best-performing stocks, that repeat themselves in each and every up-cycle throughout market history. That will help new stock market participants to better exploit new emerging opportunities.
As my stock market history teacher - John Boik - use to say it: "Study the past, so you can profit in the future".
Retrospective analysis of Ford (
F
) during 1982-194:
0. Great Relative strength. When SPX (see the upper chart) makes lower lows, FORD is making higher highs on noticeable pick-up in average daily volume. Also notice who price creates a flat-base and latter breaks out (BO) from it with volume surging above average;
1. First BUY could be made here with very tight 3% stop, a bit or right after W. O'Neil's «shake-out + 10%» rule (buy if price shakes you out and quickly reverse and runs higher by 10%) after the double bottom pattern in the bottom of the base.
2. Because of the bear market nature of the general index, quick 12-15% gain could be used to trim 1/2 or 2/3 of the position to guaranty profits, and selling the rest for break-even during the following re-test of break-out area;
3. Could be bought again during the BO of perfect VCP with tight 2.5% stop, and...
4. ...sold for the quick 5-7x return-to-risk gain.
5. When the index makes its final lower-low, F's price rebases, making a higher-low, and quickly runs higher and breaks out in Aug82 along with the SnP500.
F could be bought and shaked out during initial BO attempt, and then re-bought after price follows through in two days with volume support.
Notice how price pattern rhythms with prior Dec81-Mar82 base.
6. This big red reversal bar with substantial volume pick-up could be used to book another 15-17% gain with only initial 3-4% stop.
7. It is already clear that F is the new market leader of this new up-trend and it makes sense to track how the price acts if it corrects to 50MA (Red line) that coincides with re-tests of prior BO point.
If to zoom in into the volume dynamics of this basing actions around 50D MA, accumulation (surge in volume with closes in in upper part of the bar dominate volume on corrective bars) becomes very evident.
8. New BUY coming from this low cheat BO with massive volume support. Because the average cost was so low, one may want to move stop to break-even or tracing 50D MA.
9. Price closed in the upper third of the day - good supportive actions on the 50D MA. If stopped-out, shares could be re-bought by the end of the day or on next day BO with tight stop and low of the day.
10. Shares could be sold into this kind of climactic run above the 7 month channel line + the general market barely moves to old highs indicating relative divergence and lack of overall momentum in the market.
11. Good tight area. Could have been bought at BO and sold at BE after the BO proved to be fake one.
12. New BUY under shake-out + 10% rule with stop bellow
50D MA after it crosses the buy price. Massive volume advance on BO day acts as confirmation of large institutional interest in the stock (notice how these green volume sky-scrapers bars tend to dominate the red selling bars latter-on until the up-trend changes).
Notice again how the price shows the same character shake-out pattern it made during Dec81-Mar82 and May-Aug82. As Nicolas Darvas observed that "stocks have characters just like people".
13. Perfect selling area: price moves above the channel line in negative divergence to the market (index is not making higher-highs).
14. Same type of character behaviour with shake-out and Mark Minervine's «slingshot» move on volume support, where «shake-out +10%» buy rule could be used to establish the position with tight stop bellow the short-term 8/21emas.
15. Sell 3/4 of position or all in this first evident distribution bar + the market seems tired and is loosing momentum.
Very noticeable distribution bars starting to appear - some heavy selling and not much buying.
Important sign of character change.
16. This low volume pattern during this up-move shows that late retail buyers are stepping in with no institutional support.
That is the hint that price advance is prone to failure.
17. Definite selling signal. Price dives bellow 50MA with substantial distribution started dominating the volume pattern.
The purpose of this analysis is to find commonalities in price patterns and behaviour among the best-performing stocks, that repeat themselves in each and every up-cycle throughout market history. That will help new stock market participants to better exploit new emerging opportunities.
As my stock market history teacher - John Boik - use to say it: "Study the past, so you can profit in the future".
Retrospective analysis of Ford (
F
) during 1982-194:
0. Great Relative strength. When SPX (see the upper chart) makes lower lows, FORD is making higher highs on noticeable pick-up in average daily volume. Also notice who price creates a flat-base and latter breaks out (BO) from it with volume surging above average;
1. First BUY could be made here with very tight 3% stop, a bit or right after W. O'Neil's «shake-out + 10%» rule (buy if price shakes you out and quickly reverse and runs higher by 10%) after the double bottom pattern in the bottom of the base.
2. Because of the bear market nature of the general index, quick 12-15% gain could be used to trim 1/2 or 2/3 of the position to guaranty profits, and selling the rest for break-even during the following re-test of break-out area;
3. Could be bought again during the BO of perfect VCP with tight 2.5% stop, and...
4. ...sold for the quick 5-7x return-to-risk gain.
5. When the index makes its final lower-low, F's price rebases, making a higher-low, and quickly runs higher and breaks out in Aug82 along with the SnP500.
F could be bought and shaked out during initial BO attempt, and then re-bought after price follows through in two days with volume support.
Notice how price pattern rhythms with prior Dec81-Mar82 base.
6. This big red reversal bar with substantial volume pick-up could be used to book another 15-17% gain with only initial 3-4% stop.
7. It is already clear that F is the new market leader of this new up-trend and it makes sense to track how the price acts if it corrects to 50MA (Red line) that coincides with re-tests of prior BO point.
If to zoom in into the volume dynamics of this basing actions around 50D MA, accumulation (surge in volume with closes in in upper part of the bar dominate volume on corrective bars) becomes very evident.
8. New BUY coming from this low cheat BO with massive volume support. Because the average cost was so low, one may want to move stop to break-even or tracing 50D MA.
9. Price closed in the upper third of the day - good supportive actions on the 50D MA. If stopped-out, shares could be re-bought by the end of the day or on next day BO with tight stop and low of the day.
10. Shares could be sold into this kind of climactic run above the 7 month channel line + the general market barely moves to old highs indicating relative divergence and lack of overall momentum in the market.
11. Good tight area. Could have been bought at BO and sold at BE after the BO proved to be fake one.
12. New BUY under shake-out + 10% rule with stop bellow
50D MA after it crosses the buy price. Massive volume advance on BO day acts as confirmation of large institutional interest in the stock (notice how these green volume sky-scrapers bars tend to dominate the red selling bars latter-on until the up-trend changes).
Notice again how the price shows the same character shake-out pattern it made during Dec81-Mar82 and May-Aug82. As Nicolas Darvas observed that "stocks have characters just like people".
13. Perfect selling area: price moves above the channel line in negative divergence to the market (index is not making higher-highs).
14. Same type of character behaviour with shake-out and Mark Minervine's «slingshot» move on volume support, where «shake-out +10%» buy rule could be used to establish the position with tight stop bellow the short-term 8/21emas.
15. Sell 3/4 of position or all in this first evident distribution bar + the market seems tired and is loosing momentum.
Very noticeable distribution bars starting to appear - some heavy selling and not much buying.
Important sign of character change.
16. This low volume pattern during this up-move shows that late retail buyers are stepping in with no institutional support.
That is the hint that price advance is prone to failure.
17. Definite selling signal. Price dives bellow 50MA with substantial distribution started dominating the volume pattern.
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