A more holistic approach. Thu Mar 18

Over the last year or so I've swung between taking a more patient approach and wanting to work my capital harder, taking less overnight risk, with a shorter term approach. Having spent the early part of my trading career being very active in a short term fashion, trading in that way has been an itch I had to scratch. I felt that in recent years I hadn't properly tried my hand at intraday trading. The last 6 weeks have been about giving the shorter term approach a serious and methodical go. What I discovered is that it's too draining and too limiting for me nowadays and that the longer term opportunities when they arise are too compelling to miss out on. So, in terms of making money it's been a failure but I've learnt quite a lot and I feel like I can recommit to the method I'd been working with previously with more insight into how to improve it.
In brief, with the method I'm returning to, I would wait until there was a weekly signal implying a turning point and then I'd look at daily and intraday charts to try to time my entry. I'd obviously have a bigger stop but I'd also be looking for bigger moves. If I got the move right I would still sell some at target levels and use a trailing stop in the case of fast moves so I wouldn't necessarily be tied up for weeks in one particular stock but I'd certainly be far less active than with the intraday only approach.
Although this was profitable for me what I found most difficult was that I would often have very little to do but wait and I wasn't trained to deal with that. In order to feel productive I'd spend time punting around fairly haphazardly and I'd quite often become tense and exhausted so that I didn't have the energy to scan for weekly signals. I also wasn't clear on a lot of details, such as whether to pre-empt a turning point or wait until confirmation and the recent concentrated spell has helped to clear up a lot of these ideas. Time will tell whether I'll have the patience to do nothing but I think something in me has changed in this respect. I can't see myself trying to intraday trade at the same time in order to satisfy a misplaced work ethic.

Another thing about this method is that it's not actually so very passive. I put a position on in fgl yesterday on what I think may be a weekly turning point and after scanning through the top 100 stocks I've found another 3 stocks that I'm buying on the back foot. The market is having a well deserved pullback so far today so I've only bought half of my positions in the following stocks - aoe, bsl and ctx.

This is the weekly chart of Arrow Energy or aoe. There was a run in the first half of February followed by a consolidation. The stock broke through 265 yesterday which was the high of the last 2 weeks and could well accelerate. Weekly charts are generally smoother than dailies and a change in direction will usually persist for a few weeks. In this case, the stock has been building a base since October and has a strong chance of running up to 360 or 400 on any breakout.

This is the daily chart of the same stock. It actually pushed through 265 yesterday and I could have bought then. It looks like it could pull back in the next day or so but nevertheless the chart shows a lot of potential. Where the retracements in November (not shown on the daily) and January were quite deep the recent dip has been shallow. The move in February shows a bit of a 5 wave shape which could imply that it's the start - the first wave - of a bigger move. If this were correct then the next move would be stronger, say 120 minimum from the base at 240 giving a target of 360.

Bsl has fallen so far that the weekly chart doesn't show the pattern so clearly unless you blow up the scale but essentially it's made a higher low and is pushing on. The daily gives an idea. I'm not convinced that the fall is complete but a retracement rally could hit 300 without negating the possibility of a new low in the next few weeks.

The 30 minute chart above is pretty positive with a strong open and a slow shallow correction which is typically bullish.

The third stock I've bought today is Caltex, ctx. It was sold off heavily like much of the market but unlike the broad market it continued to fall past October hitting a low towards the end of November. The subsequent rally to 1050 breached the previous swing high of 1034 set in November implying that new lows wouldn't be reached before a stronger correction. After 3 weeks of limited falls the stock has rallied through last week's highs of 915. I've bought some at an average price of 910 and if a rally eventuates it could push on to 1200 or 1300.

The daily chart shows a strong consolidation, one where the second part of the pull back failed to go lower than the first part. 4.10 The market is about to close and there's nothing to do but observe my positions. Aoe and bsl have slipped back a little from where I bought them along with the market although they're both up on the day. Ctx has been the outperformer closing just below the day's highs at 930. Fgl, which I entered yesterday is down 7c on the day. I'm least optimistic about this position because it's been a safe haven stock and seems less likely to outperform in the near term. However, I'll wait and see what develops as the chart, while not marvellous, is really just in a trading range and does have a reasonable pivot setting up towards the bottom of this range. If it starts to run I'll probably just have a tight trailing stop on a daily basis. In the meantime I'm prepared to wait.