Click charts to enlargeThe chart at the top is MTL and the one below it is SID. Both are at the very bottoms of their channels and also near or at their 100dma's. This is the point where it is hard to buy because you envision the chart breaking down and falling off a cliff. On the other hand, it's also the point that you look at in hindsight wondering what kept you from buying there.
We bought small amounts of both of them because we know that playing the odds is profitable over time. Whether or not these two particular stocks rebound and remain in an uptrend is anybody's guess. Your guess is as good as any "professional's". The benefit of buying at the bottom of the channel is that if they do break down, they will likely rebound to roughly where they are now. After all, they're significantly off their highs already.
MTL and SID are not our real focus right now either way. They aren't the "hot" stocks we normally gravitate to. We're focused primarily on MON's earnings report tomorrow morning, and its affect on the Ag sector. Given the recent volatility in the sector, there is no question the report will move all of the Ag stocks substantially tomorrow, especially in the first half hour. We're looking to do a lot of buying of any Ag names we can get below midchannel.
6 comments:
As of wednesday afternoon, SID has the best looking chart I've seen in quite a while. It is a model for what a screaming buy looks like.
I wish I had some money free to buy some. lol. These 3 day rules really suck.
Snot, what do you make of the DBC chart? I know you don't fool with oil (although this includes futures for metals). It never seems to go below 40% of its channel in the last 10 months and it stays in the nosebleed section for long periods of time. Bubble ready to burst or an uptrend that will continue? If you could answer that authoritatively, Wall Street would be at your feet. :)
Link to DBC chart
DBC also has some ag futures. Holy Cow, why didn't I buy SID yesterday. up 5% the day after you mention it.
DBC does drop to the bottom of its channel, almost monthly. Just depends on how you draw the chart. We used a log chart because the move has been so great that it warrants it.
The uptrend goes back to Aug 07, although you'd probably be better off just drawing your linear regression line and its offsets starting in January.
See this chart of DBC:
http://img32.picoodle.com/img/img32/4/6/25/f_dbcm_b41fd08.jpg
As for where it's headed, we don't bet on oil because every day is like a new earnings report. It's dependant on way too many variables to have any real predictability. But if we view the chart alone and pretend it's just another stock, it looks like after a little more sideways consolidation, it is ready to break to the upside strongly again. The chart of OIL itself has been consolidating since early June, testing and retesting its highs around 82/83. When a chart repeatedly tests its highs or lows like this, it's just a matter of time before it decisively breaks through them. Our best guess is that OIL has another 4-5 trading days of very little movement, then it's off to the races... up another 10% in a matter of days.
SID looks good, but we can't trust it just yet. Some follow through at some point over the next 3-4 trading days would give us confidence that it could run to the top of its channel again.
Oh, P.S., when you draw a trend channel, you know you've drawn a legitimate one when its moving average parallels it. The moving average is like spellcheck for your trendchannels. Use whatever moving average hits the charts many bottoms. We usually round it off to the nearest 10. For DBC, we used 80, but 50 is actually better if you're actually going to trade it. It at least has some significance to computer trading programs.
Snot...are you still holding MTL?
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