This is not a recommendation to buy or sell any of the stocks discussed in this blog. Due diligence is your responsibility. If you need professional investment advice then find a professional.
Trust the nines. Boy o boy. The Dow liked 8100 and promptly zoomed higher in the last 4 days. Wow...now paused at 8700, a number divisible by 3. Above this is 9000, a 3 and a 9 number as well as an easy one to remember. You have to be impressed by the power over the last few days. The next question is whether this is just a flash in the pan and part of a bear market correction or the real deal. Will have to wait and see.
Over the last couple of weeks I have been looking at Darvas box stuff. I started by using the canned formulas available on the net and then playing around to try and find something to my liking. For my own peace of mind it was necessary to have something that made sense to me. There is no point in using something that does not feel right.
Although derived from the Darvas Box method I feel that the changes I have made no longer qualify what I have created to be called the Darvas Box method. So with a bow to the original creator I will call it a Darvas Box Variation or DBV. Since I have two variations one will be DBV1 and the other DBV2.
A chart is quicker than words so these two indicators are shown on the chart below of AAI. These are simply the box bottoms only with DBV1 providing a potential long entry signal. This signal occurs when the price moves from below the box bottom to above the box bottom. The green line and small diamond show when this occurs. If other evidence justifies an entry then a stop loss point could be placed at either the DBV1 level or the DBV2 level.
Over the last couple of weeks I have looked at hundreds of charts with these indicators. The variations are endless, however there seems to be a basic structure that stands out. Once the initial signal occurs it is necessary to examine the finer details. Some of these are:
- Relationship of DBV1 to DBV2.
- Relationship to 18 day and 81 day lows.
- Moving average structure.
- Trend phase.
Since the bus seems to be moving again these finer points are still in a working out stage. However the very basic frame now seems to be in place.
One of the problems I have is monitoring stocks once a signal has occurred. I have tried to use Excel to keep track but end up with a lot of maintenance work. The trees that I want to see and follow get lost in the forest. For this reason I think I am going to return to using Stockfetcher as a service. On their site I can create watch lists of the signals and then review them easily. The AAI chart provides an example of this. The DBV1 signal in early March may or may not have worked out. By using a monitoring service the price performance after the signal could have been easily followed. Four days after the DBV1 signal AAI crossed the moving average, this provided another chance to examine the potential of an up move and set stop loss points. Of course this is looking in the rear view mirror but examples have to come from somewhere. Whether this method works in the unknown future is just that, unknown.
Once I get Stockfetcher and Excel worked out I will resume posting a spreadsheet of the signals. These will probably be the DBV1 cross only with an alert when the moving average signal is given.
Link to Stockfetcher: http://www.stockfetcher.com/ui2/index.php
Thank you for your time.
