This is not a recommendation to buy or sell any of the stocks discussed on this blog. Due diligence is your responsibility. If you need professional investment advice then find a professional.
I am still fighting a little with the MetaStock software and that is frustrating. In some ways I am just fighting with myself but that is another story.
When I think about trying to explain how I use the signal information it gets kind of muddled. Yes it makes sense to me but without a ton of words and charts it takes some time to convey the thought process. Anyways, perhaps if I just give the basic skeleton the fleshy nuances can be worked out later.
Here goes. The basic principle is to use recent lows as points of reference. Call it a Darvas Box bottom or whatever, it is just recent lows. The look back time tends to be six, nine, or eighteen days. Love the three's and nine's. Once the established low is crossed a signal is generated. Depending on the time frame, indicator used, a graphic will show up on the chart.
The first signal usually generated shows up as a green line with or without a green diamond. The basis of this signal is price crossing the thicker black line. When this occurs it is time to examine the chart to decide which phase the stock is in. Accumulation, uptrend, distribution, downtrend. Looking mostly for accumulation or early uptrend positioning. Next it is a matter of determining whether a logical stop point can be set.
It is all about defence.
The points I look at to enter a stop are basically the recent low points. These are the three horizontal lines on the chart. Thick black (this is where the signal came from), thin black and yellow. A cluster of these three tends to reinforce the level as a stop point. The other two points looked at are a 5% and 10% level below the signal day close. These are the two white lines.
The intention is to find a point that says the signal was wrong and it is time to get out and move on. You do not want to lose a lot while testing the waters.
The above applies only to when a signal is generated by price crossing the thick black line. This is the major one of the three horizontal lines. The other two horizontal lines use a similar method of determining stop levels when they generate signals.
Another set of criteria is applied if the signal comes from the moving average trend indicator. For now I think this is confusing enough so I will not go into any more explanations today. The following chart is of COMS and will hopefully clarify the words. The two areas of interest are highlighted.
Thank you for your time.
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