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.
After my post yesterday I kept thinking about how to clarify the information presented here. Want "simple, but not too simple." It finally came down to three sideways and three trend.
When price is moving sideways there are three lines that will be important. The thick black one, the thin black one, and the yellow one. These three rely on a low during the look back period. Added to this are the less 5% and less 10% price levels. These are hard if you will and always relate to the present day price, being used as a reference versus a signal.
A signal is generated when price crosses from below any of the three lines. Then it is a matter of deciding if a sensible stop point can be established using any of the lines. This is a cop-out but the chart will just look right. It should look like it has an inherent sound structure. Quiet looking, not noisy. Even when I read this I think 'boy what a crock'. However, it is necessary to just have faith in what looks and feels right.
One structure to look for is a small spread between the three lines. For me at least the narrow spread provides a higher level of confidence. As well matched or tight lines can be extended and may possibly provide a reference point in the future. This feature is marked on the chart of EZPW.
The other three lines are all related to trend and are based on an 18 day exponential moving average. There is a little bit of tweaking involved but just a basic moving average works. This signal is simply a cross of price from below. Nothing fancy and shows up as a blue price bar on the charts. Moving back below the moving average may signal an exit. This will depend on whether the three sideways are still relevant or not. Generally if it is at the start of an up move then they will be important, if the up move is established then they are not.
Once again I feel that this explanation is fuzzy and I apologize. The following charts are EZPW and F. I hope they clarify a little better what I am trying to explain here. I will also post the MetaStock formulas that I am using in another post. That way you can play along at home if you want.
Thank you for your time.
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