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Email of the day - on when to use point and figure charts

Published: 08:37 13 May 2020 BST

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Comments of the Day

13 May 2020

 

Video commentary for May 12th 2020

 

Eoin Treacy's view

A lionk to today's video commentary is posted in the Subscriber's Area. 

Some of the topics discussed include: Fed's pace of monetary assistance is waning, Wall Street losing momentum and susceptible to consolidation. 

 

 

Fauci Warns Early Reopening Could 'Set You Back', Cause Deaths

This article by Laura Litvan and Justin Sink for Bloomberg may be of interest to subscribers. Here is a section:

The checkpoints that Fauci cited call for a succession of steps toward gradual reopening, including a “downward trajectory” of documented cases or positive coronavirus tests “within a 14-day period.”

The panel’s Republican chairman, Senator Lamar Alexander, opened the hearing -- with lawmakers and witnesses appearing largely by video from their homes or offices for the 3 1/2 hours of questioning -- by reaffirming his view that the administration’s efforts to increase testing capacity are “impressive but not nearly enough.”

“Before we spend too much time finger-pointing, I would like to suggest that almost all of us -— the United States and almost every country as far I could tell —- underestimated this virus,” he said. “Underestimated how contagious it would be. How it can travel silently without causing symptoms. How it can be especially deadly for certain segments of our population.”

But Senator Patty Murray, the panel’s ranking Democrat, said “the Trump administration’s response to this public health emergency so far has been a disaster all on its own.”

 

Eoin Treacy's view

The rest of the world is quickly coming to the same realisation China did. Lockdowns cannot persist indefinitely. The economic pain is too dire. Unless cases are accelerating higher, the argument for loosening lockdowns will continue to be made. That will be particularly true of cities, states and countries which have experienced the mildest outbreaks. That’s the reward for moving early to cut off exponential growth where every day matters.

 

 

Email of the day - on when to use point and figure charts

Thanks for your very clear and objective commentaries at moment. It is good that you are looking beyond the current crisis and thinking about what investments are likely to do best over the longer term. I notice that you have been referring to point and figure charts more recently. Under what circumstances do you find it best to use these, rather than a 'standard' daily / weekly price chart? Also, what do you recommend using for box size / reversal as an unleveraged investor, taking a medium / long term view?

 

Eoin Treacy's view

Thank you for this question. It was pointed out to me at the last Chart Seminar that it had historically always been conducted using point and figure charts and that David had been known as a point and figure analyst so what caused the change.

David’s Chart Craft business produced chartbooks because they were the only way to get good charts before the internet changed everything. Point and figure allows one to look at a vast amount of history in a very condensed area and since the patterns do not change all that often, they were ideal for a monthly publication. When I started to work with David in 2003, just as we transitioned to a fully online service, the only time I saw David use p&f was at The Chart Seminar.

P&F is best in my opinion for investors rather than traders. We have always used closing prices, a 3-box reversal and the system defaults to a 2% box size. However, p&f charts need to be tailored and that is why a custom box size option is available.

I think p&f charts are most useful for clearly depicting how a trend’s consistency has broken down.

 

 

Email of the day - on my personal portfolio

Eoin, does it continue to be the case that these are your most recent trades? Having been through virtually unprecedented volatility over the last 6 weeks since these trades were made, I would have expected that you might have been fairly active in the market. If these are your last trades, does that imply that you are very much an "investor" rather than a "trader". I am relatively new to the platform, and less familiar with your personal approach to investing.

 

Eoin Treacy's view

Thank you for this question which other new subscribers may also have an interest in. There are times when I am more active and there are times when I don’t have any positions. The benefit of only trading for myself is I don’t have to be active. The older I get the less pressure I feel to trade. I have tried to discipline myself to only participate in the most obvious opportunities, where the odds are clearly in my favour. A casual observer might ask “isn’t that what everyone does?” but practice is very different to theory.

 

 

Email of the day - on chasing outperformers

With respect to the second note, and knowing your own preference to stay with the "winners" and cut the "losers", at what point do you look to valuations and question the sky-high prices people are willing to pay for these "winners"? I personally have a tough time chasing stocks that have already run, but for now at least, they just keep going, proving highly frustrating!

 

Eoin Treacy's view

Thank you for this question which others may also have an interest in. The best time to buy is following a significant pullback. The next best opportunity is following the first reaction from an important low. The next will be when a breakout to new highs occur.

 

 

Email of the day on Japanese stocks and 6G:

I hope you and the family are handling the new normal? You certainly seem to, as there has been no decline in your daily's, in fact if anything they are like a good wine, getting better with age/experience.

I have recently checked all the Topix industrial indexes. Virtually all of them look like the majority of most world stock market indexes, except for two,

The Topix Telecommunication Index and the Topix Pharmaceutical Index.

They both compare more to the NASDAQ and one or two other stronger US indexes.

If you remember, late last year I sent you a list of Japanese 5G related companies, some of these are what my portfolio has consisted of most of this year. Many are performing in line with the NASDAQ, but when markets were selling off during March and April I added KDDI and DOCOMO to my list. I came across a DOCOMO white paper confirming their research into 6G!

Unfortunately, I do not have very much experience of the Pharma sector, except for the big names. So, if your collective could offer any ideas it would be much appreciated.

Thanking you in advance.

 

Eoin Treacy's view

Thank you for your kind words and for highlighting the above sectors. This report from Sandvine highlights the fact 80% of all internet traffic is occupied by video streaming, gaming and social media. YouTube alone represents 15% while Netflix is 11%.

 

 

Eoin's personal portfolio - Last updated March 27th

 

Eoin Treacy's view

One of the most commonly asked questions by subscribers is how to find details of my open traders. In an effort to make it easier I will simply repost the latest summary daily until there is a change. I'll change the title to the date of publication of new details so you will know when the information was provided.

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