Accelerated Stop Loss
In fast moving markets it is essential to lift stop losses above potential Trend Reversal levels to protect gains. This is done by lifting the stop loss to either a weekly low or moving average or in some exceptional cases the daily moving average.
Accumulation
Process by which, over a period of time, a large or excess supply of stock is absorbed by increasing demand from buyers. Generally, there is little price action until the sellers have been exhausted. Then buyers dominate and price tends to rise.
Consolidation
A generally lateral period of trading in terms of price. It is usually an interruption of an ongoing uptrend or downtrend, as opposed to a reversal type of pattern.
Distribution
This is the opposite of Accumulation. As prices reach higher and higher levels, sellers start to appear to capture the higher prices. The higher the price the more the sellers want to capitalise on the higher price and thus they sell more.
Eventually the selling will overwhelm the buying and a savage market drop occurs as a market imbalance between buyers and sellers is "triggered"
The beauty of the Accumulation and Distribution patterns is that they occur slowly before your eyes and before you need to act!
Exponential Moving Average
In a simple moving average, the price data of every bar used in the calculation of the average has an equal weight. The Exponential Moving Average is another form of weighted average. Through geometric progression, each older price is given less and less importance. The effects of the first price will never be completely removed, but its weight will continuously shrink as more and more prices are added to the calculation.
Primarily used as a trending indicator.
Fundamental Analysis
Fundamental Analysis: This is the analysis of a companies "nuts and bolts". For example: how much profit will the company make, are costs too high, is the management solid, what is the potential of the company and its future outlook.
The fundamental analyst assesses the myriad of complex variables and attempts to place a value on the company. This is often why "surprises" can shift a share price swiftly and savagely if the actual result is away from analyst's exceptions.
This is the analysis of a company’s "nuts and bolts". For example: how much profit will the company make, are costs too high, is the management solid, what is the potential of the company and its future outlook.
Key Low or Trading Range Low Reversal
Description: Clear evidence of support at a Trading Range or Key Low that must then be enhanced by evidence of a reversal structure such as a Candlestick Engulfing pattern.
Steps:
Key Low price level it hit and holds
Volume rises in response to new buying
Follow through buying on expanding volume
Reversal price action breaks identified trigger point
Trend Intensity confirmation
Buy the open the following Monday and set stop loss
Market Imbalance
A market imbalance evolves from a "battle" between buyers and sellers. These "battles" can occur at old highs/lows, resistance and support points. By the nature of a "battle" there is always only one winner who then overruns the loser. This is the same as a "battle" between buyers and sellers.
In a market imbalance situation once the "battle" has a winner, the ensuing market move is usually swift. Those on the wrong or losing side inevitably have to reverse their position by selling to prevent any further underperformance or loss, or buying to increase an underweight position in a rising stock.
This results in a market imbalance of buyers and sellers. In this situation you have an imbalance of buyers than sellers so the market must move up until the balance is restored. At some stage sellers will see value again and begin selling to bring balance back to the market The cycle begins all over again.
Momentum
The strength or sustainability of a market move as measured by an array of momentum indicators. We use the Moving Average Convergence Divergence indicator, which is used to measure momentum with three sets of criteria used.
1.MACD lines are above or below zero
2.MACD lines are in a Buy or a Sell
3.MACD histogram is expanding or contracting
New High
Description: When a New weekly High is struck the stock is bought on the following Monday's open.
Steps:
Weekly close above an old high
Trend Intensity confirmation
Buy the open the following Monday and set stop loss
Porrtfolio Membership (includes the services of Stockradar Stock Analysis Membership)
The Portfolio membership is a client driven initiative emanating from discussions during the Australia wide Stockradar seminar series in late 2007. No longer do you have to choose which recommendations to follow from Stockradar’s large universe of stocks you can simply, 1. Track one of our new smaller predefined portfolios that consistently outperform the market or, 2. Construct you own, test it, and follow it.
The Stockradar trading strategy is based on the premise that any individual trade has an uncertain outcome but over time if you consistently play the same “market edge” with effective money management rules it should deliver consistent and to a large degree predictable results. It’s just like casinos, who play only a small 2% edge over and over again to make their pots of money. The averaged annualised returns Stockradar delivers reinforces the effectiveness of that strategy.
The market “edges” we employ are founded on the Stockradar philosophy that the stock market trends higher on a long term basis and we thus identify four simple market “edges” that enable us to capitalise on this natural up “trending” bias. (See How We Work and the glossary for more information on the four market “edges”)
Portfolio Membership offers two modules: Portfolio tracking and Portfolio Testing
Portfolio Tracking. Set and forget! This module offers 5 smaller portfolios’ (20-30 stocks) for you to select from. This enables you to realistically track the simple objective method and the mechanical signals Stockradar generates from our universe of stocks (200 approx.) Then see the historical performance since March 2003 with valuations updated every night.
Portfolio Testing. See the results, test the results! The second module gives you the ability to construct your own portfolio of up to 20 stocks and test it over Stockradars trading history back to March 2003. This is effectively a back testing routine and is for those interested in developing their own portfolio using Stockradars recommendations.
Price Breakout
An upward move exceeding a previously recorded high, resistance level, or through a bullish trendline or some other criteria, often on high volume.
Protection
Protection levels are implemented when a stock rallies too far, too fast. Protection levels are placed at incremently higher key lows and are used to lock in profits that may other wise disappear if we wait for a Trend Intensity reversal signal to occur.
Resistance
A supply of stock waiting to be sold at a price above the current level. Significant trading at that level has previously created a pattern which suggests there would be resistance to the price moving significantly above that level without a great deal of stock changing hands. Levels where selling pressure is likely to occur are identified using Trend lines, Congestion areas and previous market turning points.
Reversal
This occurs when an up trend sequence of higher highs and higher lows is broken to the downside. The reverse is true when the serious of lower highs and lower lows is broken to the upside.The stock is then bought on Monday's open. See Trend
Sentiment
Indicators, which attempt to gauge individual investor and/or professional attitudes toward the market. Monitoring the degree of optimism or pessimism present is a major tenet of technical analysis.
Stock Pick
A Stock Pick is a stock that fulfils our definition of an uptrend or Reversal and is subsequently confirmed by a qualifying sentiment rating as measured by Stockradar's Trend Intensity Indicator
Stop Losses
More commonly known as Stop Losses. And that is exactly what they mean. An order is placed to exit a position if the price goes to, far against you.
One of the common problems of share traders is an inability to take a loss in the hope that the price will turn around. Invariably they just get worse. Better to get out at a minimal loss and move on to the next opportunity.
As Stockradar is a weekly based model we take our signals from Fridays close. Any stocks that have violated their stop losses based on Fridays (weekly) close and are confirmed by the Trend Intneisty rating fropping to -4 or less, are exited when the market opens on Monday. As the market is closed when we determine our stop losses we exit as soon as the market opens which is on Monday.
Support
An area or price level where a price decline can expected to be halted (or to slow) by an increase in demand. Opposite of resistance levels where buying support is likely to appear. These levels are identified using Trend lines, Congestion areas and previous market turning points.
Technical Analysis
This is the analysis of price movement. At Fundamentally Technical and Stockradar we assess the buying and selling pressures, in the light of the current trend, and where they are likely to appear. In this way we can try and determine the psychology of the market and the prevailing sentiment towards a stock.
If we can determine the sentiment and the trend, and then the buying and selling pressures and where they are likely to occur, it helps us shift the odds in our favour by building a "weight of evidence" argument for a price move.
Technical Analysis also implements the use of indicators such as Momentum and Moving Averages to support the case.
Top Ten
The Top Ten reflects the top ranking stocks in the top ranking sectors. i.e. We check for all the 10 rankings down the sector scale and then 9 and then 8 etc.
Trading Range or Key Low Reversal
Description: Clear evidence of support at a Trading Range or Key Low that must then be enhanced by evidence of a reversal structure such as a Candlestick Engulfing pattern
Steps:
Key Low price level is hit and holds
Volume rises in response to new buying
Follow through buying on expanding volume
Reversal price action breaks identified trigger point
Trend Intensity confirmation.
Buy the open the following Monday and set stop loss
Trend
A move in price either upward or downward which is characterised by a series of higher highs and higher lows (uptrends), or lower lows and lower highs (downtrend).
Stockradar's primary interest is in stocks with compelling (up) trending attributes. Any stock that is moving sideways to down is classified as NEUTRAL or DOWN. We may also classify a stock as NEUTRAL to DOWN if our position has been neutralised. The trending status will reflect Stockradar's current view on the stock.
Trending Intensity Indicator
Stockradar's Trend Intensity indicator is designed as a sentiment based indicator that is used to rate sectors and benchmark stocks on the Australian stock market. This innovative step-by-step process offers you a clear and decisive way to evaluate the trending attributes of a stock, and its sector, and thus the probabilities of price movement.
Price action and momentum are combined with market participation levels and averaging probabilities to measure each stocks trending or non-trending attributes, or the strength of the sentiment towards it The technical indicators used in our approach are Trend (See definition in Glossary), Volume, Moving Averages and Momentum.
Stockradar's readings which are predefined by our observation of the basic price analysis techniques, are then weighted into our unique rating system, the Trend Intensity Indicator to give a value of + 10 or - 10. This provides you the investor with a simple and consistent benchmark for each stock that gives confidence and control over your investments.
Ranging in value from +10 to -10, the positive indicator extremes define powerfully trending markets and the negative extremes define stocks with little up trending attributes.
The mid ranges values define markets that are still a medium term hold.
When a stock moves from one extreme (-10 or + 10) and through the neutral zone it tends to move all the way to the other extreme.
The Trend Intensity scale:
For further reading on the Trend Intensity Indicator click here
Trend Intensity Ratings Table
Each group includes commentary and relevant Trend Intensity Ratings focusing on stocks that are nearing levels that may trigger a change in sentiment over the coming week from either being a trending stock, and thus one of our Stock Picks, or a non-trending stock that does not qualify for Stock Pick Status. The commentary is also used to identify signals that further endorse a stocks prevailing trend, i.e. a new high, the Stock Picks current status, and also potential protection levels.
Stockradar does not try to identify the lowest or highest price of a stock but to tell you when a stock has a valid underlying trend, which is then supported by positive sentiment as measured by our unique tool, the Trend Intensity Indicator. Our objective is to profit from trending moves not pick market direction.
Trend Reversal Up
A simple price structure that identifies the point at which a series of lower weekly highs and lows is reversed to one of higher weekly highs and lows.
Trend Reversal/Protection column
These are indications of where a likely breakdown in a stocks trending attributes is likely to occur or in the case of fast moving stocks, when our stops or protection levels are raised to in a progressive manner to protect profits. They should not be used to replace and money management protection you employ in your trading plan. Stockradar uses them as part of the process of disqualifying stocks from our Stock Pick selection.
Trigger
This term is used by Stockradar to describe a price point that identifies the level at which the development of one of our four entry signals (Trend Reversal, New High, Spike Reversal, and Key Low Reversal) is fulfilled. This level is then the "trigger" point I identify as having a high odds profile of initiating a swift price move caused by a market imbalance of buyers and sellers.
See Market Imbalance above.
Volume
This is the number of shares traded in any one period. I.e. a day. High volume days attached to price rises are considered bullish and price rises on low volume days are considered suspect and likely to correct.