I think my last chart post on this TA Chart Thread was back on 17/12/2018 in which I pointed out the positive divergence that had appeared between the WaveTrend momentum indicator and the SP. I suggested that if the momentum continued to rise the SP would move back to the 6.5c level in the short term. Well it’s nice when these TA predictions prove correct, it doesn’t happen all that often.
But on to something more important. I’ve just read through all of the recent posts and I am horrified to learn that 4DS’s earnings are zero!!!! I mean to say, that would give 4DS a P/E (Price to Earnings Ratio) of INFINITY! Some FA experts have told me that you should look for HIGH P/E stocks with exceptional growth prospects to trade when the market is rising, so I guess this makes 4DS an exceptional trade proposition. The only worry I have is that I won’t get that 4% ff dividend I was expecting from 4DS at the end of this financial year.
Well enough of the frivolity, there’s been a lot of FA blah blah on this Chart thread that doesn’t even warrant a place on the official SFA (Speculative Fundamental Analysis) threads. We are talking about a very speculative and high risk stock aren’t we, albeit with an associated and exceptionally high potential reward. Probabilities are all we are talking about here, nothing else.
So now back to something that makes a hell of a lot more sense to me, TA and the charts. There aren’t that many charts of this thread so I thought I’d post a few of the ones that I use. They cover a number of the Trade Systems that I am familiar with. Let’s see what these charts and systems tell us about the 4DS SP probabilities.
The first chart is my Cycle and Momentum chart. The previously mentioned divergence is shown on the chart along with the relatively high volume Close levels (Anchor Zone levels) that seem to consistently identify significant support/resistance horizontal levels. The divergence followed by bounce off the lower support level just above 4c would have been a very nice trade entry level. I got in a little bit prior to that point and at a slightly higher level. I didn’t have the patience to wait for a confirmation of the bottom forming. As can be seen the momentum continued higher and the SP moved up. I was worried that it may have stopped at the 50 SMA, but it move straight through it and then came back to find support at that level before moving higher again. The next possible resistance levels I considered to be the 200 SMA and then the Anchor Zone Close levels of 6.3c and 6.5c. This range has now proven to be a significant support zone for the SP. The Stochastic Cycle indicator has once again crossed up today and note that the recent retrace/consolidation has been on reducing and very low relative volume. I’ve also placed two Fib projection indicators on the chart. The first one is based on a breakout of the trading range from 4c to 6.5c and the second one is the target of the next expected Impulse move when and if it occurs. Both have price targets in the range of 8.6c to 9.0c, which corresponds nicely with the prior High Volume Close level from back on 30/07/2018. All in all things are looking good for a continued upward move of the SP based purely on speculation regarding the outcome of the second chip iteration and or Smart Money starting to take larger positions in the stock. For those who are concerned with the speculative nature of the stock I’ve included my ATR based chandelier trailing stop on the chart, the thin black line currently under the price candles. The protective stop level is currently at 6.0c. For those who are familiar with my “Bottom Fishing Setup”, you should be able to see where it occurred on this chart.
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The next chart I use to identify what are referred to as strong trends. I use the Williams%R indicator to do this. When the W%R crosses the 50 level and the Volume-Reversal indicator swaps to positive a buy trade can be made. This occurred back on 18/12/2018. When this indicator is over the 80 level a strong up trend is in place and any negative oscillator signals can be ignored. This chart is based on Price Headley’s “Big trends” system.
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For those readers who focus on Trends the following chart is the one I use to assess the direction and strength of any trend. It is based on the Guppy Multiple Moving Average system. The Trader MMAs (RED) are now well over the Investor MMAs (BLUE). The cross and bounce of the SP above the 50 SMA and the subsequent cross of the MMA Oscillator above the zero level was a good trend change trade entry signal. This occurred on 28/12/2018. The recent bounce of the Trader MMAs confirms that the trend has now changed to up.
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Here’s another chart and system that would have led any Trader to a good trade entry signal. It’s the MarketGauge.com Triple Play Indicator system. The first panel is the Leadership indicator that plots the SP’s performance compared to the Index, in this case the XJO. When the blue line moves above its red moving average and the MA starts to curve up we have a buy signal. If the blue line moves above its one STD blue dotted line the move up is confirmed. The lower panel is the Volume indicator, specifically the OBV indicator. The same rules apply to this volume line. When both indicator indicate a buy then a trade can be taken. This occurred back on 14/12/2018.
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Anybody follow the RMO (Rahul Mohindar Oscillator) System? The RMO system chart is provided below. I focus on the SwingTrade2 indicator. It’s the red histogram and blue MA indicator below the price chart. When this indicator moved above its blue MA and then crossed above the zero level a buy signal occurred. This cross occurred on 18/12/2018. The more conservative Trader would have waited for the RMO itself, the Green histogram indicator, to cross above zero as well. This occurred on 31/12/2018.
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One of my favourite charts is the Heiken Ashi candle chart. These candles filter out most of the noise present in the price action. And you will never see a gap on one of these charts. When the candles turn blue you have a buy setup in place. I use a 50 EMA of the HA-Close as a trigger level. As you can see this level was broken back on 19/12/2018. While the candles remain blue all is good. When the candles turn red or lower wicks appear on the blue candles its time to tighten the stop level. As you can see we should now be watching our tightened stop level closely.
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And one final chart (system), do I hear a sigh of relief? Here’s the Ichimoku chart for 4DS. Things to note are that the Tenkan-sen crossed the Kijun-sen and the SP crossed both on 18/12/2018. The SP entered the Ichi Cloud on 27/12/2018. At that stage the next resistance level would have been the top of the Cloud which was at the 8.3c level. Hence a long trade with a good RR ratio could have been taken at that time. Soon after that date the forward Cloud also turned Green, another good sign. Very soon the SP will be out of and above the Cloud. The current support level is the level of the Kinjun-sen which is currently the 5.7c level. The real warning of a strong SP drop would be when the Tenkan-sen (blue line) crosses below the Kinjun-sen (red line).
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Well there you go. All these systems/charts would have identified good trade entry signals for 4DS, and the more adventurous Trader, more risk tolerant that is, could have easily made a 50% to 70% gain in less than a 4 week period. And on a company that has zero earnings – heaven forbid !!!!!!!
Hold on I forgot the Tradeguider Volume Spread analysis (VSA) system and the Elliot Wave system. No I think the above is enough to repair this threads pretence of being a Chart Thread, and I’ll leave the Elliot Wave stuff to W3Hunter as he is already doing an excellent job on that analysis.
All IMO of course – Good luck everyone – and remember “CHARTS RULE!!”
