GUIDE TO USING STOCKRADAR

1. DIVIDENDS, RIGHTS ISSUES, CAPITAL RAISING, BONUS ISSUES TAKEOVERS ETC

This topic is raised quite often when they occur, so I’d like to outline how I handle them. For the most part these aspects of share trading are outside my area of expertise as a price analyst. I treat them with respect but don’t let them alter my price approach. The rules I keep simple. It is my approach and trade plan I adhere to not ‘other’ effects.

Dividends: are treated as a bonus and the stop level is not altered by the dividend amount. A good and healthy stock will invariably carry its dividend well

Rights Issues: Adjust the price for the rights issue and the stop by the same amount

Capital Raisings: Unless price is affected no change in stop

Bonus issues: Adjust the price for the bonus issue and the stop by the same amount.

Takeovers: If I am not in the stock I will stay away until the takeover is resolved be it predator or target. If I am in the stock, I will tighten the stop to the maximum 10%

2. STOCK UNDER OFFER

If a stock goes ‘under offer’ and it is not a stock pick I am not able to enter this stock. Stockradar is disqualified from trading the stock as takeovers are not our area of expertise. Capturing trends in response to price behaviour is our objective. If it is a stock pick I will tighten the stop and in some instances of the bid looks final I will exit at market.

3. TRADING GUIDELINES ON STOPS

I normally have a predetermined stop level that covers most stocks however for more volatile stocks that can move 10-15% in a week such as small miners and biotech’s an idea might be for you to double your stop distance and halve your exposure. To confirm the validity of a ‘break’ a 1% clearance of a reversal or stop level is required.

4. ACCELERATED STOP LOSS

The ‘Accelerated Stop’ is tightened further than the predetermined 10-15% level to protect a greater portion of profits under certain conditions. Some stocks have the requirement for lifting stops further than the ‘defined predetermined limit’ due to a low volatility or a stagnating trend especially in a situation where a stock is approaching overhead resistance. By stagnating trend it means when a stocks price is well above its stop but the exponential moving average is also well above the stop. It entails using the exponential moving average as a benchmark or previous lows to raise stops further from the predetermined stop level towards, or in some cases even above, the Exponential Moving Average (XMA).

5. 1% RULE

Price violations of 1% are required to confirm reversal or stop levels.

6. STOCKRADAR STOCK INCLUSIONS & DELETIONS ARE REVIEWED EVERY SIX MONTHS

As a general rule I follow the below standards. The Market capitalisation figure can vary depending on the market so I try to keep coverage to around the top 160 stocks, which are taken from the ASX/200.

Qualification:

1. Market capitalisation > 1 $Billion
2. Weekly volume averages > $5 million
3. Minimum 6 months price history

Disqualification:

1. Market capitalisation > $550 million
2. Weekly volume averages < $5m

7. RECENTLY ADDED STOCKS

Recently added stocks that are already ‘in an uptrend’ will have their latest high set as the trigger level.

8. MARKET CAPITALISATION GROUPS

Large Caps   =   1-50 stocks

Midcaps        =   51-100 stocks

Small Caps    =  101-300 stocks

9. NEWSLETTER BACK COPIES

A tip for accessing back copies of the newsletter. Each one has a number identifier in the address bar of your browser i.e. Issue # 447 identifier is 1293. https://www.stockradar.com.au/stockradar/index.php?action=static&pid=newsletter&id=1293&month=0&year=
If you change that number for example to 1287 it will give you the 1^st September newsletter. From here you can access various back copies.

10. MY ‘YOU TUBE’ CHANNEL

Don’t forget you can view my You Tube videos at Richard Lie – Stockradar to help get you started or do some reinforcement of our processes. I am now also providing regular market reports on overseas indices, commodities and Stocks on the Move.

11. BLOG

Useful information with challenging and provocative ideas and articles to inspire you thoughts.

12. FEAR AND GREED

Useful information with challenging and provocative ideas and articles to inspire you thoughts.

There are situations that we want to avoid responding to in the historically wrong way to the cyclic behaviour of stocks. Rather we should use them to our advantage. We all know the greed/fear states represent close proximity to a top or a bottom stage so what we are going to do is identify them as closely as possible so we can take advantage of them. This may not necessarily bean exhaustive list but purely ones we have identified as potential opportunities.

A. StockradarFEAR AND GREED objective. To profit from stocks whose share price over the long term has been debilitated by fear or a stock whose price has been driven to excess by greed.

B. Standard Stockradar (stock picks) TREND Objective: To profit from trend behaviour. To qualify a stock as trending, or not, on a weekly basis.

1. Stock Coverage.The ‘fear and greed’ table covers stocks from the Stockradar universe with relevant fear or greed attributes that we can prepare to take advantage of. All other stocks can be assumed to be in either up or down trending phases or have no identifiable fear or greed attributes.

2. Market capitalisation.It should be noted that covering top stocks by market cap is not necessarily a useful criteria as many stocks that dive into the fear and unwanted cycle see their market cap status crunched badly i.e. Orica (11/7/16) ranks 72 on the market capitalisation table but only as recently as 2014 it ranked at 31. At this stage I look at all Stockradar data universe stocks.

3. Criteria for assessment.Technical assessment is not foremost but sentiment is. That is the driving force behind stocks that are driven to excess by fear or greed. The ability to read sentiment and go against it is paramount in these cases. We need to put our prudent and astute hat on. The three main tenets will be sentimentfirst, then the cycle stage (a stock generally moves through four phases, uptrend, distribution, downtrend and accumulation), and finally price or technical information.

A. SENTIMENT: A stock that is in serious trouble from a business or revenue perspective is unwanted, and the share price has been sold off severely, or a stock investors can’t get enough off and have driven the stock to excessive valuation and greed levels. All stocks on the tables are there because sentiment has driven them towards potential fear or greed levels. A turn may not be imminent but that consideration should be entertained.

DOW is a stock going through this stage (18/7/16). I have just been listening to a Sky business news analyst who remains very negative based on past performance. That may be so and is a common view amongst fundamental analysts. The recent share price action, which is at a cycle low point now would seem to fly in the face of that which is a sentiment ‘bell’ I look for. The risk below $2.70/3.50 would seem low. (Current price is $3.91).

Sentiment states:Negative – Bearish, Fear / Positive – Bullish, Greed.

B. CYCLE:The stock cycle moves between up trend to distribution to down trend then accumulation. A stock needs to be at the latter stages of a down ward cycle and may exhibit some accumulation buying activity. It should also have very negative sentiment to be included in the fear / buying stage and alternatively, a stock moving into a mature stage of an uptrend and is exhibiting some distributive (selling) behaviour and sentiment is excessively greedy or bullish will be considered to be in the greedy / selling state. Often a point is reached when sentiment is so bearish there are no sellers left and the price simply stops going down or the price has risen so far that sentiment is comfortably bullish but there are no buyers left – only potential sellersCycles:Down, Accumulation, Up, Distribution.

C. PRICE:Not always but often a stock will endure a lengthy accumulation / bearish stage where a continued barrage of bad news hampers any price gains. Alternatively a stock that receives a continued good news flow but find price gains difficult will be exhibiting flat / distributive behaviour and this is a stock that should have exposure lightened.

Price indications: Price, Volume, Support, Resistance

For example for a stock to qualify as one to be accumulating it should have had a phase of fearful sentiment, have had an extended downtrend, and is showing signs of support by the price not falling further and volume may be increasing as buyers accumulate stock.

For a stock to qualify as one to be lightening on it should have had a phase of extended reckless price advances that is exceeding market valuations, is showing distributive price action by not responding to good news anymore and volume may be increasing. These three elements, sentiment, cycle and price combined represent the perfect storm but not all may be evident.

CURRENT GUIDE: 

(Members can use their own discretion)

1. Any stock that drops 20% from its weekly high turns neutral.

2. This is not seen as an off/on approach, it is an adjustment to stock weightings

3. When we ‘distribute’ the money is reinvested in ‘accumulate’ stocks