John Jeffery |
I had the recent pleasure of attending and presenting at Optionetic’s annual traders summit, Oasis, earlier this month. At the event Integrated Investor was officially launched to US clients along with the ‘Key Series’, made up of the DividendKey, the TradingKey and the MasterKey. It was great to hear how the likes of Tom Gentile and Mike Wade have been using the software to facilitate their trading, and fantastic to have them so involved in writing and delivering the associated “Key Series” courses. If you’re one of the few who have not experienced Integrated Investor or you’ve not looked into the “Key Series” courses, make sure you read through the websites and, cliché though it is, ask about the release specials.
Within my presentation, I went through the benefits of integrated analysis and looked at an example from the US markets. This article shows the technical reasons for taking the trade, although there were plenty of additional confirmers from the fundamental, option and consensus indicators as well. In the next edition of the Self Directed Investor (which returns to publication after its recent break) there is more scope to write about these in full.
Technical analysis gives us an insight into the current position of the stock and allows us to draw certain conclusions as to where it might be heading. As with all technical analysis, the trader or investor should do their best to avoid ‘co linearity’. This is just a ‘posh’ way of saying that each indicator and signal being used must not be derived from the same source of information – a common mistake made by novice traders. Using a MACD (which is derived from moving averages) and a simple moving average cross, for example, is effectively just looking at price momentum twice. Neither indicator is examining a different perspective. With the example of Alaska Airlines (ALK:NYSE) we can build a chart showing the basic market structure.
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First and foremost there is evidence of a channel with price action moving between a well defined bullish support line and return line. This channel, should it remain intact, goes to confirm the existing Elliott Wave projections (thus avoiding the co linear menace). Zooming in to the more ‘local environment’ there are several other notable technical points.
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Price has been moving sideways whilst on balance volume has been showing an increase. OBV is a volume measure which incorporates the notion that the volume is either bullish or bearish. With OBV rising from late Jan into Feb, we can suggest that the volume over this period was predominantly made up of ‘buyers’. The MACD signal is showing a bullish cross providing a positive signal that short term price momentum is beginning to pick up (or at least no longer falling) and, finally, a 10 day new high is evident. A break of this will signify a short term break out in price and the possibility that the congestion is ending and a new trend is forming.
Stay Sharp,
John Jeffery
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