The Ball is in and the Game is on

During the course of last week, the longest measure of the trend of the overall UK market turned back to Up. The last downturn lasted only from the 4th July to the 19th Of July. The chart of the VectorVest Composite is shown below with all of the Confirmed calls marked since the start of 2016. A green triangle is a Confirmed Up signal while the red triangle is a Confirmed Down. We are back in buying mode. I have no idea how long the trends will last but follow my rules I must.

comp

Apart from JD Sports, which I exited, my portfolio hasn’t altered in the short downturn. Most of the shares have shown great resilience as the market sold off. At least now I have some cash to work with as JD Sports was a very large part of my portfolio. I had added to the share many times over the past few years and was a grand run.

Countryside Properties is a share that I have written about on this blog and featured on the videos done at Core Finance with Zak Mir. The share is undervalued and growing EPS strongly with an excellent technical trend at work. The chart is shown below and I note that legendary investor Neil Woodford has upped his stake in the company. He is a value investor and clearly sees the same value picture as is shown on VectorVest. As a retail investor, it makes me very happy to know that I have access to the same detailed information as Woodford, who has an army of analysts at his call.

csp.l

The red and the green triangles on the CSP.L chart have nothing really to do with CSP. They are the Confirmed Down and Up signals from the overall market. When I saw the Confirmed Up with the pointer on the Color Guard in Green then it was time to buy a few CSP.L. I really like the technical picture on the share in that former resistance has now become support and the share is moving upwards from this level. The share has been on a Buy recommendation on VectorVest since April 2017. I added to a small holding of CSP.L at the open on the 20th July 2017.

I have a 7 step guide which helps with my decision making and although I have mentioned the process here before, I feel it merits some revision.

 

  1. Value/Price >=1.2. This ensures a great buffer. Its conservative, I know, but it’s my plan and I am getting very conservative in my sixties.
  2. RV or Earnings Potential >=1.3. The bigger the better. The metric drives the share price.
  3. RS or Relative Safety or RS >=1. This gets rid of shares with a dubious earnings history.
  4. EPS Growth >=15%
  5. The share is on a BUY recommendation of VectorVest and is breaking new highs.
  6. The overall UK market is within (or just signaled) a Confirmed Up signal.
  7. The Color Guard pointer is in the Green and the advice on VectorVest is to buy safe, undervalued shares that are rising in price at this time.

 

Use the VectorVest stop loss and calculate the number of shares to Buy so as only 1-2% of your equity is lost if the trade should not go your way. Please study lesson 2 of the Successful Investing Quick start course for the detail of this calculation. The course is found under the training tab on the front page of VectorVest.

Exits are more difficult and they are as much a philosophy as hard and fast rules. Here are some suggestions for your consideration. Again, these are studied in detail within lesson 2 of the course mentioned above.

  1. Use the VectorVest calculated stop as a trailing stop loss.
  2. Use a percentage trailing stop loss. In a fast move, the VectorVest stop can get left behind as it’s based on a moving average. The London User Group suggests a 16% trailing stop.
  3. Exit when you have achieved a profit of 2-3 times the initial risk.
  4. Exit at an old high if there is such on the chart or exit at a FIB extension. I illustrate these targets frequently at the User Groups and webcasts.

 

Standard Chartered is a share that fulfills all of the above steps. The chart of STAN.L is shown below. The share is undervalued and growing EPS are double the 15% requirement above with a RV of 1.48. The technical picture is excellent with the share on a BUY recommendation since the end of June. As in CSP, the share has broken resistance and subsequently tested the level prior to breaking up through the 13 week high I use as a filter in my Unisearch. Over the last 6 months, the share has charted a rounded bottom pattern known by market technicians as a Cup and Handle pattern. This pattern has been very good to me over the past few years when I combine the pattern with outstanding fundamentals. The first FIB target is around 900 while the second is at 1040.

std

Morgan Sindall has had a great week with a trading statement confirming what VectorVest has been saying for many months. Taptica had also a great few days.

I am holding my spread bets on Kaz.L and Rio.L although I have brought stops well above entry to lock in profits should a sudden reversal occur. It’s close to the time to take all these leveraged profits off the table.

Please focus on the seven steps above. They make a very simple and robust way of using VectorVest and getting the best of both worlds. The best of technical analysis combined with the best of fundamental analysis finds high probability trades with outstanding risk to reward ratios.

 

David Paul

21st July 2017

 

 

 

 

5 thoughts on “The Ball is in and the Game is on

  1. Yes you have explained both entries and exit strategy . 7 steps to follow the entries are excellent. Keep up the goodwork.

  2. Hi David Great analysis
    Re CSP.L
    Great call as always. I used independent indicators Aroon D+DI [using industry standard 25 period] with aroon positive and d+ cross overs that happened way back in march and consistent with Buy rating of CSP.L at the time on v v. Momentum to the upside. Your 7 steps guide another quality suggestion. Regards Andrew

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