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  • #501
  • Jul 31, 2013 12:48am Jul 31, 2013 12:48am
Quoting InfinitySL
{quote} I post a few places. Sometimes here, sometimes on another forum, sometimes on Stocktwits. My old thread here started as one thing but really didn't fit my evolving style. You can view the old posts here. My current journal is over here. And I've recently started posting on StockTwits which i find to be a pretty useful site. I don't really post for education...
I agree, Stocktwits is an awesome source of information, but you have to be careful and follow the right guys. You are going to find ideas that both are in favor of your thesis or position and ideas that oppose that position at the same time! If you don't filter what you read, you might end up like a deer caught in headlights.
  • #502
  • Jul 31, 2013 12:49am Jul 31, 2013 12:49am
@Xtrade,

Did you want me to post on gold miners?
  • #503
  • Jul 31, 2013 5:25pm Jul 31, 2013 5:25pm
Hello Split

I'd like to hear your thoughts on the miners

Thanks
  • #504
  • Edited 3:57am Aug 1, 2013 3:38am | Edited 3:57am
Quoting Hotdog
Hello Split I'd like to hear your thoughts on the miners Thanks
Hi Hotdog,

Welcome to the thread! I am not an expert on gold miners or commodities in general, but I will try my best.

Looking at the weekly chart of the GDX (Gold Miners ETF), it is obvious that the trend is down. With current price being at $26.99 and and Major support at ~ $16.00. GDX is yet to break its down trend with the bears still being in control. Recently however, a surge in volume has occurred at these levels, look at the circle. This rising volume coupled with a MACD major divergence is significant, it should give market participants that someone is either buying or covering shorts at these levels but even this has been met with selling because price refused to rise drastically on this buying. The bears are still in control. At best we get a consolidation here, and the GDX marks a long term bottom, at worst we had for the low at $16.00 and major buying occurs. Like many market participants know, bear markets rarely end in V shaped bottoms, and if they do then you should be skeptical about it. It takes time to move from one stage to another, the GDX needs to heal before it goes higher. It needs to consolidate and base.

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Looking at the price of gold, it looks like it is also in a major downtrend. Major support is in the area between the green support and resistance lines. The price of gold is essential to the miners. Rising gold prices raises the revenue of gold mining companies who are facing higher and higher costs and expenses extracting gold. Gold miners on average need gold to be at levels above $1100 to function profitably, the current decline in the price of gold is fueling self defeating cycle to the downside. Earnings will continue to disappoint so long as gold heads lower. This market can get volatile, it can trap many buyers at various stages. I strongly urge everyone to read this piece by Howard Marks who manages billions,to understand the dynamics of how bubbles function. I can't stress how important it is to understand the attached memo.

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The main reason why gold is in this bear market is because it went into the bubble on expectation of future hyper inflation. The main variable driving gold higher is inflation expectation. The false belief that Q.E would send global markets into hyper inflation mode was faulty and hence we got the bust. Gold went down as market participants changed their view on gold and prices went lower crushing gold miners margins. The chart below on the operating margins of Goldcorp and Newmont depicts this phenomena. I have also attached the magic formula of the two stocks.

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Now does this mean that gold stocks are doomed to head lower and eventually go bankrupt? Course not! Fundamentals will eventually get better and the miners would eventually become attractive. I tend to wait for fundamental undervaluation or mis-pricing due to many possible catalysts and follow that by technical or quantitative validation before entry. I will do the same with the GDX, and its components when the time is right. For instance if gold prices were to rise, then I would immediately look at the miners who are in a clobbering process, the fundamentals would be right. I don't have to wait for quarterly earnings to perform fundamental analysis because I know from experience that the price of gold is the main factor of higher/lower earnings in the gold mining industry. I would go straight to technically attractive stocks, stocks that were basing and acting relatively stronger than the weaker stocks.
  • #505
  • Aug 1, 2013 7:57pm Aug 1, 2013 7:57pm
Outstanding analysis thank you Split.

I completely agree.

I'm bearish on gold over the short to medium term (Strong NFP tonight will see a move to 1,275/1,250 IMO) and even more so on the miners. The mining sector has been terribly mismanaged over the last few years. Why people are still so keen on it is beyond me.

Historically, additional leverage to the gold price was a good reason to invest in the miners but with today's modern financial markets leverage is so easy to attain without having to go anywhere near the garbage gold mining companies. They are constantly underreporting their true cash costs (which generally lie around 1600+) almost to the point of active deception and when gold rallies they overleverage themselves, providing further downside.

The recent rally in the miners has been a gift for the shorts.

But having said that there are a very few select companies with decent margins I don't mind so much as a long term play.

Silver is an interesting one though. Like gold, the cost to mine silver is pretty close to the current price. However unlike gold silver has pretty significant industrial demand. Silver inventories will be exhausted in approximately 2 years if supply dries up so there is a long term price floor at around $17 in my mind. Short term obviously it could go to $1 but eventually it will recover, unless the industrial demand completly dries up.
  • #506
  • Aug 2, 2013 5:32am Aug 2, 2013 5:32am
Quoting Hotdog
Outstanding analysis thank you Split. I completely agree. I'm bearish on gold over the short to medium term (Strong NFP tonight will see a move to 1,275/1,250 IMO) and even more so on the miners. The mining sector has been terribly mismanaged over the last few years. Why people are still so keen on it is beyond me. Historically, additional leverage to the gold price was a good reason to invest in the miners but with today's modern financial markets leverage is so easy to attain without having to go anywhere near the garbage gold mining companies....
Very enlightening post Hotdog, you seem to be very well versed with precious metals. I never really studied the affect of silver prices on the mining industry, your information was certainly useful. I feel like I know something on every industry but I don't know everything on one industry, you seem to be that person who's close to knowing everything on this industry. What else are you specialised in other than precious metals?
  • #507
  • Aug 4, 2013 10:00pm Aug 4, 2013 10:00pm
Thanks mate.

I've studied the PM miners a bit but my knowledge on them is still relatively superficial. In no way am I an expert (which I am glad, because most of the "experts" are EOTWAWKI, doomsday prep type characters haha). Don't get me wrong, very nice people but you'd have done well to avoid their investment advice over the last few years.

My knowledge outside of the PMs is very scattered and thin. Which is why I'm posting here - to pick your brains!

On that note, what are you looking at this week, and over the longer term?
  • #508
  • Aug 5, 2013 1:24am Aug 5, 2013 1:24am
Quoting Hotdog
Thanks mate. I've studied the PM miners a bit but my knowledge on them is still relatively superficial. In no way am I an expert (which I am glad, because most of the "experts" are EOTWAWKI, doomsday prep type characters haha). Don't get me wrong, very nice people but you'd have done well to avoid their investment advice over the last few years. My knowledge outside of the PMs is very scattered and thin. Which is why I'm posting here - to pick your brains! On that note, what are you looking at this week, and over the longer term?
Cool, yeah I get what you mean with those guys...

This week I am mostly looking to add short exposure at these levels. I want stocks that:

1.have debt;
2.were in a bubble and are now in distribution;
3.lost or in the process of losing their competitive advantage and;
4.overvalued.

The stocks that I have on my watch list that fit the bill are: VMC, CCI, AMT, SBAC & CAT.

With the exception of VMC that I haven't detected any fraud yet, the four stocks above are all susceptible of committing fraud.

All the companies above have a lot of debt, if things were to go wrong just a little bit, these companies would lose a lot. Just look at the difference between the operating and net margins.

All these stocks with the exception of VMC are in the process of losing their competitive advantage. CCI, SBAC & CAT are part of the telecom towers business which is losing out to broadband internet. CAT has 70% of its revenue generated from international markets, mainly international markets like China, which is a bubble on its own that's about to implode. CAT gives me direct exposure to the bust in Chinese real estate.

Finally, it goes without saying that these stocks are in distribution. Technical analysis 101. I will also be looking for other candidates should they represent themselves.
  • #509
  • Aug 5, 2013 11:51am Aug 5, 2013 11:51am
Quoting split_unit
{quote} Hi X nice to have you back! On gold miners, I personally don't think that the bear market is dead yet. It's just my opinion and I could be wrong about it, u would know better on it. I know for a fact that declining gold prices would squeeze gold miners margins and hurt their profitability especially given the fact that the main variable that drives stocks are "EARNINGS". I have personally learnt from experience that I am paid from the market when I do my own work, picking stocks that on discretionary intuition hasn't always worked out...
SWHC going vertical, oh well this might be the high point but just though I would post it anyway. This is the market, one day your crushed on a small new position like POT and on the other day you make it back in spades in a large position like SWHC.
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  • #510
  • Sep 19, 2013 9:50pm Sep 19, 2013 9:50pm
Hey guys,

I came across this thread today. I recently posted a query on the james16 thread which goes -

"so do you mostly trade only stocks and that too on weekly charts? Although the j16 method is awesome, trading stocks and that too on weekly charts decreases the position size drastically. In addition to that there is the chance of sudden spikes/flash crashes. So I am wondering what is the incentive to trade stocks over forex. I mean if I have to become rich, I feel that the chances of becoming rich are greater when you are trading forex when compared to stocks, at least if you are using methods described in the james16 thread."

Kindly make some comments. I would very much like to trade stocks only, but I want my path to success shorter.
  • #511
  • Sep 20, 2013 1:46am Sep 20, 2013 1:46am
Quoting giggles
Hey guys, I came across this thread today. I recently posted a query on the james16 thread which goes - "so do you mostly trade only stocks and that too on weekly charts? Although the j16 method is awesome, trading stocks and that too on weekly charts decreases the position size drastically. In addition to that there is the chance of sudden spikes/flash crashes. So I am wondering what is the incentive to trade stocks over forex. I mean if I have to become rich, I feel that the chances of becoming rich are greater when you are trading forex when...
This topic has been discussed before in the thread and on various threads and sites that could be found on Google. If you seriously want your path to success to shorten, then read this book. It was written by a hedge fund manager with $60 billion of Assets Under Management. He doesn't waste his much time on the Macroeconomic front (Forex) and he doesn't forecast the future. He primarily focuses on the present and where price is trading in relation to intrinsic value.

If you take the effort to read this book, I am sure that all your questions would be answered in a way that is more comprehensive then any other post. You will also have a clearer view of what you want to do.
  • #512
  • Sep 20, 2013 1:58am Sep 20, 2013 1:58am
Just an update guys, I am not away. Its just that I find the current environment to be far from equilibrium. I do not see any opportunities to go long here that would compensate for the risk involved. The market is up and could go higher and reminds me of this quote by Keynes “The market can stay irrational a lot longer than you can stay solvent!”.

After years if being bullish, I am now taking profits and holding cash. What the smart man does in the beginning, the idiot does in the end. I might take a few shorts here and there at extreme market environments but that's about it. The only stocks still in my portfolio are stocks that are oil sensitive like the previously discussed YPF and a new position in SLB. Other commodity stocks are also held like FCX, X and WLT. I also have have a couple of chinese stocks in my portfolio which I picked up a month and a half ago like YOKU, SOHU and CGA. I was stopped out on other chinese stocks like DATE and AMAP and CNTF.
  • #513
  • Sep 20, 2013 5:35am Sep 20, 2013 5:35am
Quoting split_unit
{quote} This topic has been discussed before in the thread and on various threads and sites that could be found on Google. If you seriously want your path to success to shorten, then read this book. It was written by a hedge fund manager with $60 billion of Assets Under Management. He doesn't waste his much time on the Macroeconomic front (Forex) and he doesn't forecast the future. He primarily focuses on the present and where price is trading in relation to intrinsic...
Thanks
  • #514
  • Sep 20, 2013 12:22pm Sep 20, 2013 12:22pm
Quoting giggles
Hey guys, I came across this thread today. I recently posted a query on the james16 thread which goes - "so do you mostly trade only stocks and that too on weekly charts? Although the j16 method is awesome, trading stocks and that too on weekly charts decreases the position size drastically. In addition to that there is the chance of sudden spikes/flash crashes. So I am wondering what is the incentive to trade stocks over forex. I mean if I have to become rich, I feel that the chances of becoming rich are greater when you are trading forex when...
A few questions that I would ask back to you --

You say: "The J16 method is awesome" -- Have you been consistently profitable trading that method? What makes it awesome? I have nothing against anyone's method but to call a method awesome would imply that it gives you a significant chance at outsized gains and by looking at the second part of your question it seems you aren't happy with it.

What is the incentive to trade stocks over Forex?
This is an easy one. Stocks have a natural upward drift over time. Furthermore, it seems that there are methods to choose stocks with certain characteristics that you think will outperform over time. Be it "growth" or "value" there are fundamental metrics you can overlay against your technical framework that I believe can give you an edge.

"I feel that the chances of becoming rich are greater when you are trading forex when compared to stocks, at least if you are using methods described in the james16 thread."

I would reccomend you become competent and comfortable in your approach before you worry about "becoming rich". Being rich is a very subjective thing anyway -- what you consider rich might be a lot different than what i consider rich. In college being rich probably meant having $1,000 in the bank. Once your grown up it all depnds on how the money fits into your lifestyle.

And yes, trading weekly charts DOES decrease position size but also gives you a higher probability of a much larger move. Here's a good example. My colleague had a $7,000 account that he turned into $20,000 over a month-long period. Good for him. He did that buy placing something like a $200,000 wager on the Aussie Dollar. When the inevitable re-trace came, he gave back everything and went right back to $7k. Leverage giveth and leverage taketh away. Trading on weeklies requires large stop-losses, but your starting equity doesn't move as much.

Remember the story of the Tortoise and the Hare....You can find infinite examples (even here on forex factory) of people trying to turn $1,000 account into $1,000,000. Don't get seduced by the idea because either those people quietly go away, or you watch them blow up spectacularly (i.e. people posting their real account balances on the website...).

I could go on, but I'll leave it there...
  • #515
  • Sep 21, 2013 5:13am Sep 21, 2013 5:13am
By J16 method I meant the pinbar strategy. I like its simplicity. i.e. place an order at the break of a A+ pinbar and you have a good chance of the move going in your favor. The past month for me, I could clearly see that this method is working. But I am still not profitable. I have realized that there are three reasons for that:
1. I sometimes take B or C grade setups
2. Even after entering on a A+ setup I either overstay in the trade or I exit early when I should have stayed put.
3. I also started loosing when I shifted from the daily time frame to the 4 hour time frame

I believe that I can control point 1 and 3. But the reason I am having difficulty with point 2 is that I have a very small account.

I also wanted to apply the J16 method to trade stocks/cfds. The recommendation given by seniors in the group is to work using weekly charts. But because of small position size (large pins --> large stop loss --> small position size) I would not be able to make large sums of money using the j16 method. Right now I am assuming that there are methods out there which might help me increase my position size as well as make tremendous profits. I am eagerly waiting for some guidelines to be help me with the problems i.e. small position size and flash crashes in stock markets.

Thanks
  • #516
  • Sep 21, 2013 6:16am Sep 21, 2013 6:16am
Quoting InfinitySL
{quote} A few questions that I would ask back to you -- You say: "The J16 method is awesome" -- Have you been consistently profitable trading that method? What makes it awesome? I have nothing against anyone's method but to call a method awesome would imply that it gives you a significant chance at outsized gains and by looking at the second part of your question it seems you aren't happy with it. What is the incentive to trade stocks over Forex? This is an easy one. Stocks have a natural upward drift over time. Furthermore, it seems that there...
What is the name of the pinbar scanner that you are using? Where can I download it?

Thanks
  • #517
  • Sep 22, 2013 4:47am Sep 22, 2013 4:47am
Quoting aserbfx
{quote} bad news came in this night. yesterday evening i tried to short the german "potash" called kali+salz (sdf). they were in a longtime downtrend with a nice close on daylow. but my broker wasn't able to deliver me any. today they drop nearly 25% *argh*
This is what scares me. Say I took a was long a stock and the next day there is some bad news. It gaps down well below my stop loss. This will royally screw my small account. I was just wondering how you guys handle situations like these.
  • #518
  • Sep 22, 2013 1:04pm Sep 22, 2013 1:04pm
Quoting giggles
{quote} This is what scares me. Say I took a was long a stock and the next day there is some bad news. It gaps down well below my stop loss. This will royally screw my small account. I was just wondering how you guys handle situations like these.
I doesn't require rocket science. I was in about 1.5 to 2 percent of AUM in the trade. When it gapped down like 25 percent I lost .25 * .02 or of my "account" or of assets under management. For instance if I had a $10000 account, I would have lost $10000 * 0.0045 = $45
  • #519
  • Sep 23, 2013 2:12am Sep 23, 2013 2:12am
Quoting split_unit
{quote} I doesn't require rocket science. I was in about 1.5 to 2 percent of AUM in the trade. When it gapped down like 25 percent I lost .25 * .02 or of my "account" or of assets under management. For instance if I had a $10000 account, I would have lost $10000 * 0.0045 = $45
OMG! So basically speaking if AUM had increased by 25% you would have gained $45 .. that's it? After waiting sooooooo many days/months the % gain in your account will be a very small amount.

As far as I remember reading position sizing book by Van Tharp -- it goes something like never risk more than 1% per trade. I think he prefers something like a 25% stop loss.

My endeavor is to keep a logical stop loss which preferably is small (something like 10-15%), then the position size will be relatively large and I will gain more.

I assume that you have been successfully trading all these years. So please tell me how you tackle this problem of small position size.

Thanks
  • #520
  • Sep 23, 2013 9:47am Sep 23, 2013 9:47am
Quoting giggles
{quote} OMG! So basically speaking if AUM had increased by 25% you would have gained $45 .. that's it? After waiting sooooooo many days/months the % gain in your account will be a very small amount. As far as I remember reading position sizing book by Van Tharp -- it goes something like never risk more than 1% per trade. I think he prefers something like a 25% stop loss. My endeavor is to keep a logical stop loss which preferably is small (something like 10-15%), then the position size will be relatively large and I will gain more. I assume that...
It also depends on conviction. If you really believe that you did your fundamental and technical homework you can size up your trade. Logically exposure to stocks for instance is lower for me than my exposure to ETF industries/sectors. For example, I might invest 7% of my AUM in the XLB which is the basic materials sector ETF and only 2% in an agriculture company because by investing in a single stock, I am exposed to company specific risk like POT when it gapped down 25%. XLB is very less likely to gap down below 25% in one session because it eliminates stock specific risk so I invest bigger.

At the same time individual stocks can gap down 25% they can also gap up 25% so by investing in industries/sectors only you miss out and that is what separates investment manager from investment manager mainly their: risk adjusted returns. Buffet invests big in a few well thought out and well times ideas, he doesn't have a hundred stocks in his portfolio.

What I have written over here barely touches the surface of asset allocation and "investing" as opposed to "trading". You really have to do your own studying and decide for yourself what suits your character. Move on from Tharp and start reading other books, Tharp as I remember was a trader. I am not a trader anymore I am an investor. I hold trades longer, what is your approach?

- Do you rely on fundamental or technical or quantitative measures of analysis? Or a combination of them?
- What is your timeframe?
- Do you focus on one industry/sector or everything?
- Do you have trading system to guide you through the treacherous market?
- Why do you invest, and what kind of return are you expecting? Do you have a plan?
- Do you think you have an edge to beat highly efficient efficient, what do you think separates you from everyone else?
- How many hours a day do you have for trading/investing?

I could go on and on... it's not an easy field... you need to go out of your way to educate yourself on everything... I can attempt to point you in the right direction... but that is all I can do... I am after all these still a student of the markets and won't stop being one to the day I die.
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