Friday, January 14, 2011

INTC Watch

Intel Corp. (INTC) released earnings after the close yesterday. The announcement showed a 6¢ surprise. Prices promptly fell and today are trading 0.7% below Thursday's close.

ppspfe trendpfe loc

INTC has been on the Watchlist since December. I owned it briefly as an earnings play, and dropped it when the technical signals turned against me. On Monday I considered it as a late re-entry for an earnings surprise, and rejected it, based mainly on support/resistance levels.

Good decision.

Nothing has really changed in light of the earnings. The tech signals are bullish, but the price is fairly rangebound, with today's decline bringing it down to the middle of the range.

INTC can also be seen as a somewhat sloppy expanding triangle with an apex on Dec. 23, if you follow that sort of thing (I don't). An expanding triangle is said by some to be a continuation pattern, and in this case, continuation means down.

(Most analysts I've read or talked to don't consider expanding triangles to be valid patterns. They put their efforts into identifying contracting triangles of various sorts, which can on occasion be useful.)

(My problem with chart patterns is the Tinkerbell Effect. The patterns work as long as enough traders believe. Once that belief breaks and traders begin to head to the exits early, then the pattern no longer works.)

Anyhow, that's INTC. I don't like it as a slow-trade either. The technical signals are pretty awful, with the confirmed bear phase beginning last June on the monthly chart.

Monthly chart
ppspfe trendpfe loc

INTC disappears from the Watchlist as of this weekend's Weeklies filing and won't appear in next week's Morninglines.

  • pps - Person's Proprietary Signal.
  • pfe trend - Trend of the polarized fractal efficiency line.
  • pfe loc - Location of the polarized fractal efficiency line.

Key to the PPS/PFE tables
pps bull phase
bear phase
pfe trend uptrend
no trend
pfe loc +100 and above
+50 to below 100
0 to below +50
below 0 to above -50
-50 to above -100
below -100

PPS/PFE Analytical Tools

The analysis uses the daily Person's Proprietary Signal (pps), developed by John Person.

This is a black box signals -- the "proprietary" means that Mr. Person knows how it works under the hood, and I don't. But it has shown a fair degree of success in identifying good entry and exit points, and I find it useful.

For confirmation, the analysis uses an indicator called the polarized fractal efficiency (pfe) technical tool. It uses the fractal math of Benoit Mandelbrot to measure how efficiently move between levels. The higher the efficiency, the more directional the price trend.

The math for the pfe is public knowledge, but it is well above my math knowledge, and so to me is also a black-box signal.

This is a relatively new technical tool, based on fractal math. Investopedia has only a cursory explanation. Wikipedia is silent on the subject. ThinkOrSwim has a fuller explanation.

PPS/PFE Trading Rules

These rules are very preliminary. I’m still trying to figure out how the polarized fractal efficiency signal works.

When Person’s Proprietary Signal (pps) is in bull phase, enter when the polarized fractal efficiency (pfe) line crosses the zero line in an uptrend trend) A pps signal and pfe uptrend have less strength but greater upside potential when the pfe location (pfe loc) is below +50, and greater strength but less upside potential when the pfe location is at or above +50.

When the pps in in bear phase, enter when the pfe trend crosses the zero line in a downtrend. The set up has less strength but greater downside potential when the pfe loc is above -50, and greater strength but less downside potential when the pfe loc is at or below -50.

How should the pfe line be treated when it has flatlined at either end of its range, around +100 or -100. My preliminary observations are that the price by then has had a large run and tends to present a picture of exhaustion. However, by the description of the pfe, a high level should indicate a continued strong trend.

This is something that I’ll figure out as I go along.

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

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