Wednesday, January 19, 2011

MVO Watch

High-yield dividend play MV Oil Trust (MVO) took a dive today before retracing about two-thirds of the fall. A key technical signal weakened, and I have taken my profits and jackrabbited out of my position.

phase pfeppstrend

MVO fell sharply when it went ex-dividend four trading days ago and has since opened and closed within that day's range.

In a posting after the fall, I identified $37.50 as my get-out-Dodge point. Today's drop hit $37.62 before bouncing.

Fact is, looking at price alone, this is the second test of the lower end of the range since the disastrous ex-div date.

What makes today different is that my main technical tool, the polarized fractal efficiency line, fell below zero for the first time since mid-November. That lends credence to the argument that the ex-div decline is something more than a brief stumble.

The price set an all-time high two days before the ex-div drop and halted a two-decline only at the 50-day moving average, more than $8 down from that high. The prior swing high was set December 22 during the uptrend.

Reversal Levels
  • $43.73, +11.8% (all-time high)
  • $39.40, +0.8% (20-day moving average)
  • $39.10 --- You are here.
  • $37.50, -4.1% (prior swing high)
  • $35.38, -9.5% (50-day moving average)

MVO remains entirely in bull phase on the slow trading monthly chart, as it has been since July 2009.

Monthly chart
phase pfeppstrend

A more phegmatic trader than myself would have stuck with the slow-trade chart and stayed in the position. I tend toward the choleric, myself, when it comes to trading. Sometimes prices bounce like a bungee cord. Sometimes they bounce like brick. I can never predict which it will be.

I regained about 10% profit by waiting a few days after the day-chart bear signal to close out, so I'm not at all unhappy with my decision-making on this position.

There is a lot to love about MVO. The main thing to hate is its low liquidity, with volume averaging under 200,000 shares a day, and the consequent lack of news coverage and increased chance of manipulation.

But, I like the Goldilocks-level 7%+ dividend -- not too low, not too high, just right -- and I'll keep an eye out for a bull phase signal to trigger re-entry. The next ex-dividend date likely will be sometime in April.

Table Abbreviations:
  • pfe - Location of the polarized fractal efficiency line.
  • pps - Person's Proprietary Signal mode.
  • trend - Trend of the polarized fractal efficiency line.

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

More on the PFE/PPS analysis

Read a detailed explanation of the analytical tools and how they’re used, including trading rules.

Read about the backtesting used to develop the PFE/PPS strategy.

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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