Saturday, April 9, 2011

4/9 Sliders

Sliders, in my price-channel analysis, are stocks who just slide along the price-channel boundary, pushing it out in the direction of the trend. A slide can last for a very long time.

They can also be called "strongly trending issues" or some such. Me, I prefer the term "sliders", as a tribute to one of my favorite old TV series and also one of my favorite unhealthy foods.

But what is a slider? I know what they look like, but for consistent trading, I need specific rules.

For my purposes, a slider is an issue that three weeks or more ago, broke out of the 55-day price channel and, after the breakout, has not closed below the breakout level and has not traded below the 20-day price channel boundary opposite the direction of the breakout.

The three-week rule, as of this weekend, means the breakout must have occurred on March 20 or earlier.

Now, with those rules, sliders must be not unprofitable over the long haul. I use the double negative because a slider can also be a sidewinder, moving neither up or down to any appreciable extent.

And under certain circumstances, a slider can be a money loser, with huge pullbacks from the price channel boundary, without losing its slider status. For example, a breakout caused by a gap well beyond the 55-day boundary can take a huge loss without trading below the breakout level or piercing the opposite 20-day price-channel boundary.

For this list, I scanned stocks on the CBOE penny increment options list down to volume of about 3 million -- down to AMZN, more or less. And I also scanned exchange-traded funds down to a volume of 500,000 shares.

And I also scanned forex, reported below in a separate table from stocks and exchange-traded funds.

The question remains, what’s the best way to trade sliders? I mean, a drop down to breakout level or to the opposite 20-day boundary can cause a massive loss.

My trading style tends to see wheels within wheels. I treat the direction of a slider’s slide as the tendency, and then trade with that tendency according to the parabolic sar and other stop/loss levels, just as I would with any issue when trading by price/channel rules.

I won’t buy and hold for the long-run of a slide, generally, but will trade in and out as immediate circumstances dictate.

In other words, the slider designation is a trade selection tool, not a trading rule.

Stocks and ETFs
sym phase adx bday blevel
AGC     feb17 $161.45
AMR     feb22 $6.91
BBY     2010dec14 $38.84
CHK     2010dec20 $24.32
CVX     2010dec8 $86.63
EUO     mar17 $18.28
FXE     mar17 $139.72
HK     mar16 $22.08
MRO     jan13 $40.77
NBR     jan31 $24.45
PFE     jan4 $17.90
PM     feb15 $60.14
SBUX     mar10 $34.79
SIVR     feb17 $31.02
SLV     feb17 $30.44
SWN     feb16 $40.16
TGT     feb18 $60.97
TSO     feb4 $20.40
WMB     feb17 $28.07
WMT     feb22 $53.14

For forex, I’ve cheated. Only three pairs became sliders before the March 20 cut-off, but six achieved sliderdom after the cut-off but before the end of March. Call them sliders aborning, and I’ve included them in my list.

sym phase adx bday blevel
AUD/JPY     mar29 ¥84.465
AUD/USD     mar24 US$1.0201
EUR/GBP     mar14 £0.8671
EUR/JPY     mar29 ¥115.978
EUR/USD     mar17 US$1.4035
USD/HUF     mar18 Ft193.17
USD/ILS     mar29 ₪3.5102
USD/MXN     mar31 Mex$11.8789
USD/ZAR     mar31 R6.7959

  • phase: Green for a bull-phase breakout, red for a bear phase.
  • adx: Average direction index location, indicating the strength, or the temperature, of the trend. Orange for 40 or greater, aqua (light blue) for 30 and up but below 40, magenta (light purple) for 20 and up but below 30, and brown for anything below 20. (Mnemonic: Orange for the overhead sun, blue for the surrounding sky, purple for sunset on the horizon and brown for the earth.)
  • bday: Breakout day, the day the price broke through the upper or lower 55-day price line.
  • blevel: Breakout level, the price level of the line that was broken through.

About channel analysis

Read a detailed explanation of my channel analysis method, including trading rules.

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