The Public Blog site

Crude Oil - Factor Trading - Peter Brandt

The Next Big Crude Oil Move

 The Next Big Crude Oil Move
 The weekly continuation chart of WTI Crude Oil displays an 18-month H&S top pattern. This is a chance that the Sep 28 high will represent the high of the right shoulder.
 
Crude Oil - Factor Trading - Peter Brandt
Read More
Trading Performance - Factor Trading - Peter Brandt

The 3 Most Important Ways to Track Trading Performance

Trading Performance

Human beings exist day-to-day in a world preoccupied by statistical measures, ranging from numerous personal health metrics (blood pressure, PSA counts, temperature, oxygen levels, heart rate, etc.) to standard weights & measures (gallons, pounds, meters, temperature, etc.) to determinants of economic well-being (GDP, unemployment rates, inflation rates, interest rates, balance-of-payments, etc.) to statistical definitions of every area of our lives. Modern society could not exist without measuring nearly every conceivable thing. Yet, many traders make no attempt to convert their Trading Performance into meaningful metrics. This is unfortunate because meaningful metrics are not simply interesting statistics – rather they can serve important functions:
  • Dictate and guide the development of trading strategy
  • Monitor trading outcomes against intended benchmarks
  • Diagnose potential problems
Read More
World Stock Markets

World Stock Markets – Perma-bears Beware

The dominant trend in major World Stock Markets indexes is UP…UP…UP.  The burden of proof is on the perma-bears. The daily chart of Dow futures completed a 4- week pennant on Tuesday. This type of concise pattern provides swing-trade possibilities.   Read More

Factor Member Questions

  Below are a few Factor Member questions from this past weekend's report I thought you might enjoy.   Question: Peter, how do you protect against large open trade profits from disappearing?    - Factor Member Answer: Read More
losing Trades - Peter Brandt Factor

How much patience should a trader have with a losing trade?

How much patience should a trader have with a losing trade?

  The question on losing trades, all traders must answer for themselves, and there really is no right answer. The answer for any given trader must depend upon his or her trading approach, markets traded, risk tolerance and other factors. For me, the answer to this question is quite simple and multi-layered.
  • My initial risk per trade seldom exceeds 70 basis points and is limited to 100 basis
  • I aggressively advance protective stops within days (sometimes hours) after entering a trade.
  • My goal is to bring a trade to as close to breakeven as possible, as quickly as possible!
Read More
Gold Trendline

Gold Trendline – Bogus or Bullish?

Gold Trendline

This past week, I posted a Tweet stating an opinion that a Gold Trendline chart featured on financial social media by a number of “Gold bulls” was bogus. The issue is an apparent Gold Trendline connecting the Sep 2011, Oct 2012, Jul 2016, Aug 2016 and Apr 2017 highs. I received numerous inquiries on why I did not accept the trendline interpretation – and a number of critical comments.

 

 

Importantly, it was the validity of the present trendline I was challenging, not the analytical or trading abilities of others who believe that the Jun 6 penetration of the trendline represents a significant technical development. In fact, I have enormous respect for at least two other public voices (@jessefelder and @raoulpal) who point to this penetrated trendline as supportive of a bullish view of Gold. I do not hold my own opinion on chart developments to be superior to other very qualified market speculators.

I want to present two perspectives of the “Trendline” as a classical chart configuration – the first perspective through the lens of Robert Edwards and John Magee (“Technical Analysis of Stock Trends”) and the second perspective through my experience trading chart patterns for nearly 40 years.

 

First Perspective  –  Edwards and Magee on [Valid] Trendlines

 

Edwards’ and Magee’s narrative is in italics, followed by my comments.

“It is our purpose … to examine trends … to see how they [trendlines] can be used to reinforce or supplement the technical forecasts derived from our other chart formation[s]….”

Are there other recognizable chart configurations at play in Gold at the present time? Answer – NO!

On the Validity of Penetration –

“We can set up three tests or criteria … for determining decisive breakouts [from trendlines].”

The first is the extent of penetration. To be decisive, prices must not only push through the line but close beyond it by a margin equal to about 3% of the stock’s [or commodity’s] price.”

Has Gold closed above 1325 to 1330, a 3% penetration of the Gold Trendline? Answer – NO! Can the trendline be considered to be valid without a close above 1330? Answer – NO! (I could legitimately argue that the 3% rule is not as applicable to commodities or forex – that 1% to 2% might be more appropriate).

“The second is volume of trading. Activity should always be expected to rise notably on a genuine up-side breakout ….”

Did Gold’s trading volume expand as prices penetrated the Gold Trendline? Answer – NO! Volume actually contracted.

“The third test … applies particularly to breaks which are borderline as far as the margin of penetration is concerned. If prices simply edge up feebly to the underside of the trendline and tend to ‘roll over’ without being able to close clearly above it – then the situation is … critical and the slightest sign of renewed selling pressure may be taken as a signal that the up-trend has been decisively broken.”

Time will tell if this third test applies to Gold. If it does apply, then the next profitable play in Gold will be on the short side.

 

Bottom line is this – if the apparent Gold Trendline does not qualify as a trendline, then there is NO TRENDLINE. In my opinion – for what it is worth – a pattern (any pattern) is only a pattern if it performs according to the expectations set forth by classical charting principles. Otherwise all we have are some coincidental lines drawn on a graph page that have no real meaning.

 

 

 

 

Second Perspective  –  My experience as a chart trader

It has been my experience as a trader that certain chart configurations are more reliable than other chart configurations. My test of reliability is that a completed chart construction produces the expected price move outcome and does so in an orderly and sustained manner without deeply challenging the integrity of the completed chart construction.

I have found that patterns with horizontal (or nearly horizontal) boundaries are far more reliable (as much as two times more reliable) than diagonal chart construction. Examples of horizontal and diagonal chart construction are found on page 3.

The most unreliable diagonal chart construction is the trendline, followed closely by the symmetrical triangle. Do NOT read this to mean that diagonal patterns do not produce profitable trades. I have experienced some wonderful trades involving diagonal chart construction. In fact, over the years many of my most profitable trades have occurred when a horizontal area pattern was completed simultaneously with the penetration of a multi-contact point trendline. In this sense I find trendlines to be of particular importance.

But, the main problem with diagonal chart configurations is that they are subject to a concept I call “morphology.” For example, a completed falling wedge may advance briefly and then fall back to begin forming a longer-duration TBD pattern. As a trader I have little interest in chart construction that is likely to morph.

 

Horizontal chart construction

·         Head and shoulders – when the neckline is flat or slants away from the right shoulder

·         H&S failures

·         Rectangles

·         Right-angled (ascending and descending triangles) – when the breakout is through the horizontal boundary

·         Horns (or sloping patterns)

·         Compound fulcrums (borrowed from point and figure charting)

·         Rounding patterns

Diagonal chart construction

·         Head and shoulders – when the neckline slants into the right shoulder

·         Symmetrical triangles

·         Right-angled triangles – when the breakout is through the diagonal boundary

·         Wedges (falling wedge more unreliable than rising wedge)

·         Trendlines

·         Channels

One additional point about trendlines must be made. All other chart construction listed above carry an implication that price will experience a “measured move.” The violation of a trendline does not carry with it a price target – but simply indicates that the price behavior of the previous trend has altered. Thus, on its face the penetration of a trendline does not convert a bear market into a bull market or visa-versa.

 

Here is the reality – chart construction today is much more complex and subject to failure than was the case in 1933 (Schabacker) or 1948 (Edwards and Magee). This decline in the reliability of chart construction may be due to a number of factors including the impact of HFT and algo trading operations and the predominance of systematic trading programs, especially in the futures and forex markets. It is commonly understood that 90% of the large spec trading volume in futures is driven by computer algorithms.

Classical charting remains a very valid tool for market speculation, but chartists must be increasingly selective in trade identification. Here’s why – WIN RATE DOES MATTER! My experience is that 30% of trendline violations on longer-term charts (weeklies) produce a meaningful move while 70% of trendline violations completely fail or produce moves that fizzle out quickly.

While risk management is far more important than trade selection, all other things being equal the performance metrics of being right 30% of the time are far different than the performance metrics with a 41% win rate (Factor’s historic baseline).

 

An exercise in sequencing

Shown (below) are 30 random sequences of 5-year outcomes (shown as NAV curves) based on Factor LLC’s historical benchmark trading metrics (at a win rate at 41%).

 

 

Shown (below) are 30 random sequences of 5-year outcomes (shown as NAV curves) based on Factor LLC’s historical benchmark trading metrics with one change – lowering the win rate to 30% which has been my experience with diagonal chart construction.

 

In summary, trading diagonal chart construction (in contrast to horizontal chart construction) produces significantly lower trading performance and most likely adds frustration to the lives of those traders who use diagonality in their signaling and opinion-forming processes.

A final word – if you as a trader have found a way to profitably trade diagonal chart construction, including trendlines, then I honor your achievement. It is not my desire to be the benchmark by which other traders are measured.

 

plb

###

 

 

 

.

Factor Membership

.
Peter Brandt is a 40+ year veteran of trading.  Through his Factor Service, members receive:

checkTrading Commodity Futures with Classical Chart Patterns: A free PDF copy of Peter’s classic out-of-print book
checkWeekend Update: 10-16 pages full of in-depth chart analysis and charting commentary
checkAlerts: Detailed information on specific charts as unique opportunities present themselves
checkMarket Commentaries: Communications on specific topics regarding market speculation and trading distributed periodically
checkWebinars: Monthly member-only webinars where Peter speaks about current conditions and fields member questions
checkKnowledge Center: Fast and easy access to current and archived content from Peter’s extensive library of content
checkAutomatic notifications: Email and social media notifications are sent out when new content is published

.

View your Factor Member options here. You could consider your membership in the Factor Service as just one more trade. If the Factor Service is not of value to you, well, it is just one more trade that did not work.   Through the Factor Service I endeavor to alert novice and aspiring traders to the many pitfalls you will face – and to offer advice on overcoming those pitfalls. My goal is to shoot straight on what trading is all about.  For more information watch my 30 minute webinar where we cover the Factor service in depth.

I hope you will consider joining the Factor community.

Factor Trading - An Introduction

.

sig

.

###

Long Term Charts – Video Tutorial – Guest Post

 

Factor Trading is honored to be joining forces with my friend Aksel Kibar and his firm TechCharts to provide comprehensive coverage of global forex, futures and equity markets from the perspective of classical charting principles.   Please see the recording of the video between Aksel and myself discussing this new association.  Link Here

Regards,

Peter Brandt

 

NOTE:  Aksel Kibar’s Tech Charts Service will be launching its limited Founding Member offer this Monday May 22nd!   

 

Long Term Charts – Video Tutorial

by Aksel Kibar

 

Richart W. Schabacker discussed the importance of chart patterns in the averages, in his book Technical Analysis and Stock Market Profits. He concluded that if  many individual issues were to make strong Head and Shoulders formations at exactly the same time, the average chart would, obviously, show a similar Head and Shoulders. However, since the many different stocks do not, as a rule, make their ‘‘peaks and valleys’’ on precisely the same days, the average chart is likley to show a less specialized and distinct pattern. We should, for this reason, expect the averages to show Common or Rounding Turns more often than do the charts of individual issues at times of important reversals.
Most stocks sooner or later will follow the major swings of the market. Individual stocks in a sector or industry group might form similar chart patterns due to economic cycles or sector rotation. These individual stocks can be affected by other factors such as commodity prices.
One should stay alert and start anticipating a major shift in the direction of the trend after finding similar chart patterns developing in a specific sector or industry group. It is important to note that these chart patterns are usually well-defined on the individual stocks when compared with the chart patterns on the averages.
The video tutorial discusses what can be next for the European banks by giving examples from the two major trading themes in energy sector equities and mining companies.

 

 

Please visit the website for more reports and educational content.  Website Link>> https://blog.techcharts.net

 

Regards,

Aksel Kibar

 

 

A Turn of Fortune for European Banks

 

European banks – H&S bottoms forming in major banks

Huge H&S bottom patterns continue to form on the weekly graphs of some major European banks.   UBS, Credit Suisse and Deutsche Bank are shown in the charts below.

UBS traded through its neckline, but the ex-dividend adjustment put prices back under the breakout level. Factor is flat, but I would consider buying UBS if it climb above 18.01.

 

European Banks – UBS

European Banks - UBS - Factor - Peter Brandt

 

European Banks – Deutsche Bank

 

European Banks – Credit Suisse

 

 

 

.

Factor Membership

.
Peter Brandt is a 40+ year veteran of trading.  Through his Factor Service, members receive:

checkTrading Commodity Futures with Classical Chart Patterns: A free PDF copy of Peter’s classic out-of-print book
checkWeekend Update: 10-16 pages full of in-depth chart analysis and charting commentary
checkAlerts: Detailed information on specific charts as unique opportunities present themselves
checkMarket Commentaries: Communications on specific topics regarding market speculation and trading distributed periodically
checkWebinars: Monthly member-only webinars where Peter speaks about current conditions and fields member questions
checkKnowledge Center: Fast and easy access to current and archived content from Peter’s extensive library of content
checkAutomatic notifications: Email and social media notifications are sent out when new content is published

.

View your Factor Member options here. You could consider your membership in the Factor Service as just one more trade. If the Factor Service is not of value to you, well, it is just one more trade that did not work.   Through the Factor Service I endeavor to alert novice and aspiring traders to the many pitfalls you will face – and to offer advice on overcoming those pitfalls. My goal is to shoot straight on what trading is all about.  For more information watch my 30 minute webinar where we cover the Factor service in depth.

I hope you will consider joining the Factor community.

Factor Trading - An Introduction

.

sig

.

###
Cup and Handle - Aksel Kibar

Cup and Handle – Guest Post

 

Factor Trading is honored to be joining forces with my friend Aksel Kibar and his firm TechCharts to provide comprehensive coverage of global forex, futures and equity markets from the perspective of classical charting principles.
TechCharts will begin as a subscription-based service on May 22 — with a pricing discount for Premium Members of the Factor Service.
Our mutual mission is to alert members of the Factor Service and TechCharts to markets exhibiting those classical chart patterns with highest level of reliability.
In the weeks ahead Aksel will post material on the Factor web site so that you can sample the wonderful work he does.

Please see the recording of the video between Aksel and myself discussing this new association.  Link Here

Peter Brandt

 

Cup and Handle

by Aksel Kibar

The Cup with Handle is a bullish continuation chart pattern that marks a consolidation period followed by a breakout. It was developed by William O’Neil and introduced in his 1988 book, How to Make Money in Stocks. Cup with handle is a chart pattern that has a well-defined horizontal boundary. Breakouts from chart patterns with horizontal boundary are usually strong and reliable.  As its name implies, there are two parts to the pattern: the cup and the handle. The cup forms after an advance and looks like a bowl or rounding bottom. As the cup is completed, a trading range develops on the right hand side and the handle is formed. A subsequent breakout from the handle’s trading range signals a continuation of the prior advance. Breakouts that complete a lengthy bullish continuation chart pattern and also record new all-time highs offer great long-term opportunity.

TAG IMMOBILIEN AG (TEGG.DE)

A 2 year-long cup with handle chart pattern formed on TAG IMMOBILIEN, a financial company listed in Germany on XETRA exchange. TAG Immobilien AG is a Germany-based real estate company that focuses on the acquisition, development and management of residential real estate. The geographical focus is on northern and eastern Germany, such as the metropolitan areas of Hamburg and Berlin, as well as on the Salzgitter and Thuringia/Saxony regions and North Rhine-Westphalia.

The stock not only formed a 2 year-long cup with handle chart pattern but also another shorter duration cup with handle chart pattern that is possibly acting as a launching pattern. For more information on launching patterns you can check out last week’s guest post here. (Launching Patterns – Guest Post May 2, 2017). When two chart patterns implying the same technical outlook overlap, the breakout is usually more significant. In this case the 8 month-long cup with handle and the 2 year-long cup with handle continuation chart pattern both suggests higher levels in the coming weeks/months. The daily close above 13.50 levels confirmed the breakout from the bullish continuation chart patterns. The breakout was featured in the Global Equity Markets – May 6, 2017 report. There are two possible chart pattern price targets. One calculated from the 8 month-long cup with handle and the other from the 2 year-long bullish continuation cup with handle. Charts below show both possibilities and how these two chart patterns are labelled. Initially TAG IMMOBILIEN can target 15 levels and possibly continue towards the larger scale chart pattern price target at 16.6 levels.

 

 

 

 

A similar chart pattern developed on CINEWORLD GROUP in the beginning of the year. The breakout and the follow through is a perfect example for cup with handle chart pattern.

CINEWORLD GROUP (CINE.L)

CINEWORLD GROUP is a consumer cyclical company listed on the London Stock Exchange. Price chart completed a 16 month-long cup with handle chart pattern and broke out to all-time high levels. The stock was covered in the Global Equity Markets – January 21, 2017 report under the watchlist. The breakout took place in the following weeks with a strong weekly price action and it was alerted and featured on the Global Equity Markets – February 4, 2017 report. Since then, CINEWORLD GROUP has been in a steady uptrend. With this week’s strong price action CINEWORLD GROUP reached its chart pattern price target at 720 levels.

 


To learn more about Cup with handle chart patterns you can watch this video.

VIDEO :CUP & HANDLE – FRONTIER SERVICES

 

Please visit my website at >>>  https://blog.techcharts.net  where you can sign up for free and receive my weekly Global Equities Market Report.

 

Regards,

Aksel Kibar

 

 

Chart Patterns - Aksel Kibar - Techcharts

Launching Patterns – Guest Post

Factor Trading is honored to be joining forces with my friend Aksel Kibar and his firm TechCharts to provide comprehensive coverage of global forex, futures and equity markets from the perspective of classical charting principles.
TechCharts will begin as a subscription-based service on May 22 — with a pricing discount for Premium Members of the Factor Service.
Our mutual mission is to alert members of the Factor Service and TechCharts to markets exhibiting those classical chart patterns with highest level of reliability.
In the weeks ahead Aksel will post material on the Factor web site so that you can sample the wonderful work he does.

Please see the recording of the video between Aksel and myself discussing this new association.  Link Here

Peter Brandt

 

Launching Patterns

by Aksel Kibar

Chart patterns form over varying duration. On a weekly scale chart, a 3 month-long consolidation pattern can exist within say a year-long chart pattern.  These shorter and longer duration chart patterns can have the same boundary lines and a breakout from the short-term chart pattern can also complete the long-term chart pattern.

In such cases the short-term chart pattern is called a launching pattern. Identifying a launching pattern can be important. Breakout from such consolidation periods will not only trigger a chart pattern breakout signal in the short/medium-term but also result in a long-term shift in the direction of the trend.

The weekly price chart of RYANAIR HLDG formed a 15 month-long cup & handle continuation chart pattern. The handle part of the bullish continuation chart pattern formed a separate 4 month-long rectangle consolidation. The rectangle continuation acted as a launching pattern for the larger scale chart development. Breakout from the 4 month-long sideways consolidation not only completed the rectangle but also breached the boundary of the 15 month-long cup & handle chart pattern pushing the stock to all-time high levels.

 

RYANAIR HOLDINGS PLC (RYA.L)

 

 

 

A similar chart setup developed in late 2016 on a Swedish Technology company FORMPIPE. A well-defined 16 month-long ascending triangle completed as a launching pattern from a multi-year symmetrical triangle. This was a massive long-term opportunity. Breakout cleared strong technical resistance between 9.75 and 10 levels. Tech Carts Global Equity Markets report highlighted the significant chart development in its January 21, 2017 reportSeveral updates on twitter showed the breakout and the trend that developed following the strong breakout.

 

FORMPIPE (FPIP.ST)

Chart Patterns - Aksel Kibar - Techcharts

 

 

Chart Patterns - Aksel Kibar - Techcharts

 

See this Educational Video I put together discussing rectangle patterns in classical charting and more relevant to this post, how they can act as a launching pattern.

 

 

Please visit my website at >>>  https://blog.techcharts.net  where you can sign up for free and receive my weekly Global Equities Market Report.

 

Regards,

Aksel Kibar