Tuesday, January 6, 2009

Some PnF Ideas

I thought it might be beneficial to show those interested one of my methods for finding playable stocks. This method involves going to Stock Charts' Stock Scan (link also in the sidebar under 'Important Technicals') and scrolling to the bottom, in the Point and Figure section. It doesn't really matter which filter you choose. Make sure you're shorting bearish stocks and buying bullish stocks, though. In this instance, I chose 'Descending Tripple Bottom Breakdowns.' It'll give you some stocks that show this pattern, and I chose a few that had a price over $10. You can go with the penny stocks, if you like, just be aware of their risk, and the fact that you may not be able to short something under $5 if you do not have sufficient capital.

Grab a few of those stock tickers, put them into the Candlestick Chart form. Add some useful indicators like RSI, MACD, Full Stochastics, 20/50/200 EMA, etc. Then do a comparison between the PnF and Candlestick charts. I've done most of the work directly on the charts below. My favorite out of the three is probably UTI. But I would be careful with any of them, as the market is in bear market rally mode. All three definitely look good for a short on overall weak market days.

Use caution. Take responsibility for yourself. Remember risk management is number one!

PS: Downloaded Think of Swim's software to do some paper trading practice. Looks solid. Thinking about posting some results as I progress.


Charlie G. said...

TOS Paper Money is a good platform for paper trading stocks (includes options and forex too). They are fairly stick though for availability of shares to borrow for shorting - them deem many "hard to borrow", but at a broker like Interactive Brokers, you could get them.

Complacent Panda said...

Yeah, I started using it today. It's nice, although I would like to have realtime quotes. I just get realtime quotes elsewhere.

I wouldn't use them as a broker, most likely. Just wanted to check out their software =)

IB definitely looks like the serious trader's brokers.

Charlie G. said...

I forget, I deposited $3.5K in my account and that gave me real time quotes, otherwise, the system isn't as realistic.

Once you establish your minimum, you can withdraw a hunk of it to free up your money (they only require an initial deposit not maintenance), but I haven't bothered. Having my money tied up hasn't been a problem because I'm exclusively paper trading right now.

IB is the way to go if you are going to day trade. Sogotrade also seems promising as they have fees that are share based and also because they are part of a bigger company, may have shares to short. I hate the fee structure at TOS, but they do send you a monkey in the mail!

Complacent Panda said...

I don't like the fee structure at ToS either. A monkey in the mail does sound tempting...but..I think I'll have to pass =) I have used Sogotrade in the past and think they are one of the better discount brokers (at the time I could do trades for $1.5; but $3 isn't bad either). I just found another broker, optionshouse.com, that does unlimited share trades for $2.95. They look promising. Not quite sure about the shorting situation with them, though.