Research Notes¶
Personal research learnings and discoveries from studying charts, videos, and strategies.
Bulkowski's Pattern Site¶
Track Record
I looked into Bulkowski's website. It's called the Pattern Site and it looks really good. He also has data on his own predictions for the S&P 500 - he makes it at the start of the year and he does it for the whole year.
If you look, only in the year 2015 he predicted that it'll go up but it went down. In all of the years when he said it'll go down, maybe it went much more down. And when he said it'll go up, it usually went up.
So at least the directional correlation was correct in the end of the year but only in 2015 he thought it will be positive but in the end of the year it ended up being negative.
Yahoo Finance Technical Analysis¶
Moving Average Setup¶
On the Yahoo website: - Select the interval as one day - Use a moving average of 200 with simple option - OR select one month as the interval and do 10 as a period (that would be like 10 months) - You can select exponential moving average or simple moving average or weighted moving average - Or you can even do time series protection
It's really good. There are many options.
10-Month Moving Average Observations¶
I checked what is happening for the 10-month moving average for S&P 500 and you can see that it actually escapes the bear markets in 2008 and before that.
Bollinger Bands¶
I also looked into Bollinger Bands and here you can also select: - The period for the moving average - The standard deviation count (1 or 2)
So you can use this Bollinger Band to see if a stock has gone out of its range, then it'll revert back to the range.
AMC Meme Stock Analysis¶
Black Swan Event Trading
I looked into the stock AMC which was this meme stock in May 2021. Here because of the Reddit group AMC Stock or Wall Street Bets, the stock suddenly went above the 200-day moving average and also exited the Bollinger Band.
If you see - if you got it when it exited the Bollinger Band at $64 and if you sold it when it is just entering the band again at $19, you could have made $400 per share.
So just looking at the bands is also a viable strategy. You need cash influx to buy and sell at such Black Swan events.
My Dogecoin Mistake Analysis¶
What Went Wrong
If you look at my previous mistake of buying Dogecoin USD on 17th May 2021, you will observe that:
- I got the stock when it has made a crazy jump out of the Bollinger Band on 10th of May 2021
- It was already coming down and inside the band
- When I got it on 17th it was already inside
- After that it fell down and it never recovered again
So even if I followed a simple charting process like this, and if I had looked into 200 days moving average, I could have been saved if I just exited at the point when the stock entered that 200-day average and Bollinger Bands - at least saved myself from the dip.
Tesla Analysis (February 2024)¶
Current Situation¶
If you look at the current stock price of Tesla as of 12th February 2024, you see that it's at around $185 - that is way below the 200-day moving average which is around $230.
So Tesla stock is obviously undervalued and it is going to go back to its mean value of at least $230 or even higher.
The Dilemma¶
The Timing Question
But the question is when and how long would you put your money into this and hold it? I guess that is why most of the people don't buy and also you don't know if it will further dip in value. But for sure it'll eventually go up and you could make a $50 profit on each share.
So now I look at this situation - you know that the stock will eventually go up but the question is when.
Options Risk¶
So that's why people buy stock options and if someone bets that it will go in one month or 6 months or 3 months with a put call then it's very risky because if it doesn't go then your stock option is expiring. It is a ticking time bomb and if you do like a bull call spread then you won't make much of profit.
I think now I understand why the stock market is really interesting and also stressful.
Capital Requirements¶
Since you know that you're going to get at least $50 profit from Tesla stock going up if you buy now eventually (let's say in X months), but you won't have so much capital because the stock value is around $180. If you want to make $5,000 with this trade then you have to buy 100 shares which will cost you $18,000. Also it could be a very long term hold.
Tesla Historical Analysis¶
The Power of Capital
I think if you observed the moving average of Tesla stock and if you had bought the stock at around $30 in March 2020 and let's say invested $25,000 - that would buy me approximately 800 stocks.
And if I waited for the stock to come again below or close to the 200-day moving average of $196 in May 2021, then I would have made around $160 profit per share.
That would translate to approximately $130,000 of profit and if you put 25% tax on it, that's approximately $85,000.
So just for the growth of Tesla, its bull run - I could have made $85,000 zero risk.
Imagine if I had put $100,000 into this - I could have made $250,000 approximately.
That is the power of having capital and doing long holds and just watching charts. Imagine institutional investors who have virtually infinite money. No wonder they can profit a lot by investing in such moments and stocks.
Semiconductor ETF Analysis¶
If you do the same with the semiconductor ETF, you could have basically double the profit from each share. It went from $60 to $120 over a period of approximately 2 years. But still it's not bad and this shows why cash is king.
Stock Market as Superimposition¶
Theory
I think the graph of a stock market is a superimposition of some slow features and fast features and the momentum features and so on. Well I think this logic of momentum trading or swing trading might actually make sense.
IBKR Technical Filters¶
Screening
You can select various technical filters in IBKR and select only stocks which have: - % volume change - % price change since start of day - etc.
30-Minute Trader Observation¶
Market Open Pattern
I observed that for most of the stock, the prices rise by few % after market opens at 15:30. I think this is what "30 minute trader" means.
Financial Wisdom Video Learnings¶
10-Month Moving Average Strategy¶
Back-Tested 100 Years
This fellow says that if one looks at 10-month moving average and picks any stock like Amazon or very volatile ARK Innovation by Cathie Wood or S&P 500 which is very stable over the period of 100 years, he found that it's a much better strategy to sell when the stock goes below 10-month moving average and buy when it goes above 10-month moving average compared to long-term buy and hold which many people do.
The strategy is back-tested 100 years and he has a really good video on it. This is freaking amazing.
How to View: - Look at the monthly chart - Use monthly chart and use 10-period Moving Average
Video: https://youtu.be/aenu7yUxTr8?si=py7V1cVc7ZYfs_Ax
Paul Tudor Jones Video Learnings¶
- A newbie investor tells himself about the expected profit - instead he should think in terms of risk and reward - that should always be the story you tell yourself
- Investing is all about defense, not attacking - this perfectly suits my mentality