Catching the Bottom

Catching the Bottom

Actually, as every broker will tell, catching the bottom is impossible. Uh- hah. When I was day trading, most of my trades were price action trades based on short term support and resistance. I was doing 30 to 50 trades a day and caught a few bottoms and tops every day. Once or twice a week I would get the bottom and top of a single trade. Even a blind hog will find an acorn now and then.

To catch tops and bottoms you need to be aware of the fundamentals, value, support or resistance, any recent news, recent being in the past three or four days, etc.

09-Nov-15 07:34 ET

ICON

Iconix Brand beats by $0.12, reports revs in-line; guides FY15 EPS in-line, revs in-line; guides FY16 EPS below consensus, revs below consensus  (7.18)

  • Reports Q3 (Sep) earnings of $0.33 per share, $0.12 better than the two analyst estimate of $0.21; revenues fell 19.4% year/year to $88.9 mln vs the $89.06 mln two analyst estimate.
  • Co issues in-line guidance for FY15, sees EPS of $1.35-1.40 vs. $1.38 two analyst estimate; sees FY15 revs of $370-380 mln vs. $375.95 mln two analyst estimate.
  • Co issues downside guidance for FY16, sees EPS of $1.35-1.50 vs. $1.99 Capital IQ Consensus Estimate; sees FY16 revs of $370-390 mln vs. $412.71 mln Capital IQ Consensus Estimate.
  • “We have gone through a difficult transition period, but Iconix continues to have significant business strengths including its diversified portfolio of consumer brands, profitable business model and strong free cash flow generation. All of us at the Company are focused on capitalizing on these strengths and addressing the issues that have impacted more recent performance to improve our results and enhance value for shareholders
Iconix Brand

Nov-15 09:42 ET

09-ICON

 : SouthernSun Asset Management discloses

10.27% passive stake in 13G filing  (8.55 +1.65)

 

 

Courtesy of Briefing.com

blog icon weekly 11-26-2015

Why on earth would you buy into this dog? It sure has a consistent pattern, down, down and down some more. But, but, but.

I originally bought this at 7.26 after the earnings and guidance call shown above. In the picture above of the weekly chart note the support levels of 7.25-5.95-4.55 and 2.55. Also note mm 5.88 (measured move).

With the 12 cent beat on the earnings call and guidance of 1.35 to 1.50 I was sure 7.25 would hold. But but but I was wrong. At this point the trailing P/E was 5.26. It can’t go much lower, right?

I only had a couple thousand shares of a cheap stock and could afford to ride this for a while considering the potential of the recovery. With no improvement beyond the 1.35 / 1.50 guidance ICON should recover to the 15 / 20 dollar area.

So the plan was to buy more at 6.11 and 5.96.

blog icon 5 min turn 11-18-2015

In the 5 minute chart above ICON bottomed out at 6.14. Ya ya, 6.11. I know.

Fortunately I was around the computer when it bottomed and saw what was happening. Often when a stock gets this oversold (at 6.14 the FP/E was down to 4.5) there are so many buyers that it never reaches the actual support level.

The green candlestick with the long tail (called a hammer) right after 11 A M is the low for the day. ICON then bounced to 6.26, only a penny away from the upper Keltner Channel band. A touch on the opposite Keltner Channel band indicates a possible reversal.  6.26 was also the high of the first tick through the trend line before the bottom was put in. Although it didn’t touch, it was a very close thing and was worthy of paying attention to. The next low was 8 bars later at 6.15, a very big deal. This is a higher low or a double bottom, whichever you care to call it, either one is a strong indicator of a reversal. The reason this is a big deal is that if the price can’t move back to the previous low it is most certainly going higher.

When something like this (a reversal) is going on I am putting the support / resistance lines in as the pattern forms.

Now let’s take a look at all the blue trend lines on this chart. The slanting ones are trend lines and the flat horizontal ones are support and resistance lines. The upper trend line is resistance and is first broken four bars prior the bottom at 6.14.This is a minor break but does indicate a little more strength than in the past but is nothing to act on. The two trend lines immediately under the candlesticks are the lower (support) trend lines. Notice that the upper and lower trend lines would converge if this trend continued for much longer. This trend line pattern is called a descending wedge and is a good reversal signal.

When we broke out of the upper trend line ICON popped up to 6.26 (the high of the first minor break) and reversed to the top of the upper trend line. This is a very common occurrence but just as often the stock will continue straight up. At this point I entered a buy stop market order at 6.27 that would not execute until 100 shares of ICON traded at that price. When that happens my order turns into a market order an fills at the best price available. I didn’t want to add to this trade until it showed me that it wanted to go higher.

In the next panel down are two technical analysis indicators. The primary one is Slow Stochastic. It is a momentum oscillator that attempts to predict price turning points by comparing the closing price of a security to its price range. It is orange line in the panel. I use this much differently than the intended use.

The grey line in the middle is the zero line. The red line at the top is 95 and the green line at the bottom is the 10 line. (Look it up to see normal settings) When the green 10 line is pierced I am looking for a buying opportunity and when the red 95 line is pierced I am looking for a selling opportunity.

The most important and reliable signal generated by Stochastic is divergence. This occurs when you have a lower low in the price chart but you have a higher high in the Stochastic panel at the same point. This occurs in the ICON chart above. From the low at 6.14 count back 10 bars and look at Stochastic below. The 6.14 low Stochastic is higher. This is divergence, another strong signal to buy.

The blue / magenta line is Rate of Change (ROC). Let me first say that all the books tell us not to use two oscillators to measure movement on the same chart. ROC measures the percentage change between the most recent bar and “n” x number of periods ago. The default setup in TradeStation is 14 bars back. Mine is set at 6 bars. You can experiment with this measurement to get the best result for your style of trading.

The difference for me is that ROC seems to tell me of changes in buying and selling pressure in advance of movement on the chart at reversal points.

Let me say that when using Stochastic, ROC, trend lines or any other indicator used to help you understand what is going on in a chart, always look at longer time frames. Below are the 10, 15 and 30 minute charts of the same event. Notice that the longer the time frame the sooner the indicators (Stochastic and ROC) reversed. I use the 2 and 5 minute charts to determine if there is a trade and if so, where to get in.

blog icon 5 min 11-20-2015

blog icon 15 min 11-23-2015

The circled break under the trend line is a common occurrence prior to a sudden move in the opposite direction.

The sharp move from 6.40 to 7.03 invites a selloff. Large moves will usually be sold off.

blog icon 30 min 11-27-2015

Well, that’s my story and I’m sticking to it. I missed the bottom by three cents and entered at 6.26, a twelve cent miss. Four or five months from now when ICON is at 15 /16 I can look back and say I caught the bottom in ICON.

Hope this is helpful

Dave C

 

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