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John Petersen
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John Petersen is the executive vice president and chief financial officer of ePower Engine Systems, Inc., a Kentucky-based enterprise that has developed, built and demonstrated an engine-dominant diesel-electric hybrid drivetrain for long-haul heavy trucks that promises fuel savings of 30 to 40... More
My company:
Fefer Petersen & Co.
My blog:
ipo-law.com
  • My Favorite Charting Method 16 comments
    Sep 7, 2011 10:17 AM | about stocks: AXPW
    For the last 20 years or so I've used volume weighted values to track both price and volume in stocks that are important for me. This instablog is an introduction to my methodology and what I look for. Since they're the easiest to access, I'll use the numbers for Axion Power (OTCQB:AXPW).

    Since I believe supply and demand are as important as business developments when trying to predict market behavior, the first chart I watch is changes in daily average volume over time. To keep things simple, the following example shows how the 10-day and 200-day moving average trading volumes compare over the last three years. It's also a classic example of the way micro-cap volatility tends to cycle around the 200-day average over time.



    The important takeaway from the graph for today is that the 10-day volume is about ready to penetrate up through the 200-day volume which usually foretells a sustained ramp in trading volume.

    The second set of values I track are volume weighted moving average prices for periods of 10-, 20, 50- and 200-days. I've found that volume weighting eliminates the day to day volatility and offers a better view of how a stock is behaving. In the following chart, I've also included the 200-day moving average volume on a secondary axis.



    The two points that I've marked with arrows were the announcement of the Exide partnership in April 2009 and the announcement of the DOE grant in August 2009. The spike where the volume line passes up through the price lines was about the time the BMW announcement was unveiled. In each case the 10-day started on the bottom and ultimately penetrated up through the 20-, 50- and 200-day lines.

    While it's hard to see without magnification, the 10-day VWMA has just penetrated up through the 20- and 50-day lines and the 50-day average has increased by a fraction of a cent. Since all the moving averages retested their lows over the last month and the curve shape is very similar to what we saw with the 2009 announcements, I think there's a fair chance the price could spike up sharply from here, rather than trend up slowly.

    Volume is one of the strongest forces in the stock market, and Axion's volume numbers are very hard for me to ignore.
    Stocks: AXPW
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Comments (16)
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  • H. T. Love
    , contributor
    Comments (17255) | Send Message
     
    John,

     

    The charts aren't showing for me.

     

    Can you see them OK when you come in from the link in Maya's insta?

     

    I don't know if the problem is on my end or not.

     

    HardToLove
    7 Sep 2011, 11:04 AM Reply Like
  • John Petersen
    , contributor
    Comments (29448) | Send Message
     
    Author’s reply » Give this link a try instead.

     

    seekingalpha.com/insta...

     

    If they don't come through for you, shoot me a quick e-mail jlp at ipo-law.com
    7 Sep 2011, 11:07 AM Reply Like
  • H. T. Love
    , contributor
    Comments (17255) | Send Message
     
    OK. It's the older browser version on my normal platform (known bug).

     

    Comes through fine on my other unit and on the old one if I click the blank space, I can seen the expanded charts.

     

    The bug is inconsistent and I didn't think of testing that first.

     

    Sorry about the waste of time.

     

    HardToLove
    7 Sep 2011, 11:28 AM Reply Like
  • John Petersen
    , contributor
    Comments (29448) | Send Message
     
    Author’s reply » Chasing down problems is never a waste of time because there are a lot of folks who'll blow that kind of thing off if it doesn't work right away.
    7 Sep 2011, 11:31 AM Reply Like
  • Mayascribe
    , contributor
    Comments (9584) | Send Message
     
    I see the charts and boy are they are working for me. Loving the 10 day bullish crossover that is occurring right now.
    7 Sep 2011, 11:11 AM Reply Like
  • John Petersen
    , contributor
    Comments (29448) | Send Message
     
    Author’s reply » The thing I like best about the VWAP lines is the eliminate a lot of the backscatter clutter and don't treat a million share down day as an offset to a 100,000 share up day. I think it just adds a level of precision while smoothing the lines a lot.
    7 Sep 2011, 11:19 AM Reply Like
  • Mayascribe
    , contributor
    Comments (9584) | Send Message
     
    FYI: My middle sister added to her position this morning, and my eldest just received a text suggesting to do the same; we're debating about buying some ATPG preferred that I had pointed out, with a 10.58% yield.

     

    I just can't get over how the 200 day is zooming upwards. Shows that whatever Quercus or Special Sitz is selling, others are buying.

     

    For me, it's a new slant on a short squeeze.
    7 Sep 2011, 11:32 AM Reply Like
  • John Petersen
    , contributor
    Comments (29448) | Send Message
     
    Author’s reply » That 200 day volume curve shows core demand, which by definition is half of volume. When the substantial bulk of the selling is coming from rapidly depleting inventories, there has to be a time when the well runs dry on the sell side because nobody including Quercus and Special Sits has an unlimited supply. Once the well runs dry the only people that matter are the ones that did all the buying.

     

    Volume pulled the price up through the end of March. That pull is still intact but it's impact has been muted by over-exhuberant selling. Thank heavens for Econ 101.
    7 Sep 2011, 11:38 AM Reply Like
  • Mayascribe
    , contributor
    Comments (9584) | Send Message
     
    Reminds me of freshman year, and Professor Grimes walking into the class with a couple of coat hangers shaped into curves, saying how the whole room was a three dimensional chart, and the coat hangers represented x,y,z axises.

     

    For a brief while, I did not catch on, until that ahah moment of epiphany occurred. Great long term memory!
    7 Sep 2011, 11:47 AM Reply Like
  • amishelvis
    , contributor
    Comments (143) | Send Message
     
    I keep forgeting that the bulk of axpw stock is being held by owners/insiders,, sure does keep things interesting.
    7 Sep 2011, 11:39 AM Reply Like
  • jakurtz
    , contributor
    Comments (1909) | Send Message
     
    Ohhhh.....how I would love to see it break that .68 today! It is just holding on by a thread.
    7 Sep 2011, 01:04 PM Reply Like
  • lsd_lsm
    , contributor
    Comments (134) | Send Message
     
    John,

     

    Thanks for the TA commentary, would love to see more when you have time ... do you have any general TA reference materials that you could recommend?

     

    Thanks.
    7 Sep 2011, 01:50 PM Reply Like
  • John Petersen
    , contributor
    Comments (29448) | Send Message
     
    Author’s reply » Like many things I do, these are methods I've developed over the years to help make tools that are relevant to stable and sustained markets useful for more volatile micro-cap stocks. For real TA, guys like HT Love are a far better source.
    7 Sep 2011, 01:57 PM Reply Like
  • walleke
    , contributor
    Comments (55) | Send Message
     
    John,
    Instead of using a fixed number of days in a moving average, why not use the number of days where the sum of volume equals the outstanding number of shares? That way you are measuring the last "market capitalization" of the stock, automatically weighted for volume.

     

    A moving average has a lag, i.e. the time at which the average is valid is not at the forward end of the series, but (approximately) at the time of the median (in volume) of the shares used in the average. Thus, when using a 200 day MA one should plot prices with (approximately) a 100 day lag.

     

    This would make clear that moving averages have no value in predicting future price or volume movements.
    8 Sep 2011, 11:09 AM Reply Like
  • John Petersen
    , contributor
    Comments (29448) | Send Message
     
    Author’s reply » What I'm trying to do with these charts is get a feel for both short and long term supply and demand dynamics at a particular moment in time because it's a truism in the market that price follows volume. The methodology you suggest might be useful for large companies with long histories, but in a company like Axion where the total trading since inception is only 106% of the total shares outstanding, it doesn't seem likely to provide a lot of useful data.
    8 Sep 2011, 11:31 AM Reply Like
  • greengirl64
    , contributor
    Comments (223) | Send Message
     
    Thanks, John. What an interesting way to read the charts. I'll give it a full read this weekend.
    30 Sep 2011, 02:58 PM Reply Like
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