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I've developed personal investing strategies for individual stocks and Asset Allocation: 1) Stocks - Fundamental value investor using Free Cash Flow as defined by Buffett's 1987 shareholder letter. Invest only in predictable, undervalued stocks with good management. Buy with a Margin of Safety,... More
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  • When The Trend Is At The End: Quick Profits On BGZ Using Demark Sequential 0 comments
    Dec 14, 2012 11:10 PM | about stocks: SPXS

    [edited hyperlinks on 12/14/12]

    I recently made a quick and easy 15% profit using the Demark Sequential indicator. Below I'll graphically show how the trade happened.

    With the Demark trading system, it's important to look at multiple timeframes to be sure you know the direction of the primary trend.

    On a monthly timeframe, BGZ (Direxion Russell 1000 Bearish 3X ETF) completed the 9-count Setup phase in May 2011, confirming a bearish trend (cell O36)

    Demark Setup - BGZ Monthly timeframe

    Moving to a weekly timeframe, BGZ completed a Sequential indicator the week of October 31st (cell AE160).
    Demark Sequential - BGZ Weekly timeframe

    Now for the daily timeframe, BGZ completed a Sequential indication on November 29, 2011 (cell AE760).
    Demark Sequential - BGZ daily

    To summarize, BGZ completed a monthly Buy Setup in May 2011, then completed a weekly Buy 'Aggressive Sequential' week of Oct. 31st, and then completed a Daily Buy 'Aggressive Sequential' on Nov. 16th. Thus, all 3 timeframes were in agreement. It was the end of the downtrend for BGZ.

    The monthly in May completed at $34.56
    The Weekly completed at $31.71
    The Daily completed at $32.45

    Any of those dates may have been a good entry price but I felt more confident seeing that all timeframes had exhausted their downtrend. In anticipation of the daily signal, I bought BGZ on the 12th day of Sequential - November 15th - at $31.25

    Setting the Stop-Loss: To set the stop-loss on Sequential, we find the lowest low of the Sequential phase and subtract the true range of that bar from the low of the bar. The lowest low (daily timeframe) occurred on October 27th, and gave me a Stop-loss price of $25.18

    The Stop-loss was never in danger because BGZ catapulted higher immediately on completion of the daily Sequential indicator. Because BGZ is such a highly volatile fund - capable of large price swings on any day - I was looking for any of a number of short-term oversold indicators to tell me when to sell out of the trade. One of my favorites - Demark Camouflage - triggered on November 25th. I sold on the open of Monday the 28th at $35.95 for a very nice 15% gain in less than 2 weeks.

    Below is a graphic illustrating the trade:

    Demark Aggressive Sequential, BGZ, short

    If you'd like to monitor your own stocks, ETF's and mutual funds using trend exhaustion indicators try my Excel 'Trend Exhaustion' spreadsheet available on the Research Offers page of HealthyWealthyWiseProject.com.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: SPXS
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