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Introduction on Stock Trend Chart Basis

"It is simple to complicate things but it is complex to make things simple" - Nameless Hero

 

The charts on this site are generated by a proprietary trend model invented by Raymond Tsang, aka Nameless Hero, the developer of this site .

 

I am trying to simplify it here so first I will first walk you through a list of chart features and then I will explain how to apply them.

Here is a list of chart features:

 

A - The stock name with symbol enclosed by parenthesis.

B - The time in eastern region the chart was generated; in this example the chart below was generated after market close. 

C - Bullish level.  A meassurement of the asset's trading activities.  This value can swing between 0 - 100% while 0% means extremely bearish and 100% means extremely bullish.

D - Green background gradient - forecasts the stock is going to trend upward.

E - Redbackground gradient - forecasts the stock is going to trend downward.

F - Period of the chart.  This can be daily, weekly or monthly depending on chart type.

G, H, I - A green bar suggests the current trend is upward.  A red bar suggests the current trend is downward.  A black bar suggests the current upward trend is stronger than usual.  G the bottom bar represents long term trends; H, the middle bar represents middle term trends and I, the top bar represents short term trends.  When all bars share the same color means the current trend is likely to continue.

J - The closing price or current price on that particular date.

 

Stock trend chart sample chart for tutorial purpose.

 

 

Consistency That Matters!

To understand how the charts work we need to know that the price is not important.  We are looking for the consistency of the color bars only.  On the same day if all bars (G, H, I) share the same color then it creates a more accurate trend signal.  A trend can be as short as one day (unusual) or whatever days the trend could last.  A mixed color of bars represents consolidation or flat in technical terms.  Most of the time the bar colors can reliably predict the direction of the next trend.

 

Bullish Level

Bullish level measures the “bullishness” of the stock. This value swings between 0 to 100% and 100% mean extremely bullish while 0% means extremely bearish. As a rule of thumb, we shouldn't buy a stock when the level becomes extremely bullish. We should instead wait for 2 signs to enter buy trades: a low bullish level and the appearance of the 1st of 3 green bars. Alternatively, we can wait for the 2nd or 3rd green bars to obtain a better price, as most of the time you can get a better price then, than buying at the 1st green bar.

 

Stock Trend Charts vs Traditional Technical Indicators

Single traditional technical indicators generally: don’t provide reliable trading signals, have a steep learning curve, and users have to "tune" the parameters. They are also prone to not working in different scenarios. The trending charts we provide have everything you need. They are designed to be simple to interpret, very reliable and don’t require tuning by the user. The best analogy to use in comparing traditional indicators to our model is 2D vs.3D.

 

Stock Trend Charts vs Cycle Theory

 

From the stock trend charts, we can observe cycles underneath, however cycles don't work while the market is moving in one direction for a long period of time.  Cycles are best for swing trades. However the period of cycles vary over time on a per stock basis which mean you have to tune the parameter, plus experience, to capture the right cycle in order to trade.  In cycle theory, they call the off cycle days stretched, or extended, and it is hard to "tune" and predict the next cycle days.  It works sometimes but not all the time.  It's like a radio station: you have to know the exact frequency to listen to the station.  As for Stock Trend Chart, it doesn't have the same problem, so is a more reliable trending tool that doesn't require the tuning and adjustments of cycle theory.
 

What's the Magic Behind Stock Trend Charts?

Believe it or not there is no magic behind Stock Trend Charts.  The model was created based on the boom and bust theory, just like Tai Chi.  It measures the momentum of the trades people do, which is reflective of the price movements and volume force.  After the noise is filtered out signals are revealed and, amazingly enough, trends are observable and reliably to trade.  The model has been sharpened over the years to be able to provide signals at this level and is presented in such a way that most people are able to understand.  The model is hardly fooled by market manipulations because it measures the underneath movements instead of pure price movements.

 

Weekly and Monthly Charts

These charts work the same way as daily charts.  The weekly and monthly charts just provide a bigger picture that daily charts can't give.  Basically it works like a zoom out which gives extra information.  These longer period charts complement what daily charts project.  If the weekly chart shows upward trend while the daily one shows downward, then more likely the daily trend will reverse back to upward quickly and this provides opportunties for people to "add" to their position.  Monthly charts work the same way, by helping to complement both weekly and daily charts.

 

Note we offer weekly charts to our registered users and monthly charts are only available to our paid subscribers.

For inexperienced users, we have pre-defined some criteria to suit most needs. There are three kinds of pre-defined filters: Dawn, Dusk and Short Term.

 

 

Criteria for Dawn

Daily between -100 and 100 (Any)
Weekly between 1 and 100 (At last one weekly uptrend)
Monthly between 1 and 1 (Only the first monthly uptrend)
Short Term <= 39 (
Daily Risk <= 39
 
This page shows the stocks that have just signified an uptrend after a long consolidation,or a sizable correction, and have started gaining momentum and garnered interest by investors and traders. The criteria for this page is designed to filter out the stocks which signaled a monthly uptrend. The next low risk filter is used for locating bottomed stocks in addition to the monthly uptrend. Please be warned that although the monthly signal confirmed a potential intermediate/long term trend reversal, the uptrend may not be sustainable due to fundamental reasons as well as broad market movements.
 
Recommended initialize position size: 5% and no exceed to 20% of total portfolio, stop loss set to at least 15% or apply Long Term Stop Loss in Gold Plan.
 
 
Criteria for Dusk
 
Daily between -100 and 100 (Any)
Weekly between -100 and -1 (one ore more weekly downtrend)
Monthly between -1 and -1 (only the first monthly downtrend)
Short Term > 39
Daily Risk > 39
 
This page shows the stocks that have just reversed to a downward trend. The monthly filter is designed for locating the stocks that have just signaled a downtrend with significant momentum. Additional risk filters are applied to locate stocks between mid to high risk level which opens opportunities for trades. Users can use this filter to either sell covered calls, exit positions or even for short selling. Please be warned that markets tend to crawl up slowly most of the time but tend to drop fast towards the end of the cycle. The makes the chance of successfully short selling a stock is less than in a long position.
 
Recommended position size: less than 3% and no exceed to 10%, since short selling is usually more risky than long positions.  Not recommended for beginners.
 
 
Short Term
 
Daily between 1 and 1 (Only the first daiily uptrend)
Weekly between 0 and 100 (Don't care about weekly trend)
Monthly between 0 and 100 (Don't care about monthly trend)
Short Term risk between 1 and 6 (low short term risk)
 
This filter is designed for short term traders who decide to hold a stock for a couple of days and then cash in profits. The filter is designed to spot the first daily up trend while ignoring weekly and monthly trends. Also short term risk is limited to an extremely low level which provides excellent opportunities for a long position. Users usually need to set a tight stop loss, like within 5% or a little lower than the previous low to protect their positions. Trades like this usually last 6 to 10 days and sometimes even longer. For short term trades, users need to constantly remind themselves to take profit as the signals are designed for holding short term positions.
 
Position size: recommended not exceeding 10% of the total portfolio.