Tea Leaves, Voodoo & Other Dark Forces (3)

Today I am posting another tragic example of machines gone wild or squiggly line madness so common to-day. Our chart is a daily study of Suncor Energy using candlesticks accompanied by an RSI, Bollinger Bands, three moving averages, a MACD and a slow stochastic. At least 11 squiggly lines to ponder. The chart is a daily plot up to the close at $30.69 at May 26, 2010.

Now I never liked Suncor because it has been a persistent under performer through September 2009. I am also not a fan of the tar sands producers because their business models are cluttered with cost problems and environmental issues. Now aside from my personal negative bias I bought the stock for a trade - can you guess why?

I can see the RSI still trending downward, the price is running down a lower Bollinger Band, the price is below 3 moving averages, the MACD has not turned up yet and the slow stochastic has not quite curled up. Finally the candlestick plot has just issued a black bar. So why would I buy now?

Tea Leaves, Voodoo & Other Dark Forces (2)

A few posts ago I displayed a tragic example of machines gone wild or squiggly line madness so common to-day. The chart was a study of Teck Resources using candlesticks accompanied by an RSI, Bollinger Bands, three moving averages, a MACD and a slow stochastic. At least 11 squiggly lines to ponder. The chart was a daily plot up to the close at $35.64 May 14, 2010.

The squiggly line signals were mixed with the RSI trying to generate a bullish positive divergence signal, the plot was into support at the lower Bollinger Band and we seemed to be into support at the 200 day MA. The MACD was into over-sold territory and the Slow Stochastic was also trying t turn up and about to generate a bullish positive divergence buy signal.

Let us now look at a pure daily chart of Teck Resources at the close of May 20, 2010. Keep in mind the daily is very short term and for traders only. Investors should use weekly and monthly charts. In this case we are only using a daily bar chart with volume. Note the break to new highs in April that was false because the new high was not supported by an increase in volume. Note now the subsequent correction – an A-B-C followed by an extension for a total of five waves. Note how the volume has spiked. I am a buyer here for a bounce up to $40. I am stopped out on a close under $30

We Have Lost a Great One

I lost a very close personal friend to-day. Donald R. Stark passed away this morning and is survived by his wife Judy and their two daughters Amy and Jenny.

Don was also Canada’s greatest unknown technical analyst.

Don and I were rookie stock broker/advisors at Richardson Securities and we hooked up in the late 1960’s just a few years before the great 1973-1974 bear market. Don was that goofy guy who drew charts all day and basically ignored the research cranked out by Richardson’s Winnipeg head office. When the great 1973-1974 bear hit we all scattered with Don settling in with Draper Dobie Ltd where he met the soon-to-be cycle legend Ian S. Notley. When Dominion Securities acquired Draper Dobie in 1977 they also had the good fortune to acquire the genius of Stark and Notley who then set out to create the original RBC Capital Markets respected Trend & Cycle Department.

Don Stark was Ian Notley’s right hand. I still have a number of their brilliant 1980 through 1984 publications which I still review to-day. Their great top down calls ranging from calling the bond market “the buy of a generation” to predicting the re-structuring of the huge American multinationals and the early transition from the “old” economy to the “new” economy are the stuff from which legends are created.

In 1987 the Stark and Notley team left the then Dominion Securities Pitfield to part as friends with Ian moving to New England and Don joining myself and Karl Wagner at Market Fax info Services. Don spent another five years there crafting his quantitative and inter-market skills before moving on as a sub-advisor to several respected fund managers.

Don had a wild side ranging from flying jet fighters to driving fast cars to racing sail boats. Don was an expert seaman and he spent all of his latter years on his beloved sailboat plying the waters of Georgian Bay, Lake Ontario and the Caribbean. Thanks for the memories Don

Your pal Bill Carrigan