PDE squared at 20% returns

Good morning,

It’s Friday again. The first trading week of the year will be over soon. How fast time flies, and soon it will be Chinese New Year, and I am still hanging around in bars, living the current time in celebrating festive mood. I have a good bottle of Junmai Sake at a very nice sake bar with my alumni and a pretty lady from the MRI department of our local general hospital. We were drinking to celebrate my Finance classmates’ passing of the FRM examination. Well, FRM is the tough Financial Risk Management professional paper and they passed it on the very first attempt, where many have failed. Our meetings are also fun, and obviously we talked about investment, the stock markets, and the coming directions and with their newly acquired professional qualification, risk management. Our idle chats drew much interest from the lady from the hospital and hopefully she can learn some trading tips as much as she was enjoying the nice sake.

I have mentioned when to buy the stock when the candle indicates a “BUY-IF” signal in the previous blog. A reader of mine asked me when should he sell if the signal is a “SELL-IF” candle, since the weekly intraweek candle formation is still indicating the signal. A SELL-IF signal is confirmed and turns into a SELL CONFIRMED signal by one of the following conditions;

The week opens with a downward gap (an opening price below the previous week’s close) signaling a bearish sentiment. The benchmark is the opening price. A confirmation is valid if the week’s prices stay below the benchmark. The pattern of this confirmation can be defined as a black weekly candlestick with a downward gap, or;

the week opens at a level, equal to or above the previous week’s close. The benchmark is the closing price of the previous week. A confirmation is valid if the week’s prices stay below the benchmark. The pattern of this confirmation can be defined as a black weekly candlestick closing below the previous week’s close, or;

the week opens with a big upward gap suggesting a very bullish week in this rarely observed case. However, the prices turn down and the week ended with a long black weekly candlestick still closing above the previous week’s close. The benchmark is the closing price of the long black candlestick. The pattern of this confirmation is a long black weekly candlestick closing above the previous week’s close. If one of these conditions is not satisfied, the SELL-IF alert remains valid without confirmation and three confirmation criteria are sought in the following week.

The only exception is a long white weekly candlestick which makes the signal void and invalid automatically without further search. If there is still no confirmation in the following week, the alerts turn to be void and invalid regardless of the following week’s pattern and the search is terminated. As mentioned, I am not taking the weekly candle formation seriously for last week’s formation since the volume is low, and I am monitoring the daily candle for buying opportunity.

NOV was down 0.97% to close at $47.10. The day’s range was $47.50 to $46.70. I bought a new position at $46.90. PTI gained another 2.29% to close at $21.85, PDE gained 1.11% to close at $33.58, NE lost 0.2% to close at $44.06, DSX was down 2.65% at $15.42 and CAB gained 1.74% to close the session at $15.16. My positions for PDE were squared with 20% returns and the better news is Citigroup is slowing creeping back with gains.

Have a great day.

Francies Cheng
BBus MAppliedFinance