Trading Education: Question regarding forecasting – Jan. 9, 2012
I thought of sharing question so that others can learn as well……
Anonymous wrote last Jan 7, 2012:
Here is the advice given….
Here in PACS, we guide you to become risk adverse traders. We avoid chasing stocks that have gone substantially up. We strive to position ourselves at every initial phase of a rally. I believe a buy recommendation on AAI was given three-four trading days ago and that last Thursday and Friday, we started looking for a sell window. While no direct recommendation was given on WIN because of the risk it comes with it, there was a general advise to stay away on stocks given last Friday and alert to start looking for sell window last Thursday.
Trading is all about timing and risk management. It will be hard to give a direct advise at this time when stock have already corrected especially WIN. It can either go up or down and I really don’t know. PACS helps us determine and describe the underlying strength/weakness of a stock at the top or bottom but it was not meant to forecast in between.
I suggest you google “Risk Management in Trading”, “Stop Loss” and setting up “Trailing stop profit” or find it on youtube. It will help you improve your trading.
Remember the key to longevity in trading is with money management. The hard truth about trading that others don’t tell you and people don’t wanna hear is this….Normally, out of 10 stocks you buy, there will only be 2-3 winners.Despite the challenge, successful traders will still come out as winners because they learned to maximize profits and limit their losses. Having master this knowledge will really help you stay ahead of this trading game we play. Good luck!
Trading Education: Question regarding AAA trade – Dec. 21, 2011
sorry for the late reply….good question.
i failed to elaborate further on this. i forgot to point out regarding gap open which i was anticipating.
apparently i gave the first resistance at 3.57. i was thinking that if AAA opens higher and first resistance breaks,there is a chance that 3.68 will be tested. of course, there will are traders who will try to buy at the at the gap open.
the line that states “to cut if 3.68 don’t break” are addressed to those who are aggressive in buying and might have bought higher at the open. to be specific, these are buyers who bought at the break above 3.57. remember yun mga bumili ang iniisip eh ma-break ang 3.68 resistance. yun ang expectation nila nun bumili sila.
what happened was that this expectation didn’t materialize and therefore because the plan did not go as intended…the right thing to do is to get out of the position. lets not forget, when we trade…we always have to have a plan. the plan are your basis whether ang ginagawa mo ay tama or mali. kapag ang plano di natutupad alinsunod sa inaasahan then masasabi natin na mali na ang trade.
it doesn’t mean that once you exited trade eh wag ng balikan. pwedeng bumalik but we have to re-evaluate and come up with a new plan again. that plan will again serve as your basis if tama or mali again ang ginagawa.
how do we know that the plan didn’t materialize?
1) very obvious price didn’t go above 3.68
2) remember resistance becomes support and vice versa. after breaking resistance at 3.57, it automatically became a support. ang expectation was for 3.57 to hold after breaking kase it now became a support. if 3.57 holds then meron pang chance that 3.68 may be retested again and probably be broken. ang kaso, it didn’t. when the price pulled back, it went straight below it and therefore became a resistance. ngayon instead of one, naging dalawa na resistance…3.57 and 3.68. mas mahirap na sila ma-break.
*always remember that aggressive buying will always require aggressive cut loss mechanism. that is the only way we can insure that we don’t get burn on our trades.
on the other line which states sell if “3.32-3.30 breaks”…they are meant for those who will buy at the bounce from the support which are from 3.35-3.37.
why cut at 3.32-3.30 not immediately below 3.35 (the support)? the logic behind it is that…we want to give some room for the price to maneuver. kung baga, we are giving our trade the chance to prove its worthiness. like a parent, mahirap masyadong stricto sa anak natin. dapat bigyan din natin sila ng room to grow but at the same time we can’t also be too lenient at baka tayo sawayin naman.
*conservative buying must be given some room to wiggle in order to let it grow and develop but never get to lenient that it will hurt our capital.
there are smc backdoor rumors that are circulating around on this stock but i don’t want to go into that zone. once we start to dip our hands and trade on rumors, am afraid we can never go back to a safer way of trading which is following a method that works.
we can get lucky once or twice but when you get hit….it really hits hard that it tends to wipe out all the hardship and effort one have put into trading. there are those who can’t get back anymore because they loss a lot of capital. if you don’t believe me, ask those who traded BHI and IP at the top based on rumors and are now stuck. you will know what i mean. 
REMEMBER A TRADER CAN BE WRONG 80% OF THE TIME BUT CAN STILL MANAGE TO HAVE 50% OVERALL GAIN.
HOW? by minimizing the losses on 80% losing trade and maximizing profit on the 20% winning trades.
THIS IS THE HOLY GRAIL OF TRADING…its all about money management and the system/method that one employs. 
Trading Education: Some PACS trading rules to follow – Dec. 13, 2011
Since the market will likely be a bid down especially at the open, I thought of doing a trading education article again.
I guess those who regularly follow PACS by now have an idea on what stock I regularly trade and what stock I avoid. For the sake of new readers, let me state it again. The basic rules that I follow in trading are all based on PACS. Here they are:
1) Buy only stocks which trends are up or have turned up from down and avoid those that are trending down.
2) Buy in the early phase of uptrend and be skeptical on stocks whose trends have been up for several days already (9 or more new closing highs).
3) For stocks already trending up:
a) Buy on pullback but always wait for a price bounce above confirmation bullish level or strength pivot point before buying and never on the way down.
b) Or buy when new closing high is established especially during early phase of an uptrend.
4) Never average down. A mistake can’t be corrected by another mistake. Most of the time it will result to compounding losses.
5) Remember that generally, morning trades are ideal for selling and the middle part of trading are for scouting and observing stocks while the last hour works best for buying.
Personally, I believe that longevity of every trader that follow PACS will be determined by two things:
a) The discipline to follow and understand PACS.
b) Ability to cut losses early and let profits run. (Majority of beginners does it oppositely.)
Now let us also discus what happened yesterday.
Just like everyone else, I came in the market with a bullish expectation. Dow was up and European markets also have reacted positively over the weekend EU meeting. My initial thoughts were also to buy into the market.
But unlike everyone else, something stopped me from executing my buy plan. Remember I seldom initiate a buy into the open. Emotions run high during opening and traders especially the beginners usually let their feelings dictate their trades. That is why we usually see the opening trade either gets extremely bid up or sold down. And so I waited for a while to see how the market will perform after excitement have subsided.
Here was my initial post on my FB and tweeted during early trades.
Apparently while observing the market, I noticed that gains were not holding up. It made me doubt my buy plan and became skeptical. In other words, my expectation over on our market was not being met and thus I quickly realize that the market is proving me wrong. Here is my follow up post on FB and on Twitter.
I still gave my expectation a chance and continued watching the market but when the overall market turned negative. I abandoned the idea of buying. At the same time I turned my attention to MEG. I noticed that its uptrend was under pressure and so I posted another comment.
Some of you will ask what if I made a mistake of buying stock whose trend are still up but have turned into a loss at the same day I bought it? Usually from experience, trades like this seldom become a winner. The right thing to do is to sell all but sometimes the right things are the hardest to do. In this instance, because the stock still is trending up, I might give half of what I bought a chance and cut the other half. Of course that will depend if the stock I bought are still in positive territory. I will even decide to sell all if that same stock I bought turns negative and sellers become predominant in the trades.
Lastly, let me just remind again….”stocks that are cheap tends to become cheaper while stocks that are considered high usually are the ones that become dearer. Always check PACS numbers and monitor prices carefully before deciding to buy. Good luck!
Daily PACS Nov. 29, 2011
Author’s additional notes:
For two days, I been sounding off an alert that Dow may rally anytime. Well last night, it heard my call and rallied big time. It closed near the high of the day and up by 291 points. I guess it is already given that for today our bias will be to the upside just like what i said yesterday and also last Friday.
But before we all get excited and buy the first stock that moves today, let me just bring all your attention to the general market condition. For that, we will need to look at PACS numbers. Let’s check the PHISIX first. We currently have a market that is trending downward. In order for its trend to reverse, the local market have to rally at least 45 points and closed above 4272. Once that happens, the general trend will now start to trend upwards. That is the time we can really rejoice and start looking for buying opportunity especially on weakness.
Another thing to note are the trend of each stock issues especially the blue chips and second liners. They are mostly down and are on red ink. Remember that price action reflects the confidence of every trader and investor. It simply means that overall sentiments of the market are still bearish. This is one reason why some issues wants to rally but can’t seem to find the right traction and therefore are not moving upward.
The lesson here is to be mindful of the trends of each stock not just the stock you own. It will give you an idea whether a rally will sustain of not. This is one way to use PACS as a sentiment indicator.
That said, we will be looking at issues with low risk and see if they can manage to have a sustainable rally. They are TA, VUL, GERI, MEG, ALI, EDC, MWIDE, BPI, SMPH, SMDC and JGS. We will be observing in accordance with PACS numbers.
*For new readers check out “How to use” PACS page found at the sidebar or click this message.
*Please note that PACS’ price alert level will always supersede any opinion coming from the author.
*Try not to chase stock and always try to buy or sell near PACS given points.
Trading Education: Some new questions regarding the use of PACS – Nov 28, 2011
Am sharing some questions and answers regarding PACS….
“For example yung MPI, UP ang trend nya, meaning its ok to buy kasi up ang trend nya? say bumili ako at 3.44 den halimbawa tumaas(since up naman ang trend) pagkabili ko at pumalo ng 3.51 pero ang analysis eh magreduce na ako pag pumalo sa 3.51.. so ganun po ba? hehe.. medyo nakakalito pa.. Pasensya na po at maraming salamat..”
PACS works well at reversal tops and bottoms. Whenever the trend is already up, it assumes that you already have a position and that you are just looking where to sell it.
In the case when the trend is already up and you’re looking for entries, it is highly advisable that you use other tools such as technical chart to time your entry well.
For those who are not familiar with technical charting or don’t have any other method to use, there are two possible ways to use PACS and still be able to trade on stocks whose trend are already up:
One is to buy when recent high of stock is broken. For example, Y stock trades from 3.00 to 3.50 on a zigzag pattern. After hitting 3.50 level, the price retreated at 3.35 level and consolidated. In this case, buy trigger will only come once 3.50 is broken which will probably be at 3.51-3.54 levels. Remember to keep your buys as close as possible to the recent high and never chase stock price.
The other is through the use of “weakness pivot point” or “bearish confirmation level”. Instead of using this as your exit point, you will use it as your buy point reference guide. You will need to monitor and wait for the stock to bounce above the levels given before executing a buy. Waiting for a bounce will give an added margin of safety to avoid buying into what suppose to be a sell. This method requires one to have a good judgment whether the stock you want to buy is in a strong uptrend or not. Note that only stock whose trend are up and strong are usually the ones that doesn’t pierce through the “bearish confirmation level”.
Whatever method you decide to use, be sure to always follow PACS when a sell signal is given. There is no IF’s or BUT’s when stock close below the bearish confirmation point. One has to learn to accept mistake and just sell.
Lastly, always remember your trend is always your friend. Own stocks who’s trend are up or about to go up. They are stocks we consider expensive today but they become more expensive as days pass by. Don’t just buy stocks because they are cheap. Usually stocks that are considered cheap today will become cheaper by tomorrow. They are stocks that are trending down.
“Boss alpha, MARC hit a high of 2.27 last week but closed 2.19. PACS is recommending a strong buy if it breaks 2.25. Does this mean it should close above 2.25?”
Yes.
let me lift some words from that “How to Use” PACS section to help me answer your question…
“*PACS works better if applied to closing prices but there are instances that waiting for the final closing numbers will result in getting left behind especially if a stock price is in a runaway mode (either up or down). Traders are therefore advised to exercise best discretion.”
From my experience, the best way to tell how closing will look like will be to buy near closing time. Generally, morning trades are ideal when you’re selling stocks, the middle hour are usually reserve for scouting trades while the last hour works best for buying.
Hope i was able to answer your question well.
“boss..question.. newbie here… reason bakit di completo ang Pricesheet mo is gusto mo kami ang pupuno?? like ung iba sa bearish lang may data ang iba sa bullish..parang ganun???? pero if u were to ask..alam mo lahat un?”
They are complete.
PACS thrives on a principle of trading with the trend and not against it. Therefore when the trend is down, the main focus of PACS will be to tell readers when to enter just in case the trend reverses. It assumes that your not holding any position during the time that it is still trending down and so it doesn’t list any data for “bullish confirmation and weakness pivot” which you won’t need anyway.
The same thing goes when the trend is up; the main focus of PACS will be to tell readers when to exit. Again, it assumes that you’re already holding a position of the stock that is trending up.
Trading Education: PACS in Action – Nov 22, 2011
Today I’ve decided to give a tutorial regarding how to use Price Action Cheat Sheet (PACS). My objective is to teach and give readers a better understanding how PACS work. I will be doing this by sharing some trading examples. So here we go…
Let’s start with the recommendation I wrote yesterday. This is what I said “Lastly, watch also IP and ICTV. They are potential buys with low risk.” Now if you immediately bought two stocks into the open without studying and understanding deeper what my statement means then am sure you are now half smiling and half frowning (ICTV went up while IP went down). Again I can’t emphasize enough the importance of checking PACS before implementing or acting on a trade. Guys please remember that PACS will always act as the final arbiter. Let’s now look at closely what happened in yesterday’s trade.
Note that before the opening bell, ICTV’s buyers were already lining up and bidding the price higher. This price action tells us that there is already a lot of interest coming from traders who were willing to pay higher just to acquire the stock. This is another encouraging sign that should have been taken into consideration.
So there were the alert I issued and then the higher opening price. They were all pointing towards a potential buy signal. The determining factor came when ICTV started trading above .44. Remember that based from yesterday’s PACS (posted above), a buy should be initiated above .44 level. When ICTV started to trade at .45, there was already a confirmation to buy.
I know some of you might be also be thinking that PACS works well only on closing and not on intraday trades. Just like what I already mentioned, there were already potential buying signs at hand (gap up, alert issued and confirmed break point). We don’t want to wait until everybody bought before we act.
Some of your next question will probably be…”What if the breakout failed to hold and stock fell back below .44 level again?” That is the beauty of PACS, we know that our breakout point was above .44 and therefore we will also have an idea where failure will occur. Since a price move below .44 is considered as a failed break then we are expected to act accordingly and cut immediately. Having this knowledge still puts readers to an advantage over the rest of traders because we have a reference point to use to decide decisively of where to cut. This helps us manage our risk.
Let us now compare ICTV with the other stock alert that i made which is IP. The stock also opened higher at 2.00 (previous close was 1.98) but after opening, it immediately started to tumble. Based from above PACS, the “bullish confirmation” column where a buy should be initiated is above 2.07. IP never reached that price therefore the alert which was to “watch IP for a buy” never materialized.
I hope you guys were able to learn something today. I will continue to educate readers more on how PACS can be effectively utilize in trading.
Trading Education: Newbie question..why buy LIHC? – Nov 15, 2011
Yesterday, I came across on a very interesting question regarding my trading approach specifically on LIHC. Am sharing this to everybody for educational trading purposes…
“boss alpha,
gud pm sayo!!
question lang abot LIHC, ano bo basis nyo sa .80 na bullish confirmation? pwde pahingi chart?”
Yesterday, LIHC became one stock among the list that showed activity with price action moving towards “bullish confirmation” level. I bought primarily because of PACS almost had a buy signal on it. At the time, I was thinking that it will soon move and close above .80. I immediately bought at .79 and .80 levels enough to secure position in case it moves up further. It is like my insurance not to get left out in case price moves higher.
“pansin ko kasi prang yung .80 to .81 is distribution phase ng big houses?
pasensya na po kung mdyo noob yung observation ko… ”
With regards to your observation regarding distribution or accumulation, that is subjective. This is what makes market interesting. What appears to you as distribution may look like an accumulation for others. It will all depend on what system or discipline you are following and whether your time frame is short, medium or long term. What is important is that you have a discipline or a system to implement that works. As long as it works, stick to it.
“interesting kasi PAC sheet mo… ”
Thank you! I hope you find it useful.
“i think you also mentioned long ago sa thread mo dito, regarding joining the battle when the forces have already assembled and medyo lamang na sa gira… which i think why you entered the .79/.80 “warzone” for LIHC… ”
Yes and the same principle is what I still apply when it comes to trading.
PACS clearly demarcated the territory between bears and the bulls which is at .80 (neutral zone or “bullish confirmation level”). Yesterday’s price action showed an assault by the bulls on bear’s camp (above .80). Although it didn’t result in a complete success, it showed that bulls now have enough confidence to go on the offensive. This effort also translated to a higher closing price which I considered still as encouraging.
This is what I meant when I said “to join when medyo lamang na sa Guerra”.
“but on the other note, how do you eliminate or minimize the risk of a potential “distribution phase danger””
We can’t totally eliminate risk in the market. It is part of trading. We can only minimize it by measuring the amount of headwinds against us. This is where PACS comes in. Again, it serves as a guide to tell traders how much headwinds ahead.
With regards to minimizing risk on LIHC’s trade, it will be having a cut loss point on a closing price just below .74.
Why .74? I started to look at price action of LIHC after it first appeared on PACS. I know that this stock doesn’t go down below .74 level even during recent market correction. Therefore, I pretty much have an idea where my worst downside will be. Coincidentally, that real trading observation is also reflected at PACS’ “strength pivot point “level.
“ in your PAC sheet… kung sa gira, (e.g. isa kang sundalo ng US marines, pinadala ka sa Iraq, at pumayag at kampante ka naman dahil marami na kayo dun at heavily armed pa, only to find out na nauubos na pala kayo sa mga bomba (mines), suicide bombers at mga taong tingin moy sibilyan pero mga terrorista din pala… ”
Let me correct your analogy of trading as a war campaign. Think of yourself as a General and not a Soldier. The buy and sells we do are like the soldiers that we deploy in the field. They are the capitals we commit to or take out from the market. Note that a soldier will only have one life and thus limited flexibility compared to a general.
As a General, you are expected to study your battleground well. You must always have a backup plan in the event things go wrong. You have to know when to retreat, pursue the enemy or wait for an ambush. And most important of all, every good General knows that it is unwise to send all troops at once in battlefield. He knows that when all his troops get ambushed, he won’t have any army to command anymore.
In relation to statement above, I don’t normally commit all my capital under one buy. I am not a Kamikaze guy who goes all in all at once except on some few instances. I always keep a leeway in case I am wrong and stock price falls further. In LIHC’S case, that fall will be anywhere around .80 to .74 levels. These are also the same levels in which where I will decide whether to commit more capital or not.
For newbies having small capital, one advise I can give is to focus your capital on a few stock and watch it like a Hawk. This will give you enough flexibility to execute succeeding buys or sells in line with prevailing stock trend.
Lastly it does not matter whether I am right or wrong on LIHC, what will matter most is how one will react to succeeding price action LIHC will have. Remember that the city of troy was not conquered in one day. It took time before they were able to invade it. LIHC is not an exception to the rule. The potential is there but we have to give it time for momentum to fully develop. If it happens tomorrow then let’s just be thankful about it. If not at all, let’s learn to follow our exit plan.
I hope I was able to address all your concerns.
Alpha
Price Action Cheat Sheet 