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Thomas,
As you know, the problem with using MetaStock Raff Regression channels
for short term channels is determining what your start and stop points
should be. For Short Term Up Trend Channels I used to start at the lowest
low in the period being considered and stretch the channel to the highest
high and extend it to the right. The problem with that is you get an
upside bias and tend to get too many false stop signals. Since a
conversation with Guy, I've been experimenting with having the start and
stop points close to the low and highs but offset enough so the mid line
falls on a data point. It also helps if the slope is close to the slope of
a 21 or 55 day exponential moving average. That does leave a great deal to
judgement and is not very scientific and I switch to Trader Vic (TV) type
trend lines as soon as I have a couple of good reaction points. For the
Russell Index, I started my Raff Regression channel on 4/3/97, ended it on
8/13 and extended it to the right. I moved the end point to 8/13 to try to
get it roughly parallel to the 21 day ema. I hadn't switched that channel
to a TV type channel yet, although one could argue that I should have. If
I was using TV type trend channels, it would have broken the channel on
8/7/97. Raff Regression normally gets you out a little later, but has
fewer false signals.
I think I like the Trader Vic (TV) type trend lines better than your
orderly movement because there isn't any subjectivity to TV trend lines.
There is only one correct method for drawing TV trend lines. Of course,
I'm using Raff Regression for short term channels instead of TV to minimize
false signals, so that blows my argument there <G>. Do you have any rules
for your orderly trend lines are do you just look for trend lines that have
3 or more confirmation points?
If both the NASD and Russell do break my regression channels, I won't
close my existing positions until their stops are hit, but new positions
will be short positions.
Best of luck on your puts.
Jim
----------
> From: Simianer <Simianer@xxxxxxxxxxx>
> To: metastock-list@xxxxxxxxxxxxx
> Subject: Re: Weekly Pick
> Date: Sunday, August 17, 1997 4:00 PM
>
> Jim,
>
> your mail was really interesting for me, since it seems that you use
really different
> channel constructions than I do.
> You wrote:
>
> >Looking at my indices, the Dow Jones
> > Industrials broke through the bottom of its Intermediate Term Up Trend
> > Channel (ITUTC) on 8/7, the OEX and SPX did the same on 8/8, and the
New
> > York Stock Exchange Index broke through the bottom of its ITUTC. The
NASD
> > and Russell's index are close to the bottom of their channel. I think
this
> > means we will get the long anticipated rotation out of the large cap
stocks
> > to the small cap stocks, so I'll stick to small caps on my new
selections.
> > The other possibility is that we will get an overall correction or even
a
> > bear market.
>
> Where did you start drawing your ITUTC for the Russelīs index? I guess
thatīs around
> April, 28 - correct? And do you talk about a Raff Channel as available in
MS?
>
> I donīt use this feature, since often I canīt follow the construction.
> And: I do not necessarily start at a significant low, as at the end of
april.
> Why? Because I search for Channels (or letīs say trendlines) that follow
a kind of "orderly"
> movement.
> You can see what I mean looking at the Russelīs chart. End of
april/beginning of may the
> index "jumped up" by almost 10%. After this it started a orderly (or
better regular?) climb
> up to the latest top at about 420pts.
> For this climb you can draw a trendline starting mid of may and is
touched three times
> before it reached the top.
> To me this looks much more useful than a channel starting at the first
mentioned low.
>
> What do you think about this?
>
> By the way: "My trendline" was broken at Aug 08, so for me the
intermediate upward move is
> finished. The same complies for the value line index.
>
> I agree with you for the NASDAQ (100) Index.
>
> Since all of the indicators I use completed top formations (most of them
H-S-H ) for all
> indexex (except NASDAQ), or broke their own upward support lines, I
expect a greater loss
> than you!
> So I bought some put-warrants last monday morning in Frankfurt.
>
> Looking forward to your opinion on "orderly trendlines"!
>
> Thomas
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