re: Time Added to Retracement Chart
Hi Mercury, thanks for your goodwill! I have been following this board as a guest for a some time and have always appreciated and learned great “fundamental” information from your posts. So, I will try to provide a little payback by answering your good technical questions with more detailed answers than I otherwise might. I hope the long answers don't clutter up the board to much. Since you departed in your post with a little personal history, so will I. First and foremost, a little background. I surmise you and I share the same occupation, you 30 years, me 40. For about 38 of those 40 years, aside from work, I have dabbled as an amateur trader based solely upon fundamental analysis (“FA”). However, in the last two years, in semi retirement, I immersed myself with attempting to learn the technical analysis side of trading (“TA”). Like law school, I become enveloped by it. In my TA study, I was amazed by what I found. In the final analysis, and in bottom line terms, I believe considerable truth exists to the TA claim that the common denominator of all “analysis” is share price (“SP”). SP seems to speak with finality as to all known information and theories. In that respect, your summary of my last retracement analysis is well summarized and spot on. Thanks for that! I think it unlikely that WOF will retrace to .33 (or potentially even .28). But, even if it does, not only will I not be disturbed by this, I will be a buyer at these levels.
With that, the following are my attempts at responses as to your questions. For those not entirely familiar with TA, I have tried to provide some background information:
1)There has been no meaningful drop of the RSI under 50 since August. What do you make of that? It just seems the retracement pattern is becoming a bounce at 50 or higher.
Answer: I agree. RSI (Relative Strength Index) measures how strongly a stock is moving in its current direction by measuring the speed and change of price movements over time periods. An RSI above 70 is considered overbought, and below 30, oversold. I think Woulfe is in the sweet spot middle in hovering around 50, neither overbought, nor oversold, but in an uptrend. Woulfe has not been rocked by wild, volatile price swings not reflective of its current intrinsic value, thus a consistent RSI. I consider this very bullish. Its higher RSI one of the reasons I continue to accumulate the stock. WOF's RSI exceeded 70 (i.e. “overbought”) only once in the last 4 months, on or about 9/20/12 with the IMC satisfactory due diligence (DD) announcement. At that time, the stock expectedly broke sharply to the upside, became overbought, and then had a normal reactive correction, back to the longer term company tasks at hand, making a profit. I expect the same type of spike and correct will occur when the financing news is released. In the interim, I think solid, stable growth in share price -reflective of what appears to be a good business plan- is where we want to be rather than on a wild price fluctuation ride with volatility generated by day traders. If the RSI dips below 50 in all of this, no problem. But, I agree with you, a likely over 50 RSI and the business plan develops, in spite of dips.
2) On a similar note, your CMF shows Woulfe has not been in the red since late September and all dips since then have remained in the green at a progressively higher low. How long do you usually see that type of pattern with a penny stock?
Answer2: . Unfortunately, since I am ordinarily not a penny stock investor, I l don't know the answer to this specific penny stock pattern length question. However, I think that “penny stock” v. “other stock” valuation in assessing Chaiken Money Flow (CMF) pattern length may be a distinction without a difference. My take is that Woulfe's prolonged, high CMF confirms its July to now bull trend and share price (SP) doubling since July. To me, CMF values since the 9/20/12 IMC/ DD announcement confirm the strong stock demand and money flowing into the stock, hence the SP increase. I assume the high CMF will continue until short term speculators start taking some profits off the table, resulting in a short term dip, but buying opportunity for longer term investors. However, I wouldn't rely on past CMF readings to predict future performance. The CMF is a “look back” indicator more than a predictive oscillator. Its readings need to be constantly confirmed with current price action and other supporting indicators. As I'm sure you know, the CMF combines current price and volume action to demonstrate how money may be flowing into or out of a stock, i.e. buying and selling pressure to confirm, or question, current price action. Thus, the CMF could drop on the short term with profit taking, but not change the long term analysis.
3) Lastly: a) your MACD shows the bottom lows are getting more shallow such that this current retracement may not go below zero before it takes its next run upward. What do you make of that? And, b) more importantly what do you make of the fact that the RSI, CMF and MACD are all three showing a similar pattern? c) By that I mean, doesn't that give you a pretty high level of confidence the pattern will continue (assuming no intervening n/r)?
Answer 3a: I think you are right on. I would be quite surprised to see the MACD signal line drop below zero/centerline on the current dip. Over the past two weeks, the MACD has been very strong and well above zero. More importantly perhaps, in the past few days, I think this indicator has actually been showing a bullish divergence. As you know, over the past few days, the share price has corrected about 10% (from .385 to .355). However, the MACD signal line has, comparatively, barely moved down. Thus, I think the shallower recent signal line troughs you point out, together with the bullish short term moving average of the stock (see, high current MACD signal line), reflect increased share price momentum and strength, when we might have otherwise expected a slight decrease in the MACD signal line during the current correction.
Answer 3b: I think the RSI, CMF and MACD are all confirmative of each other in this case and result in the same answer as 3a above. Woulfe's longer term performance history (last 2 to 3 years) did not reflect a consistently high RSI. Its current high RSI value is the result of its recent quick and strong upside move in the last few months. The speed and intensity of its price movement is supported by its more than 100% value increase since July. This prolonged, robust CMF reading since the 9/20/12 IMC news reflects the money flowing into the stock which appears supported by development of the company's fundamentals and notoriety of same. The stock's currently high MACD signal line reading reflects these recent short term gains and is certainly bullish and confirmative of the other indicators as you note.
Answer 3c: Yes. Thus far, right or wrong, there isn't much about this stock that doesn't personally give me a pretty high level of confidence that it will continue on its present course, assuming no intervening news release (NR). However, I do not want any of my thoughts to be considered those of a pumper, or taken out of context by others, as has already taken place on this board by apparent pumpers. My opinions are simply that, opinions. I am simply one individual investor invested in this stock who wants to see it succeed for my personal gain, nothing more. My opinions are, therefore, likely biased in favor of the stock; can't help it. I certainly don't invest for a living, or I would probably starve to death. With that said, and as a biased investor in this stock, my personal thoughts are: assuming favorable financing news is released, the stock will spike, then retrace the approximate/conventional 38%, 50%, or 62% that virtually all other stocks do and as this stock has done in the past, and then reverse to later challenge its previous resistance highs, and continue in this orderly uptrend in the typical up and down wave pattern for some time. How far, or how fast all of that occurs, I have no clue other than rank speculation. I simply trade this stock based on today's news and charts and leave tomorrow's news and charts to come when they do. I am sure my attitude and thoughts on the stock are about the same as everyone else, not much new here.
Sorry for the long post but your challenging questions helped me crystallize in writing some of my own thoughts and strategy on this stock. In the future, I will definitely be making my posts much shorter and less time consuming! Good luck to you Mercury, and everyone else on this board!