One of the draw backs of most technical analysis is that it is difficult to be objective. There have been various methods that people have come up with to try to eliminate any bias
1)Sharp rules of entry and exit regardless of the pattern.
2)using moving averages golden cross and death cross as two signals without having a price target
3)A measurement rule on the patterns. The pattern high minus the pattern low added on to the breakout point gives you price target. Stoploss should be 1/3rd of the target.
4)Point and Figure Charting (tic tac toe stuff)
Obviously by the title we will be looking at some tic tac toe.
I’m not going to reinvent the wheel and try to explain it all, stockcharts does a great job answering, “what is point and figure“?
The main drawback to point and figure is that it doesn’t give us a time frame, but it can give us a direction and price target and always give us an answer “is this stock going higher or lower?” and “how much higher/lower?” I did not say that it will always be right, or that it won’t suddenly give a reversal sign or breakdown and be bearish when it was bullish the day before, but it does do a good job of filtering out noise by only counting the given interval which usually is a whole dollar amount. (A break above $41 is not significant unless it crosses to $42).
P&F is useful for quickly and objectively identifying price target and calculating which areas have more upside.
I decided to put in some work in generating price quotes, running wikiwealth’s value analysis to generate price target and running P&F targets. So far I have just done those included in “regional ETFs”
I wanted to put more weight into the fundamental values first. I went with a 68% weighting into the value analysis and 32% into the P&F targets (daily chart).
Unfortunately there are some that had no P&F target at the moment, for these I had to just go with the value weighting. Additionally the “fair value” price was determined a few months ago, so it’s possible the fund has changed it’s weightings drastically since then or that the earnings or individual stocks in those ETFs have changed in value for one reason or another. So you may want to recheck the value of the ETFs.
With that being said, the result is the following 12 names with 50% or more “potential gain” as determined by this weighting.
UMX,INDL,IXP,BBH,KWT,JXI,MNA,IRY,LBJ,DZK,UBR,FGD
MNA had no P&F target
Ultra MSCI Mexico Investable Market (UMX)
Daily India Bull 2x Shares (INDL)
iShares S&P Global Telecom (IXP)
HOLDRS Biotech (BBH)
Market Vectors Solar Energy ETF (KWT)
iShares S&P Global Utilities Sector (JXI)
IQ ARB Merger Arbitrage ETF (MNA)
SPDR S&P Intl Health Care Sector ETF (IRY)
Direxion Daily Latin America 3x Bull Shares (LBJ)
Direxion Developed Mrkts Bull 3x Shares (DZK)
Ultra Brazil (UBR)
First Trust DJ Global Select Dividend (FGD)
A very diversified group. Not just diversified among sectors but countries and type to a limited extent (dividend, merger arbitrage ETF). The great thing about this is many of them add very unique things tot t he portfolio and are not heavily correlated with the markets. As such,You can get a bit more aggressive and boost your return without sacrificing risk; assuming these correlations hold and/or that this value analysis and technical analysis can offer increased returns at lower risk, which I personally believe both to be true to at least some extent.
If you are not looking for a long term play, you can monitor chart patterns or candlestick patterns instead, and try to time these. This way you are trying to time vehicles that should go upwards to a greater degree over time so if this analysis holds true and your timing is even random, you should be able to have a more than adequate return.
The next step is perhaps to look at other asset classes (currency ETFs and bond ETFs, look at commodity ETFs and REITS) and perhaps some more sector wide ETFs to get exposure to a few more sectors and do the same thing.
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