Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

Learning to Think Big

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A lifetime goal for me as a trader is the ability to recognize – – and hold on to – – stocks which experience gigantic gains over the long haul. These are the stocks on which fortunes are made, since the real winners can climb thousands of percent over a period of years.

In retrospect, it's pretty easy for a technician to see excellent basing patterns for stocks which have already enjoyed such gains. Take MMM, for instance, shown below. This stock climbed thousands upon thousands of percent over the past few decades, and you can see the oh-so-perfect saucer pattern which preceded the entire move. With hindsight, it's a cinch to see what a winner this chart was on a technical basis.

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If we zoom in to that basing pattern when it occurred, however, it isn't nearly so clean. Since you know what happened next, it might still seem very obvious to you, but I am highly confident that most people, when looking at a chart like the one below, would consider it simply on the high end of a multi-year range and not a particularly good thing to purchase.

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This topic was brought to mind this evening, since I own Cavium Networks (CAVM), and it had a good earnings report after hours. The after-hours quote shows a gain of about 8%, so tomorrow should be a good day for CAVM. But who is to say that, ten years from now, this isn't a $500 stock on a split-adjusted basis? That seems absurd, but all huge gains seem absurd before those gains are actually enjoyed.

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What I'm trying to say is that it takes vision to see a chart and imagine what that same chart would look like when it constitutes only 10% of a long-term chart in the future. There are probably only a small number of people who bought MMM who own it to this day, but those people haven't paid a penny of taxes on those gains, and they are sitting on a fortune of profits. What I want to develop for myself is the ability to hang on to select long positions over the very long haul, exiting them only when the violate an up-to-date stop price. As nice as it would be to bounce out of CAVM tomorrow for a quick 8% profit, I will instead just update the stock and let it ride.

Ford’s Chart Ahead of Earnings (by MPTrader)

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Ford (NYSE: F) earnings are due out before the opening bell tomorrow, and expectations are for relatively good numbers. The question is whether or not really good numbers already have been discounted?

Purely from a technical perspective, my near and intermediate term work argue for additional upside in F to 15.80-16.00 prior to the next meaningful correction. Does that mean really good numbers are in the price? Probably not, which leaves room for upside reaction to "really" good numbers. Do I want to enter F here ahead of earnings? Definitely not.

Buying ahead of earnings is not my style, unless the chart structure is so bullish that it is screaming for a big breakout out of a massive base pattern (like SLB last week). In terms of F, if the stock were pushing above 9.20 into earnings, I would seriously consider entering new long positions. But "up here," despite the fact that it could have another 8%-10% upside immediately, I will watch from the sidelines to see how the action develops tomorrow morning.

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