Q. Which investment software do you use?
A. I have used ShareScope for over six years and do not know what I would do without it. It has definitely helped me make money. I think it is brilliant for tracking your investments (you can set up numerous portfolios) and for finding new ideas. The charting capabilities are excellent and it calculates all your capital gains and presents them in an easy to use format.
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Q. In your blog you often show a price chart, please could you explain what all the lines are and how you use them?
I do look at charts but only to try and help me with my timing on buying and selling. First of all I have to be happy with the fundamentals; in particular the growth and valuation of the company. Only after deciding that it looks like an attractive investment will I look at the chart to decide whether to buy or wait!
The following is my standard chart which I have set up on ShareScope.
I use candles for the share price. It shows the price range during the day and the closing price. The candles are shaded blue for up days and red for down.
I use four moving averages; 6 day (blue line), 21 day (red), 50 day (green) and 200 day (black).
The geen “b’s” along the top of the chart are directors buying. With ShareScope, if you hovver over the “b” a pop up box will tell you the size and price of director buying. With Regenersis it was good to see chunky buying at the end of September after the share price had moved up following its results!
The letters along the bottom are “R” for results, “X” for ex-dividend and “D” for dividend pay date.
The “B’s” and “S’s” on the candle sticks are when I bought and sold. On ShareScope if you hovver over them with your mouse it gives the trade details; how many shares, price and value.
The first observation I would make is that virtually every holding of mine has a share price above its 200 dma. I like to be invested in stocks that are performing well (have a nice trend) and are above its 200 dma.The 200 dma can often act as support and as a buying opportunity. If the share price drops through it that would set alarm bells ringing. If the 50 dma crosses the 200 dma going upwards it can be a good sign to buy and vice versa. The shorter term 6 and 21 day moving averages can be useful for short term timing.
The yellow shaded area is a “Donchian” Channel. The boundaries are the 21 day closing high and the 21 day closing low. In the example above taken on 5th December 2013 you can see that the lowest closing price in the last 21 days for Regenersis was 265p and the highest end of day price was 360p, achieved on Friday 29th November. As each day passes the chart will adjust if there is a new high or low level in the last 21 days. I use 21 days because it is roughly a trading month and if the channel starts to drift downwards it prompts me to at least question whether the trend has changed. The bottom of the channel often acts as support and you can see three times in the last year I have added at the bottom of the channel. In May I reduced my holding slightly as I was slightly concerned that the upward momentum was waining; the 6 dma had moved down through the 21 dma and indeed the 50 dma so I decided to take some profits and watch. The stock tracked sideways for four months but support at the bottom of the Donchian Channel held pretty well. In early September I was aware that it was due to issue its full year results later that month which might stoke up some interest in the stock again. The stock had behaved pretty well over the summer whilst clearly in a consolidation phase. I still liked the fundamentals, It felt like the upward trend might resume, the shares were right on support at the bottom of the Donchian Channel and the 6 dma was moving up through the 21 dma, so I bought back the shares I had sold and a few more.
What would have concerned me would have been if the 200 dma (black) had not acted as support. As it is, it did not really get that close and therefore in this case was not an issue.
Two further examples below.
Both easyJet and Berkeley Group are good examples of where the 200 dma acted as support and represented a buying opportunity. Easyjet in November and Berkeley Group at the end of September.
easyJet looks like it is in a consolidation stage and I am looking for it closing above it 21 day closing high so that the top of the channel moves upwards; I think that would be very bullish. With Berkeley Group I would hope the bottom of the channel at £22 acts as support!