JC_NasdaqAs we approach the end of 2015, we have a lot going on here at All Star Charts. This is the first major transition since the original launch, which will officially be 5 years ago this upcoming March. The idea for the website first came up in 2010 with the intention on being a technical analysis blog to share ideas about what I’m seeing around the market. This small blog quickly turned into 10s of thousands of unique visitors, invites to come and talk about my charts on TV, quotes in news publications all over the world and speaking engagements including some of the top financial conferences in the country and Universities like Duke, Harvard and Fairfield University. Since the start of All Star Charts, I’ve been fortunate to have my work featured on Bloomberg, ABC, Wall Street Journal, CNBC, Fox Business, Yahoo Finance, CNN and Canada’s Business News Network.
In 2012 I founded Eagle Bay Capital with the goal of managing money through one portfolio in a limited partnership. After several years of requests, we launched our research arm in September of 2014 to provide technical analysis commentary across all asset classes for investors all around the world. This new venture has been more successful than we ever imagined. A little bit over a year later we are now rolling out our next major products through All Star Charts and are very excited for this launch.
A little bit about me – I grew up in Miami, FL and I’m a big sports fan. When I’m not looking through charts, I’m probably eating or watching a game, usually a combination of the two. I graduated from Fairfield University with a degree in Finance. Currently, we are running All Star Charts, which is fully owned by Eagle Bay Capital, LLC, from our Park Avenue location in New York City.
This whole technical analysis thing first started for me back in 2005 when I realized that I didn’t know anything about the stock market. What scared me even more was that there were people sitting around me at work that were twice my age, and in some cases 3 times my age, that swore up and down that they had a handle on the market. I guess I was just lucky at the time to be aware enough to realize that these guys didn’t know anything and were doing themselves and their clients a disservice.
Yogi Berra once said, “When you come to the fork in the road, take it!”. For me this fork was essentially fundamental or technical analysis. Do I want to study for the CFA and learn about companies? Or do I want to study for the CMT and learn about the stocks and the market? It seemed like an easy decision at the time but little did I know how important that decision would eventually become and how much it would impact my life and career path.
Half way through John Murphy’s Technical Analysis of Financial Markets I thought I was the next Paul Tudor Jones. I was day trading options based on MACD crossovers like there was no tomorrow. Needless to say, I quickly learned that I had a lot more to learn….
The good news was that I didn’t have much money at the time so how much could I really lose? Veterans in this business will tell you that the money you lose trading early on is your tuition. You don’t learn this stuff in school. You have to go out and figure it out on your own. That costs time and money. This is your tuition. I truly believe this to be the case and would tell that to anyone new to trading and investing in publicly traded and liquid markets.
Fast forward to 2008 and I have now finished reading the curriculum for all 3 levels of the CMT program as suggested by the Market Technicians Association. It didn’t matter that I passed all 3 levels, I already thought that I knew everything there was to know about the market. Well, wrong again. I needed a few bull and bear market cycles to really get a solid footing on the fact that I don’t know anything at all. No one does. The market is going to do what it wants and it doesn’t care what any of us think, especially me. It’s the Socrates quote: “I know one thing: that I know nothing”.
So now that I’ve figured out that I can’t tell you what will happen next and no one else can either, it’s been an evolution of a process. I can’t predict the future, but I’m willing to bet that the evolution of my process is not yet complete. It’s something that I will continue to adjust as time goes on, hopefully for several decades to come.
My timeframe is simple: I look out weeks and months. I’m not a day-trader and I’m not one of these people who make up reasons for single-day moves just because my boss tells me I have to. As far as timeframes, I personally use a more intermediate-term time horizon. Not long-term and not too short-term either. This makes it the easiest way to manage risk.
I use candlestick charts for my every day charting. Once a week I go through the 400 charts in my arsenal with just bars. No moving averages or momentum or anything else on the chart – just bars. You’d be surprised how much you can see when you simply get everything the heck out of the way. Amazing I know. For ratio analysis I use line charts. This helps with the day to day or week to week changes in a ratio. Remember that not everything opens up every day at the same time. So if you’re using candlesticks or bar charts for ratios, you’re going to have bad data all the time, most of the time really.
For momentum I use a 14-period Relative Strength Index, or RSI as the cool kids call it. I don’t change my RSI periods and I don’t smooth them out like others do. Not that there is anything wrong with that, it’s just that 14-periods works for me. Also, when I say “periods”, I mean daily and weekly. So if I’m looking at a chart with weekly candles I’m using a 14-week RSI. If we’re analyzing a daily chart, I’m using a 14-day RSI.
Smoothing Mechanisms: I only use a 200 period simple moving average. This is for both daily and weekly timeframes (like in momentum). For my timeframe a 50 period moving average is too noisy. It doesn’t help, it just hurts. Also, I don’t use moving averages for support and resistance purposes as I see being done so frequently. This is an invisible line, as far as I’m concerned, with no supply and demand history whatsoever. Therefore I use the smoothing mechanism to help with trend recognition. Is it an upward sloping 200 day? Downward sloping? Or is it flat? I hate when prices are near flat 200 period moving averages (see here: Price Near Flat 200 Day = Headaches).
I don’t look at volume on stockcharts. Sorry Charlie Dow. This is sacrilegious in some circles but I’m here to make money, not agree with everything my technician friends have to say. Charlie Dow wrote down his Dow Theory Tenets in the late 1800s well before the derivative markets existed. I think that volume can be seen elsewhere, not just in stock charts. If someone really wants in, are they going to buy the common? Or are they going to use options leverage? It depends. So my point is we don’t know. I look at volume just to make sure a market is liquid enough market for me to participate in, but that’s it. It’s not a confirmation of any kind for me, just more noise.
I think you guys get the idea. There are other tools that I use like Sentiment and Correlation analysis to supplement all of the price activity across markets. But in terms of my chart by chart work, this is my process and it is as a result of many failures and successes over a lot of years. It’s not perfect and it’s always a work in progress. I think you need to be a fool to think your process has been perfected. I got over that ego thing many years ago.
The market has taught me, the hard way, to check my ego at the door and always remember that none of us know anything. It doesn’t matter how loud they get on TV or how many blog posts they write about a subject, or how long they’ve been the Chief Strategist *of fill in the blank* sell side shop, they don’t know any more than you do about what will happen tomorrow or next year. This is a fact. So it all boils down to how well you manage risk. Remember, it’s not about being right, it’s about making money. Don’t forget that.
Thank you for coming to the site and I hope you join us on a more official capacity.