Noble Energy Takes Off

10/12/11 09:38:19 AM

by Donald W. Pendergast, Jr.

Buying into strength may not seem logical at first glance, but it all depends on the big picture.

Security: NBL
Position: N/A

In Figure 1, you can see that shares of Noble Energy (NBL) are already six trading sessions into a strong rally, and that the Raff MarketSpace stock system has only now decided to fire a long entry signal. What is going on? Should the signal have fired earlier? Here's a closer look.

FIGURE 1: NBL, DAILY. After putting in a near-textbook quality reversal, it will be fascinating to see just how far NBL can run if a true year-end rally takes the entire market higher.

Graphic provided by: MetaStock.

Anyone asking why anyone would even consider going long NBL here after such a nice move higher is probably not comfortable with the idea of trend following or buying into strength. However, if you look at the long-term track record of the Raff system for stocks (the MetaStock expert advisor version, anyway), you will likely come to the conclusion that the system can and does deliver nice returns when used in concert with other technical tools and concepts such as:

A. Comparative relative strength analysis. Only buy (sell) stocks that are outperforming (underperforming) the broad markets
B. Money flow (accumulation/distribution) analysis. Try to buy (sell) stocks that are above (below) their money flow zero lines
C. Avoid overconcentration in a given sector or industry group. Spread out your risk intelligently.

If you use these three simple tactics as a complement to the Raff (or any other winning system) method, you should be easily able to improve the results of the basic system -- over time.

For those considering trading NBL, perhaps the wisest way to go is to simply buy your position and then manage it all with a three-bar trailing stop of the daily lows. Covered-call buffs might want to look at putting on a near-term buy-write trade using at-the-money calls that are reasonably priced and with a close bid-ask spread to boot. Overall, this looks like a great long play in a market that may just be in the early stages of what could turn out to be a very nice and very profitable year-end rally. Stay tuned for more details as they develop.

Donald W. Pendergast, Jr.

Donald W. Pendergast is a financial markets consultant who offers specialized services to stock brokers and high net worth individuals who seek a better bottom line for their portfolios.

Title:	Writer, market consultant
Company:	Linear Trading Systems LLC
	Jacksonville, FL 32217
Phone # for sales:	904-239-9564
E-mail address:	lineartradingsys@gmail.com
Traders' Resource Links
Linear Trading Systems LLC has not added any product or service information to TRADERS' RESOURCE.

Click here for more information about our publications!

PRINT THIS ARTICLE

Request Information From Our Sponsors

DEPARTMENTS: Advertising | Editorial | Circulation | Contact Us | BY PHONE: (206) 938-0570

Comments or Questions?	Article Usefulness
	5 (most useful) 4 3 2 1 (least useful)

TRADING SYSTEMS

Noble Energy Takes Off

SUBSCRIBE TO OUR FREE EMAIL NEWSLETTER!

SUBSCRIBE TO OUR FREE
EMAIL NEWSLETTER!