Larry,

I have purchased FTO Frontier Oil as a Magic Formula stock.
When I check stockcharts.com I see the Parabolic SAR at $38.43 for the stop. In your smr this week you show the stop as $31.19
I have it set for .02 and 20

Am I doing something wrong?

Thanks

Peter

Peter,

You’re using the daily chart setting for PSAR. The system is based on the weekly chart settings. Also, I wrote awhile back (and I plan on explaining it on the Web site as I make some changes on the site this week) that a buy signal could be generated using the .02 and 0.2 weekly setting, but as soon as the slower .01 and 0.1 weekly setting signaled a buy, we would switch to that so we could stay in the position longer.

So the trailing stop I’m using for FTO at 31.19 is based on the weekly PSAR .01 and 0.1 setting. Your stop is way too close, Peter, to get a meaningful move. And that’s what we’re trying to do. We’re trying to stay in a winning position for three, four months or more so that we can get more 50%, 100% and greater moves.

However, let me add that if your position sizing is based on a 38.43 stop you should probably stay with that and use the weekly chart next time. Of course, the easiest thing to do is to just use the stops that I post on the Web site. I keep that page updated so that as soon as Stock Charts changes their stop on the first trading day of every week, I change ours on the same day.

Larry

Thanks Larry,

I noticed that on stockcharts.com the standard technical buy signals using the Parabolic SAR is set at .02 and .20
I can see getting stopped out of many of the magic formula stocks this way.
Using the weekly chart and set at .01 and .1 sure makes a wider stop loss range and also has some stocks not even a buy.
My current positions size on magic formula stocks are .02 and .20. Can't change them now, too much risk.


Using the magic formulas list of stocks, do you recommend checking them each week and only buying when the stock the
Parabolic SAR is below the price?

I am trying to combine the magic formula with your SAR settings.

I look forward to your website changes and explainations.

Thanks

Peter

Peter,

Using the magic formulas list of stocks, do you recommend checking them each week and only buying when the stock the
Parabolic SAR is below the price?

That's what I'm doing. The only thing is I'm not buying all the Magic Formula stocks. I'm doing research and being very selective.

Larry

Say you have XYZ today listed on the magic formula site.

Wouldnt that be a problem, that by the time XYZ goes up a bit to trigger a PSAR buy, it is not listed any more as a magic formula stock, because its price is higher, so it is not that damn cheap any more? (I am not sure how often these guys update their data on the website...)

So you would need to remember what stocks were listed lately..
Or isnt that a real problem with this approach, because prices dont change that much (to change the magic formula ranking so drastically)?

Bob,

They update the site every day by 7:00 AM Eastern. But to answer your question, just because the price goes up a little to trigger a PSAR buy, it is not going to cause the earnings yield to change very much. So it’s a not likely to be an issue.

For example, EGY is up 31% since I bought it two months ago. But the earnings yield has only gone down from 32% to 26%.

Larry