Fiducia Technicals

7 years deep into investing, trading, reading about businesses and markets, speaking with smarter and more valuable investors, and when someone asks me "whats your strategy?" that is the single most difficult question I get asked next to "what do I invest in?".


Today I want to talk about the technical side of my strategy that includes what I use to look at shorter-term movements (3-6 months) and longer-term trends (1-3 years). Believe it or not, I never used to believe in technical analysis. I thought it was Fugazi, or as Matthew McConaughey (Mark Hanna in Wolf of Wallstreet) would say "Fugayzi, Fugazi. It's a whazy. It's a woozie. It's fairy dust. It doesn't exist...."

There is some merit to this, but as I grew older and worked as an analyst for a few years at a fund, I started to learn how other funds managed money. Some used strictly algorithms and technicals (which is why I believe there is some merit to specific technical analysis), some used these technicals as key pivot points (we did, to an extent), to add, trim, or sell all. Again, it was about continuing the CAGR, i was not really trained to just "buy and hold" because in order for buy and hold forever to work, you have to be 100% right....difficult heh?

I think moving averages, such as your 20dma, 50dma, 150dma, and 200dma are the most important especially for our options strategy. These are areas of support an investor can utilize for adding / trimming their equities. In a bull market, which we have been in for a decade, they are very valuable to me because when they show strength around the moving average the buyers are stepping in. I had to read some academia for my old job one time, and if I remember correctly 85%+ of daily market volume is driven by HFT and algorithms. This sort of tells me we are up against bots, and bots are not running valuation models in the short-term. They are trading off technicals (in my opinion, I am not proving or disproving any thesis here).

Let me start with one that I was introduced by from a colleague of mine, who I wont name for privacy reasons.

VolumeProfile: This is a technical indicator that you will see on my charts, they are the blue horizontal bars on my charts that I post. What this tells me, is that there are dominant price levels investors like to look at (valuation aside for a second here). The technical takes the total volume traded at the specific price level, during that specified time, and divides it by the total volume either (buy volume or sell volume). This gives me clear indication of support.

MACD (Moving Average Convergence Divergence): This one is more of a momentum indicator for me (of which there are a ton). I use it for seeing the trends and whether they are reversing or continuing upwards. It is fairly simple, it is a buy when it crosses above and a sell normally when it crosses down (sometimes we get head fakes both ways though, this is why I STRESS knowing what you are trading and the actual business!).

StochRSI: Oh, but what about the normal RSI? Nope, that one I have found very useless in my opinion. Securities can stay very overbought or oversold, and very hard to time it with option trades whether you buy weeklies or months at a time (like I do). No one can exactly time stocks, but one can buy themselves time with trades and let the thesis slowly play out if it works! The StochRSI is just a mix of the stochastic oscillator and the RSI. I think it gives a more accurate picture of strength. You are essentially using TWO momentum indicators here mixed into one, it is much more notable than regular RSI in my humble opinion.

Look, I like to keep things simple. Investing and trading is not difficult, but we certainly like to make it difficult especially with emotions. This post is for paid members, so let us take a look at $XOM and break it down nicely...since i have $65k on this trade..

1) Exxon is showing the most perfect Cup & Handle textbook pattern I have ever seen.. and actually might be the first one I am really trading based off that coupled with news flow that gives them a macro tailwind. Yes, the MACD has crossed back down and you can note the downtrend by the equity price movement. Look at the VolumeProfile though, there is strong buying here in general so I view that as a net positive. The StochRSI is also very oversold and you can see the last time it was oversold they rallied. I do expect XOM to be $65-67 by end of June. The equity does not technically have to "drop hard" when the MACD crosses back down, you can see how it traded flat when it crossed down... we could trade flat for a bit here, which is why we buy so far out. We do not want our options just burning away!

For context, here is a cup & handle

One equity I own that I am waiting a few more quarters of delivery is Anaplan, I would really like to see delivery in this company in 2021.

121 views2 comments

Recent Posts

See All

Fiducia Investment Research: Business: The Boston Beer Company, Inc. Ticker: $SAM Current Price: $530.40 High: $1349.98 Business: As a high-end alcoholic beverage company, the company owns brands that