Identifying shares with limited trading ranges

Wider investment strategy discussions not dealt with elsewhere
Clitheroekid
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Identifying shares with limited trading ranges

Postby Clitheroekid » December 13th, 2016, 8:08 pm

Firstly, I'm far from sure that this is the correct board, but if not kindly point me in the right direction.

I've noticed on odd occasions over the years that a company in which I'm holding shares seems to move up and down of its own volition and almost independently of the market generally. The movement seems to be a bit like a saw tooth, between a range of prices, so that when it reaches the bottom of the range it drifts back up again.

When I have spotted such a share I've managed to trade it reasonably successfully, and I've often thought it would be really useful to be able to identify and target such shares - the ones I've come across have always been by accident.

So does anyone know of any way of identifying such shares without actually having to study the chart for each and every company?

staffordian
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Re: Identifying shares with limited trading ranges

Postby staffordian » December 13th, 2016, 8:21 pm

Not quite what you want but I used to do this quite regularly with FTSE100 shares like Vodafone.

I chose a high yielding share on the basis that if the bottom fell out of the market whilst I held, I'd still get about 5% return pa through dividends. I rarely had to hold them long though and I was content to sell after a very modest profit; I found several small bites were usually more profitable than waiting for fewer large ones. And with popular shares, the spreads are, of course, far tighter.

I set orders to buy and sell (and kept them within quite tight limits) to avoid the need to hover constantly over a dealing screen.

Staffordian

PS Try to do this within an ISA or CGT calculations might come into play and it can be a bu99er to calculate them with many many similar trades per year :)

Clitheroekid
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Re: Identifying shares with limited trading ranges

Postby Clitheroekid » December 13th, 2016, 8:53 pm

Thanks, using preset buy and sell orders might be worth looking at, though I suspect I'd be worrying that the price would drop because of some catastrophic event and I'd have bought a falling knife.

staffordian wrote:PS Try to do this within an ISA or CGT calculations might come into play and it can be a bu99er to calculate them with many many similar trades per year :)

I've often wondered at what point HMRC would view this as trading, and tax the gains as income. I still don't really know the answer, and it's probably a case of "where ignorance is bliss ..."

swill453
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Re: Identifying shares with limited trading ranges

Postby swill453 » December 13th, 2016, 9:07 pm

Clitheroekid wrote:I've often wondered at what point HMRC would view this as trading, and tax the gains as income.

Never, if you're "trading" as an individual, basically.

See https://www.taxation.co.uk/Articles/2011/06/29/277131/youre-trading for example

"The tribunal noted (from the Lewis Emanuel case) that an individual speculating on price movement in shares without intending to hold the shares even as a short-term investment was analogous to gambling, and fell short of trading."

Scott.

Lootman
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Re: Identifying shares with limited trading ranges

Postby Lootman » December 13th, 2016, 9:38 pm

Clitheroekid wrote:Firstly, I'm far from sure that this is the correct board, but if not kindly point me in the right direction.

On TMF there was a board for "Technical Analysis" (TA) and something like this might have been a valid topic there. Not sure if it exists on TLF except as topics here.

TA talks a lot about support and resistance levels, corresponding to the bottom and top of the range you are seeing. These are often represented in graphical form to make the pattern clear.

They can persist for some time, and then there is a "breakout", either up or down, with increased volatility, until a new "trading range" is established.

These are often used by options traders, who might sell puts or buy calls at the support level, and buy puts or sell calls at the upper level.

As to how to identify them, one idea is to look for shares with a lower beta, as they will move around in a less volatile manner.

PinkDalek
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Re: Identifying shares with limited trading ranges

Postby PinkDalek » December 13th, 2016, 9:46 pm

"Technical Analysis" has its own forum here viewforum.php?f=53

There's also "Trading my way to a million" viewforum.php?f=7 though it doesn't seem overly ambitious. :lol:

Clitheroekid
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Re: Identifying shares with limited trading ranges

Postby Clitheroekid » December 13th, 2016, 10:13 pm

swill453 wrote:
Clitheroekid wrote:I've often wondered at what point HMRC would view this as trading, and tax the gains as income.

Never, if you're "trading" as an individual, basically.

See https://www.taxation.co.uk/Articles/2011/06/29/277131/youre-trading for example

"The tribunal noted (from the Lewis Emanuel case) that an individual speculating on price movement in shares without intending to hold the shares even as a short-term investment was analogous to gambling, and fell short of trading."

Scott.

Thanks, I wish I'd known that a lot earlier, I might have carried out a few more transactions.

Incidentally, the link you gave led me to a page that only showed part of the article, followed by:

Only subscribers may read the full article

But for the benefit of other readers who may want to read the full article without the hassle of registering just do what I did, which was Google `Lewis Emanuel tax' and the full text of the article is the first hit on the page.

However, I also came across this very recent case, in which a pharmacist who indulged in day trading was deemed to have been trading - http://www.aat-interactive.org.uk/cpdmp ... anuary.pdf. The full judgment made interesting reading for me, as it directly addressed the very question I'd posed earlier, and clarified the position very helpfully - http://www.bailii.org/uk/cases/UKFTT/TC ... 04816.html

It was also a pretty spectacular success for the pharmacist, who represented himself and managed to have tax and penalties of around £330,000 cancelled.

Unfortunately, though, all the cases seem to be where the taxpayer was trying to claim relief for losses, and therefore wanted to be classified as trading. I've not come across any cases where HMRC were claiming that the taxpayer was trading and the taxpayer was trying to prove otherwise, and I just hope that they don't decide to make a test case out of me! ;)

BusyBumbleBee
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Re: Identifying shares with limited trading ranges

Postby BusyBumbleBee » December 18th, 2016, 11:22 am

've noticed on odd occasions over the years that a company in which I'm holding shares seems to move up and down of its own volition and almost independently of the market generally. The movement seems to be a bit like a saw tooth, between a range of prices, so that when it reaches the bottom of the range it drifts back up again.


It is not just on the odd occasion - it is a general rule for most established FT-100 companies. I have been trading shares on this characteristic for a long time - but was caught once by LLOY and you have to watch certain shares that have, over-riding cycles such as the water companies.

If anyone wants to know how to set up a spreadsheet to show the annual ranges - just ask and I will post it

Clitheroekid
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Re: Identifying shares with limited trading ranges

Postby Clitheroekid » December 18th, 2016, 7:59 pm

BusyBumbleBee wrote:If anyone wants to know how to set up a spreadsheet to show the annual ranges - just ask and I will post it

Yes please.

staffordian
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Re: Identifying shares with limited trading ranges

Postby staffordian » December 18th, 2016, 8:41 pm

BusyBumbleBee wrote:...I have been trading shares on this characteristic for a long time - but was caught once by LLOY and you have to watch certain shares that have, over-riding cycles such as the water companies.


This is the main reason why when I did it, I limited my trades to high yield shares. If stuck with them for any length of time, at least there was the consolation of about 5% or so annual return in dividends (obviously luck played a part where timing was concerned, ex div dates and so on...) but I guess the same applied to Lloyds until they fell victims to greed and the banking crisis!

Staffordian

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Re: Identifying shares with limited trading ranges

Postby Snorvey » December 18th, 2016, 8:47 pm

The full screener at HBOS market watch might have a few filter settings that could help you narrow down your selection?

I guess after a number of screenings, you'll get to know a few potential targets.

https://www.bankofscotlandhalifaxmarket ... n=screener

Clitheroekid
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Re: Identifying shares with limited trading ranges

Postby Clitheroekid » December 19th, 2016, 12:31 pm

Snorvey wrote:The full screener at HBOS market watch might have a few filter settings that could help you narrow down your selection?

Thanks for the link. It looks to be very comprehensive, but I can't see how it could be filtered so as to provide what I'm looking for, namely a share that moves within a regular price range more or less irrespective of the market generally.

I agree with Staffordian about the yield point though, and I've applied the same approach in the past, though nowadays the sustainability of some of the yields on offer is becoming increasingly questionable.

I think I'm going to use the stock screener linked to by Snorvey to make an initial selection based on a combination of yield and `safety', i.e. shares that may be rather dull but aren't likely to go bust, and then have a look at their SP record for the last 3 or 4 years in the hope of finding one with the sought after pattern. At least it'll give me something to do while digesting the turkey!

Snorvey
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Re: Identifying shares with limited trading ranges

Postby Snorvey » December 19th, 2016, 12:50 pm

Hullo CK

Thanks for the link. It looks to be very comprehensive, but I can't see how it could be filtered so as to provide what I'm looking for, namely a share that moves within a regular price range more or less irrespective of the market generally.


Yeah, it was mainly just to (hopefully) give you a starting point (i.e use the 'Share performance tab' or the 'technical analysis' tab' to narrow things down a bit? (these aren't normally function I use on the screener, I'll admit*)....and hopefully after a few screenings you'll see regular names cropping up for you to investigate further.

* For myself, I use a simple screener of 'Market Cap' greater than a billion, Dividend Growth Minimum 0 over 4 years, Dividend Yield greater than 3.5% and dividend cover greater than 1. That normally chucks up around a hundred companies and then I normally click on the heading tabs to rearrange the results as I want them).

If I'm looking for IT's, I click on 'Equity Investment Instruments' and set the market cap to around +100 million.

Moderator Message:
added quotes as that looks to be the convention on Lemon. Raptor.

kiloran
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Re: Identifying shares with limited trading ranges

Postby kiloran » December 19th, 2016, 2:32 pm

Clitheroekid wrote:So does anyone know of any way of identifying such shares without actually having to study the chart for each and every company?

I would have thought that a personal glance at a chart would be better at identifying the sort of pattern you want better than any software, but looking at the chart for each company one at a time can be a slow process.
You might find this tool useful: http://lemonfoolfinancialsoftware.weebl ... harts.html

You can use a simple text editor like Notepad to edit the HTML file and enter the stock symbols of shares you are interested in, then open the html file in your preferred browser. You can easily look at various time periods, and enable/disable the comparison with the FTSE.

--kiloran

BusyBumbleBee
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Re: Identifying shares with limited trading ranges

Postby BusyBumbleBee » December 22nd, 2016, 3:04 pm

Sorry to be so long coming back on this - Christmas, Meetings, Grandchildren have kept me busy!

First you need a source of data. You can get share prices going back to 1986 from ADVFN.CO.UK (useful site). I think you have to register but there is a free option.

You can set up a 'Monitor' List on it - and choose a few FTSE 100 shares but include Unilever as the example is worked round that.

From the monitor screen select ULVR and you will move to a screen which has a 'download historical prices button' - press it and then select csv with headings

Save this as an XLSx file - not a CSV file and the first few lines should look like this [EDIT see next post as ]



Now copy this table and post it into cell G1 and add the word UNILEVER in cell J1


You should then have a that looks like this


Good Luck

BusyBumbleBee
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Re: Identifying shares with limited trading ranges

Postby BusyBumbleBee » December 22nd, 2016, 3:10 pm

Sorry to be so long coming back on this - Christmas, Meetings, Grandchildren have kept me busy!

First you need a source of data. You can get share prices going back to 1986 from ADVFN.CO.UK (useful site). I think you have to register but there is a free option.

You can set up a 'Monitor' List on it - and choose a few FTSE 100 shares but include Unilever as the example is worked round that.

From the monitor screen select ULVR and you will move to a screen which has a 'download historical prices button' - press it and then select csv with headings

Save this as an XLSx file - not a CSV file and the first few lines should look like this : EDIT see enSorry to be so long coming back on this - Christmas, Meetings, Grandchildren have kept me busy!

First you need a source of data. You can get share prices going back to 1986 from ADVFN.CO.UK (useful site). I think you have to register but there is a free option.

You can set up a 'Monitor' List on it - and choose a few FTSE 100 shares but include Unilever as the example is worked round that.

From the monitor screen select ULVR and you will move to a screen which has a 'download historical prices button' - press it and then select csv with headings

Save this as an XLSx file - not a CSV file and the first few lines should look like this :EDIT couldn't post all the tables in this one so they follow later



Now copy this table and post it into cell G1 and add the word UNILEVER in cell J1


You should then have a that looks like this


Good Luckxt


Now copy this table and post it into cell G1 and add the word UNILEVER in cell J1


You should then have a that looks like this


Good Luck

BusyBumbleBee
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Re: Identifying shares with limited trading ranges

Postby BusyBumbleBee » December 22nd, 2016, 3:15 pm

Final table looks like this EDIT - cannot get tables to work :oops: - message me and I will email it direct - regards - BBB


oldcharlie
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Re: Identifying shares with limited trading ranges

Postby oldcharlie » January 9th, 2017, 4:55 pm

This is a well researched topic in TA. A share price that moves between a top price and a bottom price is identified as a rectangle ie a consolidation in the main up or down trend. The tops and bottom prices are often support and resistance levels from previous trading. They can range from a few months to a few years in length of time and can be very deep or quite shallow Thomas N Bulkowski has written a book about Chart Patterns. Rio Tinto in 2000-2003 moved between 900 and 1500, for example, IMI between 1999 and 2002 from 200 and 320. RB. had four touches top and bottom 3000 to 3680 in 2006-12.

The rule is that the "way in is the way out". So if the rectangular consolidation comes when the prior trend is up (with a clear reversal pattern at the base) then they are likely to prove just a pause in the up trend. Once in a while the base pattern reversing a long down trend will be rectangular in shape.

They can be confused with flags which are very short term tight rectangles that are angled up or down against the line of travel of the main trend.

The important thing is to place a line across the tops and bottoms. Many are not regular enough either at the top or the bottom line and may be another type of consolidation (like triangles) with different expectations in terms of direction.

If you seriously want to find such formations you need to have a programme that allows you to cycle through a directory of shares. I use Metastock and have just travelled through the FTSE 100 in a few minutes with a plain candle overlay.

The pattern is rare but very reliable. But can you see it before it breaks out (up or down)? Will you only trade upwards, making the opportunities even fewer?

However, there are other profitable formations and you might wait a long time for a rectangle! The TA board is always open to discuss an individual share. On the TMF I made it a rule to always see that a query was answered.

OC

Clitheroekid
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Re: Identifying shares with limited trading ranges

Postby Clitheroekid » January 9th, 2017, 8:18 pm

oldcharlie wrote:If you seriously want to find such formations you need to have a programme that allows you to cycle through a directory of shares. I use Metastock and have just travelled through the FTSE 100 in a few minutes with a plain candle overlay.

Thanks for the response, but I'm afraid my ignorance is such that I haven't a clue what you're talking about - "plain candle overlay"? :?

I know TA refers to technical analysis, but I know nothing at all about it, and I've never had much inclination to learn, as from what I've heard it doesn't generally produce any better results than other methods of choosing shares to trade. However, I do know from my own experience that identifying this type of pattern can work, so is there any way I can find such rectangle formations without having to learn all about TA? Would it be possible for me to use Metastock as you have suggested, and if so how would I do it?

Sorry if it's a stupid question, and if the answer's complicated feel free to ignore me!

saechunu
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Re: Identifying shares with limited trading ranges

Postby saechunu » January 9th, 2017, 9:18 pm

Pattern-based trading strategies are increasingly susceptible to being gamed by algorithmic traders, eg. setting up patterns to draw in traders and then performing stop-runs to clear them out. This is more prevalent the shorter the timeframe the pattern appears in, particularly intraday, but still something to be very wary of for patterns forming on daily charts.

I honestly think there are better (more productive) things that most people could be doing with their time than attempting to find and trade this sort of thing unless it's your absolute passion and calling (and are OK with becoming poorer!)


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