Page 44 - DIY Investor Magazine - Issue 25

ALL ABOARD: MOMENTUM INVESTING
WITH THE FLYING STOCKSMAN
Investors continually look for information on stocks and there are many interesting publications and investor services available; a new source on Twitter is The Flying Stocksman – writes Andrew Bartles.
The beauty of The Flying Stocksman (TFS) is it does not place undue expectations on its followers as many do; many investment publications look for their followers to execute daily trades and trade on a short-term basis. Not so with TFS which looks to make investment decisions last for a minimum of 18 months and any investment analysis notifications are made on a fortnightly basis.
SO, WHAT MAKES TFS STAND OUT?
Firstly, its analysis is ‘on a glance basis’, meaning that investors can simply look at a TFS chart and see immediately whether the stock is in ‘Buy’ or ‘Sell’. Furthermore, its analysts show where they would place their stops in the event that
the investment does not perform. Further detail can also be provided on position sizing too.
HOW IS THIS ACHIEVED?
TFS uses a combination of moving averages and momentum indicators which are represented by a single cloud on its charts. The cloud lags the performance of the underlying stock and accordingly investors do not buy in at the top, nor do they get out at the top; what they do get is exposure to the meaty middle where most of the gains are made.
Put simply, a new signal is produced when price moves through the cloud; a move above the cloud producers a buy signal and, conversely, a move below the cloud is a new sell signal.
Once a signal is issued TFS looks to ride the trend and where possible not alter positions until the system requires them too.
The purpose of the TFS analysis is to try to ensure that the investor is on the right side of the trade.
Thus, if stock is going up, then the investor is not caught out by trying to short it (look at the recent situation with Tesla
for example) or they are caught left holding a stock like Intu Properties as it goes bust.
To illustrate the point let us examine 10 Buy and 5 Sell investments listed on the London Stock Exchange identified by TFS.
Avon Rubber
BUY
09/11/2009
87
4142
In addition, this process means that the system has a greater chance of identifying successful trades because the momentum already exists behind the stock. Ultimately TFS aims to be on the right side of major trends and looks to minimalize the effect of daily fluctuations and eliminate the pitfalls of overtrading.
Stock
Aveva
Games Workshop
Liontrust
Ocado
Scottish Mortgage
Signal Type
BUY
BUY
BUY
BUY
BUY
Signal Date*
26/12/2016
28/11/2016
28/11/2016
27/11/2017
19/11/2012
Signal Level as at Level* 18/09/2020*
1831 4890
505 10110
304 1337
356 3794
143 968
Diploma
BUY
27/06/2016
794
1801
Kainos
BUY
03/04/2017
213
1028
An example of the TSF system is displayed in the chart below: A weekly chart of the NASDAQ – source: IT charts
London Stock Exchange
BUY
20/12/2010
798
8956
Rentokil
BUY
08/10/2012
84
563
*Source: IT Charts
DIY Investor Magazine | Sept 2020 44