Welcome to 2017, its going to be fascinating as ever, this year.
But first tuck in with me and go on a journey, a short story awaits.
Trading is a funny old game, I was reading the book ‘Mastering the Game of Money’.
One of the descriptive passages spoke of two wealthy men. One of them being the wealthiest man in Germany at the time, Mr Adolf Merckle, net worth $12 Billion.
He owned the largest Pharmaceutical company in Europe, he also had interests in manufacturing & construction.
He fancied himself as a speculator too, [Dangerous].
Sure way to a small fortune = Start with a Large Fortune + add novice speculation tendencies.
In 2008 he decided to short an ailing Volkswagen. It is not clear what information he thought he had, big German CEO’s friends are invariably other big company German CEO’s, something was clearly know or at least felt as highly probable by him, as he ‘bet’ really big.
Shortly after that point, Porsche made a bid to buy Volkswagen, The price shot up not down.
Merckle was down ¾’s of a Billion Dollars on that single trade [Stop Loss Fail!, Sizing Fail?].
To make matters worse he needed cash to pay off massive debt, and during that time the banks weren’t lending, not to Billionaires, not even to other banks!
By the time he had taken full stock of his situation he was down over $3 billion from business short falls and speculation. He was no longer the richest man in Germany, he felt he had failed his family, he wrote a suicide note and stepped in front of a speeding train.
In a tragic irony, after his death, his family found that the loans he sought came through and his companies were saved.
He had felt a failure and killed himself whilst still worth $9 billion dollars.
I have made £2,500 and felt a complete failure too before, mainly because prior to that I was up £25,000+. Although this hasn’t happened in awhile.
Sometimes you can make £300 and be absolutely delighted, as a small cheeky trade, which went exactly to plan. In fact a much smaller loss than expected can do the same too, bring some degree of elation.
Which Brings me to the HVF Method and some recent history in VW & Porsche group.
Pre-Emissions crisis, but post VW eventually acquiring Porsche, we saw the following… technically, after a recent miserable trend.
The Lead up, being the downtrend, was something already known? Who knows.
Note the sell off legs, with intermittent pushbacks.
Note the OBV ‘fails’ to rally on the push backs prior to the event emissions event, all occuring at Key Levels of Significance [KLoS], aka round numbers.
In the pattern view below, spot the bonus provided with positive slippage, the Line of Efficiency [LoE] drawn shows the time in trade and the gain, steep is ‘good’, less time on risk faster outcome and emotionally most comfortable trade. Also Note the Primer set up, that is highlighted in the chart below this. If spotted this would have blown the hinges off the RRR.
The Primer set up on the 5 minute chart. Only possible to spot if you are already in a high state of observance of the pattern and dropping the time frames. We work on the assumption that most pending set ups offer ‘gifts’ and are early to the trade for the benefits it provides to the reduced risk distance and the expansiveness it adds to the already above average Reward. RRR management.
Since this event, it was tough times for the VW Group and the Porsche listing!
Here is a Monthly perspective for the EBB and flows of events. The yellow levels point to previous HVF’s, some having served as Support & Resistance confluences and one running through the level where the emissions scandal pattern formed.
At this juncture the price here appears to be in the basement as uncertainty looms for total cost of legal class action suits.
However as time passes and we drop down to the weekly time frame, we discover there is HVF ‘DNA’ in a squeezing set up.
We also become aware of KLoS being just run and occasionally requiring high impulsiveness to break them. The round numbers of 50, 60 & 70 come to the fore.
Legacy set ups settlement levels for their funnels also prove structurally significant to the price behaviour.
As we are at a price level extreme low, we consider that once the over reaction to the uncertainty of cost of litigation, which will be assumed at the worst case scenario, by risk averse investors.
We also watch rival German Automotive companies, not involved in the scandal. BMW, may be in an Inverted Head & Shoulders Pattern, on the Daily below.
On the H4, it looks bullish and Impulsive, supported with volume.
Further to This we have a HVF on the DAX and the Euro was falling from 1.09’s to 1.05’s providing a Currency tail wind.
The Porsche trade was looking like a first set up in a new trend, these are overtly bullish and can overperform!
We watched closely however for signs of upside impulsiveness, to be confident of direction.
We noticed a Smaller Time frame set up within the weekly a Daily Primer set up.
We bought on the bullish break of the daily primer, supported by a volume spike, the ‘triggering event’ had occurred.
H4 Porsche break out.
Since then we have been long an equity that previously was a sell.
This is the value of the HVF Method, 360 degree market appraisal, and a community of traders sharing the analysis all focused on the same approach, not doing something differently.
We can even anticipate the probability of possible pullbacks so we are better emotionally equipped to stand by the trades when they breathe.
Here is an example. We met the 38% Fibonacci level, the 2nd Interim level for the major pattern [A typical stall level] and the round number 57.50 was run, a previous KLoS.
Daily Porsche chart
In short a stall was expected here at the yellow level, the green confluence is where we plan to exit.
Below is the trade in a platform with the expected pullback and its 10+ RRR illustrated.
Sure enough Trump stood up and threatened BMW, with a 30% duty for the cars assembled in Mexico, prompting a German minister to tell America, to make better cars not threaten trade.
But to us, thats all narrative, cometh the key confluence, cometh the narrative after.
Here is the pullback since.
No, we dont try get out and back in again lower, a perfect way to miss the rest of the trade!
Target EUR 65 to be run close 75%, overperformance manage the rest, a principle for another day.
We could still lose, but our chances are a lot higher at 60% of journey covered, than at entry? for a 10RRR.
Follow our outcome as it unfolds.
To learn about our HVF Method, our community looking after each other with eyes on the front, all doing the same thing, or just to have a free chat about trading, book in below on the link.
Wishing you a prosperous 2017, its going to be interesting. Maybe start your Trading ‘shift’, today!