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; 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.
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 minimalise the effect of daily fluctuations and eliminate the pitfalls of overtrading
An example of the TSF system is displayed in the chart below:
A weekly chart of the NASDAQ – source: IT charts
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.
These lists are intended as a guide to what the TFS can produce; the examples have not necessarily been chosen because they have the best or most negative returns, but because of the duration of their signals.
The TFS analysis can be used by many; it can appeal to experienced investors who are looking for further analysis to back up their own. The ‘at a glance’ nature of the system offers investors immediate confirmation as to where momentum lies in their holdings.
It can also be used by the novice investor who does not have the time to continually look through the market and look at their share portfolio. In addition, it could appeal to the individual who is looking to start to invest but has no idea of where to look. Because of the simplicity of the analysis and the clear, unambiguous nature of the cloud, it can be used and understood by all.
TFS is a research and investment information service; it does not provide investment advice and has no intention of doing so. It delivers a useful additional research tool for any investor wishing to have a different take on the conventional forms of investment analysis, whether fundamental or technical.
At present the only way to access TFS is via its Twitter account @flyingstocksman; daily tweets look at stocks, indices, currencies, and commodities.
A website is in train which will contain more in-depth information and provide more stock-market and stock specific analysis. In the meantime, TFS is quite happy to receive direct messages via Twitter from investors who wish to know more about a specific stock.