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Technical
Analysis Newsletters | StockScreener
Newsletters
Profit
Potential - Bombardier Inc.
How much
profit can you make using the tools we've investigated
in this report; moving averages and trendlines?
Let's take a look at a real-life example: Bombardier
Incorporated on the Toronto Stock Exchange. Keep
in mind, of course, that this chart was selected
because it provides a good example during a strong
up trend. On the other hand, this is exactly the
type of market you want to trade in real life!
Here
I'm using 20-day and 50-day Moving Averages, since
I'm interested in profiting from mid- to long-term
moves. This makes the trading signals more responsive
to the market than the 50-day and 200-day MAs used
in looking at the big picture with the NASDAQ composite
index.
I've used
the following straightforward entry and exit signals
(marked as green and red arrows on the chart):
- Buy (green
arrow) when the 20 MA crosses upward through
the 50-day MA.
- Sell (red
arrow) when the price breaks down through the
established uptrend.
In real
life we would also consider other, complimentary
technical indicators such as DMI/ADX, Williams %R,
MoneyFlow, etc. For the purposes of this example,
however, you can see that the combination of Moving
Averages and trendlines can provide us with very
useful -- and potentially profitable - trading signals.
The profit
on this hypothetical series of trades, based on
purchasing 100 shares each time, would have been
roughly as follows (excluding commissions):
The
total for the two trades would have been about $7.50
profit or 56% return on investment, over a period
of about nine months.
What about
the last green arrow? In the first week of July
2000 the 20-day MA once again crossed up through
the 50-day MA - a bullish signal. Keep an eye on
the trendline and the MA!
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