Ian Woodward's Investing Blog

Black Spot Disease and Rust – Simplified

 

In my last note I mentioned Rules of Thumb for quickly establishing if a stock is extended.  I call it Black Spot Disease (BSD) and Rust after Rose Diseases.  My wife loves her garden and grows roses with tender loving care and she is always using her flit gun to get rid of the diseases.  So I took a leaf out of her book and go after my stocks with the same care!  Here are the parameters:

BSD and Rust Numbers

Tim Higgit who is one of our loyal clients came up with a brilliant idea for charting the BSD and Rust parameters in the HGSI software, and I am featuring his work here in this note.  I built on his concept by adding a Red line as shown down in the 200-dma window to show that DRYS, the stock I covered in my previous note on the High Jump Indicator, had reached a peak of 160% from its 200-dma.  You can immediately see that the Rules of Thumb work very well to give one the clue that DRYS should peak again at between $85 and $87 as shown on the chart.  For HGSI customers, this Charting View is posted on the HighGrowthStock.com Yahoo Bulletin Board for you to download into HGSI:

BSD and Rust Chart

Best Regards, Ian.

7 Responses to “Black Spot Disease and Rust – Simplified”

  1. WP Walsh Says:

    I need advice on navigating to BSD Rust chart “in the HighGrowthStock.com Yahoo Bulletin Board for you to download into HGSI” . Thanks. W.Walsh

  2. ian Says:

    I assume you are not a member of the HGSI bulletin board (bb). If that is so, then you will need to sign up as follows:

    1. At the top right hand corner of this Blog you will see an arrow with a Go To
    2. Click on that link, and that will take you to the main HGS Investor site
    3. In the Table of contents on the Left Hand Side you will see a Heading called “Support”, and unferneath it “Forum”
    4. At the top you will see links that will teach you “How do I sign Up?” and “How do I access the forum to review messages”.
    5. The messages you need to read are entitled BSD and Rust Charting View II by thiggit and Ianforum. Attached to those messages are the Chart View which you will need to download to your desktop and then import to your charting module. Mine is an update of Tim’s so I would suggest you just download the one attached to my message.

    Best Regards, Ian.

  3. Paul R Says:

    Ian,

    Looking at BSD and Rust, which moving average (17, 50, 200) do you trust/weight the most when guesstimating price potential?

    Paul R

  4. ian Says:

    Paul: There is no single answer:

    1. In the early stages of a stock’s move up, i.e., 1st and 2nd stage breakouts, the 17+50-dma is the best guide. I generally favor the 50-dma as the guide, and the 17-dma for climax runs.
    2. By a third stage breakout, the 200-dma begins to take on more importance, and I tend to watch the relationship of the Highest High jump of the three combined.
    3. For 4th stage breakouts, the 200-dma is the most reliable.

    Let me anticipate your next question…”What’s a stage breakout?” Look at the chart on DRYS. Each stage is after a pause to refresh followed by a breakout. Therefore, if you can already see, “High”, “Higher” and “Highest” on the chart for the High Jump, the next stage is a 4th stage breakout, which is where it is at now for DRYS. That is why it has sold off from its recent high and it is the most extended from its 200-dma. Now the question is will it hold at support and if so, then it will probably make a further assault at a double top or push on through to achieve $84 to $88 or even higher. Best Regards, Ian.

  5. Paul R Says:

    Ian,

    You are too quick with the next explanation, now going back in my memory bank I believe I have heard this before…….next time I ask this, give me a reminder with the 2X4! Much thanks!

  6. Rob Says:

    Ian,

    The internet can be a wonderful thing. Along with several others at an investment seminar in Chicago, you taught us about Black Spot Disease. It has served me well and kept me from getting too infatuated with certain stocks.

    Another favorite recollection from the seminar was when you held a piece of paper up covering the right half of a stock chart with a very powerful upward trend and then asked us where the stock was going. None of us technical analysis geniuses one guessed it would drop like a rock the next day.

    I am glad I found you on the internet and could take this opportunity to thank you.

    Sincerely,

    Rob

  7. ian Says:

    Hi Rob: Your note sure brings back 15 years of memories, and I am glad the basic “good stuff” I taught you several moons ago has stuck forever with you. The likes of ERG, Black Spot Disease, Rust and High Jump are still as fresh as they were then and remain the foundation of my Keep It Simple teachings, though of course we have now progressed with new ideas when you fast forward these fifteen years. Many thanks for taking the time to drop me a line.

    Best Regards, Ian.

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