OLD TECHNIQUE NEEDS TO BE REVISITED

I received an email the other day and noted that it said, "Get back to basics and trade the Darvas way." I remember that this was one simple way of getting started in trading stocks without having to buy stock software. Granted, it can be more time consuming than one wishes to do, but I believe it is still worthwhile to get used to stock trading. Once you lock onto 5 stocks, just follow them. If they fall off, pick up another stock or two to being looking for new 52 week highs.

Here are the steps:
1. Screen for 52 week highs. http://moneycentral.msn.com/investor/finder/deluxestockscreen.aspx?query=New+52-Week+Highs

2. Draw the top of the "box" when there are 3 consecutive days of falling prices after a new 52 week high.

3. The bottom of the "box" is then drawn after 3 consecutive days of rising prices.


4. Buy when a box is firmly established, and a break out above the upper line of the box. A drop below the bottom of the box is a sign that the stock’s trend has changed and is a sell signal.

One can also utilize volume of shares trades as an additional indicator. Increasing volume on a rising stock indicates buyer interest. Increasing volume on a falling stock indicates seller interest. Once a box is created, place a buy stop order to buy the stock when it breaks out of the box, or a sell stop order if the stock breaks below the box.

Here is a good link to read on the subject. http://breakoutreport.com/articles/darvasapplied.htm

I am going to modify the system. Instead of looking for a break above a 52 week high, I am going to search for stocks that have an ADX less than 15 and wait for the breakout. Currently WIT has and ADX of 11. It's previous high was $17.24 and the previous trend was up. The previous low was $16.25. So here is my trading plan:
1. If the stock breaks above $17.34 I am buying in. If you notice, I place my buy stop order in $0.10 higher than the previous high. IBD recommendations.
2. If the stock breaks below $16.15, I am going to short the stock. I am going to short if the stock pierces $0.10 below the previous low. My recommendation to the flipside of IBD.

TAM is also consolidating as its ADX is 13 and the previous trend was down. However, if you tack on an Accumulation/Distribution line, you see that the slope is up for A/D. TAM may be bottoming out. So, trading plan:
1. Buy if $26.83 is broken to the upside.
2. Short if $24.61 is broken to the downside.

MCRS is oscillating between $53 and $56. ADX is 13. You ought to be able to figure out the plan now.

INFY ADX is 14. Buy above $56.19 and Short below $52.20.

AF above $28.21.

NOTE: THE DARVAS SYSTEM DOES NOT WORK WELL ON FOREX. USE A TREND-TRADING SYSTEM ON FOREX FOR BEST RESULTS.

Good luck trading.
JD