The Kirk Report Interview Part 5

The Kirk Report

Q&A With Sylvain Vervoort

Thursday, December 17, 2009 at 8:16 AM

Kirk Report Interview: Next -Previous -Part 1 -Part 2 -Part 3 -Part 4 -Part 5 -Part 6
-Part 7 -Part 8 -Part 9 -Part 10 -Part 11 -Part 12

Interviewed by Charles E. Kirk from "The Kirk Report"

Kirk:  That was a good example to show us what you look for and the indicators you use. While I think it would not be correct to suggest that every situation lines up exactly the way this one did, I think people will find it of interest. As for further clarification, are there indicators you have used in the past that you don’t use now?
Vervoort:  Yes, because there are new indicators all the time and I am making my own indicators. So, logically if I find some new indicator gives me a better result, I will change it. On the other hand once you have a set of indicators you are used to and which help you to perform well, you are often reluctant to change. That’s natural.

Kirk:  Tell us a bit about your indicator SVAPO. Most charting platforms (Stock Finder, Esignal, Metastock, etc.) have the ability to import this indicator.
Vervoort:  SVAPO is a short-term oscillator based on price and volume, so the first thing I did was look at the relationship between these two components in up- and down-trending and down trending markets. These are their normal relationships:




Combining the relationships based on market direction leaves us with three possible conditions:


In an up-trending market, price and volume are moving up. When calculating the oscillator, I will be adding volume. In a down-trending market, the price goes down, while the volume is up. When calculating the oscillator, I will subtract volume. When the volume is moving down and the price is in a consolidation phase moving in either direction, the volume will not be taken into consideration when calculating the oscillator.

Of course, merely combining price and volume will result in a very choppy oscillator. Using conventional smoothing techniques, such as standard moving averages, would create an unacceptable delay for a short-term oscillator. I use a number of different techniques to come up with a smooth but still fast oscillator.

In the chart that follows you can see the SVAPO oscillator in action. Many times, just using the turning points in the oscillator yields profitable trades and it is useful to spot the divergences which occur between the oscillator and the stock’s price.

Kirk:  Very good. I think that will likely encourage some who read this to seek out that indicator for their charting platform!
In the book you also stress viewing charts from different time periods. What are the time frames you most often look at, and what are some examples of times you think multiple time period analysis is important?
Vervoort:  When trading medium to long term on the level of daily charts, for example, I will look at a weekly chart or even a monthly chart to find out which longer term Elliott wave the stock is in. Also, are the indicators on the weekly chart in an up or down move or close to a turning point? Any decision on a daily chart in the same direction will have a better chance for success. Let me show you the chart of Black & Decker (BDK) again but now with weekly candles.

The July 2007 price made a top and therefore presumably an Elliott wave top 5. As of March 13, 2009 price made a big ABC correction, with an impulse wave for wave A, correction wave B and a correction wave C down, more or less in relation to the size of the A wave. If this is a turning point, what do we expect? A new long-term impulse wave 1 up or a correction wave B up. And now there is a bullish engulfing pattern in the candle chart and all indicators are turning up in the buying area.
It’s time to have a look at the daily chart.

Let’s even go a few days earlier to March 10, to see what was already clear in the daily chart. In the candle chart we have a nice morning star bottom reversal pattern close to the Fibonacci target price at 261.8%. The last intermediate Elliott wave C is apparently completed with an impulse wave down. Each indicator is showing a divergence with price and inverse Fisher are in the buying area. We shouldn’t forget that the long term as seen on the weekly chart is ready to turn. Buying now there is no nearby resistance and we are probably at the start of a longer-term up move. With a closing price stop at the low point of the morning star we have a very good risk-to-reward ratio. Of course you can go one step further and follow up this stock in this period on an hourly basis. You will certainly end up with an even better initial stop setting.

Kirk Report Interview: Next -Previous -Part 1 -Part 2 -Part 3 -Part 4 -Part 5 -Part 6
-Part 7 -Part 8 -Part 9 -Part 10 -Part 11 -Part 12

STOCATA Stocks Technical Analysis HOME