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Systematic Trading: Shell Midstream Partners & Tata Motors

Table of Contents

Disclaimer

All articles are for education purposes only, and not to be taken as advice to buy/sell. Please do your own due diligence before committing to any trade or investments.

Disclaimer

All articles are for education purposes only, and not to be taken as advice to buy/sell. Please do your own due diligence before committing to any trade or investments.

Table of Contents

Systematic Trading (Jan 2022): SHLX & Tata Motors

“It was never my thinking that made the big money for me, it always was sitting.”

– Jesse Livermore

Welcome to the fifth part of our series on Systematic Trading!

In case you’ve missed out on our earlier parts, do at least check out the first part of this series which sets the tone for this series.

Here are the other parts which may also pique your interest:

One of the merits of going through this series is to gain an awareness of the variety of companies that we come into contact with. From an angle that is besides our usual consumer engagement and instead, putting on an investor/trader mindset to look at how the business is reflected in the stock market.

And of course, assess whether there are opportunities to grow our money in the markets.

It is also interesting to see how stocks around the world perform in the various exchanges, and seeing the kind of market psychology that remains relevant throughout.

On that note, please be aware of the usual disclaimer that this series is purely for educational purposes.

Even as we examine one of the currently trending industries, please do not take this as advice to buy/sell!

What’s important is for you to gain one way of looking at the markets. There are potentially many other views, so do take time to understand what works best for you.

 

Quick Comments On Stock Selection: SHLX & Tata Motors

A quick scan on the TradersGPS unveiled an overwhelming number of counters from the oil and gas industry topping the list of strong stocks on the NYSE. It is evident then that a sector rotation is going on, and funds are flowing into the energy sector and specifically into oil and gas.

Among the many trending counters, I decided to go with a name that most of us would be familiar with, albeit not exactly the company that we have in mind – Shell. Apparently, Shell Midstream Partners, L.P. is a limited partnership formed by Royal Dutch Shell. Nonetheless for this article, I will be referring to Shell Midstream Partners, L.P. as “Shell”.

As for the next one, by process of elimination, I decided to feature one counter from the BSE (Bombay Stock Exchange) – not knowing that it is in fact the oldest stock exchange in Asia! When it came to the companies, in the sea of unfamiliar names, one stood out – Tata Motors.

Further research revealed that besides Tata Motors, the Tata Group comprises a wide range of companies including: Tata Consultancy Services, Tata Steel, Tata Chemicals, Tata Consumer Products, Tata Capital, Tata Power, Tata Communications, etc.

Truly a conglomerate. To think that the only reason why I was more familiar with Tata Motors was because of its listing in the NYSE under the ticker symbol TTM.

Anyway, that’s a quick backstory into the selection. Now let’s get on with the charts.

 

Oil refinery shell

Shell Midstream Partners, L.P. (NYSE: SHLX)

1. About The Company

“Shell Midstream Partners, L.P., headquartered in Houston, owns, operates, develops and acquires pipelines and other midstream and logistics assets. Shell Midstream Partner, L.P.’s assets include interests in entities that own (a) crude oil and refined products pipelines and terminals that serve as key infrastructure to (i) transport onshore and offshore crude oil production to Gulf Coast and Midwest refining markets and (ii) deliver refined products from those markets to major demand centers and (b) storage tanks, docks, truck and rail racks and other infrastructure used to stage and transport intermediate and finished products.”…

Source: Corporate website

 

2. Position Trading (Daily)

SHLX has had 1 valid entry signal recently on the TradersGPS, which was triggered on the second trading day of the year after the price exceeded the high of the previous day.

systematic trading SHLX PD tradersgps

While it would not have been ideal to take a position with the stock still in the “noisy” region (candle changing colour from red to blue and vice versa over the last few months)… Assuming an entry in this case, the price would currently be at a breakeven level at $12. Seeing the current retracement, traders who are bullish on the oil and gas industry could keep a lookout for entry opportunities in the days ahead.

 

3. Swing Trading (Weekly)

The 40-moving average is somewhat flat, which makes this counter unsuitable for a swing trade. For a bullish swing trade, both moving averages should be sloping upwards. Likewise for a bearish swing trade, the moving averages should be sloping downwards.

SHLX tradersGPS systematic trading SW

Looking at the past year, SHLX’s weekly swing set-up only appeared once, in July. Even then, the trade was not triggered. The subsequent weeks’ candles did not break the high of the previous week’s candle. When it finally did in August, the 20-MA was going flat as well, and would not make an ideal candidate in this case.

This is also a reminder of how important it is to not just have a set-up, but also a trigger for the trade. Without which, the trade would have less probability of being profitable, as we see in this case. It is better to not hastily take the trade and save the “bullets” for a better set-up.

After all, there is really no lack of stocks to trade. Rather, it pays to be patient and systematic about entries and exits.

 

4. To Trade Position Daily Or Swing Weekly?

Looking at the charts, both are actually not ideal.

Nonetheless, for illustrative sake, then the position daily one would be the better of the two. If one were to ignore the past performance and simply went by the signals, there is a possibility of the counter trending higher to make higher highs and higher lows.

 

trucks vehicles

Tata Motors. (BSE: 500570)

1. About The Company

“Tata Motors is a $35 billion global automobile manufacturing company. Its diverse portfolio includes an extensive range of cars, sports utility vehicles, trucks, buses, and defence vehicles. Tata Motors is one of India’s largest OEMs offering an extensive range of integrated, smart, and e-mobility solutions.”

Source: Corporate website

 

2. Position Trading (Daily)

Looking at Tata Motor’s chart on TradersGPS, the recent price action is actually reminiscent of SHLX’s – that it is in a “noisy” region:

tata motors 500570 systematic trading PD TradersGPS

Although there was actually an entry signal just this week, there are 2 things that I would like to point out about this counter:

  1. At the entry signal prior to this one around mid-November, we see another instance of the “trigger” playing an important role. Without the price breaking above the prior day high, it continued on its downward move, and eventually the candle turned red.
  2. In the earlier sideway phase for the most of 2021, there were entry signals prior to the stock gapping up in October. However, despite the entry signals, history could have repeated itself like in June, with the price pulling back in July. Hence it is also important to screen the stock – such as its relative strength compared to others in the BSE.

In view of the noisy history, it would be wise to give this counter a miss. While the stock’s behaviour in terms of price action may not always be accurate, it nonetheless provides hints and a direction as to what action to take for the present.

If we were to disregard the stock’s history and look at the current signals, the current price action still indicates a sideways trend that is not suitable for position trading.

 

3. Swing Trading (Weekly)

Similar to SHLX, there has not been any weekly swing set-ups recently. Looking at the past year, in fact, there was no swing weekly set-up for Tata Motors.

tata motors 500570 systematic trading TradersGPS SW

Even as the stock entered into the oversold region, as indicated by the -100 on the CCI, price seldom retraced to its moving averages. Save for the period between July and September when it did so, the 20-moving average has been somewhat flat. Hence, there has not been a set-up this past year.

 

4. To Trade Position Daily Or Swing Weekly?

Again, both are not ideal candidates… Do remember that in trading, not taking a position is also a possible course of action.

It is better to wait for the set-up and the trade to be triggered. Although one could argue that the position daily trade has a signal, that would again be for illustrative purpose.

 

Conclusion: SHLX & Tata Motors

When picking these stocks, I had no idea that they would be this similar.

I do hope, though, that this article would drive across a few important points:

  • Be patient and wait for the set-up
  • Conserve your “bullets” for the highest probability trades
  • Abide by the trigger

If we agree that we are into trading for the long run, then it pays to adopt a systematic approach that is able to reap rewards.

The market is certainly unpredictable, but it is also not our job to predict.

React to the prices, stick to the trade plan, and refine the strategy so that it suits your lifestyle and personality.

Plus, with the markets currently undergoing a correction, it is even more crucial to remember these takeaways.

You could potentially snag great companies at a discount, or risk the opportunity cost by getting in at a less than ideal price.

That’s an article for another day. For now, I hope that this series on Systematic Trading thus far has given you an insight as to how this approach works.

As always, stay tuned for the next part as we continue looking at more charts on TradersGPS!

 

Swayed by emotions? Unsure when to take action? While discretionary trading is not bad, perhaps systematic trading is what works for you. Discover the intricacies of it as we journey along this series.

If you’d like to get a FREE e-course and learn how to better time your trade entries, click the banner below:

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Jingting

Newbie in the markets. All the more reason to learn, all the better for making my money work harder. Also, good things in life are meant to be shared~

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