SHEL EMA Crossover

EMA (Exponential Moving Average) gives more weight to recent prices, making it more responsive to current price action. This means EMA crossovers signal earlier than SMA crossovers. However, this responsiveness also creates slightly more whipsaws. Most traders prefer the earlier signals.

Typically 4-8 crossovers per year on the daily chart. This is an infrequent signal strategy. Some years may have more (choppy markets) or fewer (strong trends). Patience is required - don't force trades between signals.

Best practice is to wait for price confirmation - price should close above both EMAs for bullish crossover. Alternatively, wait for a pullback to 20 EMA for better entry. Entering immediately on crossover without confirmation increases whipsaw risk.

You can still enter if price is above both EMAs and trend is developing. Alternatively, wait for a pullback to 20 EMA which often occurs within a week. Don't chase if price has already moved significantly from the crossover level.

20/50 EMA crossover is designed for swing/position trading (weeks to months). For shorter-term, you'd need faster EMAs (e.g., 9/21) but this increases whipsaws. The 20/50 combination is a balance of signal quality and frequency.

Use filters: 1) Require Weekly EMA alignment, 2) Require oil (Brent) EMA alignment, 3) Check that EMAs are separated (not converged), 4) Require RSI > 55 for bullish signals. During obvious ranges, consider pausing EMA crossover trading.

20 EMA trail is tighter - exits sooner, locks in more profit but may exit during normal pullbacks. 50 EMA trail is wider - captures larger trends but gives back more on reversal. Start with 50 EMA trail; switch to 20 EMA after significant gains.

Breakout entry: Enter on crossover day or next day at higher price. Pullback entry: Wait for price to pull back to 20 EMA after crossover, enter at lower price. Pullback offers better R/R but you might miss trades that don't pull back.

Very important. Weekly alignment acts as a trend filter. Daily crossovers aligned with Weekly direction have significantly higher success rate (estimated 10-15% improvement). Counter-trend daily signals often fail.

Generally close or reduce before earnings. EMA strategy is about trend-following, not predicting earnings. LNG results can surprise significantly. Exit 2-3 days before; re-enter after reaction if trend intact.

Backtesting suggests 20/50 is robust for Shell. 15-25 for fast and 40-60 for slow all produce similar results. Avoid over-optimizing. The 20/50 combination is widely watched, creating some self-fulfilling effect.

Shell changed from dual share class (RDSA/RDSB) to single line (SHEL) in 2022. Ensure your data provider properly chains these together. Verify no false signals around the January 2022 transition. Use adjusted data.

You can use same parameters (20/50), but don't hold positions in both simultaneously - they're 0.8-0.9 correlated. Choose the one with stronger relative performance or better alignment with energy. Alternate between them rather than doubling up.

Target Sharpe ratio > 0.5, ideally > 0.7. Single-stock trend strategies typically achieve 0.4-0.8. Shell specifically benefits from energy correlation filters. Lower Sharpe is acceptable if absolute returns and drawdown are reasonable.

EMA trades can last weeks to months. CFD daily financing of ~3-5% annually adds up. For trades > 2 weeks, calculate financing impact. Consider actual shares (via IB) for longer-term EMA positions to avoid financing drag.