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Disclaimer

Disclaimer

This seminar,

This seminar, Trade the Right Stocks at the Right TimeTrade the Right Stocks at the Right Time,, was prepared for was prepared for educational purposes only. Its contents do not recommend, advoc

educational purposes only. Its contents do not recommend, advocate or ate or urge the buying, selling, or holding of any financial instrument

urge the buying, selling, or holding of any financial instruments. s.

The author expresses personal opinions in the seminar contents,

The author expresses personal opinions in the seminar contents, herein, herein, and will not assume any responsibility whatsoever for the action

and will not assume any responsibility whatsoever for the actions of the s of the attendee, or person reading these contents. The author may or ma

attendee, or person reading these contents. The author may or may not y not hold positions in the financial instruments discussed in this se

hold positions in the financial instruments discussed in this seminar content. minar content.

Trading and investing involve high levels of risk. Future result

Trading and investing involve high levels of risk. Future results can be s can be dramatically different from the opinions expressed herein. Past

dramatically different from the opinions expressed herein. Past performance performance does not guarantee future performance.

does not guarantee future performance.

This presentation is provided for informational purposes only an

This presentation is provided for informational purposes only and does not d does not constitute an endorsement by Townsend Analytics of the informati

constitute an endorsement by Townsend Analytics of the information and on and views expressed by the presenter.

views expressed by the presenter. Townsend Analytics does not guarantee Townsend Analytics does not guarantee the accuracy of or warrant any representations made in this

the accuracy of or warrant any representations made in this

presentation.

presentation. Townsend Analytics shall not be held liable for any inaccurate Townsend Analytics shall not be held liable for any inaccurate or incomplete information or for any improper or incorrect use o

or incomplete information or for any improper or incorrect use of the f the information contained in this presentation.

(2)

To view this presentation online

To view this presentation online

in PDF format,

in PDF format,

please go to:

please go to:

http://www.toniturner.com/tradetherightstocks.htm http://www.toniturner.com/tradetherightstocks.htm

(3)

Trade the Right Stocks

Trade the Right Stocks

at the Right Time

at the Right Time

www.ToniTurner.com

www.ToniTurner.com

Trade the Right Stocks at the Right Time © 2006. TrendStar Trading Group, Inc.

All rights reserved. Unauthorized duplication is a violation of applicable laws. RealTick® graphics used with permission of Townsend Analytics, Ltd.©

(4)

Toni

Toni

Turner

Turner

.com

.com

„

„

DVDs

DVDs

„

„ The Profitable Trading AttitudeThe Profitable Trading Attitude

„

„ Swing Trade Stocks & Swing Trade Stocks & ETFsETFs in Any Marketin Any Market

„

„ Trade the Right Stocks at the Right TimeTrade the Right Stocks at the Right Time

„

„ Thirty One Center Points Thirty One Center Points (audio CD)(audio CD) „

„

Books

Books

„

„ A Beginner’s Guide to Day Trading OnlineA Beginner’s Guide to Day Trading Online

„

„ A Beginner’s Guide to ShortA Beginner’s Guide to Short--Term TradingTerm Trading

„

(5)

Workshop Overview

Workshop Overview

Module One Module One Sector Selection Sector Selection

Your Key to Consistent Profits

Your Key to Consistent Profits

Module Two

Module Two

Target Key Industry Groups

Target Key Industry Groups

and Trading Candidates

and Trading Candidates

Module Three

Module Three

Winning Strategies to Keep You

Winning Strategies to Keep You

on the Right Side of the Market

on the Right Side of the Market

Module Four

Module Four

Keep Your Head in the Game!

(6)

Module One

Module One

Sector Selection

Sector Selection

Your Key to Consistent Profits

Your Key to Consistent Profits

„

„ Sector SelectionSector Selection Why Is It Key to Consistent Why Is It Key to Consistent

Profits in Today’s Markets? Profits in Today’s Markets?

„

„ S & P 500 Sectors and Industry GroupsS & P 500 Sectors and Industry Groups

„

„ Stock Selection & EconomyStock Selection & Economy

„

„ Business and Stock Market CyclesBusiness and Stock Market Cycles

„

„ Sectors and Economic Environment Sectors and Economic Environment

Relationships Relationships

„

„ The Big Four TurbinesThe Big Four Turbines

„

(7)

Why Is Sector Selection Key to

Why Is Sector Selection Key to

Consistent Profits?

Consistent Profits?

„

„

For every market environment, certain

For every market environment, certain

sectors flourish and others weaken.

sectors flourish and others weaken.

„

„

Since 1990, average return differential

Since 1990, average return differential

between best & worst performing sector

between best & worst performing sector

(per year) = approx. 50 percentage points

(per year) = approx. 50 percentage points

„

„

The VIX indicates market volatility is

The VIX indicates market volatility is

decreasing. Knowing which sectors are

decreasing. Knowing which sectors are

moving is key for trading profits.

moving is key for trading profits.

(8)

Why Sector Selection Is Key to

Why Sector Selection Is Key to

Consistent Profits

Consistent Profits

„

„

Market environments may be:

Market environments may be:

„

„ Inflationary or nonInflationary or non--inflationary, depending on inflationary, depending on

interest rates interest rates

„

„ RecessionaryRecessionary

„

„ Bull or Bear climateBull or Bear climate

„

„ Affected by geopolitical eventsAffected by geopolitical events

„

„ Influenced by supply shocks, such as a jump in Influenced by supply shocks, such as a jump in

oil or food prices oil or food prices

(9)

Sector Selection Is Key to

Sector Selection Is Key to

Consistent Short

(10)

Sector Selection Is Key to

Sector Selection Is Key to

Consistent Profits

Consistent Profits

(11)

Why Sector Selection Is Key to

Why Sector Selection Is Key to

Consistent Profits

Consistent Profits

Sectors

Sectors ---- DefinitionDefinition

„

„ Ten stock sectors in the Ten stock sectors in the

Standard & Poor’s 500

Standard & Poor’s 500

Stock Index = ten diverse

Stock Index = ten diverse

commercial groups that

commercial groups that

drive the U.S. economy.

drive the U.S. economy.

„

„ Each sector contains Each sector contains

individual industry groups.

individual industry groups.

„

„ Market reflects interplay Market reflects interplay

between sectors.

between sectors.

Sectors

Sectors

„

„ Basic MaterialsBasic Materials

„

„ Consumer DiscretionaryConsumer Discretionary

„

„ Consumer StaplesConsumer Staples

„

„ EnergyEnergy

„

„ FinancialsFinancials

„

„ Health CareHealth Care

„ „ IT (Technology)IT (Technology) „ „ IndustrialsIndustrials „ „ TelecomTelecom „ „ UtilitiesUtilities

(12)

Sectors

Sectors

Industry Groups

Industry Groups

„

„ Basic MaterialsBasic Materials

„

„ Chemicals & Ag ChemicalsChemicals & Ag Chemicals „

„ Aluminum, Copper, Gold , SilverAluminum, Copper, Gold , Silver „

„ NonNon--Metallic MiningMetallic Mining „

„ Integrated Oil and GasIntegrated Oil and Gas

„

„ Consumer DiscretionaryConsumer Discretionary

„

„ Autos and ComponentsAutos and Components „

„ Consumer Durables and ApparelConsumer Durables and Apparel „

„ Hotel, Restaurants, and LeisureHotel, Restaurants, and Leisure „

„ MediaMedia „

(13)

Sectors

Sectors

Industry Groups

Industry Groups

„

„ Consumer StaplesConsumer Staples

„

„ Food and Drug RetailFood and Drug Retail „

„ Food, Beverage, TobaccoFood, Beverage, Tobacco „

„ Household, Cosmetics and Personal ProductsHousehold, Cosmetics and Personal Products

„

„ EnergyEnergy

„

„ Oil & Oil servicesOil & Oil services

„

„ FinancialsFinancials

„

„ BanksBanks „

„ Diversified financialsDiversified financials „

„ InsuranceInsurance „

(14)

Sectors

Sectors

Industry Groups

Industry Groups

„

„

Health Care

Health Care

„

„ Health Care Equipment and ServicesHealth Care Equipment and Services

„

„ PharmasPharmas and and BiotechsBiotechs

„

„

IT (Technology)

IT (Technology)

„

„ Semiconductors & Semi EquipmentSemiconductors & Semi Equipment

„

„ Software and ServicesSoftware and Services

„

(15)

Sectors

Sectors

Industry Groups

Industry Groups

„

„ IndustrialsIndustrials

„

„ Capital GoodsCapital Goods „

„ Commercial Services and SuppliesCommercial Services and Supplies „

„ TransportationTransportation „

„ Defense and aerospaceDefense and aerospace

„

„ TelecomTelecom

„

„ Telecommunications ServicesTelecommunications Services

„

„ UtilitiesUtilities

„

„ Electric UtilitiesElectric Utilities „

„ Gas UtilitiesGas Utilities „

„ MultiMulti--UtilitiesUtilities „

(16)

Your Question . . .

Your Question . . .

Where Can I Find Industry Group

Where Can I Find Industry Group

Components to Trade?

Components to Trade?

„

„ Populate Populate RealTickRealTick® Market Minder with a symbol ® Market Minder with a symbol chain

chain

„

„ Subscribe to Subscribe to RealTickRealTick® for 14® for 14--day free trialday free trial

www.realtick.com

www.realtick.com

„

„ Search Search MarketGauge.comMarketGauge.com Sectors and GroupsSectors and Groups

„

„ Free 14Free 14--day trial & Group Discount day trial & Group Discount

http://www.MarketGauge.com/ToniTurner

http://www.MarketGauge.com/ToniTurner

This offer is not available anywhere else!

(17)

Stock Selection & Economy

Stock Selection & Economy

Bull or Bear market?

Bull or Bear market? When you trade, always play When you trade, always play the odds . . .

the odds . . .

„

„ High odds High odds

„

„ Strong stocks in strong sectors / industry groups Strong stocks in strong sectors / industry groups „

„ Weak stocks in weak sectors / industry groupsWeak stocks in weak sectors / industry groups

„

„ Low oddsLow odds

„

„ Strong stock in weak sector / industry group Strong stock in weak sector / industry group „

„ Weak stock in strong sector / industry groupWeak stock in strong sector / industry group

Fundamentally strong stocks can decline if they reside in

Fundamentally strong stocks can decline if they reside in

a weak industry group . . .

(18)

Stock Selection & Economy

Stock Selection & Economy

„

„

Investors buy stocks with strong

Investors buy stocks with strong

fundamentals, ignoring market and sector

fundamentals, ignoring market and sector

strength and volatility . . .

strength and volatility . . .

„

„ Buying in a bear market = low oddsBuying in a bear market = low odds

„

„ Fact: large portion of stocks’ price move related to Fact: large portion of stocks’ price move related to

sector / industry group move sector / industry group move

„

„ Ignoring these facts can be dangerous to your Ignoring these facts can be dangerous to your

wealth wealth

(19)

Stock Selection & Economy

Stock Selection & Economy

As a successful trader / investor, you will…

As a successful trader / investor, you will…

„

„

Evaluate market environment

Evaluate market environment

before

before

you

you

enter:

enter:

„

„ Trending markets (bull or bear) favorable to Trending markets (bull or bear) favorable to

traders on all time frames. traders on all time frames.

„

„ Horizontal markets favorable to Horizontal markets favorable to shortshort--term term

traders. traders.

„

„ Whippy Whippy intradayintraday markets unfavorable to active markets unfavorable to active

traders. traders.

(20)

Business and Stock Market Cycles

Business and Stock Market Cycles

How They Evolve Together

How They Evolve Together

„

„

Broad market trends fueled by three

Broad market trends fueled by three

powerful cycles:

powerful cycles:

„

„ Business CycleBusiness Cycle

„

„ Stock Market CycleStock Market Cycle

„

(21)

Business Cycle

Business Cycle

Expansion Peak Recession Trough Trough

(22)

Stock Market Cycle

Stock Market Cycle

IT Telecom Transportation Energy Consumer Staples Health Care Basic Materials Industrials Utilities Financials Consumer Discretionary

Late Bull Market Early Bear Market

Middle Bull Market Middle Bear Market

Late Bear Market

(23)

Business and Market Cycles

Business and Market Cycles

Late Bull Market

Top Peak

Recession

Trough

Early Bull Market

Expansion Trough Early Bear Late Bear Market Business

(24)

When You Trade Cycles & Sectors…

When You Trade Cycles & Sectors…

These are

These are typicaltypical patterns. They are not absolute.patterns. They are not absolute.

„

„ Cycles develop in the longCycles develop in the long-term -term

„

„ Economic expansions can evolve for 6 mos. to 5 Economic expansions can evolve for 6 mos. to 5

years, or longer

years, or longer

„

„ LongLong--term cycles are created by shortterm cycles are created by short-term -term cycles

cycles

„

„ Success = understanding dynamics underlying Success = understanding dynamics underlying sector expansion or contraction.

(25)

Sectors & Environments

Sectors & Environments

„

„

Transportation

Transportation

Thrives on low energy

Thrives on low energy

prices and strong economy.

prices and strong economy.

„

„

IT

IT

-

-

Technology thrives on low interest

Technology thrives on low interest

rates and strong economy.

rates and strong economy.

„

„

Telecoms

Telecoms

Do best in expanding

Do best in expanding

economies.

economies.

„

„

Basic Materials

Basic Materials

As economy expands,

As economy expands,

commodity

commodity

-

-

related companies flourish.

related companies flourish.

„

„

Industrials

Industrials

Thriving companies need

Thriving companies need

more capital equipment.

more capital equipment.

(26)

Sectors & Environments

Sectors & Environments

„

„ Energy Energy At the top of a market expansion, energy At the top of a market expansion, energy prices typically skyrocket

prices typically skyrocket——inflationary.inflationary.

„

„ Consumer Staples Consumer Staples This sector thrives when This sector thrives when investors become “defensive.”

investors become “defensive.”

„

„ Health Care Health Care PharmasPharmas, health equipment also , health equipment also defensive

defensive

„

„ Utilities Utilities Capital intensiveCapital intensive

„

„ Prosper in lowProsper in low--interest rate environmentsinterest rate environments „

(27)

Sectors & Environments

Sectors & Environments

„

„

Financials

Financials

Flourish in low interest rate

Flourish in low interest rate

environments. Consumers spend more, re

environments. Consumers spend more, re

-

-finance more.

finance more.

„

„

Consumer Discretionary

Consumer Discretionary

autos, trucks and

autos, trucks and

housing. When interest rates and prices are

housing. When interest rates and prices are

low, pent

low, pent

-

-

up demand for big

up demand for big

-

-

ticket items can

ticket items can

lead the economy out of its slump.

(28)

Sectors & Environments

Sectors & Environments

RealTick® graphics used with permission of Townsend Analytics, Ltd. © 1986-2006 Townsend Analytics, Ltd.

(29)

The Good News:

The Good News:

Traders concentrate on the short

(30)

Big Four Turbines

Big Four Turbines

„

„

Economic Data

Economic Data

„

„

“Exogenous” Shocks

“Exogenous” Shocks

„

„

Earnings Reports

Earnings Reports

„

(31)

Economic Data

Economic Data

„

„

Stay aware of upcoming reports

Stay aware of upcoming reports

„

„

Monthly calendar at

Monthly calendar at

ToniTurner.com

ToniTurner.com

„

„ Econ reports announced monthly/quarterlyEcon reports announced monthly/quarterly

„

„ Most come out at 8:30 AM or 10:00 AMMost come out at 8:30 AM or 10:00 AM

„

„ Market’s reaction to data can stop you out of a Market’s reaction to data can stop you out of a

trade

trade

„

„ Impact on market varies with economic Impact on market varies with economic

conditions

(32)

Economic Data

Economic Data

Key Reports

Key Reports

„

„

ISM (Institute of Supply Mgt.)

ISM (Institute of Supply Mgt.)

(1(1stst of month)of month)

„

„

Jobs Report

Jobs Report

(1(1stst Friday)Friday)

„

„

Productivity

Productivity

(Quarterly, 1(Quarterly, 1stst week of 2week of 2ndnd month) month)

„

„

Retail Sales

Retail Sales

(2(2ndnd week)week)

„

„

Producer Price Index

Producer Price Index

(2(2ndnd week) week)

„

„

CPI

CPI

(3(3rdrd week)week)

„

„ Housing Starts and Building Permits (3Housing Starts and Building Permits (3rdrd week)week)

„

(33)

Exogenous Shocks

Exogenous Shocks

Exogenous

Exogenous

--

--

“Caused or produced by

“Caused or produced by

factors outside the organism or system.”

factors outside the organism or system.”

Examples

Examples

„

„

Natural disasters, weather, pandemic

Natural disasters, weather, pandemic

„

„

Accounting scandals

Accounting scandals

„

„

War, terrorism

War, terrorism

„

(34)

Exogenous Shocks

Exogenous Shocks

SPX: line chart $XOI: Candle Chart Oil Index

(35)

Earnings Reports

Earnings Reports

„

„

Earnings season for U.S. companies: March,

Earnings season for U.S. companies: March,

June, September, December

June, September, December

„

„ April, July, October and January volatile April, July, October and January volatile

months

months——October typically most volatileOctober typically most volatile

„

„ Earnings/guidance of Earnings/guidance of bellweathersbellweathers move move

markets

markets

„

„ Companies may “game” consensus analysts Companies may “game” consensus analysts

„

„ True or false? Always buy a stock the minute the True or false? Always buy a stock the minute the

company announces good earnings!

(36)

Federal Reserve Board

Federal Reserve Board

Economic Environment & Monetary Policy

Economic Environment & Monetary Policy

„

„

Inflationary

Inflationary

Fed raises interest rates

Fed raises interest rates

„

„ Interest rates = cost of moneyInterest rates = cost of money „

„ Higher rates decrease capital spending, consumer Higher rates decrease capital spending, consumer

consumption

consumption

„

„ May lead to recessionMay lead to recession

„

„

Recessionary

Recessionary

Fed maintains or lowers

Fed maintains or lowers

interest rates

interest rates

„

„ Decreased production + decreased sales = lower Decreased production + decreased sales = lower

prices

prices

„

(37)

S&P 500 & Current Interest Rate Cycle

S&P 500 & Current Interest Rate Cycle

Rates stable 1996-98 Rates lowered 1998-99 Rates raised 1999-2000 Rates lowered 2001-2004 Rates raised 2004-06

(38)

NASDAQ 100 & Current Interest Rate Cycle

NASDAQ 100 & Current Interest Rate Cycle

Rates stable Rates lowered Rates raised Rates lowered

(39)

Module One

Module One

Sector Selection Is Key to Profits

Sector Selection Is Key to Profits

Review

Review

„

„

Certain market conditions benefit / impair

Certain market conditions benefit / impair

certain sectors

certain sectors

„

„

Profit spread between winning and loosing

Profit spread between winning and loosing

sectors is wide

sectors is wide

„

„

Choosing the right stock in the wrong sector

Choosing the right stock in the wrong sector

can impact bottom line

can impact bottom line

„

„

VIX indicates markets are quieting; traders

VIX indicates markets are quieting; traders

need to know which sectors ripe for profits

need to know which sectors ripe for profits

(40)

Module One

Module One

Sector Selection is Key to Profits

Sector Selection is Key to Profits

Review continued

Review continued

Bull Market Stars

Bull Market Stars

„

„

Transportation

Transportation

„

„

IT

IT

„

„

Basic Materials

Basic Materials

„ „

Telecom

Telecom

„ „

Industrials

Industrials

„ „

Energy

Energy

Bear Market Stars

Bear Market Stars

„

„ Consumer StaplesConsumer Staples

„

„ Health CareHealth Care

„ „ UtilitiesUtilities „ „ Consumer Consumer Discretionary Discretionary „ „ FinancialsFinancials

(41)

Module One

Module One

Sector Selection is Key to Profits

Sector Selection is Key to Profits

Review continued

Review continued

„

„

Stock market cycle leads business cycle

Stock market cycle leads business cycle

„

„

Interest rate cycle fluctuates according to

Interest rate cycle fluctuates according to

inflation or recessionary environments

inflation or recessionary environments

„

„

“Big Four Turbines” that fuel cycle moves

“Big Four Turbines” that fuel cycle moves

„

„ Economic DataEconomic Data

„

„ “Exogenous” Shocks“Exogenous” Shocks

„

„ Earnings ReportsEarnings Reports

„

(42)

Take a Ten

(43)

Module Two

Module Two

Target Key Industry Groups and

Target Key Industry Groups and

Trading Candidates

Trading Candidates

„

„

Top

Top

-

-

Down Strategy: Four Key Points

Down Strategy: Four Key Points

„

„

Essential Step: Risk

Essential Step: Risk

-

-

Reward Analysis

Reward Analysis

„

(44)

Top

Top

-

-

Down Strategy

Down Strategy

Four Key Points

Four Key Points

1. Evaluate current market trend 1. Evaluate current market trend

„

„ Bull or bear market?Bull or bear market?

„

„ Analyze Dow, S&P 500, NASDAQ 100 cash Analyze Dow, S&P 500, NASDAQ 100 cash

indices on weekly and daily charts

indices on weekly and daily charts

„

„ Evaluate EEvaluate E--mini stock indices, YM, ES, NQ, ERmini stock indices, YM, ES, NQ, ER

„

„ Volatile or quiet? Volatile or quiet?

„

(45)

Top

Top

-

-

Down Strategy

Down Strategy

Four Key Points

Four Key Points

2.

2. Which “turbine” currently fuels the market?Which “turbine” currently fuels the market?

„

„ Inflationary or recessionary climate?Inflationary or recessionary climate?

„

„ Earnings season? Earnings season?

„

„ Exogenous shocks? Exogenous shocks?

„

„ Check light crude oil Check light crude oil miNYmiNY if available (root if available (root

symbol QM, website

symbol QM, website www.nymex.comwww.nymex.com ))

„

„ XOI indexXOI index „

„ OIH (ETF) OIH (ETF)

„

(46)

Top

Top

-

-

Down Strategy

Down Strategy

Four Key Points

Four Key Points

3.

3.

Decide which sectors/industry groups

Decide which sectors/industry groups

benefit or lose in current climate.

benefit or lose in current climate.

Scan weekly and daily charts . . .

Scan weekly and daily charts . . .

„

„

Look for continuations of strong trends

Look for continuations of strong trends

„

(47)

Top

Top

-

-

Down Strategy

Down Strategy

Four Key Points

Four Key Points

4. Compare daily and charts of applicable stock 4. Compare daily and charts of applicable stock

candidates. candidates.

„

„ Which are stronger than industry group?Which are stronger than industry group?

„

„ Which follow similar pattern to group index?Which follow similar pattern to group index?

„

„ Which are weaker?Which are weaker?

„

(48)

Top

Top

-

-

Down Strategy

Down Strategy

-

-

Comparing Candidates

Comparing Candidates

(49)

Top

Top

-

-

Down Strategy

Down Strategy

-

-

Comparing Candidates

Comparing Candidates

(50)

Top

Top

-

-

Down Strategy

Down Strategy

-

-

Comparing Candidates

Comparing Candidates

(51)

Top

Top

-

-

Down Strategy

Down Strategy

-

-

Comparing Candidates

Comparing Candidates

(52)

Top

Top

-

-

Down Strategy

Down Strategy

-

-

Comparing Candidates

Comparing Candidates

(53)

Risk

Risk

-

-

Reward Analysis Produces

Reward Analysis Produces

“A

“A

-

-

Rated” Trades

Rated” Trades

„

„

Determine risk

Determine risk

-

-

reward ratio before you

reward ratio before you

enter each trade.

enter each trade.

„

„

If ratio is not at least 1:2, discard trade.

If ratio is not at least 1:2, discard trade.

„

„

Risk:reward

Risk:reward

ratio derived from three prices

ratio derived from three prices

„

„ Entry priceEntry price

„

„ StopStop--loss price (potential risk)loss price (potential risk)

„

„ Initial profit target (potential reward)Initial profit target (potential reward) „

„

Apply process to every trade

Apply process to every trade

„

(54)

Accurate Risk

Accurate Risk

-

-

Reward Analysis

Reward Analysis

Is Essential to Profitable Trades!

Is Essential to Profitable Trades!

(55)

Risk

Risk

Reward Analysis

Reward Analysis

Optimum

Optimum

risk:reward

risk:reward

ratio

ratio

1:2, 1:3, or higher

1:2, 1:3, or higher

$33 $30 $29 Enter at $30 Protective Stop $29

Initial profit target: $33 R:R ratio 1:3

(56)

Set

Set

-

-

Up One

Up One

Early Bull Flag Break

Early Bull Flag Break

-

-

Out

Out

On daily chart . . .

On daily chart . . .

„

„ Stock trading in an early uptrendStock trading in an early uptrend

„

„ Price now consolidating in a bull flagPrice now consolidating in a bull flag

„

„ Price rests on or near 20Price rests on or near 20--day MAday MA

„

„ 5050--day MA rising below price patternday MA rising below price pattern

„

„ OptimallyOptimally 200200--day MA rising below patternday MA rising below pattern

„

„ StochasticsStochastics oversold, bullish divergenceoversold, bullish divergence

„

„ OBV trending higherOBV trending higher

„

(57)

Set

Set

-

-

Up One

Up One

Early Bull Flag Break

Early Bull Flag Break

-

-

Out

Out

Market Criteria

Market Criteria

„

„

Dow and/or S&P 500 or

Dow and/or S&P 500 or

Nasdaq

Nasdaq

100

100

(or Composite) trending favorably

(or Composite) trending favorably

„

„

Relevant sector benefits from current

Relevant sector benefits from current

market environment

market environment

„

„

Industry group where target stock resides

Industry group where target stock resides

consolidating or in context of uptrend

consolidating or in context of uptrend

(58)

Locate Setup on Daily Chart

Locate Setup on Daily Chart

Stochastics

OBV

RealTick® graphics used with permission of Townsend Analytics, Ltd. © 1986-2005 Townsend Analytics, Ltd.

Iran announces it’s not going to limit uranium research.

(59)

Confirm on Weekly Chart

Confirm on Weekly Chart

RealTick® graphics used with permission of Townsend Analytics, Ltd. © 1986-2005 Townsend Analytics, Ltd.

(60)

Confirm Trend on Monthly Chart

Confirm Trend on Monthly Chart

(61)

Confirm Industry Group Positioning

(62)

Daily Chart

Daily Chart

-

-

Risk

Risk

-

-

Reward

Reward

RealTick® graphics used with permission of Townsend Analytics, Ltd. © 1986-2005 Townsend Analytics, Ltd.

Aug 28: Hi & Cls $66

Enter Aug 25: $65.70 - $66.10 Initial Stop: $65.40

(63)

Entry

Entry

10

10

-

-

minute Chart

minute Chart

Entry 65.90

(64)

Entry

Entry

--

--

Trade Progression

Trade Progression

--

--

Exit

Exit

30

30--Minute ChartMinute Chart

Entry 65.90

Exit 68.50

(65)

Summary

Summary

--

--

Daily Chart

Daily Chart

RealTick® graphics used with permission of Townsend Analytics, Ltd. © 1986-2006 Townsend Analytics, Ltd.

Life is good! 2.40 points

(66)

Summary

Summary

--

--

Daily Chart

Daily Chart

(67)

Setup Two

Setup Two

Moving Average Jump Start

Moving Average Jump Start

„

„

On daily chart, stock rising out of base

On daily chart, stock rising out of base

„

„

20

20

-

-

day EMA crossing above 35

day EMA crossing above 35

-

-

day MA, just

day MA, just

below price pattern

below price pattern

„

„

200

200

-

-

day MA

day MA

above

above

price pattern, level or

price pattern, level or

rising

rising

„

„

Strong volume on breakout

Strong volume on breakout

„

„

Stochastics

Stochastics

must

must

be rising

be rising

„

„

OBV rising

OBV rising

„

„ Same market criteria as Early Bull Flag BreakoutSame market criteria as Early Bull Flag Breakout

„

(68)

Locate Setup on Daily Chart

Locate Setup on Daily Chart

(69)

Confirm on Weekly Chart

Confirm on Weekly Chart

(70)

Confirm Trend on Monthly Chart

Confirm Trend on Monthly Chart

(71)

Confirm Industry Group Positioning

Confirm Industry Group Positioning

(72)

Return to Daily Chart

Return to Daily Chart

-

-

Risk

Risk

-

-

Reward

Reward

RealTick® graphics used with permission of Townsend Analytics, Ltd. © 1986-2006 Townsend Analytics, Ltd.

Entry window: 8.35 – 8.60 Initial Stop: 8.20

(73)

Entry

Entry

--

--

Trade Progression

Trade Progression

--

--

Exit

Exit

15

15--Minute ChartMinute Chart

Entry 8.55

Initial Stop 8.37

Sell signals Exit 9.79

Add to position - prior resistance broken (9.00)

(74)

Summary

Summary

--

--

Daily Chart

Daily Chart

(75)

Module Two

Module Two

Target Key Industry Groups and

Target Key Industry Groups and

Trading Candidates

Trading Candidates

Review

Review

Top

Top

-

-

Down Strategy

Down Strategy

-

-

Four Key Points

Four Key Points

1. Evaluate current market trend

1. Evaluate current market trend

2. Which “turbine” powers the market?

2. Which “turbine” powers the market?

3. Which sectors or groups benefit or

3. Which sectors or groups benefit or

lose from current climate?

lose from current climate?

4. Scan daily, weekly, and monthly

4. Scan daily, weekly, and monthly

charts of stock candidates

charts of stock candidates

(76)

Module Two

Module Two

Target Key Industry Groups and

Target Key Industry Groups and

Trading Candidates

Trading Candidates

Review

Review

--

--

continued

continued

„

„

Focused risk

Focused risk

-

-

reward analysis produces

reward analysis produces

“A” rated trades.

“A” rated trades.

„

„

Two High

Two High

-

-

Probability Setups

Probability Setups

„

„ Early Bull Flag BreakoutEarly Bull Flag Breakout

„

(77)

Lunch Break

Lunch Break

Our lunch today is served

Our lunch today is served

courtesy of

courtesy of

Townsend Analytics, Ltd,

Townsend Analytics, Ltd,

Developers and creators of

Developers and creators of

RealTick

RealTick

© . . .

© . . .

The premiere trading platform

The premiere trading platform

(78)

M

M

odule Three

odule Three

Winning Strategies to Keep You

Winning Strategies to Keep You

on the Right Side of the Market

on the Right Side of the Market

„

„

Two High

Two High

-

-

Probability Short Sale Setups

Probability Short Sale Setups

„

„

Trading the News and Econ Reports

Trading the News and Econ Reports

„

(79)

Sector Analysis and

Sector Analysis and

Selling Short

Selling Short

„

„

Good news for some sectors is bad news

Good news for some sectors is bad news

for others

for others

„

„

For example:

For example:

„

„ Higher energy prices = bad news for Higher energy prices = bad news for

transportation stocks transportation stocks

„

„ Higher interest rates = bad news for autos, Higher interest rates = bad news for autos,

housing stocks housing stocks

„

„ Low inflation = bad news for gold stocksLow inflation = bad news for gold stocks

„

„ Lower oil prices = bad news for oil & oil Lower oil prices = bad news for oil & oil

services services

(80)

Setup Three: Triple Threat Short

Setup Three: Triple Threat Short

„

„ Daily chart: Stock’s price pattern has fallen Daily chart: Stock’s price pattern has fallen under 20, 40, and 200

under 20, 40, and 200--day MAsday MAs

„

„ 20 MA is crossing below 40 MA20 MA is crossing below 40 MA

„

„ Negative weekly and monthly chartNegative weekly and monthly chart

„

„ Momentum Ind. (12Momentum Ind. (12--period) hooked downperiod) hooked down

„

„ Negative OBVNegative OBV

„

„ Strong downside volume optimumStrong downside volume optimum

„

(81)

Setup Three: Triple Threat Short

Setup Three: Triple Threat Short

Market Criteria

Market Criteria

„

„

Dow and/or S&P 500 or

Dow and/or S&P 500 or

Nasdaq

Nasdaq

100

100

(or Composite) negative

(or Composite) negative

„

„

Relevant sector showing negative impact

Relevant sector showing negative impact

from current market environment

from current market environment

„

„

Industry group where target stock resides

Industry group where target stock resides

moving in downtrend

moving in downtrend

(82)

Locate Setup on Daily Chart

Locate Setup on Daily Chart

RealTick® graphics used with permission of Townsend Analytics, Ltd. © 1986-2005 Townsend Analytics, Ltd.

Momentum (12-period) OBV

(83)

Confirm Downtrend

Confirm Downtrend

-

-

Weekly Chart

Weekly Chart

(84)

Confirm Direction

Confirm Direction

-

-

Monthly Chart

Monthly Chart

(85)

Confirm Industry Group

Confirm Industry Group

RealTick® graphics used with permission of Townsend Analytics, Ltd. © 1986-2005 Townsend Analytics, Ltd.

(86)

Return to Daily Chart

Return to Daily Chart

Risk:Reward

Risk:Reward

RealTick® graphics used with permission of Townsend Analytics, Ltd. © 1986-2005 Townsend Analytics, Ltd.

Entry: 71.50 - 70.70

Initial stop: 71.80: adjust to above entry day’s 1st 60-minute high

(87)

Entry

Entry

--

--

Trade Progression

Trade Progression

--

--

Exit

Exit

30

30

-

-

Minute Chart

Minute Chart

Entry 71.80

Initial Stop 72.40 Target 66 Exit ½ 67.50 Exit ½ 66.25

(88)

Summary

Summary

--

--

Daily Chart

Daily Chart

RealTick® graphics used with permission of Townsend Analytics, Ltd. © 1986-2006 Townsend Analytics, Ltd.

4+ point profit Good trade!

(89)

Setup Four: Deadly Double Dip

Setup Four: Deadly Double Dip

„

„ Daily chart: Stock’s price pattern trades below Daily chart: Stock’s price pattern trades below 18

18 EMA, 40 SMA, and 200EMA, 40 SMA, and 200--day MAday MA

„

„ Within last 60 days, 20 EMA has crossed above Within last 60 days, 20 EMA has crossed above 40 MA

40 MA

„

„ Now, 20 EMA loops down to cross below 40 MA Now, 20 EMA loops down to cross below 40 MA

„

„ Momentum Ind. (12Momentum Ind. (12--period) hooked downperiod) hooked down

„

„ DowntrendingDowntrending OBVOBV

„

„ Strong downside volume on entry day optimumStrong downside volume on entry day optimum

„

„ Same market criteria as Triple Threat Short Same market criteria as Triple Threat Short

„

(90)

Locate Setup on Daily Chart

Locate Setup on Daily Chart

RealTick® graphics used with permission of Townsend Analytics, Ltd. © 1986-2005 Townsend Analytics, Ltd.

(91)

Confirm on Weekly Chart

Confirm on Weekly Chart

(92)

Confirm Trend on Monthly Chart

Confirm Trend on Monthly Chart

(93)

Return to Daily Chart

Return to Daily Chart

Risk: Reward

Risk: Reward

RealTick® graphics used with permission of Townsend Analytics, Ltd. © 1986-2006 Townsend Analytics, Ltd.

Entry 33.10 – 32.40 Initial stop 33

Profit target 30 RR: 1:4+.

(94)

Entry

Entry

--

--

Trade Progression

Trade Progression

--

--

Exit

Exit

15

15--Minute ChartMinute Chart

Entered at 33.03

Take partial profits at the close, 32.30, or next day’s first hourly low, 31.80

(95)

Entry

Entry

--

--

Trade Progression

Trade Progression

--

--

Exit

Exit

OIH

OIH –– Oil Oil SvcsSvcs. ETF. ETF 1515--Minute ChartMinute Chart

Coincident entry

Coincident partial profits

(96)

Summary

Summary

--

--

Daily Chart

Daily Chart

RealTick® graphics used with permission of Townsend Analytics, Ltd. © 1986-2005 Townsend Analytics, Ltd.

(97)

Trading the News and

Trading the News and

Econ Reports

Econ Reports

„

„

Do not trade the news, itself

Do not trade the news, itself

„

„ Wait until the market absorbs the newsWait until the market absorbs the news

„

„

Trade the market’s

Trade the market’s

reaction

reaction

to the news

to the news

„

„

Tool: Index futures and Dow Jones

Tool: Index futures and Dow Jones

Industrials TICK, or “TIKI,” NYSE TICK

Industrials TICK, or “TIKI,” NYSE TICK

„

(98)

Trading the News

Trading the News

Buy the rumor, sell the news.”

Buy the rumor, sell the news.”

„

„

“Smart money” plays early

“Smart money” plays early

„

„

News may be factored into price before

News may be factored into price before

announcement

announcement

„

„

News release (as expected) = profit

News release (as expected) = profit

-

-

taking

taking

„

(99)

When the News Is Highly

When the News Is Highly

Anticipated . . .

Anticipated . . .

„

„

If the news is good, buyers may have

If the news is good, buyers may have

already saturated the market.

already saturated the market.

„

„

Result: When the news comes out,

Result: When the news comes out,

few buyers remain.

few buyers remain.

„

„

If the news is negative, sellers may

If the news is negative, sellers may

have already squashed the market

have already squashed the market

„

(100)

Trading the News

Trading the News

„

„

It should go lower, but it doesn’t

It should go lower, but it doesn’t

„

„ Translation: it’s going higherTranslation: it’s going higher

„

„ Market may have discounted newsMarket may have discounted news

„

„ Example: Housing starts dive, but HGX Example: Housing starts dive, but HGX

(Homebuilders Index) flies higher (Homebuilders Index) flies higher

„

„

It should go higher, but it doesn’t

It should go higher, but it doesn’t

„

„ Translation: it’s going lowerTranslation: it’s going lower

„

„ Example: Company reports good earnings, Example: Company reports good earnings,

but stock falls but stock falls

(101)

Trade the Market’s

Trade the Market’s

Reaction

Reaction

to News

to News

Housing Starts data . . . worst report in years!

(102)

Take a Ten

(103)

ETFs

ETFs

: Core Trades and Hedging

: Core Trades and Hedging

„

„

Trade entire index, sector, industry group

Trade entire index, sector, industry group

or country in a single stock

or country in a single stock

„

„

Narrows time spent on research

Narrows time spent on research

„

„

Provides diversity in a single equity

Provides diversity in a single equity

„

„

Lower expense ratios than mutual funds

Lower expense ratios than mutual funds

„

„

Can be shorted on a downtick

Can be shorted on a downtick

„

„

Use for speculation or as hedge

Use for speculation or as hedge

„

(104)

Most Popular Index Shares

Most Popular Index Shares

„

„

Dow Jones Diamonds DIA

Dow Jones Diamonds DIA

„

„

Nasdaq

Nasdaq

100 Trust Unit QQQQ

100 Trust Unit QQQQ

„

„

S & P 400

S & P 400

Midcap

Midcap

SPDR MDY

SPDR MDY

„

(105)

Where to Find

Where to Find

ETFs

ETFs

„

„

State Street Global Advisors

State Street Global Advisors

Select Sector SPDRS

Select Sector SPDRS

„

„ www.spdrindex.comwww.spdrindex.com „

„

Merrill Lynch HOLDRS

Merrill Lynch HOLDRS

„

„ www.holdrs.comwww.holdrs.com „

„

Barclays’ Global Investors

Barclays’ Global Investors

iShares

iShares

„

(106)

Where to Find

Where to Find

ETFs

ETFs

„

„ State Street Global AdvisorsState Street Global Advisors streetTRACKS

streetTRACKS www.streettracks.comwww.streettracks.com

„

„ Vanguard VIPERSVanguard VIPERS

„

„ www.vanguard.comwww.vanguard.com

„

„ PowerSharesPowerShares Capital ManagementCapital Management

„

„ www.powershares.comwww.powershares.com

„

„ ProSharesProShares **

„

(107)

ETFs

ETFs

and Sector Rotation

and Sector Rotation

Early Bull

Middle Bull Middle Bear Late Bull Early Bear

Late Bear Technology QQQQ, XLK, SMH, HHH, SWH Transportation IYT Industrials DIA, SPY Basic Materials XLB, IYM, IYJ, IYD Energy

OIH, XLE, IYE, IXC

Utilities

UTH, PHO, XLU, IDU* Consumer Staples XLP, IYK* Healthcare XLV, BBH, PPH Consumer Discretionary XHB,RTH, VDC* Financials IYR, RKH, XLF, IYF * Low liquidity Telecom TTH, BDH

(108)

ETFs

ETFs

Core Trades

Core Trades

„

„ ETFsETFs make great position trade toolsmake great position trade tools

„

„ Buy as ETF breaks out of base and moves into Buy as ETF breaks out of base and moves into uptrend on daily chart

uptrend on daily chart

„

„ Sell short as ETF experiences top reversal on daily Sell short as ETF experiences top reversal on daily chart and falls into downtrend

chart and falls into downtrend

„

„ Establish trailing stop under pivot lows (or highs, Establish trailing stop under pivot lows (or highs, for short position)

for short position)

„

(109)

Hedging with

Hedging with

ETFs

ETFs

„

„ ETFsETFs make great hedging toolsmake great hedging tools

„

„ Use to protect swing positions during earnings Use to protect swing positions during earnings season, volatile economic reports + unexpected season, volatile economic reports + unexpected

global events global events

„

„ Hedging guidelines:Hedging guidelines:

„

„ If possible, hedge a dollarIf possible, hedge a dollar--amount equal to your portfolio amount equal to your portfolio

position, and . . .

position, and . . .

„

(110)

Module Four

Module Four

Keep Your Head in the Game!

Keep Your Head in the Game!

„

„

Identify your strengths & challenges

Identify your strengths & challenges

„

„

Three thought processes that lead to

Three thought processes that lead to

success

success

„

(111)

Module Four

Module Four

Keep Your Head in the Game!

Keep Your Head in the Game!

Identify Your Strengths & Challenges

Identify Your Strengths & Challenges

When you trade . . .

When you trade . . .

„

„

In which areas do you excel?

In which areas do you excel?

„

„ How can you become even better?How can you become even better?

„

„

In which areas do you need improvement?

In which areas do you need improvement?

„

„ Identify weaknessesIdentify weaknesses

„

„ Develop a plan for turning them into strengthsDevelop a plan for turning them into strengths

„

„ Write them downWrite them down and take action steps and take action steps

every day… every day…

(112)

Module Four

Module Four

Keep Your Head in the Game!

Keep Your Head in the Game!

Three thought processes that

Three thought processes that

lead to success…

lead to success…

1. The quality of your questions determines the 1. The quality of your questions determines the

quality of your trading life. quality of your trading life.

„

„ ContinuallyContinually ask yourself highask yourself high--quality questionsquality questions

„

Figure

Updating...

References

Related subjects :