INVEST SCHOOL

noreply@blogger.com (Unknown) — Wed, 02 Jan 2013 03:12:00 +0000

Welcome to Investschool. This site is dedicated to providing FREE Technical Analysis training to the everyday investor. For more information on what technical analysis is and how it can help you to profit in any market environment click here. To begin your free training just click here. By the end of your training you will be able to read charts like the one above. You will also be able to predict the movements of stocks and formulate strategies based on your analysis of charts.

noreply@blogger.com (Unknown) — Mon, 26 Oct 2009 17:58:00 +0000

What is Technical Analysis?

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The foundation for technical analysis is statistics. Technical analysis is not based on hunches or guesses. It is based on math and math never lies, unlike people. The accountants, analysts, and CEOs on Wall Street lie to the investing public on a regular basis. A good example of this is the Enron case. The accountants, CEOs, and analysts who covered Enron lied to the general public about the viability of the company. As a result many people lost a lot of money by trusting the information they received from these people. Technical analysis separates truth from lies. It cannot be manipulated because it cannot be influence by individuals. It is the only defense we have as investors against erroneous information that can devastate a portfolio.

When you look at a chart you are looking at the entire history of that company displayed in graphical form. Everything that ever happened to that company and had an affect on it's stock price is displayed on it's chart. For instance, at point A in the chart on the right maybe a new CEO came to the company and made it profitable. The corresponding reaction was an increase in the stock price. At point B maybe he/she left and the company became less profitable. As a result the price decreases. Over a long period of time as this information is collected and graphed it becomes very accurate and useful statistical information. If you are not familiar with statistics I can tell you that it is based on probability. It is not 100% accurate but if enough information is gathered to support it, it can be accurate in the 90 percentile range.

Know thy self.

We are all born with good and bad qualities and these qualities can affect they way we trade. Technical analysis can help us avoid losing money because of our personal characteristics. I'm an optimist. When I first began trading in 1998 I was always bullish because I'm optimistic. I had to learn the hard way(by losing money) that stocks don't continue to go up forever. Even after losing money it was very hard not to be optimistic and it continually got me into trouble. I finally overcame this problem and started making money when I started trading based on technical analysis. We are emotional people and our emotions can cause us to lose lots of money in the market if we are not careful. Technical analysis is not emotional. It interprets data without bias. If a stock is going to drop it shows that the stock will drop. It doesn't say "I like this company a lot and they can't lose I just know it". I stopped listening to myself a long time ago. I let my computer make the decision on whether to buy, sell, or hold because it isn't swayed by emotion. There are major hedge funds called Quant Funds that operate on this principle. Certain parameters are loaded into a computer and it makes the decision to buy sell or hold. You don't have to be a quant fund to make money in the market but you should take the emotion out of your investing if you want to make it work.

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Biggest Gains

noreply@blogger.com (Unknown) — Fri, 24 Jul 2009 02:10:00 +0000

7/23/2009 to 7/27/2009
133% In 4 Days Alcoa Aug $12 Call Option
Entry price .12 exit price .28

7/22/2009 to 7/27/2009
185% In 5 Days First Solar Aug $165 Call Option
Entry price 6.00 exit price 17.10

7/15/2009 to 7/24/2009
200% In 12 Days DR Horton Aug $12.50 Call Option
Entry price .10 current price .30

noreply@blogger.com (Unknown) — Thu, 16 Jul 2009 13:21:00 +0000

Disclaimer

The opinions provided herein are informational. They come with no warranty of any kind. If you should choose to interpret investschool.blogspot.com information as investment advice, you do so at your own risk. In no event will investschool.blogspot.com or its affiliates be liable to you or anyone else for any decision made or action taken by you in reliance on such information. You agree that the liability of investschool.blogspot.com and its affiliates, if any, arising out of any kind of legal claim (whether in contract , tort or otherwise) in any way connected with the information in any of our publications shall not exceed the amount you paid to invest school.blogspot.com for said information. Investing can be a risky venture and it is you who must assume the entire cost and risk involved in all of your investment decisions, should you choose to follow this information. The information contained on the investschool.blogspot.com web site, emails, feeds, and publications is drawn from reliable sources, but in no way does investschool.blogspot.com represent or guarantee the accuracy or completeness thereof, nor in providing it, does investschool.blogspot.com and affiliates assume any liability. This information is given as of the date appearing on the investschool.blogspot.com web site report, feed, or email, and investschool.blogspot.com assumes no obligation to update the information or advice on further developments relating to any named securities.

By visiting or using investschool.blogspot.com, or the investschool.blogspot feed, you acknowledge that you have read, understand, and agree to the terms of this disclaimer and release investschool.blogspot.com, Justin Johnson, and all affiliates of investschool.blogspot.com of any and all liablities.

noreply@blogger.com (Unknown) — Sun, 05 Jul 2009 19:48:00 +0000

Lesson 7: Finding Stocks

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Twelve years ago when I first started investing I used to visit Money.com on a regular basis. I saw that everyday no matter how bad the overall market was there were stocks that moved 10, 20, 30 percent or more (see for yourself here). Usually it made me upset that I didn't own any of these particular stocks on the days they made their moves. Being a "rookie" investor at the time, my stocks were usually losers or small winners. They never typically made big moves. After I took Finance 101 as a Marketing student I knew that if I could capture moves like this that it wouldn't take a long time to become very rich. So I had two problems to solve.

1. How can I know when a stock will make a minimum 10% move in a short period of time?

2. How can I find as many of these stocks as possible before they make that kind of move?

If you have gone through Lessons 1-6 in this Training section you already know the answer to question 1. The purpose of Lessons 1-6 is to teach you how to spot when a stock will make a big move in a relatively short period of time.

Now we will address question 2: How do we find stocks?

There are literally thousands of stocks in the U.S. Stock Markets alone. You may have a stock that isn't doing well but chances are that somewhere out there is a stock that is making a big move that you are missing out on. The secret to finding stocks is to use a Screener. All online brokers give you free Screener tools to help you find stocks.

What is a screener? A screener allows you to scan the markets for stocks using a predefined parameter. For example, you have learned about the MACD (mac-dee) and it is clear to see that this oscillator is very accurate in alerting you to when a stock will move up or down. You can tell your screener to find all the stocks in the entire market that show a bullish MACD crossover(MACD crossing over the EMA or Zero line). Or you can tell it to find all stocks with RSI values that have just crossed over 50. Or maybe you want to find all stocks that have made new 52 week lows. All screeners can be programed to search the ENTIRE market for stocks doing these or almost any other thing you can think of.

Using a screener is like having a thousand employees search the entire market for you every minute of everyday

Your screener will search the entire market for what you tell it to find. If you don't use a screener you have to find stocks on your own. This can be extremely time consuming and tedious. And no matter how much time you spend in front of your computer you will never be able to check every single stock in the market to find the few that you like. All online brokers offer free tutorials on how to use their stock screeners. I would advise anyone to take those lessons. What you learn in a short period of time for free is invaluable and it will change the way you find stocks forever.

Below are a link to a screener and instructions on how to tell the screener to find all stocks on the NYSE which have an RSI value that just crossed above 50. Although this screener won't give you the complete results of the screen unless you have an account with Ameritrade, it is still useful for demonstration purposes.

To see a sample screener click here.

Step 1. Click on Exchange (in the Basic box)
Step 2. Click on NYSE (in the Criteria Name window)
Step 3. Click on Technicals and select Relative Strength Index (RSI)
Step 4. Change the 30 to 50 in the Relative Strength Index Window

The green "view matches" box shows you the number of stocks on the NYSE that match your search criteria.

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Attention Subscribers:

noreply@blogger.com (Unknown) — Thu, 02 Jul 2009 12:42:00 +0000

I recently posted Lesson 6 but for some reason it ended up at the bottom of this feed. Please scroll down to view the lesson entitled "Putting it All Together".

Thank You

To Everyone

noreply@blogger.com (Unknown) — Tue, 30 Jun 2009 03:12:00 +0000

You guys have shown a lot of interest in my site since I've improved it. I will be posting the final few training lessons shortly. Please watch for those. And if you like the site please hit the subscribe button. This will enable you to get the latest stock picks and updates as soon as I finish typing them.

Thanks for your interest.

noreply@blogger.com (Unknown) — Fri, 26 Jun 2009 05:05:00 +0000

Click Here for full page view.

noreply@blogger.com (Unknown) — Wed, 24 Jun 2009 01:11:00 +0000

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noreply@blogger.com (Unknown) — Wed, 24 Jun 2009 01:10:00 +0000

Current Sell List
(PLEASE CHECK TRADING RECORD LINK BELOW FOR ALL CURRENT BUYS AND SELLS)

Trading Record

August 27, 2009
CENX (Century Aluminum ) Sold @10.99 Gain 74.17%

August 21, 2009
SIIHY (Smith International Aug $5 call ) Sold @.80 Gain 17.6%

August 10, 2009
CBS (CBS ) Sell If Price drops below 10.00

August 2, 2009
OEH (Orient Express Hotels) Sold At 9.23 Gain 21.13%

July 30, 2009
ELN (Elan) Sold at 7.84 Gain 4.39%

July 27, 2009
+HJQHM (First Solar August 165 call option) Sold at 17.10 Gain 185%

July 27, 2009
+AAHM (Alcoa August 12 call option) Sold at ..28 Gain 133%

July 27, 2009
+DHIHV (DR Horton August 12.50 call option) Sold at .30 Gain 200%

July 22, 2009
WFR (Memc Electronics) Sold at 20.10 Gain 11.05%

July 22, 2009
AMD (Advanced Micro Devices) Sold at 3.50 (Loss 14.63%)

July 22, 2009
UAUA (United Airlines) Sold at 3.43 (Loss 5.51%)

July 22, 2009
FSLR (First Solar) Sold at 151.30 (Loss 3.63%) Bought Aug $165 call option at 6.00

July 21, 2009
HOV (Hovnanian Enterprises) Sold at 2.61 Gain 7.85% Hold Nov $5 call bought on 7/17

July 21, 2009
PLD (Prologis) Sold at 7.37 (Loss 10.77%)

July 13, 2009
K (Kellog) Buy to cover at 47.60 (Loss 1.08%)

July 9, 2009
K (Kellog) Short below 14.10 (12:39 am price 14.10)

June 25, 2009
CAG (ConAgra Foods) Sold below 19.30 (10:10 am price 19.16) (Loss 2.7%)

June 23, 2009
MU (Micron Technologies) Sold

noreply@blogger.com (Unknown) — Wed, 24 Jun 2009 01:08:00 +0000

Current Buy List
(PLEASE CHECK TRADING RECORD LINK BELOW FOR ALL CURRENT BUYS AND SELLS)

Trading Record

August 28, 2009
SLMIM (Sallie Mae Sept. $11.00 call option) Buy at .10
CQLIY (Century Aluminum Sept. $15.00 call option) Buy at .10 (High Risk High Reward)

August 24, 2009
SLM (Sallie Mae) Buy above 9.20 (1:48 pm price 9.19)
AMD (Advanced Micro Devices) Buy above 4.00 support line (1:49 pm price 4.02)

August 19, 2009
GSG (iShares S&P GSCI Commodity Index) Buy above 30.00 support line

August 12, 2009
HOV (Hovnanian Enterprises) Buy above 4.00 support line (9:02 am price 4.14)

July 27, 2009
SII (Smith International) Buy above 25.50 support line (11:12 am price 20.84)
Support#1: 25.50
Support #2: 25.00
Resistance#1: 26.00
Target: 32.00

July 21, 2009
ADSK (Autodesk) Buy above 20.00 support line (2:44 pm price 20.25)
MON (Monsanto) Buy above 80.00 support line (2:26 pm price 79.88)
HIG (Hartford Financial ) Buy above 12.00 (2:19 pm price 12.02)
FSLR (First Solar ) Buy above 157.00 (11:10 am price 157.00)
UAUA (United Airlines ) Buy above 3.63 (9:37 am price 3.64)

July 20, 2009
AMD (Advanced Micro Devices ) Buy above 4.00 (9:37 am price 4.05)

July 16, 2009
CBS (CBS ) Buy above 6.75 (9:51 am price 6.76)

July 16, 2009
PHM (Pulte Homes) Buy above 8.90 (2:30 pm price 8.92)

July 16, 2009
CA (CA inc.) Buy above 17.99 (2:18 pm price 17.99)
Support: 17.60
Resistance: 18.00

July 16, 2009
ELN (Elan PLC) Buy above 7.50 (1:34 pm price 7.49)
Support: 7.50

July 16, 2009
WFR (MEMC Electronic Materials) Buy above 18.00 (10:34 am price 18.14)

July 15, 2009
OEH (Orient Express Hotels) Buy On close 7.62
Target: 15.00
Support: 7.50
Resistance: 8.00
Breakout above: 8.20

July 8, 2009
CIT (Cit Group) Buy above 2.00 (10:22 am price 1.92)

July 1, 2009
SCI ( Service Corp International) Buy above 5.75 (closing price 5.84)

Target: 10.00
Support: 5.75
Resistance: 6.00
Stop Limit: Below 5.47

June 30, 2009
PLD (Prologis) Buy above 8.25 (11:33 am price 8.26)

Look for BREAKOUT above 9.64 to 11.77
Target: no immediate target (potential long term hold)
Resistance: 8.50
Support 1: 8.00
Support 2: 7.50

June 29, 2009
LNC ( Lincoln National Corp) Buy above 17.00 (11:50 am price 17.13)

look for BREAKOUT above 17.18 to 17.63 200 day moving average
Target 20.00
Resistance 17.32

June 26, 2009
CENX (Century Aluminum) Buy above 6.30 (12:13 pm price 6.31)
HOV (Hovnanian Enterprises) Buy above 2.40 (3:55 pm price 2.39)

noreply@blogger.com (Unknown) — Fri, 19 Jun 2009 04:52:00 +0000

Options Picks

Options Trading Record

August 28, 2009
SLMIM (Sallie Mae Sept. $11.00 call option) Buy at .10
CQLIY (Century Aluminum Sept. $15.00 call option) Buy at .10 (High Risk High Reward)

August 4, 2009
HOV(Hovnanian Enterprises) Sept $5 call .15

July 27, 2009
SSI (Smith International) August $27.5 call .90

July 23, 2009
AA (Alcoa) August $12.00 call .12

July 22, 2009

FSLR (First Solar) August $165.00 call 6.00

July 17, 2009
HOV(Hovnanian Enterprises) Nov $5 call .10

July 15, 2009

DHI (DR Horton) August $12.50 call .10

June 24, 2009

WIN (Windstream Corp) August $10 call .05

noreply@blogger.com (Unknown) — Thu, 18 Jun 2009 20:57:00 +0000

Market Analysis

Biggest Gainers

7/23/2009 to 7/27/2009
133% In 4 Days Alcoa Aug $12 Call Option
Entry price .12 exit price .28

7/22/2009 to 7/27/2009
185% In 5 Days First Solar Aug $165 Call Option
Entry price 6.00 exit price 17.10

7/15/2009 to 7/27/2009
200% In 12 Days DR Horton Aug $12.50 Call Option
Entry price .10 exit price .30

7/24/2009

The Upcoming Commodities Rally Will Be Unprecedented

The chart above is from Bloomberg.com. It is a chart of the commodities futures index. This chart clearly shows a cup and handle formation that I've had my eye on for some time now. The cup starts in September at the -10 level and finishes toward the end of May above the -30 level-- this is where the handle begins. The handle is still not complete but it looks like it will do that this month and into next month. It will complete the formation once it reaches the high of May. I've been patiently waiting for this handle to complete it's move and I'm very exited to let all of my readers know that commodities are a sure bet. However I have one particular play that I'm very interested in. Yesterday 7/23/2009 I bought an option in the morning and by the end of the day it was up over 58%. Nothing unheard of when playing options but after some thorough investigating and analysis I came to realize that what I had was probably the biggest play for the coming months. The option that I'm talking about is the AA (Alcoa) August $12 call. I bought it yesterday at .12 and by the end of the day it was .19 on very heavy volume. Today it is continuing to rise and I just bought some more at .20 and I see that I'm not alone. The volume is up on it significantly again today. My computer alerted me to it yesterday after the stock crossed 10.80--which by the way is a very safe long term entry point. I'm 100% sure that commodities will rise and I'm 80% sure that AA will rise to a minimum of $20 within 2 months. At my entry point in this option I stand to make over 1000% In August. For another example of a cup and handle formation click here to read my article on Rimm.

noreply@blogger.com (Unknown) — Thu, 18 Jun 2009 20:56:00 +0000

Stock Picks
(PLEASE CHECK TRADING RECORD LINK BELOW FOR ALL CURRENT BUYS AND SELLS)

September 23, 2009
C (Citigroup ) Buy @ 4.70

August 27, 2009
CENX (Century Aluminum ) Sold @10.99 Gain 74.17%

August 24, 2009
SLM (Sallie Mae) Buy above 9.20 (1:48 pm price 9.19)
AMD (Advanced Micro Devices) Buy above 4.00 support line (1:49 pm price 4.02)

August 19, 2009
GSG (iShares S&P GSCI Commodity Index) Buy above 30.00 support line

August 12, 2009
HOV (Hovnanian Enterprises) Buy above 4.00 support line (9:02 am price 4.14)

July 30, 2009
ELN (Elan) Sold at 7.84 Gain 4.39%

July 27, 2009
SII (Smith International) Buy above 25.50 support line (11:12 am price 20.84)
Support#1: 25.50
Support #2: 25.00
Resistance#1: 26.00
Target: 32.00

July 21, 2009
ADSK (Autodesk) Buy above 20.00 support line (2:44 pm price 20.25)
MON (Monsanto) Buy above 80.00 support line (2:26 pm price 79.88)
HIG (Hartford Financial ) Buy above 12.00 (2:19 pm price 12.02)
FSLR (First Solar ) Buy above 157.00 (11:10 am price 157.00)
UAUA (United Airlines ) Buy above 3.63 (9:37 am price 3.64)

July 20, 2009
AMD (Advanced Micro Devices ) Buy above 4.00 (9:37 am price 4.05)
Target 1: 5.00 (25%)
Target 2: 6.00 (50%)
Resistance: 5.00
Possible breakout above 4.82 from cup and handle formation to 6.00

July 16, 2009
CBS (CBS ) Buy above 6.75 (9:51 am price 6.76)

July 16, 2009
PHM (Pulte Homes) Buy above 8.90 (2:30 pm price 8.92)

July 16, 2009
CA (CA inc.) Buy above 17.99 (2:18 pm price 17.99)
Support: 17.60
Resistance: 18.00

July 16, 2009
ELN (Elan PLC) Buy above 7.50 (1:34 pm price 7.49)
Support: 7.50

July 16, 2009
WFR (MEMC Electronic Materials) Buy above 18.00 (10:34 am price 18.14)

July 15, 2009
OEH (Orient Express Hotels) Buy On close 7.62
Target: 15.00
Support: 7.50
Resistance: 8.00
Breakout above: 8.20

July 9, 2009
K (Kellog) Short below 47.10 (12:39 am price 47.10)

July 8, 2009
CIT (Cit Group) Buy above 2.00 (10:22 am price 1.92)

July 1, 2009
SCI ( Service Corp International) Buy above 5.75 (closing price 5.84)

Target: 10.00
Support: 5.75
Resistance: 6.00
Stop Limit: Below 5.47

June 30, 2009
PLD (Prologis) Buy above 8.25 (11:33 am price 8.26)

Look for BREAKOUT above 9.64 to 11.77
Target: no immediate target (potential long term hold)
Resistance: 8.50
Support 1: 8.00
Support 2: 7.50

June 29, 2009
LNC ( Lincoln National Corp) Buy above 17.00 (11:50 am price 17.13)

look for BREAKOUT above 17.18 to 17.63 200 day moving average
Target 20.00
Resistance 17.32

June 26, 2009
CENX (Century Aluminum) Buy above 6.30 (12:13 pm price 6.31)
HOV (Hovnanian Enterprises) Buy above 2.40 (3:55 pm price 2.39)

June 25, 2009
CAG (ConAgra Foods) Sell below 19.30 (10:10 am price 19.16) (Loss 2.7%)

June 24, 2009
WIN (Windstream Corp) Buy above 8.56 (10:53 am price 8.56)

June 23, 2009
MU (Micron Technologies) Sell and or Short below 4.90
CAG (ConAgra Foods) Buy above 19.68

noreply@blogger.com (Unknown) — Mon, 03 Nov 2008 23:54:00 +0000

Lesson 6: Putting it All Together

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Page No Longer Available
(please proceed to lesson 7)

noreply@blogger.com (Unknown) — Mon, 03 Nov 2008 23:40:00 +0000

Lesson 5: Resistance and Support

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This is probably the most important and hardest concept for people to get used to. It's easy to understand but utilizing it is usually hard for most people because they don't want to believe their eyes.

What is Resistance and Support?
Imagine you have a ladder in your house that is in between your floor and ceiling. Your ceiling would be considered resistance and your floor would be considered support. Now just imagine you are the price of a stock. Lets say you climb up the ladder as fast as you can, hit the ceiling (resistance), and fall back to the floor(support). You get up and keep trying until you build up enough momentum to "breakout" of the resistance level or you fall and "breakdown" below the support level. This is what resistance and support is for a stock. It is a range where a stock can stay for a long time until it breaks out or down. All stocks have resistance and support areas and knowing where they are can help us trade with assurance and safety. These areas are used to set stop losses and as a way to enter a stock safely. For example, if a trader gets bearish signals from a number of indicators and the stock in question is near a support level, then the trader will short the stock and place a cover limit a little above the support level. This is because we know that if the stock falls below the support level then it will continue to fall.

In the DELL chart above the resistance is at 24 and the support is at 18. Notice how the stock trades in this range for an extended period of time(Jan 08-Sep 08). It broke out of the resistance level of 24 for almost the entire month of August but then began to fail. Technicians would place an order to short the stock a little below the resistance level because once that level is breached the stock will trade in the range of 24 and 18. Notice how once the resistance level was broken the stock fell to the support level. Once the stock moves close to the 18 support level technicians take a wait and see attitude. We wait to see if it will break the 18 level while paying close attention to other indicators to make sure the bearish trend is still intact. Once it breaches the support level we hold the short until the next support level is reached. If it turns bullish then we cover.

The resistance and support areas are outlined in the chart of RIO above. Being long on this stock a Technician would try to buy as close to the support level of 10 dollars as possible knowing that it would be hard for the stock to fall through this level. Once you have entered as low as possible you would put a stop limit in a little below $10 maybe at $9.60. As the stock moves up you take a wait and see attitude when it approaches the $20 resistance level. If it breaks that level you hold and place a new stop limit a little below $20. In this example the stock did not retrace below the $20 level. In fact, it continued to rise all the way to $30 before it pulled back a little and broke below the $30 resistance/support level. If you would have held this stock and followed the advice of moving your stop limit up as the stock crosses resistance levels you would have had a gain of 200%.

Like everything else it takes time for your eyes to get used to seeing resistance and support levels. Practice as much as possible in order to get used to seeing them. You can also check nasdaq.com. They have something called a stock consultant on their site that will show you resistance and support levels for any stock.

Note: Once a stock crosses above a resistance level, that resistance level becomes the new support level.

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noreply@blogger.com (Unknown) — Sun, 02 Nov 2008 23:33:00 +0000

Lesson 4: Moving Averages and Price Crosses

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Price crosses above and below Moving Averages are the most important technical indicator to many technicians. We use them to set entry and exit strategies. The concept behind price and MA crosses is the same as most of what we have already learned. When the price crosses above the MAs that is considered bullish. Crosses below the MAs are bearish.

In the chart of the Dow Jones above, the price(black line) crosses above the 50 day Moving Average(orange line) at point A and the index begins to rise. At point B the 50 day Moving Average crosses above 100 day Moving Average(green line) and the uptrend continues and increases in strength. To get the best entry price possible it is always best to use more than one Moving Average. Also, point A should not be considered an entry point by itself. If all the other indicators we have learned about point to this as a good entry point then the stock is a buy. However, by itself it should just be considered a "heads up". Point A is where you should start to consider entering. Point B should be looked at as conformation of the buy signal. As a general rule, when the smaller (50 day) MA crosses above the larger (100 day) MA the bullish trend is very strong and at it's early stage. It is hard to lose if you get in at this point because it is considered a bottom.

The chart above is of YAHOO. This example shows a bearish cross and conformation in points A and B respectively. Notice how the stock takes a serious dive after the 50 day MA crosses below the 100 day MA. Crosses of the smaller (50 day) MA below the larger (100 day) MA are considered bearish.

You can use just about any MA you like. Most people use the 50 and 100 day moving averages. These are longer term moving averages and tend to be very accurate. We want shorter term trades so I would advise you to use shorter MAs such as maybe a 30 day and 15 day in conjunction with or instead of the 50 and 100. Remember, when the price crosses the Moving Average start to pay close attention to the stock in question. When the smaller Moving Average crosses the larger one then it is safe to enter the trade. As always NEVER use any one indicator by itself to enter or exit a stock. Entry and exit prices should always be confirmed by as many indicators as possible.

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noreply@blogger.com (Unknown) — Sat, 01 Nov 2008 22:22:00 +0000

Lesson 3: The DMI

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The DMI signals whether a stock is bullish or bearish. It also shows the strength of the current bull/bear trend. This is my favorite indicator.

There are 5 parts to the DMI but for our purposes we only need to focus on 3; the ADX, the -DI (negative DI), and the +DI(positive DI). These components are highlighted below.

-DI and +DI:
Crosses between the +DI and -DI indicate changes in the trend of a stock. For example, if the +DI crosses above the -DI the stock has turned from bearish to bullish and will begin to move up. If the -DI crosses above the +DI the stock has turned from bullish to bearish and will begin to move down as seen in the chart below. Click the chart to enlarge. The +DI is green and the -DI is red.

In the first circled area the +DI crosses above the -DI, LVS turns bullish, and runs from $80 to $144.00. Since the stock turned bearish when the -DI crossed above the +DI in November of 2007 the stock has fallen from $125.00 to under $10 last week.

The ADX indicates the strength of these moves. If the ADX is below 20 the strength of the move is considered weak or non trending. When the ADX crosses above 20 the trend is increasing in strength and will most likely be sustained for some time.

I don't really care how strong the trend is so I usually don't pay attention to the ADX itself. I watch the crosses between the +DI and the -DI. If I'm long on a stock I need to know when the bullish trend will end so that I can either exit the trade or start to short the stock to avoid losing my gains. +DI and -DI crosses show me when I should consider entering or exiting a trade. Examine the chart below to familiarize yourself with this indicator. As always examine as many charts as possible to get used to seeing these crosses.

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noreply@blogger.com (Unknown) — Tue, 28 Oct 2008 18:08:00 +0000

Lesson 2: The RSI

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The RSI is used mainly to tell if a stock is overbought(has been bought heavily recently and is likely to pullback) or oversold(has been sold heavily recently and is likely to rebound). It can also signal when to enter or exit a stock which is what we will mainly use it for. We don't really care if a stock is overbought or oversold. Our main concern is when will it move and by how much. Stocks can stay overbought or oversold for very long periods of time. When the internet bubble popped many people were left holding companies like Lucent technologies thinking that they would rebound some day. On July 9 of 2000, Lucent closed at 64.00 dollars. It proceeded to sell off for the rest of the entire year and the following two years. At one point it was trading under a dollar. The point is that Lucent was oversold for 8 years.

Any stock can remain oversold for long periods of time. We don't want to buy a stock and wait for the rest of our lives to make a profit. So it doesn't matter if a stock is overbought or oversold. We want to know when the stock will move so that we can make a profit on it as quickly as possible and move on to the next stock. The RSI can tell us when to enter or exit a stock. When the RSI crosses above 50 the stock will move up and when it crosses below 50 the stock will move down. It sounds simple but it really is just that simple. The following are a few examples but you should check as many stocks as possible to see for yourself what happens when the RSI crosses 50 in either direction.

The chart above is a very good example of what happens when the RSI moves above and below 50. At point A the RSI crosses above 50 and the price of AAPL skyrockets from around $70.00 in July of 2006 to around $200.00 in December of 2007. During that time period the RSI never went below 50. When it dropped below 50 in September of 2008 the price dropped from above 150 to below 100. You can click the charts to enlarge them.

Note: The cross below 50 in January was not overlooked. The crosses at A and B were chosen strictly for their illustrative purposes.

The chart above is a 20 year chart of Ford. Points A and B further illustrate what happens to the price of a stock when the RSI crosses 50.

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noreply@blogger.com (Unknown) — Mon, 27 Oct 2008 16:14:00 +0000

Lesson 1: The MACD

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The MACD is an oscillator that shows the directional movement of a stock. There are three main components to the MACD that we will be concentrating on.

The zero/signal line
The EMA
The MACD itself

(click on any picture on this site to enlarge it)
In the chart below you will see an example of the MACD below the price movement of the Dow Jones average. You can click on the chart to enlarge it or right click to open it in a new window. The MACD is the blue line. The EMA is the red line and the black line that runs horizontally is called the Zero or Signal line. Technical analysts watch the MACD because it gives clear signals as to what a stock will do when it crosses certain areas. We use these signals to enter or exit a stock before a move upward or downward.

Lets start by examining the EMA and how to make entry and exits based on the MACD crossing it.

In the chart above you will see 3 points at which the MACD (blue line) crossed the EMA (the red line). At point A the MACD crossed above the EMA( this is called a bullish cross). As you can see the price of the stock started to move upward after the cross. At point B the MACD crossed below the EMA(this is called a bearish cross) and the stock price began to move down. Point C is another bearish cross. In between these major moves you have several minor crosses. Why were these ignored? You should never use just one indicator to make a decision on where to enter or exit a stock. As we build on this foundation by adding more indicators the picture will become clearer and you will see when to overlook or ignore the minor crosses. The chart below gives some more examples of the MACD crossing the EMA. Try to find the bullish and bearish crosses. Remember a bullish cross is when the MACD crosses above the EMA. A bearish cross is when it crosses below the EMA.

The MACD crossing the EMA is usually an early indication of where a stock will go. Sometimes it can fail, meaning, it can show a bullish sign and the stock will fall instead of rising. That is why a lot of Technicians like to wait for the MACD to cross the Zero/Signal line. When the MACD crosses the Zero line it sort of confirms what the EMA already said.

In the cart above the MACD crosses below the zero/signal line(a bearish cross) at point A. After that the stock moves down. Also notice that before the cross in point A the MACD had already crossed below the EMA but the stock price remained relatively flat. In this case the EMA was early and the Zero line cross confirmed the bearish signal. At point B the MACD crossed above the Zero line(a bullish cross) and the stock moved up. Again the EMA cross was early. Below is another example of the MACD crossing the EMA.

The MACD is just one of a number of indicators that technicians use to make decisions on when to enter or exit a stock. We use them because they let us know when a stock is going to move. You can buy, hold, and wait forever for a stock to make a move. But using technical analysis will allow you to buy or short a stock just before it makes the move and profit from that move in a short period of time. For illustration purposes I will always show you three year charts. As a general rule the longer the time period the more accurate the chart and indicator will be. But once you get used to using them you will be able to use 1 year, 1 week, or even 1 day charts to buy and sell in very short periods of time. Try to get your eyes use to seeing these crosses. Practice with as many charts as you can. There is a lot more to learn so click next for lesson 2.

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Training will begin on Monday

noreply@blogger.com (Unknown) — Sat, 25 Oct 2008 14:24:00 +0000

Starting on Monday 10/27/2008 there will be a series of lessons posted on how to trade stocks using technical analysis. All of these lessons are free of charge. By the end of your training you will be able to read charts like this. You will also be able to predict the movements of stocks and to formulate strategies based on your analysis of charts.