In This Issue

Divergences in MACDindicator is basis of OptionTrader’s strategy ............. 1

Market Review ................ 5

Data Maintenance ........... 5

S&P 500 Changes. ......... 5

It’s time to reserve your seatfor AIQ’s popular LakeTahoe Seminar Oct. 1-3 .. 6

Check out the TradersSpecial Summer Seminar inLondon this August ......... 7

Opening BellNewsle t t e r

AIQOpening Bell Interview

‘Options Offer Incredible PotentialThat Stocks Can Never Give Us’ --And This Successful Trader Proves It!

The Opening Bell Newsletteris a publication of AIQ SystemsP.O. Box 7530Incline Village, Nevada 89452E-mail:openingbell@aiqsystems.com

Vomund: I know you have beentrading options for a long time, as youwere a guest speaker at AIQ’s LakeTahoe Fall Seminar 10 years ago. Canyou tell us about your background?

Wheatley:I was a con-tractor whotraveledaround thecountryhelping thetelephonecompanieswith their

excess needs that they could not handlein-house. As with any type of contractwork, it was inconsistent. It was diffi-cult to budget my money not knowingwhat my income or expenses would be.I needed an investment that wouldallow for my traveling so I went to all ofthe typical Real Estate seminars, but Idid not really have any interest inbecoming a landlord or managing

property. I turned to stocks.

I had played in the stock market inmy 20’s, but didn’t understand it. Afterdeciding to educate myself on stocktrading, I read how options offeredlimited risk and unlimited potential forgains. That appealed to me.

To learn about when to trade, I readmany technical analysis books and spentover $500 a month just for quotes andcharts. I also plotted many charts byhand. Years later, I discovered AIQ andbought two of the AIQ programs,TradingExpert and OptionExpert. Still,all I did was spend money with no

avid Vomund interviewsDale Wheatley, founderof The Option Hunterservice. Mr. Wheatley isa full time professional

trader who has achieved financialindependence.

DALE WHEATLEY

D

“It was not until I sat down andexamined my winning and losing

trades, comparing them to the chartsand indicators, that I finally began

to discover the value in oneparticular indicator, the MACD.”

June 2007 Vol. 16 Issue 6

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March 2002

AIQ Opening Bell June 2007

return to show for it.

It was not until I sat down andexamined my winning and losingtrades, comparing them to the chartsand indicators, that I finally began todiscover the value in one particularindicator, the MACD. I knew thatwhen one line crossed the other itmeant to buy or sell, but that did notwork well or consistently, bothrequirements for trading options,since they are wasting assets.

By examining divergences in theMACD indicator, however, onecould tell when a stock was ready tochange direction with a great degreeof reliability. I concentrated onperfecting my entry and exit strategyusing this indicator, but incorpo-rated various indicator time frames.This was a process which I hadnever seen done before.

Vomund: You trade optionsbased on chart patterns and theMACD indicator. Why do youchoose the options market instead oftrading the stock itself?

Wheatley: Options offer incred-ible potential that stocks can nevergive us. Plus chart patterns develop

clearly enough to see definite direc-tion changes that will producereturns in excess of 1,000% in hours,days, or weeks depending on thestrength of the pattern relative to theprice. Besides, I don’t want to “own”anything! I just want to make

money to do the things I want, whenI want

Vomund: Are there any disad-vantages to trading options?

Wheatley: Yes, we are some-times limited by the number ofcontracts we can buy at one time. IfI see an extraordinary pattern, I maywant more contracts than I can buy.

Vomund: I know that thepattern of the underlying security isof primary importance in yourtrading system. How much does theoption’s price factor into yourpurchase? Do you run an optionmodel to evaluate whether an optionis expensive or cheap, or do youstrictly trade options based on theunderlying chart pattern?

Wheatley: I do not use anypricing models that use the Black-Scholes pricing formula or any othervaluation method. These formulasare not designed to help us make aprofit on options, but rather to showus what happens if our underlyingstock performs in a certain fashion.There is nothing I can do about theoptions prices. Whatever the bidand ask prices are that is what I have

Figure 1. Daily chart of Lam Research with MACD indicator in lower window. When doublebottom occurred in early March the divergence with MACD signalled an upturn in price.

Figure 2. Daily chart of Nicor Inc. with MACD indicator in lower window. Trendlines show strongdivergence that occurred in February between price and MACD.

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June 2007 AIQ Opening Bell

to pay, so how will that help meprofit?

Vomund: Do you look for manykinds of patterns or is there a specificpattern that you identify?

Wheatley: I use the samepattern over and over, but it couldbe on different time frames (hourly,daily, weekly, monthly, etc) depend-ing on the time left until the option’sexpiration and distance from nextstrike price

Vomund: Would you pleasedescribe the set-up?

Wheatley: What I’m looking foris a divergence in the MACD indica-tor compared to the price of theunderlying security. I look to buycall options when a stock tests itsprior low but has a positive diver-gence in its MACD indicator. Theopposite is true for identifying tops.I use this pattern because after muchexperimenting I have found it to bethe most consistent and accurate.

Vomund: Can you give us acouple examples of specific tradesyou acted on?

Wheatley: Sure. Let’s start outwith LAM Research (LRCX). LamResearch hit an initial low on Febru-ary 12 and then rallied. That lowwas retested on March 1-5. In effect,a double-bottom pattern was form-ing. The key to the entry, however,

is the positive divergence in theMACD indicator (Figure 1). Noticethat while the stock had level bot-toms, its MACD indicator was rising.March 45 call options were pur-chased on 03/07/07.

A similar example is in NicorInc. (GAS). In Figure 2, the initiallow came in mid-January, the stockrallied, and then retested on March5. Once again there was a strongpositive divergence in the MACDindicator. March 45 calls were alsopurchased on 03/07/07).

Finally let’s look at a toppingformation. Freeport-McMoranCopper & Gold (FCX) hit level highsin April/May at the same time thatits MACD indicator was falling(Figure 3). That was a time to buyput options.

On a daily chart, this patterndoes not always signify majorreversals, but in the Freeport-McMoran case, the weekly chart alsohad a huge negative divergence(Figure 4). That was perfect! Hugedownside divergences under mul-tiple time frames were exactly what Ineeded. The options went from$0.20 to $12. I made sixty times my

Figure 3. Daily chart of Freeport-McMoran with a MACD indicator in lower window. Stocktopped in late April-early May while MACD fell (trendline), signalling time to buy put options.

Figure 4. Weekly chart of Freeport-McMoran with MACD indicator in lower window. Trendlinesshow divergence that occurred in late April-early May between price and MACD.

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AIQ Opening Bell June 2007

money in just one week!

More recently, in May I enteredAdvanced Micro Devices (AMD)and General Motors (GM) calloptions, and both turned into 1000%gainers in only a few days!

Vomund: How often can oneexpect to close out a winning posi-tion using this technique?

Wheatley: Every Time!!! I’llqualify this by saying that a loss isnot the fault of the charts, but ratherthe trader. It is really just a questionof discipline and knowledge coupledwith action when the correct patternappears. If you learn the correcttechnique and act only when every-thing is in place, you will alwaysmake a profit!

Vomund: When a patterndevelops, how do you determinewhich option to purchase?

Wheatley: It depends on acouple of factors, such as the stock’sprice, how far that is from the strikeprice, how many days are left untilexpiration, the cost of the option,and the option’s liquidity. I almostalways buy out-of-the-moneyoptions that expire in the near termmonth if my pattern appears on thedaily chart. If it appears on a weekly

or monthly time frame, I buy out-of-the-money options that could expireseveral months away.

Vomund: What is your selltechnique? And using that tech-nique, what is the average holdingperiod.

Wheatley: My sell technique issimple. I’m out when the momen-tum turns back against the moveusing the MACD fast line

Vomund: You are kind enoughto educateothers on thetechnique inyour OptionsHunter weeklywebinarservice, andyou willpresent thetechnique atour LakeTahoe Fall Seminar. Why are youwilling to give away your technique?

Wheatley: I began teachingothers when some investors askedme to explain my trading style andever since then I have been talkingabout my discovery to everyone Imeet. I have taught people aroundthe world, some that I met on air-planes in the seat next to me and inother casual situations. I enjoyshowing people extraordinarypossibilities! I just wish someonewould have taught me in the begin-ning how to avoid the pain ofinvesting but, as the saying goes,“The harder the conflict, the moreglorious the triumph. What weachieve too easily, we esteem toolightly.”

I learned that the separationbetween rich and poor is becauserich people continue to do the thingsthat produced their wealth and poorpeople continue to do the things thatcreated their poverty. It is a choiceeach of us makes. I am determinedto make smart choices to achievefinancial and personal growth and Iwant to help others to make the

same choices and to feel empoweredin their own lives.

There was a time when I worriedabout everyone “catching on” if Itold them what I do, but afterteaching so many people over theyears exactly what I do, I am stillamazed that only a small number ofpeople actually apply the strategy. Ihave found it has more to do withindividuals and their preconceivedideas about returns and investing,along with the fear within them-selves that actually prevents them

from being successful. People allneed to look hard at their beliefsbefore expecting to become success-ful options traders, or succeedingwith anything in life.

Vomund: In your OptionHunter service, you are not onlygiving trading selections but you areeducating subscribers and utilizingtheir analysis to find possible trades.The number of subscribers is increas-ing so this is obviously going well.What kind of trades have peopleacted on?

Wheatley: It began ratherslowly because people came fromdifferent backgrounds and experi-ence levels. Some were beginnersand others experienced. As timewent by, however, those who stayedwith me have found many chartswithout me having to hold theirhands. One week, as the market wasbeginning to change its momentum,many subscribers chimed in withabout 15 stocks that all had thecorrect look and the next week wesaw what happened to each, withsome options jumping over 1,000%!

We’ve had traders in the group

“I am determined to make smartchoices to achieve financial and

personal growth and I want to helpothers to make the same choices and to

feel empowered in their own lives.”

AIQ Opening Bell NewsletterDavid Vomund, PublisherG.R. Barbor, EditorP.O. Box 7530Incline Village, NV 89452

AIQ Opening Bell does not intend tomake trading recommendations, nordo we publish, keep or claim anytrack records. It is designed as aserious tool to aid investors in theirtrading decisions through the use ofAIQ software and an increasedfamiliarity with technical indicatorsand trading strategies. AIQ reservesthe right to use or edit submissions.While the information in this newslet-ter is believed to be reliable, accuracycannot be guaranteed. Past perfor-mance does not guarantee futureresults.

© 1992-2007, AIQ Systems

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June 2007 AIQ Opening Bell

buy calls on QLGC, HD, CAL, AIG,MM, VLO and the homebuilders andmortgage related companies (evenwith all of the bad news out aboutsubprime lending, etc).

Vomund: Now that you’ve ledthis group for a few months, whatare the common mistakes that newoption traders make?

Wheatley: People try to over-analyze the charts instead of justlooking for the pattern on any stockin the pre-selected list of bestoptionable stocks. Many peopleseem to lack patience to trade ONLYCLEARLY DEFINED STRONGPATTERNS. I find that the clearest

patterns result in the highest returnsand LEAST RISK!

Vomund: Will your OptionHunter subscribers get anythingfrom your presentation at AIQ’s FallSeminar this October?

Wheatley: The great thing aboutAIQ’s seminar is that people havelots of opportunities to interact withother users. That’s especially true atthe Tuesday night dinner. Subscrib-ers will have the opportunity tointeract with others who are at-tempting the same technique and tohave individual and group guidanceby me to help them overcomedifficulties and become more consis-

Changes to the S&P 500 Indexand Industry Groups:

Abercrombie & Fitch (ANF)replaces Univision Communica-tions (UVN). ANF is added tothe Apparel Retail (RETAILSA)group.

Kraft Foods Inc. (KFT) replacesSabre Holdings Corp. (TSG).KFT is added to the PackagedFoods (FOODCOMP) group.

Assurant Inc. (AIZ) replacesRealogy Corp (H). AIZ is addedto the Insurance Multi-Line(INSURAML) group.

S&P 500 Changes

The following table shows stock splits and other changes:

Stock Ticker Split Approx. Date

Middleby Corp. MIDD 2:1 06/04/07Questar Corp. STR 2:1 06/05/07Co Energetic Minas CIG 2:1 06/05/07Allergan Inc. AGN 2:1 06/12/07VSE Corp. VSEC 2:1 06/12/07Penn Virginia Corp. PVA 2:1 06/13/07

STOCK DATA MAINTENANCE

Trading Suspended:Agere Systems (AGR), Geneco Shipping & Trading (GSTL),Green Mountain Power (GMP), John Harland (JH), Novelis (NVL),Sabre Holdings (TSG), Univision Commun. (UVN)

Name Changes:LSI Logic (LSI) to LSI (LSI)Technical Olympic USA (TOA) to TOUSA (TOA)Valero LP (VLI) to NuStar Energy LP (NS)Xanser (XNR) to Furmanite (FRM)

tent traders.

Vomund: Thank you for sharingyour thoughts with us. I lookforward to seeing you again at theOctober seminar.

For information on The OptionHunter, visit the AIQ Store atwww.aiqsystems.com.

All users must be aware thereare risks inherent in the stock andoptions market. Past performancedoes not guarantee or imply anyfuture success.

MARKET REVIEW

he market’s impressiverun continued in May,where marketpullbacks were mostlylimited to just one day

of selling. After a very strong April,the S&P 500 rose 3.25% in May. Thebroader market stocks alsoparticipated in the May rally, withthe Nasdaq Composite gaining 3.1%and the Russell 2000 gaining 4.0%.

By month’s end, the majority ofthe major market averages closed atnew all-time highs. The S&P 500, theS&P 400 Mid-Cap, and the Russell2000 have all erased the 2000-02 bearmarket losses. The Nasdaq Compos-ite, with its heavy technologyweighting, still has a long way to go.

What is driving this market?Most point to liquidity, which is anindicator that technicians are begin-

ning to follow. There is a lot ofcheap money because global interestrates remain at low levels. As aresult, leveraged buy-out activity isat a record level and firms arebuying back their stock. The supplyof stock is shrinking.

T

PlaceArt-work

Every morning begins with an AIQ-hostedbreakfast. Sessions begin at 8:30 each day andrun through to 5:00 pm (12:00 on last day).Regular breaks during the day include an AIQ-hosted lunch on the first two days. Tuesdayevening all attendees are invited to an AIQcatered buffet dinner. Including meals, cost for all three days is only$895 per person. Reserve your place now asseats sellout fast.

Sign-up before July 31stand pay only $845.

AIQ's 18th Annual Lake Tahoe SeminarOctober 1 - 3, 2007 Harveys Resort & Casino South Lake Tahoe,NV

AIQ SystemsPO Drawer 7530Incline VillageNV 89452www.aiqsystems.com

Nelson Freeburg Founder Formula Research

Visit the AIQ Store http://aiqsystems.com/store/page2.html

Seats are limited CALL 1-800-332-2999 x115

This year's keynote speaker

Also joining us this year will be MarthaSipe, CFA, a veteran of Wall St andpresident of mindingmatter.com, andBob Debnam, founder of the ChartProfitservice. We are also pleased to welcomeback Dale Wheatley, founder of TheOptions Hunter service and StevePalmquist, trader and founder ofdaisydogger.com. Our regular AIQspeakers Steve Hill, CEO and DavidVomund, Chief Analyst round out thespeaker line-up.

There will no Getting Started with AIQ track thisyear; instead we will be offering one-on-onehands-on clinics with senior AIQ staff.Appointment times will be accepted throughoutthe first two days of the seminar

Here's what last year's attendees had to say"Tremendously valuable -the content and clarity ofthe presentations moved

my trading educationforward"

"This was an extremelyuseful session, advancing

my understanding ofseveral important chart

patterns"

"Steve (Palmquist) actuallytold the group what works for

him and what makes him asuccesful trader,

outstanding."

11 sessions

Hosted reception

Nelson Freeburg is editor of FORMULA RESEARCH,a financial letter that develops systematic investmentmodels for stocks and bonds. When he first came to thefinancial markets, Nelson was pursuing a Ph.D. in worldpolitics at Columbia University. Wholly taken by theexcitement and promise of trading, Nelson said good-byeto the academic life. Nelson began researching the marketsfull-time. Eventually he would build a financial databasethat reaches back to the last century--and from this, a libraryof advanced trading strategies. Today Nelson uses thesetiming models to advise institutional clients and managehis own investments.

Many investment professionals rely on Formula Research.Gerald Appel, John Bollinger, Paul Tudor Jones, JohnMurphy, Martin Pring, Linda Raschke, Larry Williams--allof these and other industry leaders employ his proprietaryresearch.

BONUS live webinarsession with LindaBradford Raschke.Linda is President ofLBRGroup, Inc., aregistered CTA andmoney management

firm and president of LBR AssetManagement, a CPO. She began herprofessional trading career in 1981 as amarket maker in equity options.

Nelson Freeburg

6

A special one day seminar in London with power-packed trading tips andtechniques for the trader and investor alike.

August 10th, 2007 10am - 4pmImperial Hotel, Russell Square, London WC1B 5BB

Traders Special Summer SeminarFocus on Gann, Market Sentiment and

Chart Pattern Recognition

Session One - Gann For Everyone

Gann doesn't have to be a mystery. Bob Debnam introduces some basic but powerful methods pio-neered by W.D.Gann that any trader can use. In 1929, he predicted that the markets would probablycontinue to rally on speculation and hit new highs… until early April. In his publication, The Supplyand Demand Letter, he provided daily financial forecasts focusing on both stocks and commodities.Gann also published several books - most notably "Truth", which was hailed by the Wall Street Journalas his best work. He then began releasing the techniques that he used to make these forecasts: the Gannstudies.

Session Two - Using Chart Pattern Recognition as part of your trading arsenal

Chart patterns are obvious to some and not to others. Quantifying chart patterns in a meaningful man-ner is essential if they are to be part of your trading strategy. In this advanced session, Steve will revealsome of the findings of his ongoing 3 year study of chart patterns. You will discover the elements thatare required for a chart pattern to be valid, including why a given pattern works or does not and how totrade it. Effectiveness rates and where to place exit targets will also be discussed. Patterns discussedinclude Head and Shoulders, Pennants, Flags and double tops and bottoms.

Session Three - Let's Get Sentimental

Bull Markets are born on pessimism, grow on scepticism, mature on optimism and die on euphoria.Sentiment rules the market. How to measure it, how to use it. Changes in market direction are notrandom. Figuring out how to gauge the market is where sentiment comes in. Whether it is commitmentof traders or options sentiment, in this session Bob Debnam will share with some known and somelesser known methods to gauge a market. Bob will include some of his very own techniques that he hashoned over 30 years of trading the markets.

Special discount price for this event only $299that’s £150 at today's exchange rate!

Sign up at http://www.aiqsystems.com/londonseminar07.htmor call US 775-831-2999 x115

Presented byBob Debnam, founder TrendlineSteve Hill, CEO, AIQ Systems

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