Handout of Lecture

BRIDGE THE GAP

Jan 2006

By

KH Tang

Topics for Discussion: Who are the participants in the Market?

What is the Time Frame of their Business?

What are their Edges in this Business?

Phases of Manipulation Cycle.

Sector Rotation. (How to detect Them)

Methods to operate in the Market by the pools. (A detail Example..)

What is the Significant of Understanding the Volume.

Methods to operate in the Market by the Professionals. (Approach…)

Objective: 1. To bridge the most fundamental gap that do not cover in any modern

investment books/courses that I have come across.

2. After gone through this basic introduction, it would facilitate the readers,

in a much faster and easy way, to do their own study/learning with much

better understanding in both classic and modern Technical Analysis

Application rather than just trying hard to memorize patterns.

Who are the participants in the Market?

1. Pools (Insiders of corporations, Very Rich, Powerful and

influential people in the market/political position, Institution

funds.) - Question: Who are their Supporters?

2. Professional Traders (Floor Traders, Lone-Rangers,

Families Business, etc..) – Question: How do they get

Train? – How long is the training?

3. Public. (“Uneducated”, and “not proper educated”

individuals thinking in terms of investment.) – Question:

How Much Training do they receive?

What is the time Frame of their Business?

1. Pools – (A) Long Pull, and (B) short-term profit operation.

2. Professional Traders – (A) Swing Trades, (B) Day-Trade.

3. Public – (A) Buy and Hold, (B) Take Small Profit, hold or Sell at

Big Lost.

(Dow Theory)…The 3 waves.

Dow Theory…The 3 waves.

Question: Can someone decompose the composite waves?

What are their Edges in this Business? – (Pool)

Pools Edge

Manpower Material

Method Machine

Management

Money

Insiders in companies,

Experienced Pool Managers,

Influential Policy Makers,

Any Special Talent in all

Fields, as long as

necessary for the operation.

Future Prediction (or even

fabrication) of Fundamental

Statistics,

Public Financial and Account Status,

Control of Public Media to influence

public mind.Tips, Rumors and News Factories.

Compensation Scheme for

Stock Analysts,

Access to brokerages and banks

for their clients information,The Wealth Transfer

Machine Stock Exchange

Rules and Regulations,

Strategies and Tactics from The Art

of Wars*.

Abundance of capital

by Sponsors*.

Absolute support

and co-operation

from team members.

What are their Edges in this Business? – (Professional)

Professional Edge

Manpower Material

Method Machine

Management

Money

Mainly on Technical Analysis,

from minutes-to-days-to-

months. Key foundation build

upon Classic Tape Reading

Techniques.

Understanding of Fundamental

Analysis.

Training and Hard work!

Training and Hard work!!

Training and Hard work!!!

Superior Money Management and

Risk Control Scheme!

Personal Management and Self

control on Psychology.

Computer(s) with Multiple Monitors,

keyboard(s) and Mouse(s).

High Speed Internet Connection.

More Training and Hard work!!!!

What are their Edges in this Business? – (Public)

Public Edge

Manpower Material

Method Machine

Management

Money

Rumors and News distributed

mainly from the public media.

Brokers Recommendation.

Tips from basically any where

Lack of Self-

Emotional Control.

No Money Management

or Risk Control Plan.

Basic Computer.

Any Speed Internet Connection.

No or not fully understand

Technical Analysis.

No or not fully understand of

Fundamental Analysis.

But, PUBLIC HAVE All

Strategies and Tactics that

can be applied in Las Vegas!!!

Gambling Attitude.Continuously, month after month,

bringing more money from their other

professions to the Stock market.

Phone (calling broker*).

*broker – By Wall Street old definition, A broker is a man who assists the Investor in going broke gracefully.

Phases of Manipulation Cycle.

Accumulation

Stage for

Institution from

the Public

Distribution

Stage for

Institution

to the

Public

New Cycle, or

History Repeat

Itself.

Mark up

stage

Mark

Down

stage

Continue in

Telling Bad

News.

Public will be

feared and let

go their

holding to

manipulators.

Start to Tell

Positive Turn

Around

Stories,

Public will

help to push

up the Price.

Continue in

Telling

Positive

Story, Public

buy from

manipulators

because of

greed.

Start to

Tell

negative

Stories,

Public

will get

fear

again.

Stages of Market (or individual stock is more easily done)

What the Public Investor Need to Know?

In the view of the Institution and Insiders.

Sector Rotation

Example: Oil and Airline are 180 degree out of phase.

The Composite will be the market index: Such as S&P500, Dow Jones Industrial Average(30), Nasdaq, etc…

Sector Rotation (How to Detect Them?)

Sector Rotation (How to Detect Them?)

Methods to operate in the Market by the pools. (A detail Example..)

Supplement by Words File… Too long to be describe in here.

Key Points:

• Need to Select the Right Stock for Manipulate: Active and

Enough Float. –( Reason to select Leaders and avoid

“inactive” stocks)

• Pool Operations are Extremely Expensive! Therefore need to

generate profit during the operation. Not just simply buy from

bottom and sell at the top. Lot of Tactics are used to achieve the

goal. –(Reason to understand how pattern formations are

formed.)

Methods to operate in the Market by the pools. (A detail Example..)

How pattern formations are formed…

(Upper Limit, Lower Limit) – detail to be drawn on the spot.

What is the Significant of Understanding the Volume.

Accumulation DistributionMarking-

Up

Marking-

Down

Pool

Pro

Public

Where the different group of participants participate the most?

How the System facilitate such volume pattern?

Does it Work EXACTLY the same in Singapore as USA?

Volume

Price

Do the Pools Operations ALWAYS So Straight

Forwards and Successful???

What is the Significant of Understanding the Volume. (Examples)

Key Summary!!!

Phases Pools’

Goal

Price Volume Meaning

From

Accumulation

till Marking-up

Long on

BalanceUP UP +VE

DOWN DOWN +ve

From

Distribution till

Marking-down

Short on

BalanceDOWN UP -VE

UP Down -ve

Learn to use at least one Volume Based Indicator as confirmation indicator.(with Modern Tape Reading Technique!)

- Eg. Money Flow Index, On Balance Volume, etc..

Note: This does not refer to the typical Daily Charts, as Volume has become a decoy used by the

manipulators. For example, the manipulators can sell heavily on the stock all day long from the

beginning of the and buy back a little portion only at the end of the day to ensure a higher closing

price. Using the End Of Day data for analysis will lead to completely WRONG decision!!!

See the Charts on next Page that, illustrate by a back test, EOD volume is USELESS in today Trading

Decision.

Lost of Value in EOD Volume Information

Lost of Value in Typical Public Favorite Indicator(s)

Methods to operate in the Market by the Professionals. (Approach…)

This would take a weekend to workout the Details!

Top Down Approach:

•Overall Market

•Sector/Industry Classification

•Individual Stock Selection

Mode of Operation:

•Long Pull (how long)

•Swing Trade

•Day-Trade

Tool Box:

•Sector Rotation Detector

•Classic TA – Chart Patterns

•Modern TA – All kinds of indicators

•Modern Tape Reading*

•Absolute & Relative Strength*

•ETFs Internal Strength Analysis*

•Etc…

Bonus:

•A Self-Developed Financial Advisor

Tool for Singaporean.

* New and proprietary.

More Trading Articles:

Trading Concepts and Tools

Traps for Investors & Financial Freedom, etc…

Just a Community Services

Bless You

KH Tang