trade the right stocks at the right time - toni turner · pdf filethis seminar, trade the...

DisclaimerDisclaimerThis 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, advoceducational purposes only. Its contents do not recommend, advocate or ate or urge the buying, selling, or holding of any financial instrumenturge 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 actionand will not assume any responsibility whatsoever for the actions of the s of the attendee, or person reading these contents. The author may or maattendee, or person reading these contents. The author may or may not y not hold positions in the financial instruments discussed in this sehold positions in the financial instruments discussed in this seminar content. minar content.

Trading and investing involve high levels of risk. Future resultTrading 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 anThis presentation is provided for informational purposes only and does not d does not constitute an endorsement by Townsend Analytics of the informaticonstitute 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 oor incomplete information or for any improper or incorrect use of the f the information contained in this presentation.information contained in this presentation.

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Trade the Right Stocks Trade the Right Stocks at the Right Timeat the Right Time

www.ToniTurner.comwww.ToniTurner.comTrade 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.© 1986-2006 Townsend Analytics, Ltd.

http://www.toniturner.com/

Toni Toni TurnerTurner.com.com

DVDsDVDsThe Profitable Trading AttitudeThe Profitable Trading AttitudeSwing Trade Stocks & Swing Trade Stocks & ETFsETFs in Any Marketin Any MarketTrade the Right Stocks at the Right TimeTrade the Right Stocks at the Right TimeThirty One Center Points Thirty One Center Points (audio CD)(audio CD)

BooksBooksA Beginner’s Guide to Day Trading OnlineA Beginner’s Guide to Day Trading OnlineA Beginner’s Guide to ShortA Beginner’s Guide to Short--Term TradingTerm TradingShortShort--Term Trading in the New Stock MarketTerm Trading in the New Stock Market

Workshop OverviewWorkshop OverviewModule OneModule One

Sector SelectionSector SelectionYour Key to Consistent ProfitsYour Key to Consistent Profits

Module TwoModule TwoTarget Key Industry Groups Target Key Industry Groups

and Trading Candidatesand Trading Candidates

Module Three Module Three Winning Strategies to Keep You Winning Strategies to Keep You on the Right Side of the Marketon the Right Side of the Market

Module FourModule FourKeep Your Head in the Game!Keep Your Head in the Game!

Module OneModule One

Sector SelectionSector SelectionYour Key to Consistent ProfitsYour 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 RelationshipsRelationships

The Big Four TurbinesThe Big Four TurbinesHow they power market cyclesHow they power market cycles

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.

Why Sector Selection Is Key to Why Sector Selection Is Key to Consistent ProfitsConsistent Profits

Market environments may be:Market environments may be:Inflationary or nonInflationary or non--inflationary, depending on inflationary, depending on interest ratesinterest 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

Sector Selection Is Key to Sector Selection Is Key to Consistent ShortConsistent Short--Term ProfitsTerm Profits

Sector Selection Is Key to Sector Selection Is Key to Consistent ProfitsConsistent Profits

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

Why Sector Selection Is Key to Why Sector Selection Is Key to Consistent ProfitsConsistent 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.

SectorsSectors

Basic MaterialsBasic Materials

Consumer DiscretionaryConsumer Discretionary

Consumer StaplesConsumer Staples

EnergyEnergy

FinancialsFinancials

Health CareHealth Care

IT (Technology)IT (Technology)

IndustrialsIndustrials

TelecomTelecom

UtilitiesUtilities

Sectors Sectors –– Industry GroupsIndustry GroupsBasic MaterialsBasic Materials

Chemicals & Ag ChemicalsChemicals & Ag ChemicalsAluminum, Copper, Gold , SilverAluminum, Copper, Gold , SilverNonNon--Metallic MiningMetallic MiningIntegrated Oil and GasIntegrated Oil and Gas

Consumer DiscretionaryConsumer DiscretionaryAutos and ComponentsAutos and ComponentsConsumer Durables and ApparelConsumer Durables and ApparelHotel, Restaurants, and LeisureHotel, Restaurants, and LeisureMediaMediaRetailRetail

Sectors Sectors –– Industry GroupsIndustry Groups

Consumer StaplesConsumer StaplesFood and Drug RetailFood and Drug Retail

Food, Beverage, TobaccoFood, Beverage, Tobacco

Household, Cosmetics and Personal ProductsHousehold, Cosmetics and Personal Products

EnergyEnergyOil & Oil servicesOil & Oil services

FinancialsFinancialsBanksBanks

Diversified financialsDiversified financials

InsuranceInsurance

Real EstateReal Estate

Sectors Sectors –– Industry GroupsIndustry Groups

Health CareHealth CareHealth 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

Technology Hardware and EquipmentTechnology Hardware and Equipment

Sectors Sectors –– Industry GroupsIndustry GroupsIndustrialsIndustrials

Capital GoodsCapital GoodsCommercial Services and SuppliesCommercial Services and SuppliesTransportationTransportationDefense and aerospaceDefense and aerospace

TelecomTelecomTelecommunications ServicesTelecommunications Services

UtilitiesUtilitiesElectric UtilitiesElectric UtilitiesGas UtilitiesGas UtilitiesMultiMulti--UtilitiesUtilitiesWater UtilitiesWater Utilities

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 chainchain

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

www.realtick.comwww.realtick.com

Search Search MarketGauge.comMarketGauge.com Sectors and GroupsSectors and GroupsFree 14Free 14--day trial & Group Discount day trial & Group Discount http://www.MarketGauge.com/ToniTurnerhttp://www.MarketGauge.com/ToniTurner

This offer is not available anywhere else!This offer is not available anywhere else!

http://www.realtick.com/

http://www.marketgauge.com/ToniTurner

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 oddsStrong 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 . . .a weak industry group . . .

Stock Selection & EconomyStock Selection & EconomyInvestors 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 movesector / industry group move

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

Stock Selection & EconomyStock Selection & Economy

As a successful trader / investor, you will…As a successful trader / investor, you will…

Evaluate market environment Evaluate market environment beforebefore 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.

Business and Stock Market CyclesBusiness and Stock Market CyclesHow They Evolve TogetherHow 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

Interest Rate CycleInterest Rate Cycle

Business CycleBusiness Cycle

Expansion

Peak

Recession

Trough Trough

Stock Market CycleStock 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

Early Bull Market

Business and Market CyclesBusiness and Market Cycles

Late Bull Market

Top Peak

Recession

Trough

Early Bull Market

Expansion

Trough

Early Bear

Late Bear

Market

Business

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 longeryears, 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.sector expansion or contraction.

Sectors & Environments Sectors & Environments Transportation Transportation –– Thrives on low energy Thrives on low energy prices and strong economy. prices and strong economy. ITIT-- 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, commoditycommodity--related companies flourish.related companies flourish.Industrials Industrials –– Thriving companies need Thriving companies need more capital equipment.more capital equipment.

Sectors & EnvironmentsSectors & EnvironmentsEnergy Energy –– At the top of a market expansion, energy At the top of a market expansion, energy prices typically skyrocketprices 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 defensivedefensive

Utilities Utilities –– Capital intensiveCapital intensiveProsper in lowProsper in low--interest rate environmentsinterest rate environmentsAre able to pass on higher fuel (oil) costs Are able to pass on higher fuel (oil) costs

Sectors & EnvironmentsSectors & EnvironmentsFinancials Financials –– Flourish in low interest rate Flourish in low interest rate environments. Consumers spend more, reenvironments. 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, pentlow, pent--up demand for bigup demand for big--ticket items can ticket items can lead the economy out of its slump.lead the economy out of its slump.

Sectors & EnvironmentsSectors & Environments


XHB and Oil miNY

The Good News: The Good News: Traders concentrate on the shortTraders concentrate on the short--term …term …

Big Four TurbinesBig Four Turbines

Economic DataEconomic Data

“Exogenous” Shocks“Exogenous” Shocks

Earnings ReportsEarnings Reports

The Fed’s Monetary PolicyThe Fed’s Monetary Policy

Economic DataEconomic Data

Stay aware of upcoming reportsStay aware of upcoming reports

Monthly calendar at Monthly calendar at ToniTurner.comToniTurner.comEcon 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 tradetrade

Impact on market varies with economic Impact on market varies with economic conditionsconditions

Economic DataEconomic DataKey ReportsKey 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)

GDP (3GDP (3rdrd or 4or 4thth week)week)

Exogenous ShocksExogenous Shocks

Exogenous Exogenous ---- “Caused or produced by “Caused or produced by factors outside the organism or system.”factors outside the organism or system.”

ExamplesExamples

Natural disasters, weather, pandemicNatural disasters, weather, pandemic

Accounting scandals Accounting scandals

War, terrorismWar, terrorism

New technology, called “disruptive”New technology, called “disruptive”

Exogenous ShocksExogenous Shocks

SPX: line chart $XOI: Candle Chart Oil Index



Earnings season for U.S. companies: March, Earnings season for U.S. companies: March, June, September, DecemberJune, September, December

April, July, October and January volatile April, July, October and January volatile monthsmonths——October typically most volatileOctober typically most volatile

Earnings/guidance of Earnings/guidance of bellweathersbellweathers move move marketsmarkets

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!company announces good earnings!

Federal Reserve Board Federal Reserve Board Economic Environment & Monetary PolicyEconomic Environment & Monetary Policy

InflationaryInflationary –– Fed raises interest ratesFed raises interest ratesInterest rates = cost of moneyInterest rates = cost of moneyHigher rates decrease capital spending, consumer Higher rates decrease capital spending, consumer consumptionconsumptionMay lead to recessionMay lead to recession

RecessionaryRecessionary –– Fed maintains or lowers Fed maintains or lowers interest ratesinterest rates

Decreased production + decreased sales = lower Decreased production + decreased sales = lower prices prices Lower prices = falling earnings = lower stock pricesLower prices = falling earnings = lower stock prices

S&P 500 & Current Interest Rate CycleS&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


NASDAQ 100 & Current Interest Rate CycleNASDAQ 100 & Current Interest Rate Cycle

Rates stable

Rates lowered

Rates raised

Rates lowered


Module OneModule OneSector Selection Is Key to ProfitsSector Selection Is Key to Profits

ReviewReviewCertain market conditions benefit / impair Certain market conditions benefit / impair certain sectorscertain 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 linecan impact bottom line

VIX indicates markets are quieting; traders VIX indicates markets are quieting; traders need to know which sectors ripe for profitsneed to know which sectors ripe for profits

Module OneModule OneSector Selection is Key to ProfitsSector Selection is Key to Profits

Review continuedReview continuedBull Market StarsBull Market Stars

TransportationTransportation

ITIT

Basic MaterialsBasic Materials

TelecomTelecom

IndustrialsIndustrials

EnergyEnergy

Bear Market StarsBear Market StarsConsumer StaplesConsumer Staples

Health CareHealth Care

UtilitiesUtilities

Consumer Consumer DiscretionaryDiscretionary

FinancialsFinancials

Module OneModule OneSector Selection is Key to ProfitsSector Selection is Key to Profits

Review continuedReview continuedStock market cycle leads business cycleStock market cycle leads business cycle

Interest rate cycle fluctuates according to Interest rate cycle fluctuates according to inflation or recessionary environmentsinflation or recessionary environments

“Big Four Turbines” that fuel cycle moves“Big Four Turbines” that fuel cycle movesEconomic DataEconomic Data

“Exogenous” Shocks“Exogenous” Shocks


The Fed’s Monetary PolicyThe Fed’s Monetary Policy

Take a TenTake a Ten--Minute BreakMinute Break

Module TwoModule TwoTarget Key Industry Groups and Target Key Industry Groups and

Trading CandidatesTrading CandidatesTopTop--Down Strategy: Four Key Points Down Strategy: Four Key Points

Essential Step: RiskEssential Step: Risk--Reward AnalysisReward Analysis

Two Winning Setups and FormulasTwo Winning Setups and Formulas

TopTop--Down StrategyDown StrategyFour Key PointsFour Key Points

1. Evaluate current market trend1. 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 chartsindices 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? Check VIX and VXNCheck VIX and VXN

TopTop--Down StrategyDown StrategyFour 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)

Upcoming economic data?Upcoming economic data?

http://www.nymex.com/


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 trendsLook for continuations of strong trends

Look for reversals of slowing trendsLook for reversals of slowing trends


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?

Is there a highIs there a high--probability candidate?probability candidate?

TopTop--Down StrategyDown Strategy-- Comparing CandidatesComparing Candidates


RiskRisk--Reward Analysis Produces Reward Analysis Produces “A“A--Rated” TradesRated” Trades

Determine riskDetermine 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:rewardRisk:reward ratio derived from three pricesratio derived from three pricesEntry 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 Adjust to fit trading time frameAdjust to fit trading time frame

Accurate RiskAccurate Risk--Reward Analysis Reward Analysis Is Essential to Profitable Trades!Is Essential to Profitable Trades!

Risk Risk –– Reward AnalysisReward Analysis

Optimum Optimum risk:rewardrisk:reward ratioratio

1:2, 1:3, or higher1:2, 1:3, or higher

$33

$30

$29

Enter at $30

Protective Stop $29

Initial profit target: $33

R:R ratio 1:3

SetSet--Up One Up One Early Bull Flag BreakEarly Bull Flag Break--OutOut

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

Buy as price breaks out of consolidationBuy as price breaks out of consolidation

SetSet--Up One Up One Early Bull Flag BreakEarly Bull Flag Break--OutOut

Market CriteriaMarket CriteriaDow and/or S&P 500 or Dow and/or S&P 500 or NasdaqNasdaq 100 100 (or Composite) trending favorably(or Composite) trending favorably

Relevant sector benefits from current Relevant sector benefits from current market environmentmarket 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

Locate Setup on Daily ChartLocate Setup on Daily Chart

Stochastics

OBV


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

Govt. contract awarded to NOC

Confirm on Weekly ChartConfirm on Weekly Chart


MACD

Confirm Trend on Monthly ChartConfirm Trend on Monthly Chart


Confirm Industry Group PositioningConfirm Industry Group Positioning

Daily Chart Daily Chart -- RiskRisk--RewardReward


Aug 28: Hi & Cls $66

Enter Aug 25: $65.70 - $66.10

Initial Stop: $65.40

Initial Profit Target $67.60 Initial RR 1:3

Entry Entry –– 1010--minute Chartminute Chart

Entry 65.90

Stop 65.50

EntryEntry----Trade ProgressionTrade Progression----ExitExit3030--Minute ChartMinute Chart

Entry 65.90

Exit 68.50


Summary Summary ---- Daily ChartDaily Chart


Life is good! 2.40 points

Setup TwoSetup TwoMoving Average Jump StartMoving Average Jump Start

On daily chart, stock rising out of baseOn daily chart, stock rising out of base2020--day EMA crossing above 35day EMA crossing above 35--day MA, just day MA, just below price patternbelow price pattern200200--day MA day MA aboveabove price pattern, level or price pattern, level or risingrisingStrong volume on breakoutStrong volume on breakoutStochasticsStochastics mustmust be risingbe risingOBV risingOBV risingSame market criteria as Early Bull Flag BreakoutSame market criteria as Early Bull Flag BreakoutBuy Buy asas stock breaks out of basestock breaks out of base

Confirm Industry Group PositioningConfirm Industry Group Positioning


Return to Daily Chart Return to Daily Chart -- RiskRisk--RewardReward


Entry window: 8.35 – 8.60

Initial Stop: 8.20

Profit target: 10 R:R 1:3


Entry 8.55

Initial Stop 8.37 Sell signals

Exit 9.79

Add to position - prior resistance broken (9.00)



Trading CandidatesTrading CandidatesReviewReview

TopTop--Down Strategy Down Strategy -- Four Key PointsFour 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 or3. Which sectors or groups benefit or

lose from current climate?lose from current climate?

4. Scan daily, weekly, and monthly4. Scan daily, weekly, and monthly

charts of stock candidatescharts of stock candidates


Trading CandidatesTrading CandidatesReview Review ---- continuedcontinued

Focused riskFocused risk--reward analysis produces reward analysis produces “A” rated trades.“A” rated trades.

Two HighTwo High--Probability SetupsProbability SetupsEarly Bull Flag BreakoutEarly Bull Flag Breakout

Moving Average Jump Start Moving Average Jump Start

Lunch BreakLunch Break

Our lunch today is served Our lunch today is served courtesy ofcourtesy of

Townsend Analytics, Ltd,Townsend Analytics, Ltd,

Developers and creators of Developers and creators of RealTickRealTick© . . .© . . .

The premiere trading platformThe premiere trading platform

MModule Threeodule Three

Winning Strategies to Keep You Winning Strategies to Keep You on the Right Side of the Marketon the Right Side of the Market

Two HighTwo High--Probability Short Sale Setups Probability Short Sale Setups

Trading the News and Econ ReportsTrading the News and Econ Reports

ETFsETFs: Core Trades and Hedging Tools: Core Trades and Hedging Tools

Sector Analysis and Sector Analysis and Selling ShortSelling Short

Good news for some sectors is bad news Good news for some sectors is bad news for othersfor othersFor example:For example:

Higher energy prices = bad news for Higher energy prices = bad news for transportation stockstransportation stocksHigher interest rates = bad news for autos, Higher interest rates = bad news for autos, housing stockshousing stocksLow inflation = bad news for gold stocksLow inflation = bad news for gold stocksLower oil prices = bad news for oil & oil Lower oil prices = bad news for oil & oil servicesservices

Setup Three: Triple Threat ShortSetup Three: Triple Threat Short

Daily chart: Stock’s price pattern has fallen Daily chart: Stock’s price pattern has fallen under 20, 40, and 200under 20, 40, and 200--day MAsday MAs20 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

Sell short when stock breaks nearby supportSell short when stock breaks nearby support

Setup Three: Triple Threat ShortSetup Three: Triple Threat Short

Market CriteriaMarket CriteriaDow and/or S&P 500 or Dow and/or S&P 500 or NasdaqNasdaq 100 100 (or Composite) negative(or Composite) negative

Relevant sector showing negative impact Relevant sector showing negative impact from current market environmentfrom current market environment

Industry group where target stock resides Industry group where target stock resides moving in downtrend moving in downtrend



Momentum (12-period)

OBV

Confirm Downtrend Confirm Downtrend -- Weekly ChartWeekly Chart


Confirm Direction Confirm Direction -- Monthly ChartMonthly Chart


Confirm Industry GroupConfirm Industry Group


Uggggly!

Return to Daily Chart Return to Daily Chart –– Risk:RewardRisk:Reward


Entry: 71.50 - 70.70

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

Profit target: 66 (prior support, Nov. 2005) R:R 1:3+


Entry 71.80

Initial Stop 72.40 Target 66

Exit ½ 67.50

Exit ½ 66.25




4+ point profit

Good trade!

Setup Four: Deadly Double DipSetup Four: Deadly Double DipDaily chart: Stock’s price pattern trades below Daily chart: Stock’s price pattern trades below 18 18 EMAEMA, 40 SMA, and 200, 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

Sell short as price breaks supportSell short as price breaks support



32.53

Return to Daily Chart Return to Daily Chart –– Risk: RewardRisk: Reward


Entry 33.10 – 32.40

Initial stop 33

Profit target 30

RR: 1:4+.

32.53


Entered at 33.03

Take partial profits at the close, 32.30,

or next day’s first hourly low, 31.80

Watch volume

EntryEntry----Trade ProgressionTrade Progression----ExitExitOIH OIH –– Oil Oil SvcsSvcs. ETF. ETF 1515--Minute ChartMinute Chart

Coincident entry

Coincident partial profits

Stop



1.25 points profit

Trading the News and Trading the News and Econ ReportsEcon Reports

Do not trade the news, itselfDo not trade the news, itselfWait until the market absorbs the newsWait until the market absorbs the news

Trade the market’s Trade the market’s reactionreaction to the newsto the news

Tool: Index futures and Dow Jones Tool: Index futures and Dow Jones Industrials TICK, or “TIKI,” NYSE TICKIndustrials TICK, or “TIKI,” NYSE TICK

Applicable industry group reaction Applicable industry group reaction

Trading the NewsTrading 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 announcementannouncement

News release (as expected) = profitNews release (as expected) = profit--takingtaking

Don’t trade on Fed day Don’t trade on Fed day

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 markethave already squashed the market

Result, few sellers remain.Result, few sellers remain.

Trading the NewsTrading the NewsIt should go lower, but it doesn’tIt should go lower, but it doesn’t

Translation: it’s going higherTranslation: it’s going higherMarket may have discounted newsMarket may have discounted newsExample: 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’tIt should go higher, but it doesn’tTranslation: it’s going lowerTranslation: it’s going lowerExample: Company reports good earnings, Example: Company reports good earnings, but stock fallsbut stock falls

Trade the Market’s Trade the Market’s ReactionReaction to Newsto News

Housing Starts data . . . worst report in years!

Take a TenTake a Ten--Minute BreakMinute Break

ETFsETFs: 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 stockor country in a single stock

Narrows time spent on researchNarrows time spent on research

Provides diversity in a single equityProvides diversity in a single equity

Lower expense ratios than mutual fundsLower expense ratios than mutual funds

Can be shorted on a downtickCan be shorted on a downtick

Use for speculation or as hedgeUse for speculation or as hedge

Check ADV before day tradingCheck ADV before day trading

Most Popular Index SharesMost Popular Index Shares

Dow Jones Diamonds DIADow Jones Diamonds DIA

NasdaqNasdaq 100 Trust Unit QQQQ100 Trust Unit QQQQ

S & P 400 S & P 400 MidcapMidcap SPDR MDYSPDR MDY

S & P 500 SPDR SPYS & P 500 SPDR SPY

Where to Find Where to Find ETFsETFs

State Street Global Advisors State Street Global Advisors

Select Sector SPDRS Select Sector SPDRS www.spdrindex.comwww.spdrindex.com

Merrill Lynch HOLDRSMerrill Lynch HOLDRSwww.holdrs.comwww.holdrs.com

Barclays’ Global Investors Barclays’ Global Investors iSharesiShareswww.ishares.comwww.ishares.com

http://www.holdrs.com/

http://www.ishares.com/

Where to Find Where to Find ETFsETFs

State Street Global AdvisorsState Street Global Advisors

streetTRACKSstreetTRACKS www.streettracks.comwww.streettracks.com

Vanguard VIPERSVanguard VIPERSwww.vanguard.comwww.vanguard.com

PowerSharesPowerShares Capital ManagementCapital Managementwww.powershares.comwww.powershares.com

ProSharesProShares **www.proshares.comwww.proshares.com (short index opportunities)(short index opportunities)

http://www.streettracks.com/

http://www.vanguard.com/

http://www.powershares.com/

http://www.proshares.com/

ETFsETFs and Sector Rotationand Sector Rotation

Early Bull

Middle Bull Middle Bear

Late Bull Early Bear

Late Bear

Technology

QQQQ, XLK, SMH, HHH, SWHTransportation

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

ETFsETFs –– Core TradesCore TradesETFsETFs 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)

Exit when trend weakens or breaks Exit when trend weakens or breaks

Hedging with Hedging with ETFsETFs

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 eventsglobal 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 . . .

Don’t hedge as a substitute for exiting a losing positionDon’t hedge as a substitute for exiting a losing position


Identify your strengths & challengesIdentify your strengths & challenges

Three thought processes that lead to Three thought processes that lead to successsuccess

Double your profits!Double your profits!


Identify Your Strengths & ChallengesIdentify Your Strengths & ChallengesWhen 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 weaknessesDevelop a plan for turning them into strengthsDevelop a plan for turning them into strengthsWrite them downWrite them down and take action steps and take action steps every day…every day…


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

Formulate highFormulate high--quality answers, and quality answers, and act on themact on them!!


Potential Questions to Ask Yourself . . .Potential Questions to Ask Yourself . . .How can I conduct my preHow can I conduct my pre--market analysis market analysis more efficiently and effectively?more efficiently and effectively?

How can I learn my level of risk tolerance?How can I learn my level of risk tolerance?

How can I become an expert in one or two How can I become an expert in one or two setups?setups?

Is my trading plan and criteria working well?Is my trading plan and criteria working well?

How can I raise my winning trade How can I raise my winning trade percentage?percentage?

How can I apply more effective discipline?How can I apply more effective discipline?


Three thought processes that Three thought processes that lead to success…lead to success…

2. Investigate your personal belief systems2. Investigate your personal belief systemsDo you think everyone is smarter than you Do you think everyone is smarter than you are?are?

Do you believe that “the love of money” is Do you believe that “the love of money” is connected with evil and selfishness?connected with evil and selfishness?

Do you believe that you don’t Do you believe that you don’t deservedeserve to to make money quickly and easily?make money quickly and easily?

Module FourModule FourKeep Your Head in the Game!Keep Your Head in the Game!Points to consider . . .Points to consider . . .

You are You are extremelyextremely smart. Establish that belief smart. Establish that belief system right now! system right now!

Take “right” and “wrong” out of your trading Take “right” and “wrong” out of your trading vocabulary.vocabulary.

Every decision is a choice. Different choices lead Every decision is a choice. Different choices lead to different outcomes.to different outcomes.

Don’t reactDon’t react to market action to market action –– respond!respond!Stay Stay proactiveproactive ---- not reactive.not reactive.

Don’t compare your success with others. You are Don’t compare your success with others. You are competing with your own levels of success.competing with your own levels of success.


Points to consider (cont’d) . . .Points to consider (cont’d) . . .

“Inaction breeds doubt and fear. Action breeds“Inaction breeds doubt and fear. Action breeds

confidence and courage. If you want to conquerconfidence and courage. If you want to conquer

fear, do not sit home and think about it. Go outfear, do not sit home and think about it. Go out

and get busy.” and get busy.” ----Dale CarnegieDale Carnegie


Points to consider (cont’d) . . .Points to consider (cont’d) . . .“Love of money is the root of all evil,” comes “Love of money is the root of all evil,” comes from deepfrom deep--seated belief system of Puritanical seated belief system of Puritanical upbringing. upbringing.

Rationalized by others’ fears and failuresRationalized by others’ fears and failures

Does not apply to you!Does not apply to you!

Money is good . . .Money is good . . .Measure of value placed on goods and services.Measure of value placed on goods and services.

Essential to our livesEssential to our lives

Offers the opportunity to share with othersOffers the opportunity to share with others


Check your deservability belief systemsCheck your deservability belief systems

Do you hold on to outworn, negative beliefs Do you hold on to outworn, negative beliefs established in childhood?established in childhood?

Do you earn good profits, and then lose them?Do you earn good profits, and then lose them?

Do you deserve to make a lot of money?Do you deserve to make a lot of money?

You are programmed to fulfill your belief systems!You are programmed to fulfill your belief systems!


Three thought processes that lead to success…Three thought processes that lead to success…

3. Develop a well3. Develop a well--thought out trading career plan.thought out trading career plan.

1.1. Use processUse process--oriented and percentage oriented and percentage goals, not monetary goals.goals, not monetary goals.

2.2. Review your plan daily; at least weekly. Review your plan daily; at least weekly.

If you don’t know where you want to go, If you don’t know where you want to go, how can you possible arrive there?how can you possible arrive there?


Double Your Profits!Double Your Profits!

KaizenKaizen principle: “continuous betterment”principle: “continuous betterment”

Expand your trading knowledge by 1/10 of Expand your trading knowledge by 1/10 of 1% each day.1% each day.

By end of week = ½ of 1% By end of week = ½ of 1%

½ of 1% compounded for 4 weeks = ½ of 1% compounded for 4 weeks = 2% gains in knowledge & experience2% gains in knowledge & experience


Double Your Profits!Double Your Profits!

Thirteen, 4Thirteen, 4--week months in one yearweek months in one year

TwoTwo--percent knowledge and percent knowledge and experience gains x 13 = 26%experience gains x 13 = 26%

Compounded, will double in value everyCompounded, will double in value every

2 ½ to 3 years!2 ½ to 3 years!

Module FourModule FourKeep Your Head in the Game!Keep Your Head in the Game!Identify your strengths & challengesIdentify your strengths & challenges

Three thought processes that lead to successThree thought processes that lead to success1.1. The quality of your questions determines the quality of The quality of your questions determines the quality of

your trading life. your trading life.

2.2. Investigate your personable beliefs programming. Investigate your personable beliefs programming.

3.3. Develop a wellDevelop a well--thought out career plan.thought out career plan.

Double your profits!Double your profits!KaizenKaizen principle: “continuous betterment”principle: “continuous betterment”

My best wishes go with you. . .My best wishes go with you. . .

To your good wealth!To your good wealth!

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This presentation is provided for informational This presentation is provided for informational purposes only and does not constitute an purposes only and does not constitute an

endorsement by Townsend Analytics of the endorsement by Townsend Analytics of the information and views expressed by the information and views expressed by the presenter.presenter. Townsend Analytics does not Townsend Analytics does not guarantee the accuracy of or warrant any guarantee the accuracy of or warrant any

representations made in this representations made in this presentation.presentation. Townsend Analytics shall not be Townsend Analytics shall not be

held liable for any inaccurate or incomplete held liable for any inaccurate or incomplete information or for any improper or incorrect use information or for any improper or incorrect use

of the information contained in this presentation.of the information contained in this presentation.

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