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DAILY/WEEKLY HISTORICAL GL's TUTORIALS BASICS FUNDAMENTALS TECHNICALS ROLLING TC-2000 OPTIONS	Scroll to the bottom of this Guidepost for an easy way to ask for clarification on any questions that arise! Greetings, fellow Pro-fundity team members - 02-25-05. “SELL POINT 3” I’ve got good news and I’ve got bad news. Feedback on SellPoint has been terrific. Feedback on SellPoint has been marginal, too difficult to use, too many glitches, not user friendly… Let’s examine the issues in this Guidepost with a real example put together this week for this very purpose. Begin with today’s trading tip, repeated here for ease of use: “I have learned that to watch the tape (computer screen) during the market hours is like a slow death. Every price tick up and down just drives me nuts. And I end up making on the spot stupid decisions. Then I see some news flash on my trading window and suddenly I am swayed one way or another on that stock. So I go ahead and place some order on the spot thinking of how I can make money off the latest newsflash. Even though I know very well that the news only confirms the move. The move always occurs well before the news. The smart money usually sells into good news only to buy it back at a reaction. That is because the smart money had discounted the news weeks before it became news. When the news is released and the public gets excited, the smart money can sell into the increased volume of buying from the public. When I watch the tape, it turns out to be nothing more than an online casino. And in a casino, online or not, the odds are against me. I cannot be a successful speculator if I do not pay attention to odds of wins. The only time I have made big money in the stock market is when I have relied on myself and nobody else. And it has always been a successful venture when I made a small first commitment and added larger pyramid positions to my first commitment. And all of my most successful trades involved never watching the tape but relying on stop orders.” Brad Koteshwar - ”The Perfect Stock Keep this common-sense view in mind as we proceed. We owned a stock that had languished longer than comfortable [NEM (Newmont Gold)], not providing the increase expected. It was still above our stop levels, but time suggested we move on. We liquidated NEM, looked carefully at our picks the last couple of weeks and chose three we felt promising. We are often asked if all our picks are recommended buys. We won’t insult your intelligence with any such claim. Anyone close to the market understands what a Herculean task it would be to select 30 winners each week, every week, for the 7+ years Pro-fundity has been on-line. Rather, stocks are chosen that satisfy certain fundamentals criteria, demonstrate technical patterns that could provide near-term increases, and are not hampered by negative market news. This gives us a better than even chance of finding winners among the picks. But it is our (your) responsibility to study the companies and price charts to make those selections. If you are looking for Red/Green arrow Sell & Buy points, don’t waste your time with Pro-fundity. Here are the three selected on Tuesday last (Monday was President’s day holiday). This was after considering these picks over the long weekend: Main Picks – 02/18/05, FON & WFR Breakout Picks – 02/11/05, IIG Let’s examine the price charts for each of the three, going in. That is, before purchase. First FON. Fig. 1. Daily price chart for FON, how it looked Friday 2/18/05. The price chart looks a bit cluttered but it’s what we use for technical analysis review. Why did we like this one? The biggies in our trading arsenal include, considering the three frames: Top – The price chart itself. This is the single most important indicator. We have a blue solid-line price channel as well as a dashed blue Bollinger band, both finding the price action near the center. The red line is a Money Stream (MS) indicator provided by Worden Bros. on TCNet which is a price/volume indicator, suggesting a divergence to the up-side. Middle – Its hard to see on this pix, but OBV (on balance volume) is the gray line, below zero on the left moving well above zero on the right. Balance of Power (BOP), another Worden indicator indicating institutional buying with the green bars on the right. TSV (Time Segmented Volume), a third Worden indicator. When this is above zero it suggests strength in the short-term price/volume equation. Essentially, these three indicators tells us the same thing in different time frames, BOP longest, MS mid, TSV short. In this chart they are all favorable. Wilder’s RSI is the red line in the middle frame. This is not positive here. Bottom – Volume is usually left to the bottom frame, but in this case we have two moving averages of volume, the red line is a 20 day MA, and a dashed line which it a 5 day MA. The volume bars are actually hidden. We can glance at the relationship between the two MA’s to see when volume is increasing or decreasing. Back in December you can see a dramatic volume increase when the price spiked, again near the first of February. At the current time, there does not seem to be much change in volume. In the bottom frame we’ve included the oscillators, Stochastics and the MACD Histogram. These provide good information in trading (sideways) markets, less when trending. In this case, we like the MACD just turning up from the bottom, the Stochastic a bit inconclusive. A rate of change (ROC) indicator is included as the black line. With that battery of indicators, we could easily be overwhelmed. Not to worry. Since we understand that no indicator is perfect, we gather consensus where some indicators agree. Then make a decision, a judgment, realizing some of our decisions will be dead wrong. But that is how we learn. Who was it said, “Its not how far you climb, but how high you bounce when you hit the bottom.” Most traders use only a few indicators for their trades. Find which fit your trading personality by back- or paper-trading with SellPoint. Nothing will give you a better experience or hone your trading skills at such a low cost. Before we make those judgments in our trading routines, we should always look at different time frames on the charts. Here is what the weekly chart looks like for FON (just press 5 on the keyboard). Fig. 2. Weekly price chart for FON. We learn from this picture the stock has been in a solid trend for 21 months, as seen by the position of the 50 day Moving Average. We also see the price breaking through the 200 day MA in October, suggesting the trend has been down prior to the time frame shown on this chart. Nothing on this time frame to discourage us. Next, look at WFR, also a main pick last Friday. Here is the daily chart on that day. Fig. 3. Weekly price chart for WFR. We like the momentum shown here. The hazard is that it is already spent, and is nearing overbought conditions. Here is the weekly… Fig. 4. Weekly price chart for WFR. Lastly, look at a Breakout Pick on 2/11/05, IIG. Fig. 5. IIG daily price chart. This looks like a decent pull-back, from a trend well ahead of both the 50 day MA and the 200 day. The MACD histogram looks ready to turn up with increasing price. Now the weekly. Fig. 6. IIG weekly price chart. Ok, we’ve set the stage for our SellPoint example. The return from our sale of NEM was $650, which we split among the three candidates, or about $200 each. Why would anyone invest such a little amount in a stock? Let’s see where this takes us. Before we see the financial detail, lets see where the stocks went this week after entering the detail into SellPoint. Remember, SellPoint is a management tool after selections are made. We only check the progress at each days-end. The next picture is the entry of FON into sheet 1 of SellPoint, with progress entered each day for the four trading days of this week. Fig. 7. FON entered into SellPoint. We have a 2.5% price rise, which gave us a negative 3.4% dollar increase due to commissions. See how reality sets in with costs? Fig. 8. WFR entered into SellPoint. Fig. 9. IIG entered into SellPoint. Whoa! What happened here? Well, the stock price went south. But SellPoint gave us a sell sign the day after we opened the trade. That is, it told us what our trading plan had already done. You see, we had placed stop loss orders as soon as the orders cleared. On the same day. Notice the sell price was the stop level, $20. We took the money returned with the stop and increased our commitment to WFR. Here is the SellPoint summary sheet after the four trading days: Fig. 10. SellPoint Portfolio Summary Sheet. The summary shows we sold IIG and increased our position in WFR. Now, what is the advantage or benefit from using SellPoint? We have two positions, FON and WFR, having been stopped out with minimum damage on IIG. Let’s watch the action and remind ourselves what our responsibility is to make this work. Watch the closing action on our long positions each day. Enter the data (ticker,date,O,H,L,C,Vol) into SellPoint for each position. When the Stop Point changes, make the change accordingly with you broker, before the next-day open. In the two positions we still hold, the price has not increased enough to change the stop price. As the price increases, we will see the stop increase, which we must execute with a change to the stop order with our broker. We must take this action every day the stop increases. The next picture shows the trading sheet with my broker for these actions during the past week. We will follow the progress carefully, taking action as SellPoint directs. Follow with us the action going forward. Fig. 11. Trading sheet with Scottrade broker. One of the difficulties users have expressed with SellPoint is the entering of data each day. Please review the tutorial in Advanced Tools on loading data: DWN-LD This covers the use of both TCNet and Yahoo-Finance for this purpose. Don’t make this any more difficult than necessary. This is a routine you can become very comfortable with. Enjoy! Click here for our new feature, CHART CHAT Click here for a new look at this week's PICK PERFORMANCE This week's Picks (02-25-04): Main Picks - AHM,ALK,ATG,BEZ,CBCF,ERICY,GLK,MRH,SMMX,WCG Breakout Picks - AKS,ASR,ATO,CCK,CEDC,GDP,HOLX,LUX,NSS,PWI Quick Picks - ARNA,ASCL,BBA,BLI,MFLX,MONE,PKTR,PVX,STE,TE 100 Optionable Picks = Tickers in comma separated format for use in personal tools, such as TC2000. Be Diligent Take Action! If you have thoughts, suggestions, or comments, we would like to hear about them. Your e-mail address: Your comments: COPYRIGHT © 1998-2006 by Pro-fundity (sm). All Rights Reserved. No part of this work may be used or reproduced in any manner whatsoever without the written permission of Pro-fundity(sm). Pro-fundity(sm) is an independent research firm producing research reports based on many sources believed to be reliable. No guarantees are made as to the accuracy and completeness of the information. 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