Greetings, fellow Pro-fundity team members -
9-29-00 Page Background music:

A. This weeks picks (remember the basis of our stock picks: a) sound fundamentals, b) supportive technicals, c) possible near-term buy, and d) positive news):

• (ABFS) [Transportation - Trucking] Arkansas Best
• (ALB) [Chemicals - Synthetics] Albemarle Corporation
• (ETH) [Consumer Durables - Home Furnishings & Fixtures] Ethan Allen Interiors Inc.
• (FII) [Financial Services - Asset Management] Federated Investors, Inc.
• (GTK) [Computer Software & Services - Business Software & Services] Gtech Holdings Corporation
• (HAKI) [Telecommunications - Processing Systems & Products] Hall, Kinion & Associates, Inc.
• (LZB) [Consumer Durables - Home Furnishings & Fixtures] La-Z-Boy Incorporated
• (NCBC) [Banking - Regional - Southwest Banks] National Commerce Bancorporation
• (UL) [Food & Beverage - Food - Major Diversified] Unilever PLC
• (WORK) [Diversified Services - Business/Management Services] Workflow Management, Inc.

B. Quick Picks

We have added five low-cost price charts for subscriber interest. These have good technicals and have passed the news scan, but the subscribers must do their own fundamentals research.

C. 100 Optionable Possible’s

The link on the home page to 100 OPTIONABLE POSSIBLES provides a list of tickers with interesting price patterns, all optionable between $4.00 and $15.00, that merit your consideration. Any fundamental, technical or news screens are left to the subscriber.

D. This Week's Guidepost

Apologies for the delay in recent guideposts. We have been breaking ground on some exciting new strategies for buy and sell triggers with Rolling Stocks. Please follow carefully!

1. We have always taught that with rolling stocks, we shouldn't buy just because the price reaches a pre-determined low (support) level. We should wait for evidence that it has started up. Likewise, we sell with weakness, when the price signals a downturn. The difficulty with this strategy is knowing when strength and weakness are present.

2. One approach, which we cover in our book, is using the number of upticks to signal strength, the number of downticks to signal weakness. We suggest that a lot of paper trades can help understand when such an approach is viable on what type of price patterns. An uptick is simply a price increase from the open to the close, a downtick the opposite. If the price increases three days in a row, that is a level of strength. If it increases five days in a row, that is greater strength. The reverse is true with downticks.

3. Good chartists observe the action of volume with price changes. An increase in price with increasing volume is bullish. The price is likely to increase further. A price increase with decreasing volume is bearish and the increase is likely short-lived. On the down-side, decreasing price on increasing volume is quite bearish. Get out while you can. However, if the price decrease is with decreasing volume, a reversal is more likely in the works. This all comes from the action of institutional investors, who account for 80% of all market volume. They are all out there buying (accumulating) or selling (distributing) as slowly as necessary to keep price from moving too fast before they establish their positions. Volume always precedes price.

4. Putting these two paragraphs together, as we did some brainstorming in search of a higher purpose, we arrived at the obvious. Let's couple the uptick/downtick strategy with volume changes to strengthen our case. Sounds easy enough. But consider the following:
   • What would be the best number of upticks and/or downticks to use?
   • What constitutes an increase in volume; 5% or 10% or 50% over the 7 day average, or the 20 day average, or the 50 day average?
   • Should the upticks (buy signals) be mirror images of the downticks (sell signals) or should they be different?
   • What type of rolling pattern should be used to test the strategy and will all patterns work in the same way or will each ticker have its own unique behavior?

5. Other questions arise as this unfolds, but it is apparent that the number of combinations necessary to test such an idea are bewildering. However, the computer provides the means to test these many combinations on a variety of rolling patterns. That is what has occupied our hearts and minds in recent weeks, developing the software to handle the problems. The results are exciting. We will share the results of this study in coming guideposts. Additionally, we hope to provide a very reasonable software product that our subscribers can use for their own studies. If this sounds interesting to you, please let us know, and stay tuned.

It is our intent to help our subscribers understand market strategies well enough to make informed decisions and understand the risks.

TC-2000 tutorials are available on the home page.

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