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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! There will be no page this week. Have a joyous Christmas. Pro-fundity! Greetings, Pro-fundity guests - 12-23-05 Let’s step into the wonderful world of “chart-smarts” and see how Technical’s can work for us. This example will punch-up the tremendous value our weekly picks and pick performance bring the novice investor, or anyone seeking to improve trading results. The following table shows one week's pick performance. Fig. 1. Pick-Performance for 6/03/05, highlighting Main Picks on 4/22/05. Why did we highlight 4/22/05 (6-week ago Main Pick)? Each week in the table is broken-out in the Pick-Performance, as shown next for the 4/22/05 P. We chose this set for our example because the top three picks outperformed the SP-500 by over 4X! But, here’s the question: “What is common among these three that would have told us to buy? Of the ten main picks, these three outperformed the rest handily! Is there something in the data (the charts) that would have pointed us in that direction?” As we seek the answer, consider the process as it applies to 18 different sets of 10, each week, in coming to understand and employ chart methods and techniques in the improvement of our trading skills and results. Fig. 2. WatchList Tracking for 4/22/05 P, 30-trading days (42-calendar), Pick-Performance. What happened to these three tickers? Lets start with PHI. Following is the chart pattern on the day of the pick (see the arrow). Everything to the left was visible on that Friday, but we could see nothing to the right. Fig. 3. Price/Volume chart for PHI on 4/22/05, the day of the pick. Notice the technical indicators shown in Fig. 3. In the price window there are only two moving averages, the red 50-day and the blue 200-day. The price was moving about the 50-day MA and had just touched down to the 200-day a few days before. In the second window, I’ve included two indicators along with the volume bars and moving average; the TSV and the OBV. TSV is a proprietary Worden Bros (TCNet/TC2000) price/volume indicator and the OBV is the common On-Balance-Volume, also a price/volume indicator. (Click on the blue Worden icon to learn more) If we think about it, all technical indicators are derived from price, volume, and timing. Creative people have derived creative combinations of these three factors attempting to forecast where the price is going to go. And most work under certain conditions some of the time. Otherwise, they would totally disappear. Just remember that no one knows for certain where price will go, or when, or how far. We use technical indicators to heighten our probabilities. To increase our odds, nothing more. A powerful technique for studying price charts is that of recognizing and making the most of “divergences.” A divergence is when a technical indicator move against price. Indicator moves up, price moves down, or vice-versa. This usually (I emphasize the word “usually,” meaning often) means something is going on, in favor of the indicator, not the price. That is, in a good divergence, the indicator will usually prevail. Notice the price/TSV divergence shown in the chart below. Fig. 4. Price/Volume chart for PHI outlining the TSV divergence. Price fell from the low point near the end of March (circled) to the low just before April 22nd. At the same time, TSV increased as shown between the same two points. This is a marked divergence. Notice, OBV (the gray indicator line) did not diverge, but fell with the price. TSV has an uncanny ability to “contradict” price in this manner. I don’t know why, or how it works, I just enjoy the result. Before leaving this price chart, notice the bottom window, containing the two indicators, Stochastics and MACD. In Figure 4 above, on 4/22/05, they both supported the notion that price was about to move up. That gave us consensus between three indicators, increasing the odds. Now consider the divergences on price charts for the other two tickers. Fig. 5. Price/Volume chart for ABV outlining the TSV divergence. Fig. 6. Price/Volume chart for DHI outlining the TSV divergence. Study these price patterns to see what they had in common and how the probability for price increase was manifest. But most of all, look at the many other possibilities housed in the Pick-Performance report, available each week, with new tickers for your review and education. Now, where else can you get such a wealth of training materials for improved investing/trading? Good trading, and remember, "Always use stops!" Enjoy! Each week we publish a review, how well the chosen picks performed, for Members benefit. For example, click here for a look at this week's PICK PERFORMANCE 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 © 1998-2005 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. The information in this report does not constitute an offer nor solicitation to buy or sell securities. Information obtained via the use of this site should be coupled with the individual's personal due diligence in researching individual securities BEFORE purchase and the individual is advised to contact their broker or financial advisor before making any investment decision. 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