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Resources:
Chartology: Understanding Candlesticks
and
Support & Resistance Levels:
To be successful at investing you must learn to Buy
Low and Sell High consistently and you can do this by recognizing
Support and Resistance levels on candlestick charts (not basic line
charts).
Support and Resistance Levels:
-
Recognize the current stock market is no longer a long-term buy
and
hold investment vehicle (based on the massive losses in Sep. and
Oct. '08), but a short-term trading platform utilized by traders.
-
These
traders tend to stop selling stocks at certain (low) price levels
and begin buying them, this is "Support". Likewise, traders also
tend to stop buying stocks at certain (high) price levels and begin
selling them, this is "Resistance".
-
For
example: The following candlestick chart (Figure.1) on McDonalds
(MCD) from Aug - Oct '08:
-
In early August Support(1) is at $60 and the stock
moves up and hits Resistance(1) at $66 and falls down, back to $60
in early September.
-
It bounces back up near Resistance(1) $66 and falls
back to Support(1) at $60 in late September.
-
It then retests Support(1) at $60 in early Oct. and
breaks down at (A), falling to a new low less than $50 but builds
Support(2) near $51.50.
-
It retests the new Support(2) twice in Oct. while
establishing a new Resistance(2) at $60, which was the old
Support(1) level - a very common event when resistance and support
levels change positions (this is very significant)!
-
Note: If you traded MCD during Aug. - Sep. and
recognized these Support ($60) and Resistance ($66)
levels, you could have bought the stock near $60 and sold it near
$66 for $6 profit and 10% ROI.
Figure-1.
ALERT: Stock Market may have
"Broken-Out" on Thursday (4/9/09):
S&P-500 (SPX): Closed at (856) above 100-day SMA &
Resistance (840) = Breakout?
NASDAQ-100 (NDX): Closed at (1340), Gap above
Resistance (1275) = Breakout?
DJIA-30: Closed at (8,083) above 100-day SMA &
Resistance (8,000) = Breakout?
Note: Simple Moving Average (SMA)
Apply what you've learned to earn the income you deserve.
Candlestick Charts:
Candlesticks
provide considerably more information about stock or ETF movement than
traditional line charts because Candlesticks have (5) daily components
(See Figure-2):
-
(H) High
for the day (upper wick)
-
(L) Low
for the day (lower wick)
-
(O)
Opening value (body)
-
(C)
Closing value (body)
-
Direction
(open candle - up, closed/solid candle - down)
Figure-2.
The length
(height) of the candle also defines the degree (magnitude) of movement
for the day, a tall candle (long wick) shows considerable movement,
while a short candle (short wick) shows small movement. Likewise, a tall
body also defines large open vs. close movement and a short body defines
small open vs. close movement.
DOJI
(doe-gee)- Signifies Change:
A Doji is very
significant because it has a very short body meaning open vs. close for
the day are nearly the same, small movement. This signifies a "change"
is imminent because the market is at a point of indecision when the open
vs. close are very close in value. This "change" can indicate a "turning
point" for the stock (See Figure-3):
-
If the
stock was in an upward trend and hitting Resistance
(high), Doji can indicate a turn to the downside and may be time to
sell the stock.
-
Note:
Wait for confirmation: Second day movement is also down and
it breaks the prior days low.
-
If the
stock was in a downward trend and hitting Support
(low), Doji can indicate a turn to the upside and may be time to buy
the stock.
-
Note:
Wait for Confirmation: Second day movement is also up and it
breaks the prior days high.
Figure-3:
Back to Solution
Apply what you've learned to earn the income you deserve.
Mutual Funds - NOT!
There
are a multitude of reasons why we do NOT recommend Mutual Funds in
today's market, no longer favorable to long-term buy & hold, especially when you compare them to Exchange Traded
Funds (ETFS):
| Description: |
ETFs |
Mutual Funds |
|
Expense & Mgmt Fees |
Only 0.35% Avg.,
lower cost |
Range 0.9% - 1.5%, more expensive |
|
Trade In / Out of the
Fund |
Anytime during the
day (flexible) |
Only after Market closes,
end-of-day |
|
Utilize Option
Strategies |
Yes; Calls, Puts,
Spreads, long / short |
Not available |
|
Wide Selection /
Industry Sector |
Yes; sufficient, easy
to understand |
Yes; too many, more complex |
|
Searchable Database |
Yes;
www.ETFconnect.com
|
Too many, by manager |
|
Leverage, 2X Market
|
Yes; "Ultra" funds,
long / short |
Not allowed |
|
Stock Turnover, buy &
sell |
Very low, results in
lower costs |
Can be heavy, 100%+, more costly |
|
Redemption liquidity |
Very fluid, trades
all day like stock |
Illiquid, must sell fund's stock
to pay withdrawals, typically at lower prices |
|
Management |
Less expertise req'd
/ industry sector |
Few good Managers |
| Performance |
Based on Industry Sector, Options
offer hedging & leverage |
Statistic: 80% Fail to match or beat the S&P
500 index |
Apply what you've learned to earn the income you deserve.
Tax Deductions:
Save Money on Your Taxes and Enjoy These 250 Tax Deductions like
Corporate America!
Get your Added Value Report that shows you
How To Save Money on Your Taxes and Enjoy These 250 Tax Deductions
like Corporate America! - coming soon - late Jan '09.
Partners:
Internet-based online charting service that is Free
www.BigCharts.com
Internet-based online trading account (stocks, bonds, mutual funds,
options)
www.OptionsXpress.com
Account setup specialist for traders at Traders Accounting
www.TradersAccounting.com
Advanced business setup strategies and tax advice at Path Finder
Business Services & Strategies (Drew Miles, attorney)
www.pfbs.com
Internet-based online options trading & education -
www.888options.com
Listed on:
Dmegs Web Directory
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New Years
Opportunity:
Barron's Headline (1/5/2009): "Get Out Now! - Are
Treasury Bonds Safe?"
Ref:
http://online.barrons.com/article/SB123094029415750267.html?mod=b_hpp_9_0002_b_this_weeks_magazine_home_top
If investors have moved too much money into US Treasuries
and pushed 30-Year bond yield below 3%, when investors sell these bonds
to move into higher yielding investments, the bond price will fall and
the yield will rise.
Opportunity! There is a Double Short Ultra ETF on
Long Bonds (20+ years) = TBT that may be worth considering!
We bought TBT on Friday (1/2/09) at 38 on a confirmed
breakout (2nd up candle above prior day's high)
Note: To learn more about reading candlestick charts, see
Chartology (above)
Apply what you've learned to earn the income you deserve.
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