[isatrader]

Attached are the updated US Industry Sector Charts and relative performance table.

[isatrader]

It been a while since I last showed the the UK FTSE 350 Stocks Relative Performance table and charts, so I thought I'd do an update for our UK members.

NMX1730 Forestry and Paper tops the rankings currently, with NMX1750 Industrial Metals still in the bottom spot.

[isatrader]

The following article is the latest article by our sponsor Alan Saunders from Sharehunter.com who provides a daily stock alerts service via email based on Weinstein’s trader method for the S&P 500, Nasdaq 100 and the FTSE 350 stocks.

Weinstein Is Not Enough!

Perhaps it might have been fairer if this was titled “Stage Analysis is not Enough” as Weinstein does spend time to consider stops settings etc. But, for share buying to be successful, whether for trading or portfolio composition, it is not enough.

Having said that, let me confirm that Weinstein’s ‘Stage Analysis’ is the fundamentally important analysis on which all share purchases are made in our company. But it is the additional three ‘add-on’ analysis areas that dictate whether a share purchase is likely to be successful and whether or not profits will be made and retained over time.

These three additional analysis techniques are –

1. ‘Breakout’ Analysis
   
2. Prudent Money Management
   
3. Strict Stop-loss and Profit-protection control
   

‘Breakout’ analysis consists of careful identification of active support and resistance levels for each share being considered. Shares price will react to support and resistance levels based on either, and most commonly, the “8ths” rhythmic scale (12.5%, 25%. 50%, 75% etc.) or the “3rds” rhythmic scale (16.66%, 33.33%, 50%, 66.66% etc.). These are powerful levels and it is important to only buy (or sell) a share when such levels are being tested and the price has managed to breakout (or breakdown).

Prudent Money Management means risking only a small percentage of your capital on each separate trade and never exceeding it (no matter how good you think the trade). Take the (likely) entry price and deduct from it the stop-loss price which you adjust to create a loss figure that you are willing to bear. At ShareHunter we stick firmly to a limit of just 1.5% of the capital base as the maximum that we are willing to lose on any trade.

Strict Stop-Loss and Profit-Protection is fundamental to successful share trading whether short term of medium/long term. My experience over many years is that to build profits you should almost forget about the winning trade(s) and just concentrate on the new trades whilst the stop is below your entry price. Put the stop price into the market so the decision, and exit, is made for you if it is hit.
That way you will make money from trading shares.

These three ‘musts’ have stood the test of time and have, for example, allowed ShareHunter to run a model £20,000 client spread betting/CFD account up to over £150,000 in just 4 years – exclusive of costs but, even allowing 30% of profits to disappear in charges you can appreciate how valuable has been Weinstein’s Stage Analysis + the three ‘add-ons’.

Alan Saunders
Chief Analyst, ShareHunter.com
August 2013

[isatrader]

I came across three charts in my daily scans today that I thought would make good examples for people learning the Stage Analysis method.

We show a lot of charts on here every day in various stages in the watchlist threads and the daily breakouts and breakdowns threads, but we rarely see those A+ Stage 2 advances that the book talks about finding. So here are some examples of what Stan was talking about in the book when he mentioned looking for the A+ picks, and considering the opportunity costs of trading average breakouts instead of working to find these big winners.

As you can see from the charts they all had very strong Stage 2 runs over the last year and are now in different Stages with UNXL now in Stage 4, and TSLA and LCI both in Stage 2B, but both still with strongly rising 30 week MAs.

The volume profile wasn't necessarily perfect on the Stage 2A breakout week, so they wouldn't have been considered A+ picks straight away, but as you can see all three had strong volume come in as they broke out to new highs, and it continued to build, as well as mostly strongly outperforming the market following the breakouts and staying well above their Mansfield zero lines.

So I think it's good to realise that the A+ picks might not be in instantly recognisable from an A or a B grade pick, but once that volume starts coming in as it continues to make new highs, you'll know to hold onto them through the Stage 2 advance and follow the trailing stop loss method as suggested in the book.

[goodtyneguy]

Great examples of the profitability of the method once in the right stocks. So the message sees to me to be don't be too concerned about the lack of volume in the base immediately preceding the break out or on the break out. Rather look for the mansfield RS to cross the zero line, enter on a break out and if big volume does not come in, in say one, two, or three weeks later then exit and look for another opportunity?

[isatrader]

Great examples of the profitability of the method once in the right stocks. So the message seems to me to be don't be too concerned about the lack of volume in the base immediately preceding the break out or on the break out. Rather look for the mansfield RS to cross the zero line, enter on a break out and if big volume does not come in, in say one, two, or three weeks later then exit and look for another opportunity?

I think you want to see the relative performance strongly outperforming the market on and immediately following the breakout, and then if you start to get some heavier volume coming in as well, then you'll have a good idea that you could to be onto a A+ stock and try to hold on through the advance.

I'm not sure if you can put a time limit on it of only a few weeks with investor positions, as as the TSLA example shows, it took a few months until the volume started to build in that stock, and you would have missed a 330% advance if you taken an early profit or breakeven trade as it pulled back to the breakout level for a while. Basically, it's always going to be a judgement call as to whether to cull a stock that doesn't immediately show some life in the right places (relative performance and volume) in favour of finding something else. But I'm sure the traders among the group, can be much more picky and dump stocks easier as they won't have the same transaction cost considerations as the investors buying stocks outright.

[gbarbs]

With the bullish percent index flashing a warning are you taking a more cautious approach? Noticing that has got me going back through Weinstein indicators. Here's what I'm seeing:

1. Dow is still stage 2 but has broken its 30 wma and is rising less sharply. Its losing some incline but still increasing. Remains stage 2
2. NYAD. I see very slight divergence on recent peaks. It is over a few months. Maybe it will be easy to see if the Dow gets to another peak and the HL does not
3. Div ratio. I don't use this since it has been low for 20 years, but the Schiller PE
and normal PE are above average.
4. Momentum Index - I don't see any warning there. There was a sharp drop last year but not down thru zero. Its been declining since about May but not to a level of warning.
5. World index is in stage 2. I went through the individual charts and have 11 stage 2's, 6 neutral (stage 1 or 3), and 3 stage 4's. So overall ok
6. GM is probably not valid any more but is stage 2 along with Ford, and General Electric. XOM is neutral and AAPL is just coming out of stage 1 into 2.
7. The news reports? I don't know but I don't think they are all roses so don't think there's any contrarian signal yet
8. NYHL - I see divergence on this. This one has declining peaks going back to last year. So a definite warning there.

So, total score:

3 bearish warnings of reversal (2,3,8)
2 bullish signs (1,5)
3 no signal (4,6,7)

So this would indicate caution. With the Bullish % warning I am thinking I should get a head start on looking for shorts. I am going to take some time and double check all of my sector charts where I own anything, and tighten up stops.

Am I on track with that Bullish %? I got that far in Dorsey's book so I think it warrants caution with buys.

   

[isatrader]

With the bullish percent index flashing a warning are you taking a more cautious approach? Am I on track with that Bullish %? I got that far in Dorsey's book so I think it warrants caution with buys.

Dorsey describes the Bullish Percent Index as the head coach and compares it to American football. Below is a quote from one of their articles on their site:

"There is a time to have the offensive team on the field, and a time to have the defensive team on the field. The problem that most investors have is they don’t know what team should be on the field. When the offensive team is on the field, we focus on wealth accumulation strategies. When the defensive team is on the field, the focus is on wealth preservation."

So with the Bullish Percent Index currently on a sell signal in a column of Os and around the key 70% level the playbook recommends that the defensive team should be on the field and hence the focus should be on wealth preservation strategies. Here's the bullet point list from their Bullish Percent Playbook that suggests strategies for what do in it's current state:

• Aggressive Defense
  
• Decrease volatility
  
• Raise cash levels
  
• Reduce exposure to offensive sectors
  
• Tighter stops on longs
  
• Sell leaders & laggards on breakdowns
  
• Buy protective puts to hedge
  
• Buy inverse funds to hedge
  
• Initiate Short Equity exposure
  
• Increase non-correlated exposure
  

So you are on the right track with what it recommends if you are at least starting to think about wealth preservation strategies.