November 2, 2007
Finding The Big Trends in Stocks
Finding The Big Trends in Stocks (notes from the seminar 11/1/07 with Price Headley)
1. Look for FEAR and GREED at the extremes using
2. CBOE Equity Put/Call Ratio
3. CBOE Volatility Index (VIX)
4. Williams %R using efficiency ratios and 100% above 200-day moving averages
CBOE Volatility Index — VIX plots average “implied volatility” for put and call options
In put and call options at the extremes, these market expectations often create signal for a reversal
1. Puts increase in value when a stock declines
2. Calls decrease in value when a stock declines
3. Calls increase in value when a stock rises
4. Puts decrease in value when a stock rises
VIXs with Bollinger bands with 2 deviations
Implies 95% of action should be within those bands. When you see spikes in the upper or lower band it shows things are overdone.
- If on the fifth day the indicator is not working, that is a reason for concern.
- November, December and January are the most bullish months of the year.
CPOE Equity Put/Call Ratio (off cboptions Chicago Board) Great indicator of direction
A measure of how many puts are traded relative to the number of calls traded on any given day
1. High up volume, relative to call volume indicates bearish sentiment
2. High call volume, relative to put volume indicates bullish sentiment
Bollinger Band with 2 deviations (good for non-trending markets)
Acceleration Bands
These band should encompass 95% of the price action. Look to trade the other 5% of the price events outside the acceleration bands
Lower Part of Band When gets too close to lower part of band means the market is too optimistic. Anything within 10% of the lower band … means too much optimism
Top of Band Shows too much fear.
Acceleration find trends that are starting to speed up for faster profits
Most start trading with moving averages but noticed that the best stocks never come back to test major moving averages. Acceleration Bands should encompass 95% of price action (adaptive bands of Keltner and 20 bar acceleration band
—-you man prefer to trade the other 5% of the price events outdid of the Acceleration Bands
George Soros stated that these unexpected substantial moves, known as the “fat Tails” where he usually made the most money with these acceleration bands.
Willimas %R Method
Similar to Stochastics in measuring overbought and oversold levels — the traditional scare is from 0 to 100 … While most use a 10 or 14 bar setting try to use a 30 bar setting – smoother but still responsive
BULL TRENDS — look for overbought reading above -20 followed by a close above that bar’s high low (action should be within 5 bars)
BEAR TRENDS: Look for oversold reading below -80, followed by a close below that bar’s low (action should be within 5 bars)
Money Strategy
>>> takes HALF of your position profits at 100% or more.
Allows you to release the fear of giving up profits as you recoup you initial investments and guarantee at least a breakeven.
‘’’’’’If inter-day noise gets you stopped out too often use a stop at the end of a given bar.
For a daily closing stop , use the price 15 minutes before the end of the day. If stop is violated, place a market order to exit the position.
looks for triple play efficiency ratio (on last 20 days for 5 bars(if daily five days)) percent R
some kind of moving average with upper and lower bands
Easy Relative Strength Measure:
Stocks that reach 100% or more above their 200 day MA surprising result is that stocks tend to go up much more from there.
Percent Above 200-Day Indicator
• BigTrends went back and studied stocks that reached100% above their 200-day MA
• Surprising result: These stocks tend to go up much more from there – Lift off into orbit
• Rules: Once a stock goes 100% or more above 200-day, then we must see a Close above that day’s high to generate confirmation of a new buy. Cross back under
the 100% line sets new stop at that low.
BigTrends Home Study 15 Hour Course for just $499
|
Normal Price: |
|
Now Only: $499 |
Spread the word
