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Trading breakouts with stage analysis


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Trading breakouts with stage analysis

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 isatrader 
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My aim with this journal is to forward test Stan Weinstein’s four-stage breakout method that he describes in his book from 1988. As with hindsight, you can see that the method works beautifully to this day. However, it’s not as easy to make decisions at the right edge of the chart that look obvious with hindsight. So I plan to follow his method as closely as possible, but I’m also going to use point and figure charting methods for additional confirmation and to aid with the stage identification and breakout points.

I like to read a lot and have tried various methods over the last four years since I began to learn to trade and I imagine I’ve got many more years to go yet before I become consistently profitable. However, my goal in the short term is to try and develop my discipline and to stay focused while I test this method and not deviate from my plan. As I need to be consistent in my approach to see whether the system works or not, as otherwise I might disregard the method if I fail, when it was actually not the fault of the system, but my own short comings that caused the failure.

I’m currently on my third reading of Weinstein’s book as I’m keen to fine-tune my understanding of the four stages so that I can try to identify the A+ situations that he talks about, which are most likely to turn into the biggest winners over time and try to avoid the C- mediocre buys and false breakouts.

I won’t go into the whole method in this first post, but it is based on buying breakouts when the general market trend is positive; that are in the strongest sectors; that are breaking out into stage 2 with minimum overhead resistance; which have strong increasing volume on the breakout and also have good relative strength versus the market overall.

The method is based on buying stocks, but is also supposed to work just as well on commodities and indexes. However, from studying the charts I don’t think it is as suited to forex, although the stage analysis still seems to work very well, so I think it could still be a useful method in the toolbox for fx. But I’m going to limit my trades to stocks, indexes and commodities only to begin with and see how I get on.

I hope you enjoy the journal and I will appreciate any constructive feedback, especially from people that have tried the method or trade in this way.

Cheers

isatrader

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 isatrader 
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Charts moving into stage 2 are thin on the ground at the moment, but attached is the US Dollar index chart. It has recently broken out of a stage 1 consolidation that started forming back in April this year. The 30 week moving average has turned higher for the first time in over a year. Volume has increased on the breakout from the range and relative strength versus the S&P 500 has increased and moved into positive territory. So by my interpretation of the method this is the beginning of a new stage 2 uptrend. However, although it meets the majority of the criteria in Weinstein's method, one crucial area is not so positive - overhead resistance. There is significant resistance above the breakout which will likely limit any advance that it tries to make. The 82 level looks like strong resistance in the short term IMO, which could be bullish for stocks and commodities if it tops there and begins a new range.


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 isatrader 
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The US 30 year has had a fairly model stage 2 since it's breakout in early May. It moved up to previous resistance on increasing volume, then pulled back towards the breakout level and the volume contracted giving a second lower risk entry point early in July. Currently it's still in a strong stage 2 rally. However, it's a bit extended from it's 30 week MA, so the trader stop loss position would move inside the MA to below the most recent low which is around the 137.50 level. But the investor stop would be just below 130 I think.

I've included the daily chart as well on the attached chart below.


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 isatrader 
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The S&P 500 is in stage 4 downtrend currently. One of the key criteria of the method is that the market trend must be positive if you are buying stocks and negative if you are shorting. So as the S&P 500 is currently in a stage 4 downtrend, I would only be allowed to short at the moment.

I've attached the chart below with the four stages marked up over the last year. The current consolidation seems to suggest it could be early in a new stage 1, but this could easily give way and break to the downside again as the 30 week moving average is still a way off and would need to start to flatten out a bit to have more confidence.

I think one of the things I like the best about this method is that stops you from jumping into buying a stock too early, which I've been guilty of many times over the years. So hopefully it will help me to be more disciplined with my timing.

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 isatrader 
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I've been experimenting with adding volume to point and figure charts this morning, as volume is so integral to the method for confirmation and I thought it would be interesting to see if the volume data looked clearer on a P&F chart, as P&F charts do such a good job of filtering the noise on the price action.

The initial results are promising. Have a look at the S&P 500 volume levels on the major breakouts over the last few years:

S&P 500 Mar 2009



S&P 500 August 2009



S&P 500 September 2010



I think that this will help me to filter out some of the false breakouts as the method calls for at least twice the average volume on the breakout, otherwise you should take a quick profit and get out of the position as it's likely to reverse if it doesn't have the volume to back it up. So for example, looking at the volume at the moment in the current chart, it looks anemic and has been all year. So I'd want to see a big volume bar on any breakout above 1230 and a contraction in volume on the pullback following any breakout as you can see in the other breakouts above.

S&P 500 Current


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 isatrader 
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As the market trend is in a stage 4 downtrend at the moment and I'm already short the S&P 500 from this weeks bounce to the near the top of the daily channel yesterday. I'm going to spend some time over the next few weeks/month studying the method more and trying to get some watch lists set up of stocks/commodities in stages 1 and 2 and that are outperforming the market since the August low, so that if the market trend turns positive again over the next month, that I'm ready to buy the best looking candidates.

I've been reading the "refining the buying process" section again today and thought it would be useful for me to write down the buying reference on the first page of my journal so that I can reference it easily in future.

Buying Reference
  1. What is the major trend of the market overall
  2. What groups/sectors look the best technically
  3. Create a watch list of the stocks from the sectors identified that have bullish patterns but are currently in a trading range. Make a note of the breakout price level of each.
  4. Narrow the list by discarding the stocks/commodities that have overhead resistance nearby.
  5. Narrow the list further by discarding the ones with the worst relative performance versus the general market - I use the latest major low in the S&P 500 as my baseline for this.
  6. Put buy-stop orders on for half the position on the few stocks/commodities that meet the buying criteria.
  7. If volume looks promising on the breakout and then contracts on the pullback towards the initial breakout level, then buy the remaining half of the position.
  8. If volume doesn't increase enough on the breakout then sell on the first rally. If it doesn't manage to rally and falls back below the breakout point then dump it immediately.
So that's the quick reference of the most important things to do when buying with the method, which I'm going to try to stick to from now on.

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 Big Mike 
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Looking forward to your journal. Nice to see some PnF charts.

Mike

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 isatrader 
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I like to use market breadth charts in my analysis to try to help to gauge the risk in the broad market. I focus on four charts especially which are:

NYSE Bullish Percent Index ($BPNYA) - this is a compilation of the percent of stocks that trade on the NYSE that are on Point and Figure buy signals and tells you whether to be offensive or defensive with your strategy.
  • Xs = offense
  • Os = defense
  • 30% and 70% are the oversold and overbought areas where risk is highest
  • All stocks have an equal vote


NYSE Percent of Stocks above their 200 day moving average ($NYA200R) - this is a measure of the percent of stocks on the NYSE that are trading above their 200 day moving average



NYSE Percent of Stocks above their 50 day moving average ($NYA50R)- this is a measure of the percent of stocks on the NYSE that are trading above their 50 day moving average



SPY/TLT - this is the ratio between the S&P 500 and the US Treasury bonds, which I use as a measure for the risk on/risk off trade. I find it a very good guide, as the signals last for a long time generally, although it can have the occasional false signal. But since the beginning of the 2009 rally there's only been 3 signals as you can see on the chart which would have kept you on the right side of the market.



I tend to look at these charts at least once a week as a group, as individually you'll see that they can experience whipsaws from time to time and give a false signal. However, as a group I find them very robust and a great guide to whether I should be looking to buy or looking to sell.

I'll be referring to them frequently in my journal, and I'm keeping an especially close eye on them at the moment as the percentage charts are all in the lower range and a break above 30% on all three would make me keen to get back into stocks on the long side. However, these are only secondary charts as I'm trading Stan Weinstein's method, so I'd need all the buying criteria I mentioned before to be in place before I got long again. For now they are all on the sell side so I'm staying short for the time being.

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 isatrader 
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I like to trade the precious metals, so I thought I'd try and make sense of what gold is doing at the moment.

The weekly chart is in Stage 2B I believe, but the pullback to the 30 week moving average has been a little bit more extreme than the previous pullbacks over the last two years, so it's possible that it could be the beginning of a Stage 3 range. However, the moving average is still rising for now although it is slowing which is why I think this is Stage 2B and not Stage 3 yet.

On the daily chart I had a measured swing target of 1585 from the Stage 3 top, which has been reached. However, the daily chart is in a Stage 4 consolidation currently, so I'm not looking to buy until it forms a stage 1 base and manages to breaks out into a new Stage 2 following the rules of the system, as it could just as easily break lower. So I'm still on the side lines for now.

Below is my charts


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 isatrader 
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I found a pdf of his Global Trend Alert advisory service newsletter from March 2005 that he did (still does?) for Institutional Investors. I'm not sure if this is still going but it supposedly cost institutions $40,000 a year for the service and shows various charts of stocks and markets at the different stages and analysis of them, which I think helps to see, as it helps you to identify the stages he talks about in the book on some actual charts. Here's the pdf:

https://futures.io/attachments/51208d1317996797

I think this gives an important update to the book, as the book was written 23 years ago and he's clearly refined the system a little bit since then. For example, the four stages now have extra definitions with A, B, + and - symbols. So you now have a Stage 2B, and if the technical pattern is outstanding it is labelled 2B+

Here's the definitions of the stages from the newsletter

Stage 1A - Start of a base. Needs much more time.
Stage 1 - Basing Phase. May begin accumulation.
Stage 1B - Late in base-building phase.Watch for breakout.

Stage 2A - Early in uptrend stage. Ideal time to buy aggressively.
Stage 2 - Advancing Stage
Stage 2B - Getting late in uptrend. Watch carefully. But still a hold.

Stage 3A - Looks as if a top is starting to form. Be sure to protect holdings with a close stop.
Stage 3 - The Top Area. Start to reduce positions.
Stage 3B - Has become increasingly toppy. Use rallies for at least partial selling.

Stage 4A - Stock has entered Downtrend Stage. Close out remaining positions.
Stage 4 - The Declining Stage. Avoid on the long side.
Stage 4B - Late in downtrend. Much too soon to consider buying.

Additional ratings
(A) Early in that Stage.
(B) Late in that Stage.
(+) Outstanding pattern in that Stage.
(–) Unexciting pattern in that Stage.

Below is the simple diagram from the newsletter to give the descriptions above some context.



Another thing that I think is really useful about the Global Trend Alert newsletter pdf, is that it has all the S&P 500 stocks marked up with their stages from the 25th February 2005. I think this is great as you can go back in your own charting package to that date and get a much better idea of the various stages and hence become better at identifying them. As the charts in the book were very small and the print quality wasn't great. So I think this will really help my understanding of the stages.

On that date the Stage Ratings Overview had the following:
Stage 1 - 8%
Stage 2 - 58%
Stage 3 - 18%
Stage 4 - 16%

So you should have around 40 examples of Stage 1, 290 examples of Stage 2, 90 examples of Stage 3, and 80 examples of Stage 4 to look at. There are also ratings of the sectors, some etfs and secondary stocks in there.

I plan to create a spreadsheet and go through them one by one to create my own reference guide so that I can use them to identify the stage on my charts in the future.

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 isatrader 
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As a follow up to my previous post outlining the break down of the four stages, I've been going through the Global Trend Alert Newsletter to get some real life examples of the various stages to use as a reference in the future.

Stage 1A - Start of a base. Needs much more time

Key
(+) Outstanding pattern in that Stage.
(–) Unexciting pattern in that Stage.

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 isatrader 
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Stage 1 - Basing Phase. May begin accumulation.

Key
(+) Outstanding pattern in that Stage.
(–) Unexciting pattern in that Stage.

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 isatrader 
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Stage 1B - Late in base-building phase. Watch for breakout.

Key
(+) Outstanding pattern in that Stage.
(–) Unexciting pattern in that Stage.

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 isatrader 
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Stage 2A - Early in uptrend stage. Ideal time to buy aggressively.

Key
(+) Outstanding pattern in that Stage.
(–) Unexciting pattern in that Stage.

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 isatrader 
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Stage 2 - Advancing Stage

Key
(+) Outstanding pattern in that Stage.
(–) Unexciting pattern in that Stage.

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 isatrader 
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The breadth indicators I follow are showing some positive signs and are in a good field position. The fastest indicator, the Percent of Stocks Above 50 Day Moving Average ($NYA50R) has given a buy signal by breaking out above 30%.



The slower SPY/TLT has also moved back to a buy signal for the first time since Junes sell signal, but can give the occasional whipsaw so requires confirmation.



The Percent of Stocks Above 200 Day Moving Average ($NYA200R) has reversed to a column of Xs, but still needs another 12% of stocks to move back above their 200 day moving average to give a new buy signal.



The NYSE Bullish Percent Index ($BPNYA) or head coach, has reversed into a column of Xs in a good field position - 27.54% of stocks are now on P&F buy signals. But I want to see a move above 30% before I get more bullish.



Finally, the S&P 500 hasn't given a P&F buy signal yet, and even if it did, the volume is anemic at the moment and doesn't fulfill the criteria of the method of being at least two times the recent average volume so I'm going to remain cautious until I get confirmation. So for that reason and because the 30 week moving average is still falling I think we are now in Stage 4B - Late in the downtrend. Which is much too soon to consider buying for a medium to long term position. However there might be an opportunity for some short terms gains, although I'm inclined to short any rally at the moment because of the lack of confirmation.


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 isatrader 
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Carrying on my reference guide of the different stages - using the Global Trend Alert newsletter. Here's some real life examples of stocks in Stage 2B from February 2005.

Stage 2B
- Getting late in uptrend. Watch carefully. But still a hold.

Key
(+) Outstanding pattern in that Stage.
(–) Unexciting pattern in that Stage.

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 mfbreakout 
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isatrader View Post
Carrying on my reference guide of the different stages - using the Global Trend Alert newsletter. Here's some real life examples of stocks in Stage 2B from February 2005.

Stage 2B
- Getting late in uptrend. Watch carefully. But still a hold.

Key
(+) Outstanding pattern in that Stage.
(–) Unexciting pattern in that Stage.

Thanks for your posts. You may want to look into Mark Fisher book " The Logical Trader". Paul Tudor Jones calls him the best pit trader ever. After 2 years of loosing money I became profitable 9 months ago after reading Mr. Fisher book.

His method is a breakout method. I also ordered Weinstien's book. Do you know of any other book which talks about breakout method preferably written recently to accommodate changes in the market place.

Thanks,

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 isatrader 
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Stage 3A - Looks as if a top is starting to form. Be sure to protect holdings with a close stop.

Key
(+) Outstanding pattern in that Stage.
(–) Unexciting pattern in that Stage.

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 isatrader 
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mfbreakout View Post
Thanks for your posts. You may want to look into Mark Fisher book " The Logical Trader". Paul Tudor Jones calls him the best pit trader ever. After 2 years of loosing money I became profitable 9 months ago after reading Mr. Fisher book.

His method is a breakout method. I also ordered Weinstien's book. Do you know of any other book which talks about breakout method preferably written recently to accommodate changes in the market place.

Thanks,

Thanks for the the recommendation mfbreakout. That's one I haven't read, so I'll get myself a copy.

As for other books on trading breakouts. I haven't found anything else that's good on the subject so far. However, you might want to look at Point & Figure charting as it is by nature a breakout method and the best book I've read on that is Point & Figure charting by Tom Dorsey which I think is excellent. Here's a link to the Google books extract: Point and figure charting: the ... - Thomas J. Dorsey - Google Books

Cheers
isatrader

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 isatrader 
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Stage 3 - The Top Area. Start to reduce positions.

Key
(+) Outstanding pattern in that Stage.
(–) Unexciting pattern in that Stage.

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 isatrader 
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Stage 3B - Has become increasingly toppy. Use rallies for at least partial selling.

Key
(+) Outstanding pattern in that Stage.
(–) Unexciting pattern in that Stage.

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 isatrader 
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Stage 4A - Stock has entered Downtrend Stage. Close out remaining positions.

Key
(+) Outstanding pattern in that Stage.
(–) Unexciting pattern in that Stage.

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 isatrader 
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Stage 4 - The Declining Stage. Avoid on the long side.

Key
(+) Outstanding pattern in that Stage.
(–) Unexciting pattern in that Stage.

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 isatrader 
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Stage 4B - Late in downtrend. Much too soon to consider buying.

Key
(+) Outstanding pattern in that Stage.
(–) Unexciting pattern in that Stage.

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 isatrader 
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Finally, I've managed to get through all the stage examples as you've probably noticed above. I really think it's been a worthwhile exercise though, as I can already see that I was identifying some of the stages wrongly, particularly mistaking the move from Stage 1 to Stage 2 too soon, which I can now see was actually moving into Stage 1B and even Stage 1 still in some cases.

I think the additional A & B tags really help to define the stages more clearly, although there is some overlap between them and sometimes stages can be skipped when the stock has some momentum it seems. But I can now use the reference stocks to compare against current charts and get a clearer picture of what I need to do or not do as the case may be.

I think the market is still in Stage 4B (Late in downtrend). So I'm watching for either a Stage 4 continuation move to the downside or a sideways to up move into Stage 1A. Both of which seem possible at the moment, and don't allow any buying for long term positions; so I'm going to keep studying for the time being, so I can identify some A+ winners when the market next turns up.

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 isatrader 
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I've had a terrible week as I broke my collar bone playing football last Sunday, and my girlfriends cat was put down yesterday as it had aggressive cancer. So a week of pain, no sleep, and a very sad day yesterday for us. It wasn't the cat in my avatar if you were wondering. That's my cat Illyana, and hopefully she's got many more years with me yet although she doesn't do a lot of exercise so I worry about her.

Anyway, as a follow up to my previous post on the US 30 Year Treasuries on the 28th Sept, I've gone back over my previous analysis and updated it now that I have a better understanding of the stages from my work on the stage examples. I was slightly wrong with my mark up of the Stage 3 breakdown into Stage 4 and I also identified the move into Stage 1B as the Stage 2 breakout which actually happened at the start of August. But that is the point of me doing this journal, as I want to get a proper understanding of the method so that I can test it as fairly and accurately as possible.

Ok, onto the charts. I've included the weekly and the daily chart as I think it's necessary to view multiple timescales to get the clearest picture possible. On the weekly chart, US 30 Year Treasuries look to still be in Stage 2 but are having the first major pullback since the breakout. A positive sign is that weekly volume has decreased during the pullback which is in the criteria for the method. However, the trend line support is 6% below at around 130 and last years high reached 131.15, so a pullback to there is possible IMO. Although treasuries are inversely correlated to the S&P 500, which is at -0.84 currently; a very strong negative correlation. So if the equities break down again next week, then we should see a further move to the upside by the Treasuries again based on that strong negative correlation.

The daily chart is showing some weakness and it looks like it's moving into Stage 3A as it has broken below the trend line and the moving average has turned down. Relative strength is weakening and cumulative volume has given an initial sell signal by breaking below it's moving average. I've marked where I believe the trader stop should have been positioned and moved up from my understanding of the method. So I think it would now be at point D which is just below 137.5 and very close to being breached.

I think this an important chart to follow if you trade stocks because of the inverse relationship to the stock market, so it is another way to get clues on what's going on in the market.


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 Big Mike 
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Sorry to hear about the bad week. I'm an animal lover as well. I suggest after a short mourning period you consider rescuing or adopting another cat or dog or etc. It is always tough, they aren't a replacement but don't let that stop you from helping another animal in need.

Mike

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 isatrader 
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I've been keeping a close eye the breadth charts that I follow to try a see if the recent hope rally in the market has any legs to it. The signs are swaying towards the positive side as three of the four charts are now on buy signals, however, the lack of volume confirmation continues to hold me back.

The NYSE Bullish Percent Index ($BPNYA) is in a column of Xs in a good field position - 46.63% of stocks are now on P&F buy signals. So it's given a risk on signal by breaking above 30% and a double top buy signal this week. So it suggests a more risk on strategy currently.



The Percent of Stocks Above 200 Day Moving Average ($NYA200R) is in a column of Xs, but it still needs another 4% of stocks to move back above their 200 day moving average to give a new buy signal above 30%. This is the only chart of the four not back on risk on mode yet. So I'll be watching it carefully this week.



The Percent of Stocks Above 50 Day Moving Average ($NYA50R) has raced away over the last week or so but is getting near the higher end of the range. So is a bit short term overbought, but still has room to the upside.



The slower SPY/TLT ratio has stayed on a buy signal, so suggests the bias has shifted back to equities from US Treasuries.



The final chart is the S&P 500 P&F chart. The volume of the recent 10% bounce off the October bottom is still concerning me. However, the rules of the system state that it needs to be twice as much as the recent average volume, and it is roughly that, but it's hardly convincing.

Something that concerns me more is the fact that there is 8 months worth of resistance to work through as shown by the price by volume on the side of the chart. Which I've highlighted in blue. So between 1270 and 1350 there is a huge amount of resistance which needs to be overcome before any meaningful rally can occur. So this leads me to believe currently that any end of year rally will be contained by this supply. So I'm going to be looking to other markets like the Nasdaq 100 for a better return, which have less resistance to overcome.


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 isatrader 
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The $NYA200R - NYSE Percent of Stocks Above 200 Day Moving Average joined the other three breadth charts I follow that I mentioned in my previous post and gave a risk on signal today, by breaking out above the 30% level. So all my breadth charts are giving me the green light to trade on the long side for first time since April.



However, this journal is about testing Stan Weinstein's breakout system; and using my reference charts guide earlier in the thread I can see that the S&P 500 is currently still in Stage 4B - Late in downtrend. Much too soon to consider buying. Or possibly a very early Stage 1A - Start of a base. Needs much more time. So, no long term trades for me still at the moment using the system, but I will be getting on the long side with some short term trades and intraday trades as the breadth charts suggest making some risk on plays. However, I'm going to keep that separate from this journal so I don't go off course with it.

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 mfbreakout 
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E- mini has moved from 1050 to 1250 and targets for year end by most analysts is 1300. I am wondering once final stage is confirmed, your plan is to go long on pullbacks? and if it's true what is line in the sand for pullback in terms of level for bullish set up to stay intact. I am assuming once set up is confirmed , your position will be for swing trade.

I do not trade E-mini, SPX or indices but do trade crude oil futures as i find it to be more suitable for breakouts etc using ACD method of Mark Fisher.

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 isatrader 
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mfbreakout View Post
E- mini has moved from 1050 to 1250 and targets for year end by most analysts is 1300. I am wondering once final stage is confirmed, your plan is to go long on pullbacks? and if it's true what is line in the sand for pullback in terms of level for bullish set up to stay intact. I am assuming once set up is confirmed , your position will be for swing trade.

I do not trade E-mini, SPX or indices but do trade crude oil futures as i find it to be more suitable for breakouts etc using ACD method of Mark Fisher.

The method is based on 4 main stages. Stage 1 is the base, Stage 2 is the uptrend, Stage 3 is the topping area, and Stage 4 is the downtrend. This then starts again at Stage 1. So the aim is buy long term positions on the first breakout into Stage 2, and shorter term positions on continuation breakouts during Stage 2 or on a breakout of a failed Stage 3 top. Or the reverse when your are shorting. Here's the link to the Stage 1B examples earlier in my journal which show the kind of pattern I'm looking to buy a breakout from:



Looking at the SPX at the moment, it has too much resistance immediately above it, so the move into Stage 1 will probably be limited by that resistance between 1270 and 1350 for now. A Stage 2 breakout probably won't occur until it works through some of that resistance. So a move up into it and then a pullback and then a breakout above that high would possibly be my entry point. However, the NDX looks more promising to me at the moment because it has nearly overcome it's resistance, so has clear sky for some price discovery.

I bought Mark Fisher's book by the way. Thanks for the recommendation. It is quite interesting.

"Fate does not always let you fix the tuition fee. She delivers the educational wallop and presents her own bill" – Reminiscences of a Stock Operator.
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 isatrader 
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As I've said in my previous posts the breadth indicators have encouraged me to make some short term trades, but there's not much that meets the requirements of the system currently as I need to wait for the stock market to stabilize into Stage 1 on the weekly chart before buying any early Stage 2 individual stock breakouts. However there are some commodities which look tradable, so I chose Gold for my first trade in a while today and got back into it after yesterdays breakout above the daily Stage 4b range into early Stage 1a. I think any advance will probably be limited by the resistance above 1800, so I'll be tightening up my stop fairly quickly.

I initially set my limit order around the daily pivot at 1686, so as to get in on a retest of the breakout area. However, the price didn't reach it and turned around fairly sharply at the open of US futures trading, so I changed the limit order to 1725.1 above the earlier high to get in on the next breakout instead if it reached it. It was filled two hours into the US session so will see how it goes.

Trade

Gold CFD
Direction: Long
Order Type: Limit

Entry: 1725.14 (0.04 slippage)

Stop loss: 1549
Target: 1920

Percentage Risk: -10.21% (-5.75% ATR Adjusted)
Potential Reward: 11.30% (6.36% ATR Adjusted)

Risk Ratio: 1.11

ATR (200 Day): 30.64 (1.78%)
ATR (52 Week): 65.51 (3.80%)

ATR Targets:
1x ATR: 1755.78
1.5x ATR: 1771.10
2x ATR: 1786.42
2.5x ATR: 1801.74




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 isatrader 
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My limit order in Silver was triggered on the breakout above 34.11 earlier today. Here's the trade details:

Trade

Silver CFD
Direction: Long
Order Type: Limit

Entry: 34.113 (0.03 slippage)

Stop loss: 30.905
Target: 38.16

Percentage Risk: -9.40% (-1.98% ATR Adjusted)
Potential Reward: 11.86% (2.50% ATR Adjusted)

Risk Ratio: 1.26

ATR (200 Day): 1.6188 (4.75%)
ATR (52 Week): 3.4429 (10.09%)

ATR Targets:
-1x ATR: 32.49
1x ATR: 35.73
1.5x ATR: 36.54
2x ATR: 37.35
2.5x ATR: 38.16

Entry reason
Silver is in Stage 4 on the weekly chart, but has broken out into Stage 1a on daily chart today. So I've taken the breakout using a limit order for a short term trade with a target at the previous breakdown level around $36.50 to $38. The P&F chart showed the $34 level was significant so I placed my order a bit above it to make sure I wasn't caught by a false breakout. Below is the charts.




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 isatrader 
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My limit order in the Nasdaq 100 Index was triggered earlier when it broke above 2395.1

Trade

US NDAQ 100 (CFD)
Direction: Long
Order Type: Limit

Entry: 2395.2 (0.1 slippage)

Stop loss: 1949
Target: 3000

Percentage Risk: -18.63% (-10.85% ATR Adjusted)
Potential Reward: 25.25% (14.71% ATR Adjusted)

Risk Ratio: 1.36

ATR (200 Day): 41.12 (1.72%)
ATR (52 Week): 91.14 (3.81%)

ATR Targets:
-1x ATR: 2354.08
1x ATR: 2436.32
1.5x ATR: 2456.88
2x ATR: 2477.44
2.5x ATR: 2498

Entry reason
The Nasdaq 100 has the least resistance of the major indexes to work through and is close to breaking out above this years highs. This is a medium term position so I've given it a fair bit of room with the stop loss and adjusted the margin to 50% to reduce effects of the leverage and financing costs. Below is the charts:




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 isatrader 
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Trade

Spectra Energy (NYSE:SE)
Direction: Long
Order Type: Market

Entry: 29.3

Stop loss: 25.29
Target: 46.5

Percentage Risk: -13.69% (-7.16% ATR Adjusted)
Potential Reward: 58.70% (30.71% ATR Adjusted)

Risk Ratio: 4.29

ATR (200 Day): 0.56 (1.91%)
ATR (52 Week): 1.20 (4.10%)

ATR Targets:
-1x ATR: 28.74
1x ATR: 29.86
1.5x ATR: 30.14
2x ATR: 30.42
2.5x ATR: 30.70

Entry reason
SE (Spectra Energy) caught my eye when was scanning the weekly charts for possible breakout candidates. It made a four year high yesterday, and made a possible Stage 2 breakout. So I checked the monthly chart and there's virgin territory above $30 for some price discovery.

Relative strength versus the S&P 500 has been strong for the last two years and SE has outperformed the market by around 30%. Volume on the other hand is mediocre at the moment, so needs to pick if it's breaks higher or I'll have tighten my stop loss quickly in case of a false breakout. But we did get a new weekly closing high and the pullback today closed on the breakout level, so that's a positive sign I think.

My time frame on this is medium to long term, so I've only bought half the position like suggested in the rules of the system and will aim the buy the other half on the first pullback towards the breakout level.

Below is the charts:





Below is the S&P 500 P&F chart (20 box size). The volume is starting to return as you can see at the bottom of the chart. The price by volume on the side of the chart shows that there's much less resistance above 1340. So that's my key level to watch.


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 isatrader 
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I've been re-reading Chapter 5 in Weinstein's book, and am particularly interested in the triple confirmation pattern as my aim is to focus on finding the exceptional winners. Below is the diagram taken from the book that illustrates the pattern I'm talking about:


© Stan Weinstein, 1988

The formation produces some excellent winners apparently. But is not meant for short term trading, rather it's a method for aggressive investors to uncover potential big winners to ride for a major advance.

In addition to the basic requirement of the stock being above it's 30 week moving average it must have:
  1. Volume Signal (A on Chart) - This is vital! We want to see volume of even more than twice the average volume of the last 4 weeks, and additionally, the initial volume surge should be followed by several more weeks of heavy trading. Which indicates a sudden interest in the stock, as well as additional future demand. So impressive volume is the key ingredient.
  2. Relative strength (B on Chart) - this is very important for distinguishing good from great buys. The RS line must be in a certain position. It should either be in negative territory or hugging the zero line in a neutral manner. Then as the Stage 2 breakout occurs, the RS line should move decisively into positive territory. This is very important!
  3. Big move before the stock breaks out - i.e a 40% or more move before breaking out do the best in the months ahead. But this adds near term risk to the breakout, which is why it's strictly for investors rather than traders. So a 50% position size on the initial breakout.

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 isatrader 
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I think I've found one stock which meets the criteria for the triple confirmation pattern I described in the previous post. However, the range before the breakout was only 32%. So not quite the 40% or more he said became the biggest winners, but not too far off.

The stock is El Paso Energy (EP) - it had a Stage 2 continuation breakout two weeks ago on more than four times the average volume. The relative strength had been hugging the zero line and has decisively broken higher, outperforming the S&P 500 by 25% this month. The move before the breakout was 32% in two weeks, but it's up 56% now following the breakout. So I think this is a good triple confirmation pattern candidate and have put a limit order above the latest high at $26.01 at a 50% position size.

The main worry with this is that earnings are due out on Wednesday 2nd November, so that adds some near term risk to the buy if the limit order gets filled before then.

Here's the charts:




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 isatrader 
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Trade

Rolls Royce (RR.L)
Direction: Long
Order Type: Market

Entry: 712.95

Stop loss: 649
Target: 1030

Percentage Risk: -8.97% (-3.63% ATR Adjusted)
Potential Reward: 44.47% (17.99% ATR Adjusted)

Risk Ratio: 4.96

ATR (200 Day): 17.62 (2.47%)
ATR (52 Week): 43.90 (6.16%)

ATR Targets:
-1x ATR: 695.30
1x ATR: 730.60
1.5x ATR: 739.40
2x ATR: 748.20
2.5x ATR: 757.00

Entry reason
Rolls Royce (RR.L) has built up a very large Stage 3 consolidation range over the last 2 years, but it broke out above it two weeks ago on some improving volume. There's no resistance above it, so it's in a price discovery stage now. It's a stage 2 continuation buy, so I've bought my full position size and the point and figure chart gives a preliminary price objective of 1030, using a 10 box size, which would be a nice 44% gain. But it's currently pulling back in line with the market, so hopefully it will outperform if we get a year end rally.

Below are the charts:




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 isatrader 
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It's been about a month since I last looked at the market breadth indicators in detail. So I thought with the market pulling back and the erratic media proclaiming doom one day and that everything's fine the next, that I should see what the market breadth is saying.

The NYSE Bullish Percent Index ($BPNYA)

The NYSE Bullish Percent Index is in a column of Os in the middle of the range, so a fairly neutral field position - 57.41% of stocks are now on P&F buy signals. So it's suggests a slight bullish bias in the market on a percentage basis. However, on a directional basis the failure at the downtrend line and move back to a column of Os suggests that the market has the ball currently and that I should be in a protective mode with a more risk off strategy and tighter stop losses.




NYSE Percent of Stocks Above 200 Day Moving Average ($NYA200R)

The Percent of Stocks Above 200 Day Moving Average ($NYA200R) is in a column of Os. 26.65% of stocks are above their 200 day moving average currently, which is 14% less than the high in October. It has fallen back below the 30% level after making two lower highs in November so far and is close to giving a sell signal - but hasn't yet. So this is suggesting caution still in the short term.




NYSE Percent of Stocks Above 50 Day Moving Average ($NYA50R)

The Percent of Stocks above their 50 Day Moving Average ($NYA50R) has topped out and is pulling back, with 59.36% of stocks now above their 50 day MA. This moves from overbought to oversold much more frequently than the 200 day chart, but currently it is negative in the mid range. So is again suggesting caution.




SPY/TLT ratio

The SPY/TLT ratio has stayed on a buy signal since October. However, the last column of Xs made a lower high and it is very close to giving a new sell signal. So is also suggesting caution currently.



All in all the breadth charts suggest to me that we are still not out of the bearish phase yet, but that there has been some improvement in the NYA50R an Bullish Percent Index so it could be a more neutral phase between bull and bear, although it seems to be leaning back towards bear at the moment.

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 isatrader 
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I like to keep an eye on the Treasuries charts as they have a good inverse relationship with the stock market. So I've updated my stage analysis of the US 30 year Treasuries and included the 10 year US Treasuries charts as well.

On the US 30 Year Treasuries weekly chart, price pulled back to the 30 week MA four weeks ago and has had a good bounce since. However, it is yet to make a new high, volume has been below average and relative performance vs the S&P 500 is weakening, so I'm considering it in late Stage 2B at the moment as the moving average is still trending higher.

On the daily chart it is much weaker and has moved into Stage 3 with price trying to break back above the trendline, but so far failing. It's in a Stage 3 range so it could go either way with a break above 147 or break below 135. However, if it fails to make a new high soon then I'd favour it managing to break below 135.

The US 10 Year Treasuries are showing the same pattern so I'd be looking for a break below 127 if it can't make a new high soon.



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 isatrader 
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I stumbled upon an interesting chart today, and thought I'd mark it up as I think it shows a lot of promise for a long term sell. The EURGBP chart has formed a large stage 3 top over the last 3 years or so after a huge Stage 2 run up of around 3000 points in 2007 and 2008.

The price broke down last year to give a Stage 3 low point below the 30 month moving average. This gave a pivot point for a 5 year trendline, which held over the last year until it was breached in September. Price has bounced around that trendline for the last 3 months, but it looks like the sell side is winning as it's not been able to get back above the trendline this November and was sharply rejected when it tested it again this week.

Volume on forex isn't the same as stocks, so I can't use the crucial volume part of the method faithfully on this chart. So I use my backup of cumulative volume at the bottom with a moving average to determine the conviction of the move. Which seems strongly negative as cumulative volume is near the low, but price hasn't fully broken yet - so there is a negative divergence.

The 30 month moving average has turned down for the last 3 months and the weekly chart has moved in early Stage 4A. So I'm looking to sell this with an initial swing target at 81, but hopefully it will eventually take that out as well and continue lower. But as I'm using a monthly chart for this, it could take a very long time to play out. So it's could be a long term sell and hold for me.

Another thing I like about this trade is that both the Euro and the Pound have around a +50% correlation with the S&P 500. So it's one of the few trades I can do that is not correlated to everything else, as it is just a relative strength play between the Euro and the Pound. Of which the chart says the Euro is weakening against the Pound after 5 years of Euro strength. So maybe I'll be able to afford a bit more on my next holiday to Europe.


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 isatrader 
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Attached is the latest US 30 Year Treasuries chart. It made a lower high two weeks ago and sold off a bit last week before bouncing at resistance on Friday. It's another transitional one. I personally rate it as 2B still until the short term trend line is broken. But as we've discovered the transitional stage is subjective, so it could also be classed as 3A and I believe the book recommends taking partial profits at this point and leaving the remaining stop under the most recent major low. So under 135 I think for that.

This is a very important chart imo, as US 30 Year Treasuries have a strong negative correlation with the S&P 500. So if the lower high holds, then it's good news for equities.


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 isatrader 
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After the Euro mess got a short term fix yesterday I decided to take a new long position in YUM.

YUM made a Stage 2 continuation breakout on the weekly chart this week to hit new all time highs. Relative performance is good versus it's industry and it's individual sector, and it is also outperforming the S&P 500 as well. Volume is only average, so looks like a good traders entry for the method imo.




I've got a number of other trades open at the moment. They are:

Longs
Nasdaq 100 (NDX)
Gold
GBP/USD
GBP/EUR
Rolls Royce (RR.L)
Spectra Energy (SE)
Reynolds American (RAI)
Intuitive Surgical (ISRG)
YUM Brands (YUM)

Shorts
Silver
DeVry (DV)

My risk is weighted to the long side at the moment and I'm a bit over leveraged for my liking. So I might try to trim some positions in the coming weeks to get back to a safer level.

My long Gold, short Silver relative strength trade is doing ok so far and I'm happy to leave it open for a while as I think if Gold does sell off that Silver will be hit harder.

The GBP/EUR trade has had a good start and moved into profit straight away. It's probably going to be a long term holding for me as I think the UK will outperform Europe in the next few years.

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 isatrader 
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The NYSE Bullish Percent Index ($BPNYA)

50.41% of Stocks in the NYSE are currently on a P&F buy signal. The NYSE Bullish Percent Index (Head Coach) moved back to a column of Xs over the last few weeks signalling that it time to put the offensive team back on the field. However, as the field position is neutral there's no need to get carried away here. So I'm focusing on a few individual plays in the strongest and weakest sectors for my longs and shorts and staying slightly weighted to the long side in my portfolio.



NYSE Percent of Stocks Above 200 Day Moving Average ($NYA200R)

The Percent of Stocks Above 200 Day Moving Average ($NYA200R) has moved back below the 30 level, with only 28.5% of stocks above their 200 day moving averages. It is on a sell signal currently and in a column of Os so it needs to reverse above 34% to give a new buy signal currently.



NYSE Percent of Stocks Above 50 Day Moving Average ($NYA50R)

The Percent of Stocks above their 50 Day Moving Average ($NYA50R) has fallen back to 42.93%, but had a reversal on Friday into a column of Xs as 6% of stocks moved back above their 50 day moving average. Although a positive sign, it is a fairly weak one and isn't a buy signal.



SPY/TLT ratio

The SPY/TLT ratio is currently on a sell signal and reversed 6% into a column of Os last week. It has yet to make a lower low, but it is showing that 30 Year US Treasuries are outperforming the S&P 500 currently.



As Mike was kind enough to do a table tutorial, I thought I'd put it to use and do a summary table of the charts above.

Market Breadth Signals
TickerDescriptionSignalColumn
$BPNYAThe NYSE Bullish Percent IndexBuyXs
$NYA200RNYSE Percent of Stocks Above 200 Day Moving AverageSellOs
$NYA50RNYSE Percent of Stocks Above 50 Day Moving AverageSellXs
SPY/TLTS&P 500 / US 30 Year TreasuriesSellOs

As you can see from the table above it's a mixed bag at the moment in the breadth indicators, with a bias towards the sell side. So a time for caution still.

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 isatrader 
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Current Trades
TickerDescriptionLong/ShortEntry PriceCurrent PriceEntry Stage
SESpectra EnergyL29.329.382A
RR.LRolls RoyceL678.85723.142A
SI_FSilverS32.00929.644
RAIReynolds AmericanL40.0640.632A
GBP/EURPound/EuroL1.16361.190392A
YUMYUM BrandsL58.2657.672
BF-BBrown Forman CorpL78.777.752
SPD.LSports DirectS207208.174A
DUKDuke EnergyL21.0820.992

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 isatrader 
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Below is the latest US 30 Year Treasuries chart which I believe is very important at the moment as it highlights the risk off trade. Price bounced off the trend line and and made a new weekly closing high and now looks set to test the September high this week. If it breaks out then the risk off trade would be back on and equities would likely sell off imo. One thing to note is that volume was fairly light on lasts weeks move higher though.

Below is the charts


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 Big Mike 
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Nice work on the tables

Mike

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 isatrader 
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The weekly chart for Gold has moved into Stage 3 now, with price finding support this week at the 3 year trend line. Volume has been leaving Gold as you can see in the cumulative volume, but price is near the bottom of the Stage 3 range so there’s a possibility of a bounce soon. Especially as there a number of factors supporting Gold in the 1550 to 1600 area.

To become long term Stage 4 I’d personally want to see a close below the 3 year trend line and a move below 1535. Here’s the chart



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 isatrader 
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Here's the latest US Industry Sectors charts. Utilities (XLU) continues to outperform with Consumer Staples (XLP) close to breaking out into a Stage 2 continuation. So it's worth looking through the Consumer Staples sub sectors to see what's outperforming and filter down to the individual stocks from there.


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 isatrader 
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Pfizer (PFE) made a Stage 2 breakout with a 52 week high yesterday (20th). The Industry sector (Health Care) and the sub sector (Pharmaceuticals) both look reasonable. Pfizer is outperforming both of them by roughly 8% and is also outperforming the S&P 500 by the same amount. So the relative performance requirement is in place.

What I need to see now is a pick up in volume if it breaks higher, but if I take it, I'll only take a half position as recommended by the buying guide section as this is an investor entry point. With the idea to buy the remaining half position after the first continuation pivotal point is formed.

The monthly shows there's old resistance from the 2005 and 2006 range up to $29, but that still gives it room to move and old resistance is over 2 years old and so is less relevant.

Daily ATR(200) is: 0.42 points average movement per day or 1.96% as a percentage.
Weekly ATR(52) is: 0.89 points average movement per week or 4.15% as a percentage.

The investor stop position below $18 is over 8x the daily ATR(200), so a closer stop below $19.70 might be more suitable using the daily chart. But for the least risk you would need to wait for the breakout to pullback and form a new pivot point.

Here's the charts




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 isatrader 
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A week seems a long time in the markets at the moment with the constant volatility. But it's caused a few of my favourite breadth indicators to move onto buy signals today (22nd) on the short and longer term time frames. Below is the summary table and charts:

Market Breadth Signals
TickerDescriptionSignalColumn
$BPNYAThe NYSE Bullish Percent IndexBuyXs
$NYA200RNYSE Percent of Stocks Above 200 Day Moving AverageBuyXs
$NYA50RNYSE Percent of Stocks Above 50 Day Moving AverageBuyXs
SPY/TLTS&P 500 / US 30 Year TreasuriesSellXs



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 isatrader 
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I'm currently reviewing my first few months of live trading with the method and although it has been excellent so far a number of questions are coming up that aren't covered in the book, but need some significant attention.

Mostly, is portfolio management. For example, on the stocks long side I'm currently in mostly utilities and some consumer staples stocks as they are the sectors that are in Stage 2 at the moment. However, the premise of the method is to be in the strongest stocks, in the strongest sectors in Stage 2 at the time. But sectors rotate all the time and the current leaders might not be the leaders in a few months. And even though the sector might not be a leader anymore, there's a good chance that it will still be in Stage 2 for a long while, so the stocks I hold won't have given a sell a signal. But there might be better opportunities breaking out into fresh Stage 2 situations and becoming the new leaders elsewhere. So my question is how to deal with this?

Should I hold onto my initial portfolio stocks until they complete their respective Stage 2 situations and give a sell signal and only then start rotating into the new leading sectors.

Or another option, should I only allocate a certain weighting in my portfolio per sector. Maybe 3 to 6 sectors, so I could get into all the leading sectors at the ideal entry point per the method. This may mean that I'm only partially invested at certain times as only one or two sectors might be in Stage 2.

Or I could only invest in two leading sectors and sell out of them early as new sectors take over the leading role etc.

There's lot's of other scenarios going through my head, so I won't go on too much as I'm sure you get the gist by now. But I think this is an important area to consider, to successfully trade the method, of which there is no guidance from the book unfortunately as I imagine the scope it covers could probably fill a book itself.

But I'd appreciate any constructive insights that anyone has on this subject.

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 isatrader 
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US 30 Year Treasuries have continued to consolidate near the highs. The weekly chart is currently in Stage 2B still. It made a weekly closing high three weeks ago, but failed to make a new high overall but is still near the highs, so it could breakout higher. However, momentum on the 30 week MA is slowing and a Stage 3 top looks to be developing, but it is still rising at the moment and price has yet to break it. So I consider it Stage 2B until the stop below 139.5 is breached.

Price broke below the short term trend line and is trying to break back above it again and relative performance versus the S&P 500 is flattening out.

So watch for a Stage 2 continuation move above the high or Stage 3A breakdown below the 30 week weighted moving average and stop position below 139.5


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 isatrader 
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Attached is a chart showing the 2007-2008 similar period alongside today's chart with Weinstein's advance decline momentum indicator and my 30 week MA momentum indicator. I hope it will further explain my current position on the Stage I think we're at, as although the charts look similar, I can see a number of important differences from the price action and the secondary momentum indicators. The advance decline breadth data especially.


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 isatrader 
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Here’s the S&P 500 quarterly chart since 1950 using a logarithmic scale. I’ve marked it up to show you what I’m seeing, as based on the price action this could possibly be the early part of a new Stage 1 formation on a quarterly basis. Or it could still be in Stage 3, but I think due to the failed Stage 4 breakdown in 2009 and two higher lows since then that it is actually now early in Stage 1 so could bounce around the 1000 to 1550 range for a few more years yet. But a break below 1000 would invalidate it.

For a historical comparison we only have the 1970's to look at on the S&P 500 of a similar consolidation period which took 5 years to resolve to the upside after the failed Stage 4 breakdown in 1974.

Below is my 61 year chart.


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 trendisyourfriend 
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I am impressed by the proTA charts you are showing. I suppose you are running Ninjatrader on an Windows emulation software and proTA native on OS X. Don't you have any problem running these together ? Also, what data feed is available for proTA ?

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 isatrader 
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trendisyourfriend View Post
I am impressed by the proTA charts you are showing. I suppose you are running Ninjatrader on an Windows emulation software and proTA native on OS X. Don't you have any problem running these together ? Also, what data feed is available for proTA ?

When I use Ninja I run it on a separate PC as I don't like emulation software as has slower performance. So I just got a secondhand pc from ebay for that. But as most of my trading is longer term based the ProTA charts on my Apple are great as the custom code language is very simple so I've created loads of custom indicators for myself with no trouble at all. For data I got a plugin called StockXloader which downloads free EOD data from yahoo. But I also put most of the commodities and futures data in myself from the CME site as it just takes 15 minutes of copying and pasting at the weekend.

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 trendisyourfriend 
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Could you connect proTA with a data provider such as DTN/IQ ?

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 isatrader 
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trendisyourfriend View Post
Could you connect proTA with a data provider such as DTN/IQ ?

Am not sure to be honest. It is end of day software, so doesn't have intra-day time frames, so data is just imported when you connect to service provider you choose. The direct provider is Dial Data which charges a fair bit a month, so I've always stuck to the free data and used other software for looking at intra-day.

Here's the link to website so you can look into it : https://www.beesoft.net/

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 isatrader 
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Everyone who has read the whole thread and Weinstein's book should be able to interpret a weekly chart by now fairly well, so attached is a handful of the major charts I look at each week for comparisons. As I think it's important to look across a broad range of markets to gauge what the price action is telling you.

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 isatrader 
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Below is my list of current open trades. Since my last update on here on the 17th Dec I've closed SPD.L at close to breakeven as I didn't like the price action it was showing and the large volume spike on the test of the support. So I closed it on the 29/12/11 at 206.61 for a minor profit.

Current Open Trades
Entry DateTickerDescriptionSectorLong/ShortEntry PriceCurrent PriceEntry StageCurrent StageATR(200) Percent
10/27/11SESpectra EnergyXLUL29.331.032A23.09%
11/1/11RR.LRolls RoyceXLIL678.85759.612A24.58%
11/24/11SI_FSilverCCIS32.00929.67441.42%
11/25/11RAIReynolds AmericanXLPL40.0641.282A21.79%
11/27/11GBP/EURPound/Euro-L1.163601.20801125.48%
12/9/11YUMYum brandsXLYL58.2661.222A22.45%
12/15/11BF.BBrown FormanXLPL78.778.862A20.10%
12/16/11DUKDuke EnergyXLUL21.0821.299220.78%

I haven't bought anything new since the middle of December as the portfolio was performing well and I wanted to let it ride for a while. Current total performance of my Weinstein method trades is +18.96% ATR(200), which equals a 5.70% gain in my account as my position sizing has been a little erratic. But I intend to correct that and worked out a position sizing calculator in my trades spreadsheet over Christmas where each initial position will only be 0.25% of my account based on it's ATR(200) size. And I'll add to the best performers after continuation pivotal points up to a maximum of 1% of my account. My maximum open risk based on stop loss position should not exceed 6% of my account.

So I'm pleased with the progress at the moment. None of the trades are the Weinstein A+ situations he talks about in the book as the volume has stayed average on most. But I think we are more likely to get a few of those once the market actually enters a new stage 2 phase and bullish momentum builds. A few of the stocks have now entered their first pullback phase, so I've got to do my best to sit on my hands through this as if I've picked well then they should continue on and make a new continuation pivotal points and I should be able to move my stop loss up in due course. Of course the market could falter and I could be stopped out but I need to be patient at this point and let the stocks do what they will. Although I am tempted to trim a couple of the worst performers for a small profit to free up some trading capital as I'm at my maximum account risk of 6% at the moment so need to close something before I put on a new trade.

Relative performance versus the S&P 500 has been good as when I opened my first trade on 10/27/11 the S&P 500 closed at 1284.59 and closed this week at 1289.09. And thus has made +0.035% in the same time period. So the account has outperformed the S&P 500 by +5.35% which is quite nice.

Attached are my charts.

"Fate does not always let you fix the tuition fee. She delivers the educational wallop and presents her own bill" – Reminiscences of a Stock Operator.
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 isatrader 
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The market breadth charts that I follow have continued to improve since my last post on the 23nd December. However, 75% of stocks in the NYSE are now above their 50 Day moving average as can be seen on the $NYA50R chart below and have entered the higher risk zone above 70%. This means that in the short term stocks are getting a bit overbought. If you study the $NYA50R you'll see that stocks can stay in this zone for a while, but it's warning you that there's greater risk in the market in the short term of a correction. The longer term charts are all in the mid range area at the moment, so are more medium risk currently but they have plenty room left to go on the upside. So the breadth charts are suggesting that although the market is in a good place for a medium term buy that in the short term we could have a correction soon, so it might be better to wait for a pullback before getting in any new positions.

Market Breadth Signals
TickerDescriptionPercentSignalColumnRisk
$BPNYAThe NYSE Bullish Percent Index62.93%BuyXsMedium
$NYA200RNYSE Percent of Stocks Above 200 Day Moving Average48.30%BuyXsMedium
$NYA150RNYSE Percent of Stocks Above 150 Day Moving Average59.21%BuyXsMedium
$NYA50RNYSE Percent of Stocks Above 50 Day Moving Average75.69%BuyXsHigh
SPY/TLTS&P 500 / US 30 Year Treasuries-BuyXs-






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 isatrader 
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Trade Details

Brown Foreman Corp B
Ticker: BF.B
Direction: Long

Entry Date: 12/15/11
Entry Price: $78.70

Exit Date: 1/17/12
Entry Price: $79.88

Percentage Gain: 1.50%
Account Percentage Gain: 0.25%
ATR(200) Percentage Gain: 0.77%

Trade Grade: C

Exit Reason
BF.B was acting the weakest technically in my portfolio and I was at my 6% risk limit. So I decided to close the trade to free up some capital in my account, so that I can look for another trade. Volume has been poor since the Stage 2 continuation breakout and relative performance versus the S&P 500 had started to under perform.



Trade Details

Silver
Ticker: SI_F
Direction: Short

Entry Date: 11/24/11
Entry Price: $32.009

Exit Date: 1/17/12
Entry Price: $30.383

Percentage Gain: 5.35%
Account Percentage Gain: 1.03%
ATR(200) Percentage Gain: 0.99%

Trade Grade: C

Exit Reason
Silver has been in Stage 4 since it's second breakdown in September. I got in on the continuation move in late November, but it took another 3 weeks after to finally roll over and moved down quickly to retest the September low. However, since then it's had a bounce and been struggling to regain the $30 resistance level. But today it broke above that level more convincingly, and price is above the 30 day MA, so as I had full position size I decided to take the 1.03% gain for my account and move on to look for new opportunities.


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 isatrader 
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Trade

Automatic Data Processing
Ticker: ADP
Direction: Long
Order Type: Buy Stop

Industry Sector: Industrials (XLI)
Sub-Sector: Financial Administration (^DJUSFA)

Entry: $55.13
Units: 3.92

Stop loss: $53.18
Target: $65.03

Percentage Risk: -3.54% (-1.97% ATR Adjusted)
Potential Reward: 17.96% (10.00% ATR Adjusted)

Account Percentage Risk: 0.5%
Account Potential Reward: 2.53%

Risk Ratio: 5.08

ATR(200 Day): 0.99 (1.80%)
ATR(52 Week): 2.17 (3.94%)

ATR Targets:
1x ATR: 56.12
1.5x ATR: 56.62
2x ATR: 57.11
2.5x ATR: 57.61

Entry Reason
Stage 2 continuation for ADP today. I set a buy stop order with my broker on 6th January for 55.13 which was filled shortly after the open today. My full write up on the stock and the industry and sector analysis can be found on my Stan Weinstein discussion thread here: Stan Weinstein's Stage Analysis - Page 27


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 isatrader 
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Here's the updated open trades table:

Current Trades
Entry DateTickerDescriptionSectorLong/ShortEntry PriceCurrent PriceEntry StageCurrent StageATR(200) Percent
10/27/11SESpectra EnergyXLUL29.331.282A23.53%
11/1/11RR.LRolls RoyceXLIL678.85760.632A24.64%
11/25/11RAIReynolds AmericanXLPL40.0641.592A22.25%
11/27/11GBP/EURPound/Euro-L1.163601.20388124.97%
12/9/11YUMYum brandsXLYL58.2661.872A22.98%
12/16/11DUKDuke EnergyXLUL21.0821.319220.85%
1/17/12ADPAutomatic Data ProcessingXLIL55.1355.652A2A0.53%


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 isatrader 
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New Trade

Nasdaq 100
Ticker: ^NDX
Direction: Long
Order Type: Market

Entry: $2403.2
Units: 0.088

Stop loss: $2315.70
Target: $2840.70

Percentage Risk: -3.64% (-2.00% ATR Adjusted)
Potential Reward: 18.20% (10.00% ATR Adjusted)

Account Percentage Risk: 0.5%
Account Potential Reward: 2.50%

Risk Ratio: 5.00

ATR(200 Day): 43.75 (1.82%)
ATR(52 Week): 99.98 (4.16%)

ATR Targets:
1x ATR: 2446.95
1.5x ATR: 2468.83
2x ATR: 2490.70
2.5x ATR: 2512.58

Entry Reason
The Nasdaq 100 made a Stage 2A breakout today with the close above 2400 and it's six month downtrend line. I got in early in the day as I was watching the price action intra-day in various markets and stocks and liked the strength I was seeing across them. The Stage 2A continuation move in Apple also gave me the confidence to get in early in the day as it makes up a large percentage of the index.

Below is my entry chart


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 isatrader 
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The breakout and close above 1300 in the S&P 500 moved it into a new Stage today. I'm undecided whether it is Stage 1B or Stage 2A. But there is still significant resistance for the S&P 500 to work through up until 1370, and the percentage of stocks above the 50 day moving average is in it's upper range so I'm still a bit cautious and am going to wait for a pullback before I invest my remaining 0.5% of risk available.

The sector rotation evident in the last few weeks has seen Materials, Financials, Industrials, Consumer Discretionary and Technology become the new leaders percentage wise. However, the Mansfield relative strength is still negative on Materials and Financials. So my focus is looking for stocks in Industrials, Consumer Discretionary and Technology for the time being.

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 isatrader 
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The market breadth indicators that I follow have continued to improve this week as you would expect with the breakouts in equities over the week. On a short term basis you can see that we are now near the top of the higher risk zone as 83% of stocks in the New York Stock Exchange are now above their 50 day moving averages. So the risk of a near term correction is increasing and could happen very soon. However, the medium to long term indicators are not so overbought and are in very bullish positions right now.

Finally the ratio between equities and bonds has shifted back to equities as the buy signal from last week has held as people continue to sell treasuries and buy stocks.

So strategy wise it suggests to me to not initiate anymore new stock positions until the short term correction occurs. However, once it does it should be a great opportunity to get into stocks for a medium term move.

Market Breadth Signals
TickerDescriptionPercentSignalColumnRisk
$BPNYAThe NYSE Bullish Percent Index67.88%BuyXsMedium
$NYA200RNYSE Percent of Stocks Above 200 Day Moving Average58.08%BuyXsMedium
$NYA150RNYSE Percent of Stocks Above 150 Day Moving Average70.21%BuyXsHigh
$NYA50RNYSE Percent of Stocks Above 50 Day Moving Average83.34%BuyXsHigh
SPY/TLTS&P 500 / US 30 Year Treasuries-BuyXs-






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 isatrader 
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I've been watching the railroad sector for a little while now as the sub-sector was showing some good price action and was close to making a Stage 2 breakout to new highs. This led me to study the sectors individual names and UNP stood out as the strongest pick imo, as it was outperforming the market, industry and sub-sector by a good amount and had just made a Stage 2 breakout in the last few weeks.

The Stage 2 breakout was confirmed two weeks ago by it closing the week above the previous high. But I held back on taking a position as earnings were due last week. However, they had a really strong earnings report and some volume came in as a result and it gaped to a new high on Thursday. So I waited to see the price action on Friday, and when the market was pulling back UNP was showing good relative strength and failed to break below it's gap. So I went long at the gap level at 112.45

Trade Details

Union Pacific
Ticker: UNP

Industry Sector: Industrials (XLI)
Sub-Sector: Railroads (^DJUSRR)

Direction: Long
Order Type: Market

Entry: $112.45

Stop loss: $99.49
Target: $138.85

Percentage Risk: -11.53% (-4.91% ATR Adjusted)
Potential Reward: 23.48% (10.00% ATR Adjusted)

Account Percentage Risk: 1.21%
Account Potential Reward: 2.46%

Risk Ratio: 2.04

ATR(200 Day): 2.64 (2.35%)
ATR(52 Week): 5.94 (5.28%)

ATR Targets:
1x ATR: 115.09
1.5x ATR: 116.41
2x ATR: 117.73
2.5x ATR: 119.05

Attached are my charts of UNP, the Industrials sector and the Railroads sub-sector.

"Fate does not always let you fix the tuition fee. She delivers the educational wallop and presents her own bill" – Reminiscences of a Stock Operator.
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 isatrader 
London, England
 
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I had an active week in my portfolio as I closed two positions in Silver and Brown Foreman for a small profit in each (see Post#65) and opened three new positions in Automatic Data Processing, Nasdaq 100 and Union Pacific.

The silver exit I took last Tuesday looks like it was the right move as the price action continued to strengthen and popped on Friday. So I'm pleased with that one, however, less pleasing was closing Brown Foreman, as that ended up being an out performer this week and made a continuation move with close on Friday above the consolidation high. So that's a Stage 2 continuation buy again and I should get back in it. However, I used up my remaining risk capital with my purchase of Union Pacific on Friday, so I'll have to sit that one out.

Here's my open trades list.

Current Trades
Entry DateTickerDescriptionSectorLong/ShortEntry PriceCurrent PriceEntry StageCurrent StageATR(200) Percent
10/27/11SESpectra EnergyXLUL29.331.532A23.98%
11/1/11RR.LRolls RoyceXLIL678.85733.622A23.11%
11/25/11RAIReynolds AmericanXLPL40.0640.182A20.18%
11/27/11GBP/EURPound/Euro-L1.163601.20359124.94%
12/9/11YUMYum brandsXLYL58.2662.462A23.47%
12/16/11DUKDuke EnergyXLUL21.0821.279220.71%
1/17/12ADPAutomatic Data ProcessingXLIL55.1356.772A2A1.66%
1/18/12^NDXNasdaq 100XLKL2403.22438.82A2A0.81%
1/20/12UNPUnion PacificXLIL112.45112.822A2A0.14%

Stan Weinstein's Stage Analysis method has been really good so far and has kept me on the right side of the market through the volatility of the last quarter or so. I think we are close to moving to a new phase now though, as the stock indices are lining up for potential Stage 2 moves. The Nasdaq 100 is the closest of the major indices and closed the week within a few points of a Stage 2 breakout and the S&P 500 is now in Stage 1B. So barring any black swan events the trend appears to swinging towards the long side in the intermediate term.

"Fate does not always let you fix the tuition fee. She delivers the educational wallop and presents her own bill" – Reminiscences of a Stock Operator.
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 isatrader 
London, England
 
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Attached is the updated major charts for analysis.

"Fate does not always let you fix the tuition fee. She delivers the educational wallop and presents her own bill" – Reminiscences of a Stock Operator.
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 isatrader 
London, England
 
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Thanks: 68 given, 207 received

It was a very quiet week for me and I didn't have anything to do other than watch as I'm at my full risk allocation of 6%. The portfolio underperformed by -1.07% this week as it was down -1% week on week and the S&P 500 was up +0.07%. It's been fairly flat for most of January as the older picks that were outperforming have pulled back a bit while the newer picks have been picking the slack since I bought them. I think this is because the market has seen a shift to the risk asset classes of Materials and Financials since the start of year and away from Utilities and Consumer Staples which were leading the market higher at the end of last year. However, until the last week or so both were still too early in Stage 1 to consider buying anything in them. But now Materials has moved into later Stage 1, possibly 1B. So the sector is much better off and I can now look at adding a new pick from there into my portfolio. There's a few that have caught my eye, but CAT is a possible on it's next pullback and continuation breakout, but it would require me either raising my stop loss on another open position or closing a position to free up some risk capital.

Current Trades
Entry DateTickerDescriptionSectorLong/ShortEntry PriceCurrent PriceEntry StageCurrent StageATR(200) Percent
10/27/11SESpectra EnergyXLUL29.331.632A24.16%
11/1/11RR.LRolls RoyceXLIL678.85738.622A23.39%
11/25/11RAIReynolds AmericanXLPL40.0639.422A2-0.94%
11/27/11GBP/EURPound/Euro-L1.163601.18984123.24%
12/9/11YUMYum brandsXLYL58.2662.842A23.79%
12/16/11DUKDuke EnergyXLUL21.0821.169220.32%
1/17/12ADPAutomatic Data ProcessingXLIL55.1355.332A2A0.20%
1/18/12^NDXNasdaq 100XLKL2403.22458.42A2A1.26%
1/20/12UNPUnion PacificXLIL112.45114.9792A2A0.96%

"Fate does not always let you fix the tuition fee. She delivers the educational wallop and presents her own bill" – Reminiscences of a Stock Operator.
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 isatrader 
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Attached is the updated major charts I follow. The S&P 500 held the trendline breakout from last week, however, the price action on the weekly bar shows indecision as to the next move. I've got the Stage as Stage 1B currently, so I think it could have another pullback to value before trying to reach Stage 2A like the Nasdaq 100 has already done. The 10 year Treasuries chart is interesting this week as it closed within a fraction of the previous high after a very strong week and looks poised to break out into a Stage 2 continuation this coming week. Which due to it's inverse relationship with equities, would quite likely cause equities to correct. So an interesting week ahead I think.

"Fate does not always let you fix the tuition fee. She delivers the educational wallop and presents her own bill" – Reminiscences of a Stock Operator.
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 isatrader 
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Attached is this weeks major charts for analysis. The S&P 500 survived it's minor pullback to the trendline breakout at 1300 and is now in Stage 2A by my reckoning and closed the week strongly near the high of the week.

Below are the charts

"Fate does not always let you fix the tuition fee. She delivers the educational wallop and presents her own bill" – Reminiscences of a Stock Operator.
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 isatrader 
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The market breadth indicators that I follow have continued to improve since my last update on the 21st January. But I thought now is a good time to highlight them again as all the charts have reached the end zone now and the short term chart ($NYA50R - NYSE Percent of Stocks Above 50 Day Moving Average) has reached it's highest level that it ever gets too within a few percent or so, as 90% of stocks are above their 50 day moving average in the entire New York Stock Exchange and this level has only been reached 7 times in the last 10 years. So risk is increasing of at least some sort of consolidation, as these lofty levels aren't normally held on to for very long as the market is too one sided on a short term basis. The good news however, is that as this is the first push up to this level in this bull move, and that history has shown that after the inevitable pullback/consolidation that will happen very soon due to these extended levels, that market has then started a new longer term bull move. For example it reached this level for the first time in May 2003 and in May 2009. A few months after each of those times was the best two times to buy in the last 10 years. So the question is will history repeat itself again? And the answer is no one knows, but it's certainly something to consider when the TV pundits start predicting the end of the world again over the next few months when the market decides to take a break.

Below are the breath table and charts

Market Breadth Signals
TickerDescriptionPercentSignalColumnRisk
$BPNYAThe NYSE Bullish Percent Index74.57%BuyXsHigh
$NYA200RNYSE Percent of Stocks Above 200 Day Moving Average73.81%BuyXsHigh
$NYA150RNYSE Percent of Stocks Above 150 Day Moving Average81.41%BuyXsHigh
$NYA50RNYSE Percent of Stocks Above 50 Day Moving Average89.32%BuyXsVery High
SPY/TLTS&P 500 / US 30 Year Treasuries-BuyXs-






"Fate does not always let you fix the tuition fee. She delivers the educational wallop and presents her own bill" – Reminiscences of a Stock Operator.
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 isatrader 
London, England
 
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It was a better week for my portfolio last week as it rose 1.79% week on week. So it only slightly underperformed the S&P 500 which gained 2.17% week on week. I didn't make any more changes last week as I'm happy to let the positions I have ride for a bit as if the market starts to consolidate in the short term as I think it will fairly soon some of the more defensive names I have will start to outperform again and hopefully give me a chance to move my stop positions up and free up some more risk capital so I can purchase some stocks from sectors I don't have exposure to yet.

The other issue I need to address is that being based in the United Kingdom my US stock trades have currency related risk and the GBP/USD has a positive correlation with US equities, so when they rise, 34% of the time the Pound does as well. So my returns will be dampened by this unless I hedge the US positions by buying the Pound/Dollar cross to cover this. Timing however is the trickiest thing to do, so my aim currently is to buy half the position on the next major pullback in the GBP/USD.

Current Trades
Entry DateTickerDescriptionSectorLong/ShortEntry PriceCurrent PriceEntry StageCurrent StageATR(200) Percent
10/27/11SESpectra EnergyXLUL29.330.542A22.21%
11/1/11RR.LRolls RoyceXLIL678.85783.582A25.94%
11/25/11RAIReynolds AmericanXLPL40.0639.722A2-0.50%
11/27/11GBP/EURPound/Euro-L1.163601.20305124.87%
12/9/11YUMYum brandsXLYL58.2663.822A24.60%
12/16/11DUKDuke EnergyXLUL21.0821.369221.03%
1/17/12ADPAutomatic Data ProcessingXLIL55.1355.492A2A0.36%
1/18/12^NDXNasdaq 100XLKL2403.22525.32A22.79%
1/20/12UNPUnion PacificXLIL112.45116.082A21.38%

"Fate does not always let you fix the tuition fee. She delivers the educational wallop and presents her own bill" – Reminiscences of a Stock Operator.
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 isatrader 
London, England
 
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Attached are the major charts for analysis. It was a reversal week for most of the charts, some at key support or resistance levels. So an interesting week ahead.

"Fate does not always let you fix the tuition fee. She delivers the educational wallop and presents her own bill" – Reminiscences of a Stock Operator.
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 isatrader 
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It's been a few weeks since I updated the open trades and the portfolio fell last week by -0.84%, but it managed to recover it all this week as it gained 1.48%. That was better than the S&P 500 which only gained 1.38% this week, however, I'm still under performing the index since the new year began by around 6% due to my weighting in more defensive sectors at the beginning of the new year. I made some changes to address this in the latter part of January, but only the Nasdaq 100 has outperformed so far from those 3 trades.

I did add a new trade this week though, which was in the GBP/USD. This is not a suitable Weinstein method trade as it's currently still in Stage 4. However, it was necessary for me to hedge the US Dollar exposure in portfolio, so I bought the position on Tuesday.

DUK paid part of it's dividend into the account this week, which was the reason for the drop on the daily chart on Wednesday, and that added 0.25% to the account. So even though the chart shows it's making a loss at the moment, it's actually just above breakeven currently.

RR.L (Rolls Royce) continues to be the best performer and made another continuation move and closed the week at a new high. It's reached it's short term measured move target now, but I think it could go further in the medium term.

The worst performer so far is ADP, however, it's retesting the breakout level at the moment so if it can pivot here then it could make a continuation move.

Below is my current trades table and charts.

Current Trades
Entry DateTickerDescriptionSectorLong/ShortEntry PriceCurrent PriceEntry StageCurrent StageATR(200) Percent
10/27/11SESpectra EnergyXLUL29.330.932A22.91%
11/1/11RR.LRolls RoyceXLIL678.85796.112A26.65%
11/25/11RAIReynolds AmericanXLPL40.0640.882A21.21%
11/27/11GBP/EURPound/Euro-L1.163601.20339124.91%
12/9/11YUMYum brandsXLYL58.2665.242A25.77%
12/16/11DUKDuke EnergyXLUL21.0820.88922-0.68%
1/17/12ADPAutomatic Data ProcessingXLIL55.1354.232A2A-0.91%
1/18/12^NDXNasdaq 100XLKL2403.22583.12A24.11%
1/20/12UNPUnion PacificXLIL112.45110.9492A2-0.57%
2/14/12GBPUSDPound / US Dollar-L1.568231.583314B-4B-1.37%

"Fate does not always let you fix the tuition fee. She delivers the educational wallop and presents her own bill" – Reminiscences of a Stock Operator.
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  #81 (permalink)
dinapoli
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isatrader View Post
Attached are the major charts for analysis. It was a reversal week for most of the charts, some at key support or resistance levels. So an interesting week ahead.

I would like to know which type of Indicator is the FORCE INDEX you use with a MA.......... becuase in Stockcharts is completely different:

Im trying to learn as mucho as i can with your graphics and Weinstein techniques.

Also i donde exactly from where the "Perfomance" comes from....... and normally i use divergenges with RSI or other Indicators.

Thanks.

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  #82 (permalink)
 isatrader 
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dinapoli View Post
I would like to know which type of Indicator is the FORCE INDEX you use with a MA.......... becuase in Stockcharts is completely different:

Im trying to learn as mucho as i can with your graphics and Weinstein techniques.

Also i donde exactly from where the "Perfomance" comes from....... and normally i use divergenges with RSI or other Indicators.

Thanks.

The force Index indicator I use is a custom variation of Elder's Force Index indicator which is widely available. It is simply a cumulative version of the indicator with a moving average overlaid to aid with entry and exit points. I don't believe that you can do it in Stockcharts.com because they don't have the ability to customise their indicators code. So you may need to use another charts package if you wish to create this indicator. Any decent end of day software program will have the ability to customise or you can try prorealtime.com which I know does have the ability to customise and is free for end of day charts.

The reason I've added this indicator to my charts is because volume is an integral part of the Weinstein method and I find the straight volume information isn't very clear. But I believe that my cumulative version of force index gives you a much better idea of the volume coming into or leaving a stock.

The Relative Performance indicator I use is simply a relative strength calculation of the stock versus the S&P 500. Chartmill have an explanation page on their site of how to calculate this which they call the Relative Strength Dorsey (RSD). Here's the link: ChartMill.Com | Articles on Technical Analysis Indicators and Screeners
Also on the same page is the explaination of how to calculate the Relative Strength Mansfield indicator. This is the Relative Strength indicator that is used in Stan Weinstein's charts throughout the book and is a combination of a moving average and the RSD indicator. I use this indicator also, but I only focus on whether it is above or below it's zero line and you can find it on my charts above the Relative Performance indicator. I call it the RS Mansfield Crossover and when it crosses above zero it is marked by a green line and when it crosses below zero it is marked with a red line. So it is very simple to see whether the stock is outperforming or under performing the S&P 500 at a glance.

Stan Weinstein's method requires you to look at the volume of stock when it breaks out and also the relative performance of the stock versus the market and it's peers. So I've customised my charts to make that the easiest for me to do, but that doesn't mean you have to use the same tools that I do, but if you are following the method, then you do need to look at the volume and relative strength (performance) versus the market in some fashion that makes it easiest for you to understand.

I'd recommend reading the book again at least once and really studying each section like you would for an exam. Take notes; do the quizzes at the end of each section, and try to build your understanding of the method up. Replicate Weinstein's charts from the book which is fairly simple as he has the Relative Strength Mansfield indicator which I gave the link for the calculation above and then the volume below that. That and a 30 week weighted moving average on a plain chart is all it is. So get that setup and see how you go to start with as that is all you need for the method.

"Fate does not always let you fix the tuition fee. She delivers the educational wallop and presents her own bill" – Reminiscences of a Stock Operator.
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  #83 (permalink)
 isatrader 
London, England
 
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Attached is the updated major charts for analysis. The US 30 year Treasuries is the key one for me to watch as the price is sitting exactly on the 30 week weighted moving average after a fairly lengthy consolidation period since the September 11 high. I'm rating it Stage 2B- now as it's right on the cusp of becoming Stage 3A if it breaks down and closes below the $140 level or it could pivot on the moving average breakout into a continuation move. However, it's given a few more negative signs on the weekly chart as the Mansfield relative strength has crossed into negative territory this week and the cumulative volume has moved below it's moving average for the first time since it crossed above it in March 2011 indicating that volume is beginning to slowly leave the 30 year Treasuries. Finally relative performance versus the S&P 500 has given a negative signal by moving below it's October low.

"Fate does not always let you fix the tuition fee. She delivers the educational wallop and presents her own bill" – Reminiscences of a Stock Operator.
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  #84 (permalink)
 Trafford 
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isatrader View Post
Attached is the updated major charts for analysis. The US 30 year Treasuries is the key one for me to watch as the price is sitting exactly on the 30 week weighted moving average after a fairly lengthy consolidation period since the September 11 high. I'm rating it Stage 2B- now as it's right on the cusp of becoming Stage 3A if it breaks down and closes below the $140 level or it could pivot on the moving average breakout into a continuation move. However, it's given a few more negative signs on the weekly chart as the Mansfield relative strength has crossed into negative territory this week and the cumulative volume has moved below it's moving average for the first time since it crossed above it in March 2011 indicating that volume is beginning to slowly leave the 30 year Treasuries. Finally relative performance versus the S&P 500 has given a negative signal by moving below it's October low.

@isatrader

Are you using the Pristine Trading Method as they use stage analysis.

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  #85 (permalink)
 isatrader 
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@ isatrader
Are you using the Pristine Trading Method as they use stage analysis.

No, I'm forward testing Stan Weinstein's Stage Anaylsis method from his 1988 book Secrets for Profiting in Bull and Bear Markets.

"Fate does not always let you fix the tuition fee. She delivers the educational wallop and presents her own bill" – Reminiscences of a Stock Operator.
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  #86 (permalink)
 isatrader 
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A reasonable week for the portfolio as it rose 0.25% which was only a little bit less than the S&P 500's 0.33% gain, so it was fairly in line with the broad market. I've added more cash recently and doubled the size of the test portfolio account. Which is still very small, but I think a gradual build up is the sensible way to go as I get more confident with the method and I can see the potential from my results so far of this becoming my main trading method. But I want to take my time to learn and give it the time it needs.

With the new cash injection into the account and my growing understanding from my studies over the last year, I'm now able to move onto the next phase of my test, which is to test the short term trader method alongside the investor method. There is a lot less information in the book on the trader method as the main focus is the longer term investor method, and there's a lot more discretionary elements, but the entry points are the same, so I'll be basing it on what information I have to work from.

I added two new trades this week to the portfolio. Caterpillar (CAT) was added on 2/22/12 at 115.85 and Premier Oil (PMO.L) was added on 2/24/12 at 448.01. CAT made a Stage 2 breakout to a new high, whereas PMO.L moved into early Stage 2 by breaking above it's recent high and back into last years resistance range.

PMO.L adds a much needed trade from the energy sector, but as CAT falls under industrials I've now got four in that sector and need some more diversification into the other sectors where I'm under weight. Basic Materials is my next likely sector pick, but I'm considering playing copper directly if it makes a Stage 2 breakout above $4. The other sectors that I have no exposure to are Health Care and Financials. Health Care is in much better shape than Financials so that would likely be where I'd look following Basic Materials.

Current Trades
Entry DateTickerDescriptionSectorLong/ShortEntry PriceCurrent PriceEntry StageCurrent StageATR(200) Percent
10/27/11SESpectra EnergyXLUL29.331.7092A24.30%
11/1/11RR.LRolls RoyceXLIL678.85810.072A27.48%
11/25/11RAIReynolds AmericanXLPL40.0641.242A21.74%
11/27/11GBP/EURPound / Euro-L1.163601.18061122.10%
12/9/11YUMYum brandsXLYL58.2665.532A26.01%
12/16/11DUKDuke EnergyXLUL21.0821.09220.04%
1/17/12ADPAutomatic Data ProcessingXLIL55.1353.802A2A-1.34%
1/18/12^NDXNasdaq 100XLKL2403.22601.62A24.53%
1/20/12UNPUnion PacificXLIL112.45112.642A20.07%
2/14/12GBPUSDPound / US Dollar (Hedge)-L1.568231.589814B-4B-1.96%
2/22/12CATCaterpillarXLIL115.85115.972A2A0.04%
2/24/12PMO.LPremier OilXLEL448.01448.962A2A0.08%

"Fate does not always let you fix the tuition fee. She delivers the educational wallop and presents her own bill" – Reminiscences of a Stock Operator.
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  #87 (permalink)
 isatrader 
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Attached is the latest US Industry Sector charts for analysis


"Fate does not always let you fix the tuition fee. She delivers the educational wallop and presents her own bill" – Reminiscences of a Stock Operator.
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  #88 (permalink)
 isatrader 
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Here's the link to the latest interview given by Stan Weinstein: Technician Stan Weinstein: Outlook for Stock Market Remains Positive; Bullish on Gold As Well Also, Ryan Puplava with the Market Update and Rob Bernard with the Fixed Income Report | James J Puplava CFP | FINANCIAL SENSE that someone on my discussion thread found. The interview starts after 10 minutes or so of the recording.

"Fate does not always let you fix the tuition fee. She delivers the educational wallop and presents her own bill" – Reminiscences of a Stock Operator.
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  #89 (permalink)
 isatrader 
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Attached is the updated major charts for analysis. Crude Oil (CL) was the out performer last week with a breakout move up to almost $110. Treasuries were fairly flat again and continue to hover around the 30 week WMA which is flattening out and would likely turn down if the price broke below the recent range for a few weeks. Gold is another interesting chart as it made a continuation short term breakout within it's huge range since last summer, however in the short term it has resistance at 1800 to break through, but to become a longer term buy again it needs to close above last years high around 1925 as Stan mentioned in the interview lplate found.

The S&P 500 made an attempt to reach last years high last week and fell just short on Friday of reaching it. However, it did make another higher high and lower low on the weekly chart, as did the Nasdaq 100. So although the short term correction/consolidation seems likely, the price action is yet to confirm it. Stan mentioned in the interview a break of the 1340 level for a short term correction to occur and until then price action is still positive. So I'm watching for either a breakout to a new high or a pullback into the lower 1300's on the S&P 500.

Copper (HG) made a nice pivot last week off of the $3.70 support from the October 2011 short covering rally high. It's forming a small Stage 1 range above that support level between $3.70 and $4.00 and I'm looking for a Stage 2 breakout above the $4.00 level to get long again personally.

Finally, the Dollar Index (DX) made a move down towards it's trendline support this week and closed very close to it with the daily price making it's lowest close since November 2011. This is an important one to watch this coming week as if it continues lower then the commodities such as Gold and Copper will get a further boost, but if it reverses it could aid the bears desperate for a correction.

So a very key week ahead as a lot of the charts are at critical support and resistance levels. Remember to follow the price action and not your opinion.

"Fate does not always let you fix the tuition fee. She delivers the educational wallop and presents her own bill" – Reminiscences of a Stock Operator.
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  #90 (permalink)
 isatrader 
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I had a good week this week and finished 0.78% higher week on week and outperformed the S&P 500 by 0.5% which only managed 0.28% this week. However, I noticed some changes in the portfolio this week with the four stocks that were just above breakeven last week moving to negative territory. So my gain was down to only a few trades mainly including Rolls Royce, YUM, Nasdaq 100 and GBP/EUR - which is slightly concerning me as I need to manage my risk and currently nearly 25% of the profit is coming from Rolls Royce. This would have been slightly less if I'd taken a full position size in YUM which is the second best performer, but I was being cautious when I entered it as it needed a bigger stop loss, so I used a smaller position size to compensate and it hasn't pulled back so there's been no opportunity to complete the position so far.

So my question to myself here is, do I need to change anything? I think I need to spend some time over the weekend reviewing the individual charts and then doing some broader research as well including looking at the breadth charts to refocus again and feel confident in the trades I have.

Anyway, enough rambling for now. Here's the trades table and the individual charts so I can review them.

Current Trades
Entry DateTickerDescriptionSectorLong/ShortEntry PriceCurrent PriceEntry StageCurrent StageATR(200) %Grade
10/27/11SESpectra EnergyXLUL29.331.4592A23.86%A+
11/1/11RR.LRolls RoyceXLIL678.85822.062A28.13%A+
11/25/11RAIReynolds AmericanXLPL40.0642.032A22.90%A+
11/27/11GBP/EURPound / Euro-L1.163601.19935124.41%A+
12/9/11YUMYum brandsXLYL58.2666.242A26.60%A+
12/16/11DUKDuke EnergyXLUL21.0821.0222-0.21%D
1/17/12ADPAutomatic Data ProcessingXLIL55.1354.422A2A-0.72%E
1/18/12^NDXNasdaq 100XLKL2403.22644.52A25.52%A+
1/20/12UNPUnion PacificXLIL112.45110.8392A20.61%E
2/14/12GBPUSDPound / US Dollar-L1.568231.583724B-1A1.41%B
2/22/12CATCaterpillarXLIL115.85112.412A2A-1.14%F
2/24/12PMO.LPremier OilXLEL448.01435.692A2A-1.00%F

"Fate does not always let you fix the tuition fee. She delivers the educational wallop and presents her own bill" – Reminiscences of a Stock Operator.
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