Common Cents Investment Group Welcome! Monday September 30 th

Agenda Today in the Market Technical Analysis Random Stock Pick

Today in the Market Gov’t announced it will shutdown tonight ◦ Market sell off (worldwide) ◦ Maybe a good buying opportunity

Technical Analysis An investment strategy using technical indicators A more “numbers” and chart based decision making process Often viewed as the opposite of fundamental analysis

Main Concepts Operates on the assumption that all news and related information is already reflected in the stock price My view: a mixture of the two approaches, for an overall financial analysis

Timeframe Day Trader – buy & sell within the same day ◦ 5 minute chart Swing Trader – buy & sell within 1-3 weeks ◦ Daily chart, hourly chart Long Term Trader – hold for 3 months+ ◦ Weekly chart, daily chart

Candlestick Chart

Line Chart vs. Candlestick Chart AGNC – Mortgage REIT

Stochastic Stochastic Oscillator - A technical momentum indicator that compares a security's closing price to its price range over a given time period %K = 100[(C - L14)/(H14 - L14)] C = the most recent closing price L14 = the low of the 14 previous trading sessions H14 = the highest price traded during the same 14-day period.

Stochastics - Good Example Buy when below 20% and Sell when above 80%

Stochastics – Bad Example Be careful!

Moving Averages 50 day moving average ◦ Resistance on downtrend ◦ Support on uptrend 50 day to 200 day crossover ◦ Typically indicates bullish or bearish

50 DMA - Resistance

50 DMA - Support

Caution! 50 DMA not during trend

Bollinger Bands Purpose: measure volatility & give relative highs and lows 20 day Simple Moving Average Bands 2 standard deviations from 20-dma Stock within bands 85-90% of time Suggested Reading: Bollinger on Bollinger Bands by John Bollinger

B.B. - What do I look for? Volatility Squeeze ◦ When bands become very close together Hook at Bottom – Indicates trend is over

B.B. - What do I look for? “Walking the Bands” ◦ Uptrend that hugs the upper band Buy when hits 20 or 50 day moving average

Important Patterns Head & Shoulders formation ◦ Bearish reversal (end of uptrend) “W” formation ◦ Bullish reversal (end of downtrend) 3 Stage Trend (rise, rest, rise) Recognizing Channels ◦ Range stock is trading

Patterns – Head & Shoulders Daily chart of ANR Neckline Shoulder 1 Head Shoulder 2 ANR becomes BEARish when drops below neckline after Shoulder 2 Taller peak (HEAD) between two lower peaks (SHOULDERS) of similar height

Patterns – “W” Formation

3 Stage Trend Rise, rest, rise Buy during rest

Uptrend Master Card [MA] - 3 year weekly chart RESISTANCE SUPPORT 20%-25% gain if bought when touched RESISTANCE line and sold when touched SUPPORT line

Range Bound Kohl’s [KSS] – 3 year chart (weekly candlestick) $54 $42 +29% SUPPORT RESISTANCE

Downtrend SUPPORT RESISTANCE 15%-20% gain if bought when touched RESISTANCE line and sold when touched SUPPORT line

How to find a trending stock Perform stock screen with these parameters: ◦ Moving Averages: 20 > 50 > 200 ◦ Price: $8+ ◦ Price/Earnings: 5 < x < 70 ◦ Daily Volume: 500,000+ ◦ EPS Growth Rate (5 year): 20 < x < 100 ◦ Revenue Growth (5 year): 15<x<100

Current List – 28 stocks

Next Steps Look at each individual stock ◦ Cross out for charts you don’t like ◦ Look deeper into fundamentals for any red flags ◦ Develop your own rules for what is acceptable Or modify search criteria to cut down list Create Excel spreadsheet for stocks that make initial cut ◦ Highlight in green favorite stocks

EPAM (good)

MELI (bad) MELI (bad) Trend not discernible or logical

SYNA (really bad) 1 year growth – 14% 2 year growth – 40% 3 year growth – 37%

Caution! “Shot to the Bow” ◦ Signal trend is over; Significant departure from channel

Current List – 18 stocks

Favorites List

Last March’s Favorites If purchased all 7 last March, return of 16% !!

My Personal Goal Usually goal is to gain 20%+ on a trade Minimize risk ◦ Place stop 7% below entry price or just below resistance line ◦ Raise stop after each 5% gain Clearly identify entry point and exit point before executing trade If trade fails, admit defeat and cut your losses ◦ Don’t get emotionally attached! ◦ Patterns fail, it’s just the nature of the beast

Some Tips Avoid holding over earnings ◦ Reactions to earnings ignore technicals of chart If technical trade fails, sell and cut losses ◦ Look to see what you missed or what you “ignored” Don’t get discouraged Sign up for the free daily videos: ◦

Resources ml ml trading/charts-and-patterns/ trading/charts-and-patterns/ o-state.edu/default.html o-state.edu/default.html