Weekend Strategy Review December 14, 2013
Posted by OMS at December 14th, 2013
As most of you know, I was cruising the Caribbean last week on vacation. I took some time to relax, recuperate form my surgery, and think. I like to take time to think about things. It’s one of my favorite things to do, especially this time of the year.
In late January, or early February, I like to go to the Money Show in Orlando. I go there to talk with friends in the business, look at new products, and listen to what other newsletter writers have to say about the future. Then I come home and reflect on what I saw and heard.
I have been doing this for years. It’s something that I encourage you to do.
I also use the time to evaluate The Professor’s Methodology. I look at some of the trades I made. Did I make or loose money? Did I use discipline in the trade? Did I follow the rules? If not, why not?
I’m always asking myself if I could have done better.
So while Marcia was reading and sunning herself in a deckchair, I was busy doing what I love. Relaxing with my computer, thinking about the markets and doing research..
One of the first things I looked at was the performance of my algorithms. To tell the truth, I was pretty happy with what I saw. The performance of The Professor algorithm was second to none. For the trader, it identified every major market turn during the year. Not one or two, or most…no, it caught all of the major turns!!
Same for the Dean’s List. The Dean turned positive in early January and remained positive until May, when he started to became cautious. The Dean turned positive again in late June and remains positive today. If you were a longer-term investor and followed the Dean, staying in the markets when his List was positive, you likely did very well.
However there was one area that I looked at during my critical review that I want to share with you. The reason I’m talking about this today is not because it was a poor performer. Hardly. But I discovered something that can make a good performer into something great!
I’m talking about Emeritus and how he highlights individual stocks for the Honor Roll. Now it’s hard to be critical of an algorithm that highlighted stocks like Apple at 440.and then again at 498. Schlumberger at 80, Tosco, Gilead Systems, Gulfport, Green Mountain, Baidu.com and many others like them. You know the names. The important thing to note here is that these stocks were not just on a List of 800 other stocks like many of my competitors give you. Then leaves it up to you to decide which ones to trade. No, Emeritus highlights specific stocks that you told me you were interested in trading and does this a day or so before they begin to trend. It also warns you of a potential decline in your stock if it appears on the list. Nobody does that!
But on my cruise, while I was busy relaxing and doing research, I found a way to improve the performance of the Emeritus algorithm even more. I’m talking a really significant improvement in performance, so pay attention!
One of the things that triggered my research was something that I talk about frequently on these pages. So this weekend, as part of my Big Picture Strategy, I want to focus on the Emeritus algorithm, so you have a better understanding of how the algorithm is best used.
I have said time and time again that I like to trade stocks from the Honor Roll when there are several stocks on the List. I have to tell you that by doing this, I have had a great year. This is because the algorithm highlights stocks that are entering the trend mode. Trust me, it’s a lot easier to make money when you’re always trading trending stocks. Many times, you can just buy something form the Honor Roll, and then hang on. Then once it starts to move up, the only thing you need to be concerned about is money management.
However, during my critical review, I noticed that there were times when Emeritus identified a stock, but once highlighted, the stock didn’t do much after that. Most of the time, these stocks popped right after being put on the list, but after a few days, they either flat lined or started to head back down again. Hmmm?
I was determined to find out why.
And this weekend I’m going to share what I found with you. The reason was staring me in the face, but I didn’t see it.
It has to do with the pattern and trend. When Emeritus identified a stock that was in an uptrend with a pattern, it usually produced a nice winner. Many times a Big Winner. Think Netflix at 80. When the stock was in a downtrend and even though there was a TLB pattern in place, Emeritus was able to identify the pop off the bottom, (the trade), but unless there was a Rope Jump associated with the trade, the stock was usually a poor performer. I also found that sometimes, Emeritus was identifying the final leg up of a THT Pattern, and when this leg completed, sometimes after only a few points, the stock started to fall in response to the THT pattern.
So the key to using Emeritus is the pattern. Specifically where the stock is in the overall pattern.
For example, on 10 October, when The Professor gave his most recent Buy Signal on the overall market. Emeritus was highlighting many stocks to trade. These were no brainers. They all had excellent performance. So today’s first take away is that you might want to watch for signals from the Professor and then look to trade Honor Roll stocks. That’s usually what I do.
But suppose you missed the Professor’s initial signal. Suppose you were visiting Grandma or were on a cruise. What then? Hmmm?
That’s what the Honor Roll is for. It gives you a chance to participate in the rally, or commit additional resources to the market by identifying stocks that did not start to move after the initial signal.
For example, on 15 October, three trading days after the market started to move, Emeritus identified Apple, AAPL, at 498. The stock was coming off a THT pattern, had a Rope Jump, and was starting an Uptrend. It was a pretty obvious choice, and I talked about it a lot on these pages, in my Update Class, and during my “Trading the Turns” webinar I did for AIQ Systems.
However on the same day Emeritus identified APPL, he also highlighted Landstar Systems, LSTR. If you look at Landstar’s chart, you will see that the stock really didn’t do anything. It had an initial pop of about 1 ½ points, but then flat lined.
Why? Why was there such a big difference between AAPL and LSTR? Hmmm?
Well, take a look at the pattern. Landstar was in a very similar to Apple when the stock was highlighted. It too was in an Uptrend with positive PT indicators. But while Apple was coming off a severe downtrend while it was forming its TLB pattern, Landstar was not. The TLB pattern on LSTR was formed while LSTR was in an Uptrend. It was not a turn around stock. The real pattern for LSTR was the Hockey Stick that started last December and completed in late June. Since June, the stock was moving up in response to the 10 point December ‘Stick’. So when it reached its target of 59, the run was over. All Emeritus did was identify the final move in the overall pattern.
I saw the same thing happen on 16 October, when Emeritus highlighted VALE and WYN. Vale had been in a downtrend when it formed its TLB pattern. When it was identified, it had performed a Rope Jump, with a pullback Blade and had positive PT indicators. It looked good. But there was still a problem with the stock. It never entered an Uptrend. When the Blade developed, it formed under the moving averages, so the 50 never got a chance to move above the 200.
On the other hand, Wyndham Worldwide, WYN, was already in a solid uptrend when it was identified by Emeritus. The stock was rising in response to a Hockey Stick Pattern that projected a target above 69. So when Emeritus identified it at 62, it was pretty easy for the stock to move up to 72 as the overall market pushed higher.
During my review I saw several stocks like this. What I discovered was something I always knew. Patterns are important! Where a stock is in relationship to its overall pattern is the primary reason why some stocks do better than others.
So please keep this in mind the next time you want to trade a stock from the Honor Roll. Don’t trade it blindly. Always look for a pattern.
Like the SIGN says: Lists, Pattern and Indicators.
Have a great weekend.
That’s what I’m doing.
H
BTW, as far as the overall market is concerned, I still don’t see any compelling reason for buying stocks now. It appears that wave “d’ down is underway, and before I get serious about either the long or short side, I want to see a trend develop. Right now, that’s not happening. So take a break. If you can’t stand the thought of being away from the markets, do a few scalp trades. Just remember not to fall in love with any of them ;>).
All of the commentary expressed in this site and any attachments are opinions of the author, subject to change, and provided for educational purposes only. Nothing in this commentary or any attachments should be considered as trading advice. Trading any financial instrument is RISKY and may result in loss of capital including loss of principal. Past performance is not indicative of future results. Always understand the RISK before you trade.
As most of you know, I was cruising the Caribbean last week on vacation. I took some time to relax, recuperate form my surgery, and think. I like to take time to think about things. It’s one of my favorite things to do, especially this time of the year.
In late January, or early February, I like to go to the Money Show in Orlando. I go there to talk with friends in the business, look at new products, and listen to what other newsletter writers have to say about the future. Then I come home and reflect on what I saw and heard.
I have been doing this for years. It’s something that I encourage you to do.
I also use the time to evaluate The Professor’s Methodology. I look at some of the trades I made. Did I make or loose money? Did I use discipline in the trade? Did I follow the rules? If not, why not?
I’m always asking myself if I could have done better.
So while Marcia was reading and sunning herself in a deckchair, I was busy doing what I love. Relaxing with my computer, thinking about the markets and doing research..
One of the first things I looked at was the performance of my algorithms. To tell the truth, I was pretty happy with what I saw. The performance of The Professor algorithm was second to none. For the trader, it identified every major market turn during the year. Not one or two, or most…no, it caught all of the major turns!!
Same for the Dean’s List. The Dean turned positive in early January and remained positive until May, when he started to became cautious. The Dean turned positive again in late June and remains positive today. If you were a longer-term investor and followed the Dean, staying in the markets when his List was positive, you likely did very well.
However there was one area that I looked at during my critical review that I want to share with you. The reason I’m talking about this today is not because it was a poor performer. Hardly. But I discovered something that can make a good performer into something great!
I’m talking about Emeritus and how he highlights individual stocks for the Honor Roll. Now it’s hard to be critical of an algorithm that highlighted stocks like Apple at 440.and then again at 498. Schlumberger at 80, Tosco, Gilead Systems, Gulfport, Green Mountain, Baidu.com and many others like them. You know the names. The important thing to note here is that these stocks were not just on a List of 800 other stocks like many of my competitors give you. Then leaves it up to you to decide which ones to trade. No, Emeritus highlights specific stocks that you told me you were interested in trading and does this a day or so before they begin to trend. It also warns you of a potential decline in your stock if it appears on the list. Nobody does that!
But on my cruise, while I was busy relaxing and doing research, I found a way to improve the performance of the Emeritus algorithm even more. I’m talking a really significant improvement in performance, so pay attention!
One of the things that triggered my research was something that I talk about frequently on these pages. So this weekend, as part of my Big Picture Strategy, I want to focus on the Emeritus algorithm, so you have a better understanding of how the algorithm is best used.
I have said time and time again that I like to trade stocks from the Honor Roll when there are several stocks on the List. I have to tell you that by doing this, I have had a great year. This is because the algorithm highlights stocks that are entering the trend mode. Trust me, it’s a lot easier to make money when you’re always trading trending stocks. Many times, you can just buy something form the Honor Roll, and then hang on. Then once it starts to move up, the only thing you need to be concerned about is money management.
However, during my critical review, I noticed that there were times when Emeritus identified a stock, but once highlighted, the stock didn’t do much after that. Most of the time, these stocks popped right after being put on the list, but after a few days, they either flat lined or started to head back down again. Hmmm?
I was determined to find out why.
And this weekend I’m going to share what I found with you. The reason was staring me in the face, but I didn’t see it.
It has to do with the pattern and trend. When Emeritus identified a stock that was in an uptrend with a pattern, it usually produced a nice winner. Many times a Big Winner. Think Netflix at 80. When the stock was in a downtrend and even though there was a TLB pattern in place, Emeritus was able to identify the pop off the bottom, (the trade), but unless there was a Rope Jump associated with the trade, the stock was usually a poor performer. I also found that sometimes, Emeritus was identifying the final leg up of a THT Pattern, and when this leg completed, sometimes after only a few points, the stock started to fall in response to the THT pattern.
So the key to using Emeritus is the pattern. Specifically where the stock is in the overall pattern.
For example, on 10 October, when The Professor gave his most recent Buy Signal on the overall market. Emeritus was highlighting many stocks to trade. These were no brainers. They all had excellent performance. So today’s first take away is that you might want to watch for signals from the Professor and then look to trade Honor Roll stocks. That’s usually what I do.
But suppose you missed the Professor’s initial signal. Suppose you were visiting Grandma or were on a cruise. What then? Hmmm?
That’s what the Honor Roll is for. It gives you a chance to participate in the rally, or commit additional resources to the market by identifying stocks that did not start to move after the initial signal.
For example, on 15 October, three trading days after the market started to move, Emeritus identified Apple, AAPL, at 498. The stock was coming off a THT pattern, had a Rope Jump, and was starting an Uptrend. It was a pretty obvious choice, and I talked about it a lot on these pages, in my Update Class, and during my “Trading the Turns” webinar I did for AIQ Systems.
However on the same day Emeritus identified APPL, he also highlighted Landstar Systems, LSTR. If you look at Landstar’s chart, you will see that the stock really didn’t do anything. It had an initial pop of about 1 ½ points, but then flat lined.
Why? Why was there such a big difference between AAPL and LSTR? Hmmm?
Well, take a look at the pattern. Landstar was in a very similar to Apple when the stock was highlighted. It too was in an Uptrend with positive PT indicators. But while Apple was coming off a severe downtrend while it was forming its TLB pattern, Landstar was not. The TLB pattern on LSTR was formed while LSTR was in an Uptrend. It was not a turn around stock. The real pattern for LSTR was the Hockey Stick that started last December and completed in late June. Since June, the stock was moving up in response to the 10 point December ‘Stick’. So when it reached its target of 59, the run was over. All Emeritus did was identify the final move in the overall pattern.
I saw the same thing happen on 16 October, when Emeritus highlighted VALE and WYN. Vale had been in a downtrend when it formed its TLB pattern. When it was identified, it had performed a Rope Jump, with a pullback Blade and had positive PT indicators. It looked good. But there was still a problem with the stock. It never entered an Uptrend. When the Blade developed, it formed under the moving averages, so the 50 never got a chance to move above the 200.
On the other hand, Wyndham Worldwide, WYN, was already in a solid uptrend when it was identified by Emeritus. The stock was rising in response to a Hockey Stick Pattern that projected a target above 69. So when Emeritus identified it at 62, it was pretty easy for the stock to move up to 72 as the overall market pushed higher.
During my review I saw several stocks like this. What I discovered was something I always knew. Patterns are important! Where a stock is in relationship to its overall pattern is the primary reason why some stocks do better than others.
So please keep this in mind the next time you want to trade a stock from the Honor Roll. Don’t trade it blindly. Always look for a pattern.
Like the SIGN says: Lists, Pattern and Indicators.
Have a great weekend.
That’s what I’m doing.
H
BTW, as far as the overall market is concerned, I still don’t see any compelling reason for buying stocks now. It appears that wave “d’ down is underway, and before I get serious about either the long or short side, I want to see a trend develop. Right now, that’s not happening. So take a break. If you can’t stand the thought of being away from the markets, do a few scalp trades. Just remember not to fall in love with any of them ;>).
Category: Professor's Comments, Weekend Strategy Review