Advanced charting last meeting

• Only invest when:– Share passes our filters on REFS – Dominant trend in market is up– Dominant trend in share is up– Share shows short term buying signal

• Always use stop loss [7.5%] and ‘time controlled selling signals’

• Use centred moving averages

Googled author

• Much in demand in UK and USA

• Sells data and programmes via his own company

• Last [expensive] book in ‘99

80:20 rule

• Sectors in year when Index -16%

80:20 rule

• Sectors in year when Index +1%

80:20 rule

• Sectors in year when Index +25%

80:20 rule• Shares in year when Index +25%

• Shares behave similarly when Index is flat or decreasing

• “Most of the time, 80% of shares will follow the direction of the market while 20% will do the opposite” - don’t try to buck the market!

How to determine dominant trend in market?

• Use 41 week centred, moving average of FTSE 100

Centred is more accurate

But centred MA stops short

• Extrapolate by eye to NOW

• ‘Price analysis’ extrapolation

• Average MA itself

• Try a shorter span MA near NOW [NAS]

• If share’s dominant trend has been up for >6 months, look for share with younger trend

Dominanttrend changing?• Calculate % of 120

shares with rising41 week MAs; <60% is signal for caution

• Lot of work or buyauthor’s data andsoftware

Buy signals• Trough in 5 week MA - more accurate than

10 day MA cutting up through 50 day MA

Channelanalysis• Best technique

of all

• Must use centred MA

• Drawing by eye is fine

Quick profits• Channel shows dominant trend is up

• Half channel bounce gives 17% in 4 weeks

• Full channel bounce gives 22% in 7 weeks

Extrapolate channel to NOW

• Easy and accurate to do by eye

• If difficult, don’t invest!

• Use weekly prices until price approaches lower boundary when daily prices are better

• Lots of examples show good gains and when not to invest

• No losses as market buoyant

Example of CA - buying• Select growth share using Zulu and REFS

• Channel is rising so extrapolate by eye and wait until price arrives at lower boundary

• Buy when trough formed

Example of CA - selling• Peak on upper boundary

• Stop loss already triggered

• Sell for 41% gain in less than 4 months

Conclusions

• Plot FTSE 100 and its 40 week MA using website• Centre MA by moving it left 20 weeks using

tracing paper• Draw in channels to NOW; get excited if trend is

up!• Draw channel for selected share and extrapolate• Buy/sell when price at a boundary• Refer to these slides on our website• I’m willing to help!

Reasons for failure

• Trying to pre-empt market• Buying on price fall[a trend continues until it

ends!]• Misplaced patience• Holding on for dividends• Listening to advice• Not spreading the risk [8-12 shares]• CAPITAL MUST BE PRESERVED