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Common Cents Investment Group

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.

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Common Cents Investment Group

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  1. Common CentsInvestment Group Welcome! Monday September 30th

  2. Agenda Today in the Market Technical Analysis Random Stock Pick

  3. Today in the Market • Gov’t announced it will shutdown tonight • Market sell off (worldwide) • Maybe a good buying opportunity http://finance.yahoo.com/video/closing-bell-exchange-190400323.html

  4. 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

  5. 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

  6. 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

  7. Candlestick Chart

  8. Line Chart vs. Candlestick Chart AGNC – Mortgage REIT

  9. 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.

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

  11. Stochastics – Bad Example • Be careful!

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

  13. 50 DMA - Resistance

  14. 50 DMA - Support

  15. Caution! 50 DMA not during trend

  16. 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

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

  18. 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

  19. 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

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

  21. Patterns – “W” Formation

  22. 3 Stage Trend • Rise, rest, rise • Buy during rest

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

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

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

  26. 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

  27. Current List – 28 stocks

  28. 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

  29. EPAM(good)

  30. MELI (bad) • Trend not discernible or logical

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

  32. Caution! • “Shot to the Bow” • Signal trend is over; Significant departurefrom channel

  33. Current List – 18 stocks

  34. Favorites List

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

  36. 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

  37. 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: • http://www.stockmarketmentor.com/

  38. Resources • http://stockcharts.com/freecharts/index.html • http://www.investopedia.com/active-trading/charts-and-patterns/ • http://library.morningstar.com.proxy.lib.ohio-state.edu/default.html • http://www.stockmarketmentor.com/

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