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    © All Rights Reserved
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    581 views136 pages

    4) Adam Khoo Wealth Academy Investor

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    Prabhu
    4) Adam Khoo Wealth Academy Investor

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    © All Rights Reserved
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    of 136
    AN INTRODUCTION TO TECHNICAL INVESTING Introduction Fist ofa let me corgratulate yeu for signing up the Wealth Academy workshop, and ‘welcome to the aan market! "Know that you are excted because you ae going to eam the technical aspects of investing (or perhaps trading). wonder if you have heard lots of good things about how much one ‘an maken the fnancal market before coming to this workshop. Mote specieaby, some of you may have heard before that its pretty easy to make money from investing and/or trading (true?) to wonder if any of your fends or relatives fs suceefl invertor] trader. How many of your trends) relatives are succesful investor) trader by the way? Have you been looking forward to quiting your 9 to 5 job and becoming to a fulltime investor and trader? If your answer tothe stove questions is "es, | would ike you to stop reading this manval further and go back tothe world of reat. Perhaps you may be etter off ding something ‘else athe than larrng how to investor rade, For those wha choose to contin to read, | would ike to weleame you to the reality and cruelty of the franca market as you have imply accepted that this 2 tough bated and there is no such ting called “quick to get ric’ In learlng how to ivest or rade. Ave ‘yeu familar withthe World War and 2s, Imagine the Mala market asa bate, 3 ace consisting of ferent people, each of whom is playing a ferent olen this pace Let me hep yu to categorize them nt tee broad groups “They have deep pocke's elo of money] and sophisticated tol to allow them to place pestions in “min-seconds” and make money ‘he second group aigespecultor, ‘These are ndviduals who ae vesting on thei own. They may not have very sophisticated Uiemilion or blionepeaps) and they are highly eduested. They krow exactly what they are doing, lt more tFan what you ae think about the franca markets 176 Thelast group isthe general public ‘They lack the "finandal muscle” (i2. money) compared to the large institutions and speculators. They usualy learn Row to Invest by putting money tothe market directly as ‘they don't believe the need of geting proper education fast. They would rather choose to pay "Mr. Market” for teaching them how to invest Wade and if you get what mean ln ts Fespect). Theyre poo" rskrmanagers. The fist thing that comes to their mind in investing i “how much money can make in tis trade?” On the other hand, profesional investors think very liferensl besause tel fst question would aways be: “What if | am wrong, what will be my risk?” Now that you have been tld thatthe nancial markt iste abated how can you tackle all the challenges you might encounter in your journey of creating income from investing? How you to respond te ths question in my ming wll determine your approach i inves. Unrderstan! that neat, there is no right oF wong way in investing. Each of us ill adopt Giferent appreach as ar risk tolerance and personality varies. In your investing journey, you are going to find out exactly “who you are as an investor” ie, what exactiy your Investing personaly and risk tolerance level, ‘ot me share wih you my own view on this particular top f the fst and second groups consis of some 7-88 ofthe total market partcpant it means that he tie group makes up the remaining 923% These 7.8% of the total market patlpans are those who are ‘making decent money in te Snail worl because ofthe edges they have (ke. money, tool andknowledes). ‘Thus, asa matter of fat you and Belong tothe tie group andthe truths that our chance ‘of winning is lower conpared to these ete traders. $0, ou Jobs to find our own edges so that we are able to invest in an appropriate and consistent manner. We ae going to model the elite traders and aque thelr mindsets in terms of investing and trading by focusing on risk fist. doings, we ae giving ourselves a chance to be admitted as we ae admitted to ‘the famous “8% Cub. The remaining 95% out ofthis group wl tay where they ae now as ‘theres this saying that 5% ofthe investors traders lose money in the financial market, ‘hope you wil now resize that as a retalinvestr, you have indeed 2 challenging job infront of you. ‘Once again, please allow me to congratulate you because you are on the right track to get proper edison with a view to keeping the membership ofthe 3H Club” ra a Re ‘My got as your caach a smple ane ~ "to share with you what | already know in technical fnalysis” Asa matter fact anna trader in options and cutency and (have to know alot ‘ore than what you right think in terms of technical analy What! sharing with you in| the workshop and inthis manual isthe cllectve knowledge of many other succesful Investors and waders ‘Miroutcome for you ater completing this warkshon ‘My outcome for you's 0 simple on ~"to help you toe a more confident investor than the time before you attend the Wealth Academy workshop.” Let us be realistic ere. You fare not going to be an expert in investing immediatly after attending the werkshop. Investing stl and ws, le prfecty understandable that you wl ake your time to work Con the craft, Some af You wl take a lesser time and sme of you wil equite more time. I depends on your level f other commitments which in tur determines the time you can allocate to study the market, Obviously the more time ou spendin studing the market, the Shorter the learning cue you can expect. Make sense? ‘another criti succes: factor in my mind in speeding up ths learing cure is whether you fre passionate inthe avesting world, Uy Adam said, you hve the passion on something ‘you eat breathe and deep with tf you have the passion inthe financial market, yu wil Saya touch with it cund the clock yes, you might stil be thinking ofthe nancial market ‘wht lesping) In ycur pursuit of ti journey, you wil be excited by the fact that you are Tooking forward to leaming new things every day. You have the desire and are commited to ‘yoursalf to bud a sucess busines in investing and you wil ony allow yourself to cose ‘down the business on you deci to callit a day. This s what al Love what you do and do what you love 0, since yu love whit you do and do what you lve, you wil ee theres sooner or ater. In summary, mating money st goa ise but sa result of succesful investing. ‘The stratepes and tecrniques | am sharing with you are those that have been implemented Successfully by many weltknown investors. The information contained in this manual isa fomplaten of my krowledge, commitment, ak Kass 1 personaly learnt from many feaperenced traders and investors all over the word. Please understand that there Sbsoltely nothing caled the "Holy Grail in investing oF tang for that matter. you can {reat the fatowing chpters an optimal gle to help you tobe atte informed investor, bbllave that you have lead made the fist and important step in your investing journey. So, contin to enjy ths process and et the fun begin, 8 = ‘There ate thousands of boots and articles you can read. Infact, wih the advent of internet, such information can now easly be found on the Internet fre of charge, Here is the dea. Information snot power. The application of information. Therelore, no matterhow much Information we gather, we have to take home the lessons we learnt ad aap. of 90 patil value to bea took junkie ar a seminar junkie, reading bocks and taking courses ‘again and agai, think thatthe books/ courses ean help us to make money overnight. In fealty the greatest teaching can ony be gven by the market although the prerequisite ( trust by now you wl agree) is to got yourself propery educated, AL this point of time, can feel the ansey from some of you. I sense the extement from Some of you. Rest assured that was in your shoes before and know exactly how you fel Fight now. Some of youl kely believe that since you ae a novice investor, haw much can yu actualy lesen fom his workshop? ‘mycule of engagement ‘ay rule of engagements for you to adopt a systematic approach and this is why the couse ‘materials have been stuctre ina certain way. You ae gong to be introduced the base ‘concept and you must be committed to yours to undertae forthe researc on any opie ‘of your interest. Proper coaching is extended to all of you with the am of helping you to bull up good foundtions in your new career Of cours, this is your choles. DO you allow Yours tobe coached? ‘Once again, | would ike to congratulate you on taking ths sep to get serous education in the financial markets. woul ie to thank you for allowing ine to be your coach, mentor whoever you think am, sock Won, Trainer @ Weath Acasery™ ‘Adam Khoo Learning Technologles Group Email jackweatthacadeny@gmai.com Second Eaton duly 2041 19 arnt iGAASPECT OF mvesTING CHAPTER 1: INTRODUCTION TO TECHNICAL ANALYSIS inthis chapter, we are going to discus echnical analysis ("TA"). My aim sto help you to ‘sau with some basic knowledge on 2 proup of selected technica indicators so that you tebe hero tne your ent ofa particular ade Basics of TA ‘TA voluates price mavement by anaying statistics generated by market ati, + TAs buit on the theory tht market prices display repetitive patterns that can be tacked and used fe forecast furs price movement + We can plk good sacks to buy using fundamental analysis, However, the question f the timing othe entry This is why we dsuss TA nthe Wealth Acadery™ weshop, For further readings inTA, | would strongly recommend you this book “Technical neti of the Finonciel Markets ~ & Comprehensive Guide to Ti rode and Apoliction “wen by Joh Murphy. Tire my Sle im TA. You may also wish fo consider getting “Tradina For ving” and “Comina into My Trading Reon” writen by Os, Alexander Eder {These books should besvalable in your local bookshop ot els can be purchased online rom Amazon.com, Different Types of Chart Line cna Its the most basic typeof chart used by fnancal institutions andi created by connecting a series of past pices together witha line, For the purpose af ths workshop, we wal use losing pce of patel underyng, rea Chars ‘Area chart is created ated on ine chart. The area between ala the ine are commoniy lemmphasized with ols seen below) textures and hatchings, ‘nTROUEION To TECHieAL ASPECT OF INVESTING Sacchart Bar carts alo town as OMLC (Open High Low cose) chart. {day bar chart erested by plotting al the dally bars of an underlying security and each bur eantains the open, high Tow, clase ofthe undeiing on a particlar day. Silty, 2 ‘waeky bar chat Is cteated by poting all the weekly bars of an underhing and each bat Contains the open, ih low, close ofthe underingsecrty ona parlelar week ‘Asa matter of fect, depending on the tool you use, you may have access to month bar chat and yearly bar chart. For better vissalization purposes, some carting software and/or broker platforms will use "agen" to denote a bulish bar and “red” to dnote a bearsh bar. Other software/ broker platform wil se“white” to denote a bulsh bar and “Black to denote a bearish ba. ‘bar fsa blsh barf te eosing pric i higher than the opening pie Bullish Bar |Abar sa bearish bar ithe opening pice i higher than the closing price. Bearish Bar 18s INTRODUCTION TO TECHNICAL ASPECT OF ESTING For better euaization purges, some charting software andor broker platforms wil use green” to denote a bush candle and “red” to denote a bearish candle ‘candles a bls cal the closing price i higher than the opening pric. os ™ Bullish al Candle ‘candle fa bearish ead tho opening pric is igher than the closing price. ane = Bearish Candle ‘one may argue that» candlesticks chart contains the same information 25» bar char Proponents of candlestick charts however argue that a candlesticks char i splayed in an ‘isles way to absorb the price information to enabla them to understand the psycloay of the bulls and the bears. As a rest, most shor-tem or intraday traders tend to use candlestick chars For the purpose ofthis workshop, we wil use both bar chart and candlestick chart, tn chi canes Some advanced condetcks chart rade ue Hein Ashi (HAY) candlestics instead. The Tounese phvase"Heiin- Ashi” means "average borin Engith, WA candlesticks represents 2 ‘weithted version of candlesticks calelated withthe following formule ‘open = (open of previous bar close of previous ban/2 Close = opentighslowscose/ 4 igh « maximum of igh, open, or ose (whichever highest) {ow = minimum flow, pan, or dose (whichever is lowes] (INTRODUCTION TO TECHIICAL ASPECT OF INVESTING rs sarc wpe con Unlike regular candlesticks chart, the body of a HA candle does not necessary sync up with the actual open and close. Along wick shows more strength whereas on a standard candlesticks chart man show along body wth tle or no wick HA candlestick isnot part of the syllabus inthis workshop. Those who are interested in Tooting into HA candlesticks should do further reearch on this top Poin & Finger Chart, [A Point & Finger (DRE) chart is created by plotting periodic price movements without thinginto consideration the passage of tine Its composed of a numberof columns which ether consist ofa series of stacked “Xs” oF "ose, A colunn of Xe sured to ilstat 9 sng pie, while Os representa fling pice. ‘The major benefit of wing PAF chat fter out non-significant prie movements. aso ‘tows an investor] trader to easy determine the etical support and resistance levels For further reading of PF charts, consider gon ta the following website and havea ook tos school shart schoolch sont chars You may aso obtsin » copy of "Point and Figure Charting: The Essential Application for Forecasting and Tracking Market Pies" by Thomas Dorsey. ve The Art of Chart Reading ow do we make money rom the financial market? Let us review the following question: Which ofthe following statements are core tall investors? A) Buy tow, Sel igh 8) BuyHig,SelLow ©) IeDepends 2) dont know Do yougetthe right enster otis question? In order to become an oan sawier investor, you also have to acquire the minds of milionae investors by anderstanding that you can also Buy High and Sell Higher 188 ‘Tre reason why suggest al of you to acquire the next evel of thinking i prety simple. f you have ony the Buylow-Selt Nigh mindset, you wil never buy a stock or Ineease the Folding ofa particular sack you regard the stock price a5 already high in te rin ree cuantve) NEE aa armen ar Rs te a ae ele ~ ‘on the ther end, if you have the Buy High Seliger mindset, your mind wil be open to suezestion in that even ifthe stock aie Is already considered high, you may stil consider ‘iter buying the stock or increasing the holding of such astockifyour prognosis that the tockcould go up even further. pl nul "Why do we need this advancea VEAL THE: level of thinking process? 190 na TAMER AST or wvesrne ‘Trend Identification The trend is your friend, until the end ow do we know that astock ay go higher? There are many ways to answer this question, “The very fst methad we we is to enti the trend ofthe underying. believe that ths important for beth investors and traders. You have to start traning your eyes to review Charts on a regular interval in order to spot the trend ofthe various securities. Uness the {tend of an underlings consistent with your directional progness, you should stay put rather thon rushing to int 3 pee postion. ‘As the following stocks in Uptrend or Downtvend? wd LY ape wagge Wan wy Ssouce: dae ones. \, Suse iad aewaptonopesam on |TRODUCTION TO TECHWICRL ASPECT OF INVESTING Isnt i interesting to tel out that even without applying any techrica Indicators at this Juncture, wear able tose the trend Bo you now realze that you have already his capability of reading cars? It may ust be the fase that you have yet tobe aware of. This fa good star tit? ter going through this section, sincere trust that you can do alot beter. Let me quote Ams favourite phrase If we can do it, so can you can til erember ths story and allow me to share with You ‘Back in 2008 when | fest started this busines, Iwas committed in that whenever I ead newspapers and fnancal magazines focused onal the chats therein = whether they are ‘Hock, indexes, commodities, currency pals. What id then was to ran my ees to review {3s many carts as posible, The rth tht tl today, Lam stil practicing ths technique In other words, ths s my pattern. | strongly betleve that tis approach is etter than 2 technical jnkle” approach, What do ream by this? As ths term suggests, technical Junie (sa person who relies on many technical ndeators wlth vew to finding the Holy Grall-e. who they think the stocks toing Very offen tecricl junkie wil end up i the state of "analysts paras". Have You heard ofthis term before? If no, take 2 lok of the following chart and you wll now ‘exactly what mean, so - maageme st {tis scary to become a technica junkie in my opinion. I would prefer to keep this business a Simple and straightforward one. Hence, Ihave nothing against anyone who chooses olearn technical indicators ané use thm primary as shes TA techniques. Ik should also be noted that all technical indcators work well only for certain market ‘conditions In othe stations, these indicators can fal miserable de other characterises fn inherent iat atthe time of invention, Some indators work best on channeling Stocks but ae unsuitabe fr trending toes. 15 ROUEN eo wvestve Technical Indicators a eect + Teal nets pe formton hats eae us Whe tcc enue evening tyr ens rt ten be mre hn Savin ving se arwhterrhtent aon + Teale ented se tans a + Commonly used setings for technical ndcators can provide some insight to the actions ‘of ether market partipant [A this point, mpertant to understand that technical Indicators are known 2 lagging Inleators. They wilfolow changes inthe market environment and show signs only after an ‘event has taken place. There sth sayrg that techaleal indeatrs reach the top ale the ‘economic environment tas peaked and bottoms alter the same s tease, ‘Examples of Technical ndeators ‘Moving Average Convergence Divergence [MACD) Stochastic Parabolic Stop and avers SAR) Relative Strength Index (St) wala ‘commodity Chane index (CC) Chaikin Money Flow (CMF (On Balance Volume (08Y) ‘know you wil probably ask which of the above technical ndcators the most powerful. To ‘me, the most powerful ecwiclindeator “SUPPORT & RESISTANCE” ‘Why is Support and Resistance the mest powerful technical indicator? Inmy opinion, the reasons areas follows: + Use ofPrice Acton with minimal technica indicators wil fite lt of nose + Weeanchoose:0 kep chart reading imple and hencit's2 pleasure or make this so complicated andwe havea nikname "Technal Freak.” Swoport ce ‘Asuppor ia level or an area on the chart under the market where buyngintrest is ‘suflenty trong to overcome sling pressure. ‘resistance evel oran are onthe chart ove the market whee selling pressure ‘overcomes buying presse (Guidelines on Support & Resistance Support can become Resistance AND Resistance can become Support ‘wmy SRR works istecause these lines fle the psychology ofthe varius market partiipants master $8 tberomes the most powerful technical analysis ‘The move we practi, the faster We wl ee theso nes without drawing ther hos INTRODUCTION TO TECHNIEAL ASPECT OF INVESTING ‘he following is # daly chart of SP (the xchange Traded Fund ("EF") for Standard & Poor 500 index). it was eaftured from October 2009 to August 2010. As you can see from this Chart its relatively eayto draw the various levels presenting te resstance and support level of Sv. sPORDJIndeatialAvengeETF Tost 10487 roc oxy EN \' ses os mse == Vai deasiihasaslilang, Source: tev eptensoes.com 196 INTRODUCTION TO TECHIVICNL ASPECT OF mIVESTING How to Draw Support 8 Resistance? ‘The Clee textbooks on TA willy tll us to draw support and resistance nes by connecting the varius lows (for support) and highs (for resktance. Based on my own esearch in the US equty markt 0 fa, there is actually no right ar wrong ways of drawing support and resistance Having sald that, because there are 3.400 optionable stocks Inthe US stocks, they tend to ‘ove from one lageallve to another lola eve: “Take a look of the follawing daly chart of Internationa Business Machines Cor (BM) onl eos acon Co rae oon 08 Source: tp fmoponsprescm ‘As yu note, a logal level canbe set at every $10 on tis daly chat. IBM breaks above ‘av $120, the not tret level could be $140. 11M breaks above say $140, the next target level ould be $150 and so on and sofort. wt eTRODUCTION TO TEcHEAL ASPECT OF INVESTING Let’take look of anther example, The following isa dally chart of Research In Motion Ltd (cum: ese tn mae cocoons — oO y Tae hr Fw oporcom ‘As you note a lopeal level can beset at every $5 on this aly chart. If RIMM breaks Below 545 level of suppor, the next logical level could be $40. If RIMM breaks below $40 level of Support the next og leve col be $35 and so onan sofort, ‘TRODOCTION TO TECHNICAL ASPECT OF INVESTING “Tere ae n fixed ules on determining how to apply the logical lvoe as each stock has its ‘oun personality. In addition, depending on whether you are appving the loxcal lev _anallson daly charts and weekly charts, the result could ary. ‘Gan this techaigue be aooied to indies? You bet. The Flowing dal chart of Dow Jones Industrial Average (SDM, soto rr} souceifsonsgresscon ‘logical lve can be stat every 1,000 points Hf $0! breaks above 10,000 points, the next Tegel level could be 3,000 pnts. SDI ress above 11,000 points, the reat logical level ‘ould be 12,000 points. Ina, | al thes opel levels “psychological levels". Te reason i that there are the evs watched by everyone, including the fos at CNBC. | remembered n 2005, when $b! had been sideways from January to esly December, one CNBC anchor alerted the viewers that SDJ was about to break 1,000 points. When that happened, the anchor sa, "Elnally Dow Jones breaks above 1,000 points" and there was amin party at {hse stcio to celebrate thi So, pay attention to thes important psycholopeal levels 3s ‘they are Good indicators af the marke sentiment ae Tso 400 points instead of 1,000 poles on $bu! stating fam 10,000 points. You wil gain srldtonal insight on inteprting $0 Further insights on Support & Resistance ‘There ae alot to yon this particular teple. However, inthe absence of space ist the ‘three most important sights have on applying suppor & resistance ana: tes facta based ~:his means that this technique canbe applied in diferent time Fame {estabe for wadersand investor) “Take note thot the lial level of week charts and dally chats can be diferent However, the techn queto dra the logis levels wil be the same. = Super charge this technique by incorperating volume anasto confirm whether theres ‘song conviction ona breakout of Support & Resistance. ‘Your Ufe-long homework forthe purpore of hs seston willbe to pul out any charts of your choice and start drawing the lines sng what was dgcssed above. A€ the beginning. use ‘ler and pnelfpen toda tis exerese. When your eyes are trained for awhile, you should bbe amaze bythe fat Hat even without drawing these ines using ruler and pen pen, you can "see" these Inesor the chart. Trust me-=if can doit scan g Further Discussion on Trendlines ‘A twenline is commonly drawn to conneet two o¢ more significant lows for uptrend price ‘hart or sigan hig (for downtrend prie chart) If a stock rice i trading above the endline and is aling, the trendline is Hkely to support the fling pice and reverse It to assume the uprend move. Simi if 3 sock grea = wang bolow the tendie an rising, the trending i ikly to est the advancing ce and reverse it to assume the downtrend move When the price touche: 2 particular trendline and keeps bouncing back on many oceasons, It-may be a strong indeation that the tendine represents the price of acceptance (or Fefection) by the markt padepants Once established, this behavior can lst for a whe, H the stock price approaches and touches trendline during that period, there v2 Nigh probability that the prce wil bounce back and assume’ an opposke prise movement thereafter Its aso mentioned in the TA erature that trendlinesrellet the hidden market order as wel asa selling prophecy. The market paripants may get 2 sense ofthe stock pice Arection by looking at the trading volume and trendline together. Fr example, once the price touches the trendline and moves aay sharply with a trading volume much higher than ‘he average trading vole, itmay be 3 ign ofa pullback. The characteris of the trendline wil change ence it has been broken (penetrated) with two or more days trad in a manner inconsistent with ts previous behavior. This coud 310 provide us with 2 good ueato to time our entry of ext of poion 201 _ oT eer Bulsh support tine ‘A bulls support tine fan indication ofa bllsh stock that goes upward, Ks drawn by ‘Conneting the several owes points oa tock at iferent periods of time Take 2 look ofthe weedy chart of Amazon.com {AMZN} below where | have drawn bulsh Supportline. AS you san see, AMZN Bounced off on ths bullshsuppert ne nicely and hhene, we can say that R appears that AMZN sin 2nyptrend, am A bearish resistance tne an inaction of 9 stock price that ges downward Is drawn by connecting the several ghest points ofa stockat diferent prods of tne. ‘Bearish Resistance tine ‘Take a look of the daily chart of Bank of New York Mellon Corporation (BK) below where 1 have drawn a bearish resistance line. As you can se, BK hit the bearish resistance line and backed, Hence, we can ay that lt appears that BK isin a downtrend ati et aon cretion ne svc ce) et Sai Soucy Pmstontrarescon 203 | | | | ‘Change in Tend ‘Ateend wil nt las forever. The questions how we can identify a potential change in trend Le’ review the felling example “Take a look ofthe daly chart of Sina.com (SINA) below where have dawn 2 ulsh support line, As exlaned Inthe workshop regard a change in an uptrend a taking place when the Lunderiing closes consecutively twice below the bulls support line. Please note that this doesnot mean that the tend does not necessary change to a downtrend. Wis more onservativeto say thatthe uptrend has come ta ‘pause cr CO ‘So, you are holding the underyng and spttng a potent change in trend, you have to know how to protect your poston. For investors, it may be the good time to take pots For more savy Invests who know how to se options as » hedge, they would have had purchased put optionsas an insurance hedge. Take 2 look of the daly chat of Baidu Inc (BIDU) below where I have dravm a bearish resstance ne. As expined inthe workshop, | regard a change In 3 downtrend a8 tang place wien the underhing closes consecutively twice above the bearish resistance ine Please note that this doesnot mean that the trend doesnot necessarily change toa uptrend eis more conservative say thatthe dowatrend hs cme ta ‘paue! a A Souce: new sgecom So, i you consider the tnderying a stork that you should ow, you should tart researching on the stock ~ studying the fundamentals. You should then establish certain entry tigger land drat a trading plan. When the enty Wager occurs, you should know how to place the ‘rade in your broker platform and manage the trade acorcingly once ie filed, For ore ( savy investors, they may consider using bullsh option stategles for ths partcalat ‘opportunities the soe is an optionable stock. 205 channeling / Range Bound/ Constipation “the solution teany problem shouldbe as simple as posible, but no simpler” = Alber netein White a stock can move an uptrend ora downteend may als be engaged na sieways channel during certain aeriods especially when folowing sustained moves and dng periods indecision amongst investors, In other words, channeling or norrendng stocks are those ‘vith prices that trade within a spec aie range overaperi o tine. i Sout: mep oporsies con Generally the tonne Ke more representative when It touches more pont. The above ‘hart pattem sls known 8 sideway tend atthe stocks trading within aight range 255 range between $32 5 and $37.5 inthis case), In the station, traders may trade tis type o tock a hel pee pater su prewitable {nd many strategies can be implemented. Do exercise caution and not be complacent =the ‘market cn change without warning. One ather hand, investors have to be patient forthe ‘edevelopment ef anuptrend or pethaps mave onto another stack that is experiencing 2m uptrend 206 TEs Technical Indicators Before we begin the dicussion of certain technical indicators, lt us recapitulate what we have discussed so far onthe use of technical nictors ‘Technical indicators are constructed using pice and volume ina varity Ways + Many technical indicators can be laggards and should be used with caution * Reliance solely on one technical indicator is dangerous in investing and trading. However, reliance on many tech indcatrs can make us technical reas, We have to strkea Balance and keep thi business simple! 207 ‘pga aeerermesrae ‘Moving Averages (MA) fr swag Pec, Mong Ae MN) ig nde (ead prc aie ie ig pcr pater See tao he Sc howe eer mde Ent ‘tert SMA(K| = Sum ofthe close ofthe Previous K days/K “The EMA wil gv heavier weighting to the more recent pies Trader can choose between ‘these inatrs tat best sui ther trading stl. 2M = (previous day EMA) x(1/) + (Kx Current close) where 2 Tn periods ‘often SMA oc EMA are used in paso ferent periods For instance, 10 day/0 day pai is for shrterterm study and 50 day/200 day pa I for longerserm ana ‘Tere is no hard and fst ule onthe numberof dys ose. order to get the best result {rom using this indicator, we may selector adjust the MA settings to suit the individu style Different toc may spond diferandy when afferent MA paris used, New investors are évsedto experiment orth diferent Mk setting afin the eight ating fr ther 208 INTRODUCTIONTO TECHNICAL ASPECT OF INVESTING ‘Take a look of the following daly char of Google ne (GOOG). | have applied 50-day SMA on this chart. As you can se 50-day SMA offers dynamic support and restance on GOOG at ferent intervals ‘coos sass on os se “are mi epnsiessem How about applying 20-day SMA? See the chat below on GOOG. 2 ey Sore p/w apenas (NTRONUCTION TO TECHIIGAL ASPECT OF INVESTING [Most insttutlon partipants use the $0 day/200 day SMA for confirmation on major ‘movement instock prices A buying or oling signal sven whenever the stock price its the '50 oF 200 day MA These two MA also serve a major dynamic restance or suppor in chart analyse, Once the pie level breaks through the 200SMA, the stock Is regarded as having Entered a new trend phase as institutions begin tobe interested in owning the stock. The ‘crossover formed by 50/200 MA isa signfiant point to take note of as institution traders may intiate major trade action there. oogltne oo ioc com) Source Mtflawioptonspescom 210 “Moving Average Convergence Divergence (MACD) [MACD (proncunced as"MAC-0")is2 momentum indlator developed by Gerard Appl nthe 1560s, Ieseeks to measure the strength af the market by showing the dference between a fast and slow EMA ol closing prices. AS ths Is 9 trend-folowing Indicator, 1 do not recommend using tina ranging market conditions. the way, you should never rely on 'MACD only asthe sole technical indicator. ‘There are thee parameters thsindeatr, Le 12 period EMA (ast), 26 period EMA (Sow) ‘and 9 period EMA figual. The setting here Is considered the standard although aferent Settings canbe used “The tives parameters generate the types of pays namely ‘waco Graph ‘+ MACD Sigal ne 3 MACD Hstogram [MACD graphs the dierence between 12-perid EMA and 26-period EMA. -MACD signal ines constructed by computing the period EMA on MACD eaph [MACO Histogram the ference between MACD graph and ts signal ine, Generally, the closing aries are used to compute the above EMAS. forthe purpose of thie workshop, we shall use MACD Histogram, ‘Moving Average Convergence Divergence (MACD) ‘Aco fproncunced as AC-D" isa momentum indicator developed by Gerard Appel inthe 1980s, It seeks to measure the strength af the market by showing the dferene between 3 {ast and slow EMA of cesng prices. As thie ie trendfellowing indetor, | donot ‘recommend using itn a ranging market conditions. By the way, you should newer rely on [MACD only as the sole technica indeatr. ‘There are three parameters in this indicator, Le 12-peiod EMA (ast), 26 period EMA (slow) and 9-period EMA (gall. The Setting here is considered the standard atthough cferent Stings canbe used ‘The tree parameters generate three types of plays namely = ACO Graph ‘+ MACD Sigal ine 1 MACD Hstograr ‘Aco graph ste diference betwen 124 vod EMA and 26 period EMA. 'MACD signal ine i constructed by computing te period EMA on MACD graph, ‘MACD Histograms thecifference between MACD graph andi signal ine Generally, the casing pices are used to compute the above EMAS For the purpose af this workshop, we shalluse MCD Histogram, 2 |TRODUETION TO TECHIICAL ASPECT OF MUESTING Let's us consider the flowing example using daly chart of Tuppleware Brands (TUF). | have als plotted 50-day andl 200-49 SMA andl applied MACD Study x the Bator ofthe hart ere: ei cptonserecom General guidelines in applying MAC Histogram Look for Buy Signal when MACD Histogram is sbove zero tne. Look for Sell Signal when MACD Histogram is below 220 line, 210 |NTROBUCTION TO TECHNICAL ASPECT OF INVEST ‘Combining SMA and MACD Histogram ‘As dzcusse inthe warsho in order to gain an edge over the gneral real investor, we "may have to be consent in choosing the ting of ou entry. Let me use the same daly chart oFTUPoiustrate this oi ‘We may want to inst along positon when we see a bllih SMA crossover (ie. 50-day SMA crosses above 06-day SMA) and alse MACD Histograms bove the eine. pes Source Mp anaponresicom 213 Directional Movement Index (DMI) [OM is used to evaluat the strength of the current tend regardless of whether ii an ‘uptrend ora downtend. Windcates whe a trend is present andthe over strength ofthe mathe, The higher DMIs, the stronger the trend will be was developed by, Welles Wilder and made up of three tines (Dit =the strength of upward price pressure 6. Ol «the trengh of downwaré price pressure ‘0 ADK the over strength ofa trend with regardt the direction ‘The clelation steps forthe Average Dietionllnex (ADX) areas ellos 4. aleulate the True Range (TR), Plus Directional Movement (40M) and Minus Dikeclonal Movement (DM for each period. 2. smooth theve feo values Using the Wider’s smoothing techniques. 5. hide the 18day sinoothed Pht Directional Movement (40M) by the 14day smoothed True Range to find the 14-day Pls Directional indicat (+0114). Misty by 100 to move the decimat point wo places. This «DIL4 5 the Plus Diectionat Indicator grein) thats plotted along with ADK A. Divide the 144ay smoothed Minus Diectonal Movement (DM) by the 14-day smoothed True Range o find the 14-8 tana Directional Indicator (118). up by 100 ta tnave the decimal polat two places This 114 isthe Minus Directional Indlator (red ine that spotted alongwith ADS, 5. The Directions Movement Index (OX) equals the absolute value of 40114 fess -DIL4 vided by the sum of sDILA and O14 16, Alter ll these tes, it time to ealeulte the Average Diectional Index (ADX) The first ADK value i simply a 1470%, the tend may reverse and move downward soon, Simi, frie touches ower Bo and RS is <20% the trend may reverse and move upward soon. However, the trend is Tey to continue i pre touches 88 and RSIis nat in the oversold or aver-bought zones, aol Soa RFT SRoMaTER ms WASPECT OF vESTING Putting Them Together ‘Tale a study of science where scientific tools are deployed to provide technica indetions ‘on market, However, the art in nterpreting the technical indicators requires greater knowledge on human behavior in rlation to Wading atts inthe market system ‘here are many ways one can apply the knowledge of TA Some investors develop system ‘th using only the mcving average, thers combine few indicators to generate buy and se trading sina. “inatrame Instead of wing the cy char alone, we should ao study the weakly chart When the vwecky charts trending up, ag bulls trade based on the daly ehart signal has beter ‘hance of success, Likewise, fhe weelly charts trending down, taking a bearish dally char sana asa beter chance of succes Combining indeators ‘eilotors provide ely warning signals for entey and ealt to trained chart readers. As the costlators are not meant to provide a dret ying o sling signa, they are rarely used love. It is 8 good practice to cme mre than one indetor In performing Techical ‘nals. However, he selected indicator should complement each ather. Sl and Stochastic fare toth oxilators, Hence each should not be used 2s 3 confirmation for the other Combining ether exciiator with MACD wil gve beter esuts Lt us lok at another example, Trenlines ae the fst ter supportresitance level. When the level's broken, ths mouing averages wil act as the second er supportresstance level. ‘an uptrending market fst brake the suppor ren line and then went onto break the 50 ‘and 200 day MA clearly neeated that market had turned bearish. “The sivergence betwen the osilators and the price tend often signals the change In price trend soon, Volume usualy reed together with price action. Any breakout wth Hight ‘lume normally indicts a weak folow through. Conversely, high volume suggests thatthe Strength of going rene strong, The above may lead 1 new trades bong created or sure of profitable posons Mindset ‘any good entry wile guarantee 200% success, We trade what we see onthe chats. When the charts change to unfavorable conditons, we need to change out inital euleek When a dob, ane should exit the market nd watt fa ether trading opportunites. ma ITmOnUTION TO TECHGRL ASPECT oF wvESTING CCANDLESTICKS PATTERNS \We can “see” the whol markt in general though charts. Te span ofthe chart can belong term ike 3 years, Syees or 10 years. We ean also “ee” where the market is going through anintraday chart. Candlesticks chart tecinique has been widely used by the Japanase sce trades to moritor the price since 27 certury, ts applieation has been further popularized by Mi, Steve Non throu his various bokson this opie nclestick charts ae ey ta ead, One shoud be able to tl Fits 2 HHHL day or LL day Stone glance a the eadlestikeae displayed with colors in most caring softwar. Similar to the br char, each candle consis of Opening prc, closing pie, highest price of the day ani the lowest pice ofthe day Examples are given as below Candlestick Formation Uneasy | Mh me Lower shadow > ven Te tow Urersndon y | oh Soe erties Po Om — | “The distance betweenthe opened ang closed pice is refer toa the boy. [black for red) body represents tr 8 down dey or bearish day, wth the Gosing price lower than the opening pee. ‘Auite body (or green epresetsaup day or bul day, with the closing price higher than the opening pric, As oe the thin vertical lin, It epresents the extreme high or low price of ‘he day ale known a: the shadow. 225 aa eset or ese The candlestick charting provides addtional nfermation onthe price direction ofthe sock For the purpose of ths workshop, we will ony ook at four trend reversal candlestick pattems to hep in the chart reading. These are not the “Hal Gra” of predicting price ‘movement but they giv us tool to forecast the pcs together with ther inceators, Reversal Candlestichs Patterns ‘Areversal pater sone ofthe cus that we lok for ncandlsticks charting. Trend change ‘ccuts over a petod of time and in stags responding tothe change of market's mood and ‘business cimox. Therefore, a reversal pattern signal ley change tothe rice trend but not necessary reversing ofthe trend immediately Hammer ‘hammer pattern i whon the opening pice and the losing pica occur a the top 20% of the whole candlestick pattem. Iti aso consider as a bottom reversal inal, The eal body «an be either back or rd or white (or green. Inthe example below, the candlestick closed at the day high, inicag a slghtbullsh behavior The black or white real body f of no major consideration fr ahammercanestick. 1 1 en | ho ord Hammer The hammer has the characteristic of along lower shal. signa a sharp sol off during the doy and then boures back to case a the day highest price or near. It displayed strength onthe stock and would be valid there sno upper shadow. Since ths» bottom reversal signal, we needto spot during 3 fang trend and ako confirmation of bullish day required onthe next 102 days. 206 aa ‘The inverted hammer cceurred when i has a longer upper shadow, opening and losing at the Bottom 30% of the candlestick. This patter would be used for bulish signal ater a ! | hiyya "or wht by Invert hammer Uke al signal, teed confirmation alter the inverted hammeris shown, Hanging Man ‘This pattem is similar tthe Hammer butt isfourd in an uptrend candlesticks. the ‘hanging man comes wath some upper shadow ans is black candlestick that indctes ‘weakness on buying VF this pattern occurs when stock rice i tal ine high, couple with another beach day {UAL 2 short poston may be placed with preater confidence. Hanging Man 27 fl nar ors = a. thernext day (ornext few days opening and closing reversing the orignal trend, 1. wen marketis overbought or oversold However, this pattern not be vai ifthe chart deployed numerous do. pS \ ad A H] 4 im TN ome ‘Uptrend doji Down tend doji “ Doi T T Loi Dragon Gravestone dj ‘eanples of aierent DoF Dol can be viewed a5 2 significant warning of pics change wien we can identiy 2 fe woralng ca aa Le ee stars Anoter set of cevesa sign are a series of patterns with small real body black or whit) tht breakaway gop] For age rel ody before tis ao sometimes refer as dol str ‘he smal real body gy tug of war between the bul and bears during a prong trend Sometime, the trend ray also start a sideway movement of the stock price when volume stagnant below average. Morning stars ‘star is 3 candlestick wih the opening and closing of the candlestick not touching the previous dy close or subsequent bullh day open, Gap have been formed on both ies of Star The diagram below shows a typel moraing star pattern. A bearish day represented by ‘Condestich Ais followed bya morning star. The following day, represented by candlestick B further confirms thi atten with a blsh day closing above the whole star. The morning star pater considered more vad when occu a the support evel | h W | O | Candle cantesick Qo i ‘Supportline Black oe white moening star Morning star Some experienced traders who ate conversant in candlestick charting technique ae not so Pavia if tha conde nrape the morning tar il not lessen the effectiveness of this pattern, The pattern bullsh sign compared to evening stars which we are Boing tO ferplore next ns Evening stars ‘The Evening star isthe beash counterpart ofthe morning star pater In the diagram below, eanlesick A= bulsh day, A stark formed by gaping eway fom candestic A Further confirmation is ven when a bearish canalestick i formed thereafter. “a-—Blck or white morning star aaa ca Cantestick B ! ol | | Evening star Shooting star As shown in lagram Lelow, the shooting star has a small eal body with along upper shadow, sma othe ierted hammer. While the inverted harmerisusedt spt reversal of bearish trend shooting star is dented during ales. Therefore the shootng so is. op reversal bearish signal wile the inverted hammers a bottom reversal lsh inal. These patterns are name afer shooting star a the upper shadow looks like a blazing tail cot cross the shy. A shooting star in Janeve term shows trouble brewing thus ivng this pattern tis name aptly I! Ih | 4 shooting star 230 ‘Tere are 4 reversal pattems inthe star formation namely, orang star (uli), evening star (beash, dj sta (bullish of bearish) and shooting star (Bearish). In 2 uptrending ‘rarket the Bulls are cbviously in charge. With the appearance of star it sigs a shit of Contrl. Sideways market wil occur when buyers are sidetnes with not much seling pressure may show an stack from the boar when seling pressure increase. The sme is true for bearsh trend lo anther way to decipher the sar pater is through the reading fof volume. If there eet volume the day prior tothe stars and heavy volume onthe day Ser the stag, itshows 3 change of contol fom the pir trend othe new force of direction. ‘Therefore, with more experience in reading chart using canlestcs, we have to execse “icretion and apply according othe markt sentiment For more information on candlestick chang technique, you might consider reading the fallowing books: “tapanese Candlestick carting techniques" by Steve Nison *aeyond Candlesticks" by Steve Nison, “candlesticks explained by Mostn |. Pring “Profitable Cansesticks Trading” by Stenhen Bigalow. 21 |WTRODUCTION TO TECHNICAL ASPECT OF INVESTING SPECIFIC CHART PATTERNS Recognition of chart ptems Is essential sl avestors and traders should develop over times. In this Section, we wil discuss certain commen chart patterns ~ double tops and bottoms and head and shoulders, Aer this, we wll dkcuse tome other common continuation and consldaton patterns. Double Tops and Bottoms In practice, tis patter is realy recognizable by many professional investors and traders land hence It has recaved a lot of attention. And ies because of ths, the aumber of ‘Successful double tops and bottoms is nt vey high, Double Tops A mare! that ha tried to breach 2 resistance neon tre than two separate ‘occasions and has subsequently failed on the second attempt may form a double top pattern Pllgan chase aca we cco moe i wa : a Sear mtn oponsiresam 2 ‘WTRODUGTION TO TECHIERL ASPECT OF WHvESTING Double Bottoms ~ A market that has tried to breach a support fine on more than two Separate oecasions ané has subsequently falled onthe second attempt may form a double bottoms patter PoeShres 000 Tats 95 oom OO oo [il aise Rae Laas CaN AL) IK aa " oo ww an aa ty Steet encom Searched optonsescam ‘The distance in time between the double tops and bottoms can act as after which we can use to determine the strength of the trade. Greater distance generally Inples greater strength Head and shoulders This pattem is namec because of the patten’s resemblance to a person's head and shoulders. tis developed in five major stages. The fst stage commences when a strong Upward breakout serum, reaching new hehe with increased volume othe bls push the market higher. In many cases, It looks very much lke 9 continuation ofa long-term bull as a ‘move with a strong trend apparent. A period of consotdaton forms the second half ofthe first shoulder, which Soften accompanied by dedning volume, ‘The head is then formed with another upward breakout, but volume remains lo relative to the fest upward movement asthe cemnants of th bush speculators start to chase the market, This is the most important part of the formation because the high Is reached without cnfrmed volime and pies retraces quik. Consolidation signals the beginning of {he second shoulder before a minor breakout with increased volume makes an attempt at forming new high. When the bulls fai to push the stock higher, the head and shoulder pattem is complete. The lowest pointe ofthe two lows on eithar sida ofthe head! become thenectne ofthe formation and can be represented with neo support. Dow Indust Aver 1031995 cm ene oe ” “O:13,78.30 WA3 995.79 Li13779.90 C:A367OAS RatDKAd 08/26/2007 16,50R08 vty = a0 a a RS | _ see ‘Gite ne 4500 gop iil iy i Sure: meplnw epsom 24 ‘INTRODUCTION TO TECHHICAL ASPECT OF INVESTING TWangles ‘when a market letra sideways with the range ofthe sideway ction narrowing, a tiangle pattern may be formec. Tangles are bounded converging tre lines and generally develop turing uptrend or dow trend, Ther ae three types of riangles—symmetial, ascending or ‘descending, When a tock enters into one of these pattors, tis aso likely to experince & ‘decline in volume too. Aste range get ghter, the ensung rove kel tobe explosive ‘SPDR Gold Trust 0000 axes om NL Sour: Moflawoptnsphetion Ineaty 2080, GLO wat in a cansldation phase for tree months (ante Mar 2010) and finaly mi Apel GUD made an explosive move onthe upside ‘lags and Pennants Fags and pennants ste similar patterns that are relatively short-lived. These sideways patterns form after a sharp rise or decline In peice, and representa pause inthe current move. Fags and penrant are continuation patterns that occur at the appropriate midpoint ‘ta strong move. Hence, these formations have measuring plcatins from which we ean trade, 235 [A pennant resembles 4 symmetreal tangle with two converging tend fines, A flag resembles a rectangle that sight trending up or down. The slopes rections often the ‘opposite ofthe move prior to formation; a stong upwar move is followed by 2 sehty tlwnturned lag and vee versa, Both ofthese formations typically take one to ieee weeks tafor, with volume delrng into the pater. when the price breaks out ofthe flag or pennant, iti inthe diction ofthe prior move. Further, since the patt appears at the midway pont ofthe entice formation, thee Is 3 projected price range out ofthe flag or pennant. We measure the move from the inl breakout point to ur fag or pennant, ad thi number to the breakout pre from the ag oF pennant. We expect tse strong volume when the price breaks away from either pater, Feqaraless of direction 26 no Heer ons CHAPTER 2: NEWS WATCHING, SECTOR INVESTING AND MACROECONOMICS [Asa savy lovestor, you have vested interes in the company You own. Accordingly, ts Important to keep an eon the news and events that may affet the stock you have quarterly Esmings ie companies ae required to make a quactry fing to report tel perfarmance. In ‘he earings report, a company has to provide information on net income, earings per ‘hace, earings fom cantiulng operations and net sles. These numbers would be weighed ‘gaint the previous ears numbers. Investors can analyze the comparative numbers to {gauge the tinaneal heath of the company and whether ks worth investing Most ofthe pute corpanes fle the report card in January, Apr Jay and October. These ae known as heavy eavnings reporting periods. ‘Atypical report with posi results looks the this cea rept at utr suri of 05 frst, 0.08 beterha the Cpa sens Revues roe 11% yarn 5268 tn versie $258 bllon consent “cnr or tenes fore by ince come Whe aif {he covet usr sl sve the oy ee als onersioncped sev, \Wesr expr panel wihurpesemanee night ect eonomk and mrt calege “kiana san we rs, api aerlornt te nth ec pack Di eompued wah he square of cal napaaslatecarind wi bene Atypical report with negative ests ks ike this: teen ep trtraigst507 uae,0.0 wa antec ans sn at ‘oor ‘serhe cnro sn piuesetcsing eea em ar TST Leer or este You may think that when a company produces an excellent report car, its share pce must also go up. Conversely, when 2 company announces disappointing results, its share price rust come down. Thisis net tue. The marke participants reat to the pice movement By comparing the company’s actual performance with the analysts’ expectation of ie performance For example: ‘capt $0283 $02 Raman ees canina rom §596blnw $607 Hn amon Re Mt epee sy ering $1.24 ae, 50.08 beter hte nila nea tte fren oe 15. ern to $8.7 aa te S553 nes Some companies will ansounce earnings before the market open. Some wil announce earnings ltr the markt lose, wednesday, 2uy 08 er ee g i a Nine ER ‘ursday uty 07 Tak a, None a 6 tan Toy HELE 77 08 22.20 Ir Spenowny oar oz zr rer Sante 20s 7 5 ce wow WORE ast ost ws Sane Sie Suresh con 28 Most people wil rety on secondary sources in obtaining the companies earrings ‘announcement date, Some popllr webstes fr such infermation are: eg cafoetresendaearins ones aferaingariiee asec However, | woul tory recommend thatthe date of earings announcement be Confirmed from the company's website 239 ‘A stock spits an action taking by 2 puble company to increase the numberof shares Price ‘willbe adjusted 35a eat ef the stock spit 50 thatthe markt capitalization ofthe company Femalne unchanged. For Instance, in a 2-fart stock slit, each shareholder with one stock wil be given an ‘detional share. If the company had 50 millon shares outstanding befor the spt twill have 100 milion shares outstanding after the spit ‘You may probably ask whether some companies may engage instock splits exercise, One ‘theory behind the moveis thatthe market partipants believe thot stock spit wil result in 3 higher stock pie. To thebestof my nowledge, there sno empirical evidence to support ‘this theory. What is ccrxmonly sen in the markt is that stock spt usualy occurs on @ ‘company whose share ice has made a lage run. Momentum investing suggests that the trend would persist, Therefore, a company may initiate a stock split to increase the Kauidty ‘ofthe stocks that more buyers and seers can prtpatein the stock ransations, For example, Lululemon Athletic Ine (LULL) has made nie tun fom SLL in July 2032 to almost $100 in late Agi 2011. On 9 June 2011, LULU announced 3 2-1 stock spit and ‘ajustment wl be made on 12 ul 2031, o-) - Scent optnagrecan 20 a “Another classe exampl i aid In (B10U). On 28 Apri 2010, BIOU announced 310-1 st and adjustment was made on 12 May 2010. Before te spl, eath share of BIDU is more thon US8600 (and more expensive than one share ef Google nc (GOOG) at that ime). After the split, IDU continuss the bull tend and reached the al tne high of $156.08 on the fis eat anniversary ater he stock spt Sure mip ontonsipesom [Another commen bali when a company were to inate a stock split that ths sina the managements confidence in the future prospect ofthe company. ‘The opposite of a tak eplt ie the reverse st This occurs when a company has tow share price as it woul! lie to increase the share prices to ether gain more respecablty in the Imarict or prevent it for lng delisted. For example, na reverse Sfor- split, 10 milion butstanding shares a $0.50 each would now become 2 lon shares outstanding at $2.50, ‘er aha. In both cases, the company continues to be worth $5 millon 2a ad (One recent example ofa reverse stock split ligroup () whose shar price was adjusted ‘on9 May 2011, Why Citigroup's Reverse Sp! a Signal to Dump the Stock ry by ty vn es ya ot cman hlgroup's (WYSE: CD) 16-0 revere sl on My 8 ‘on more reason ste wock nay, enels ‘heel sewn IRAERSSSILE moro camanator na soc ween acoomies 13, ei suggests soul ve pes ihe. Dut die how stocks Cy vncungr ‘nat untego reverse spits uerperam ne mart both TORTI neacterm and angen. reatoex nee Moi, BUM mnt Clyroup be ruse pling espace? Fear Many statins ~ 9. tal und nd pon eens ‘unas fave mason’ poles nat prone tem en ‘nrg ens pend beow 590, loup sok pinget ‘sow $5 00m January 209. Sea he, thas ose af Sow $5.9 ony dung we ‘wept, atin Aus 2208 ae ann Janu) 2011 Ra been ang teen stout 440m $4.50 hee mere, ‘ce fod coninsiaren ILRI cepacia dnp ee | | mae Large investment inttations and brokerage firms are regarded by many retail ivestors 2s the profesional. In order for their business tobe successful, thir cents must aso be succesful Hence thee firms hte thousands of analysts whose Jb are to issue broker ecommendations and reperts on specie stocks These recommendations often matiate traders to buy or sel potialr stocks. Broker recommenditiens generally range rom strong sell to strong buy. When brokers realy fee! strongly abat the direction a stock Is tka to move, they use the adjective “Strong” within thelr recommendation, However the truth by the time a stock gets a strong buy or strong elecommendato,&isslready moving in that dction. ‘The fllowing are common examples ofthe usual reports ‘ra ot wth ad t aon eos gt $F ate rcs estan recat ow {esrton aes defi mertent th oth expected ta ue moth ‘Srnmine They poet syegesroms pile eb aquston whe for ‘Soup. doesnt ts ange ts pinay Woe a8 ‘Shs anatin es rm catomer pw evans prompt stom may sare sereaston Us race the i to 50 om $75 sping yi, Haso AE tlre and TMS reproant majer mw apport capable of hanging IN rev growth actor inthe rear orm Tai net wave atesage products mays equaly pressive and Provides plethrolcatasts over the ext 18 months Some of us may be contrarian by acing Inthe opposite direction hase on the brokers recommendations, However, my vew which i also my generclguiine for you, is “donot bind follow the anatts recommendation. If you haven't baught the stock, you should not buy it because the arate recommend a trong buy.” Ifyou have to buy the stock, you rust have other resane to do 0 (eg, fundamentally sound and healthy stock and {echnialy nan uptes. Mergers & Acquistion ‘The term “mergers & acquisitions” (MBA) refers to the aspect of corporate statey, corporate france and management dealing with the buying, sling and combing of efferent companies and similar entities that can ad, nance help a growing company in a vn industry grow apaly without having to ereate a subsidiary or other eid ent Ie is posible thatthe company in which we invest may be ether the target company or the ‘acquiring company. Its thus important to study the deta of the M&A and understand how ‘would affect the comzany we Invest. For example, isthe transaction purely ash buy out? (0s involved both ash and share for share exchanges? ‘The folowing i an extract ofan 8A announcement by Apha Natural Resources (ANR} on 28 anuary 2011: Alba tural Resurces NR) and Masse Enory (MEE) announce tat ha signed 2 ‘efintive agreement unde which ANR wil aqua outsansing shares oF MEE common ‘sock MEE stxolrs wl cae, athe losing, 1.025 shoes Of AR commen stock nd ‘10.00 cash foreach share of MEE corman sol ase on te arin shar pice ofANR ‘ommon tok asf anus 28,2013, the agreement paced 3 au of $833 pe share of [MEE coran soc onan $5 bin entrpie aus for ME] apd represent 20% premium to MEE curent share pice AN ad ME sfcthndore wl an “sn 46% ot the combined, espectcly ANK ha obtanod $8; billon in conte fnaning for ‘Morgan Stanley and Gi which, nadion to exstingcashbalances, wi eset 9 finance es consleraton to Nasey seco and wo relinanee certain esting det. The ‘esutingco ithe an attractive fan profile wit expected po fora 2010 evens of “$6 nan thahghest re cas ow generation of any pure play US. col empany, 3 responsible ance Sheet, and signfearty enaneed ele with scanned enterprize valde orsistin a aR ws Some companies ike Apple Inc (AAPL) wil regulary aunch new products perialcaly ta ‘order to sustain the grow ofthe company ad boos the share price further. For example, lover the last few years AAPL launched iad, Ped Touch, MacBook Ar, MacBook Pro, od, 'Phone 3, iPhone 365, i242, Phone 4 ete ‘As AAPL kept the markt excited with new products being launched everyday, the share pice (oF AAPL had gone up tremendously as you can se from the daily chart of AAPL Below tiny as Now = So, keep an eye onthe company you own and find out if thas any busines plan to launch ew products services. 246 [TRODUGTION TO TECHNICAL ASPECT OF INVESTING SECTOR INVESTING ido stu Secon? + Diferant sectors are stronger at liferent points nan economiceyle + Hot money wil flow rom sctr(s) to sectors at liferent points of time Sector Rotation Mode: ‘Technology |_Basic Industry | Staple ives Gyaveais [_incusinat [Energy | Services | Finan Soace tfc ‘Stage. = far Recover, Consumer demand begins to recover and so oes indus production, ‘period of eas) monetary poiey = Interstate sensitive sectors banking) and consumer discretionary (consumer

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