robertts12

THE
SECRET
OF
SELECTING
STOCKS
FOR
IMMEDIATE
AND
SUBSTANTIAL
GAINS
BY
LARRY WILLIAMS
WINDSOR BOOKS, Brightwaters, New York
TABLE OF CONTENTS
Page
CHAPTER ONE
MY MILLION DOLLAR STOCK MARKET CONCEPT 1
SELECTING STOCKS TO OUT PERFORM THE MARKET 1
WHY THE WORD FORECASTING IS IMPORTANT 3
WHAT I LEARNED ABOUT CHARTS 3
WHAT I LEARNED ABOUT MOVING AVERAGES 5
THREE NEW WAYS TO USE MOVING AVERAGES 7
WHAT I LEARNED ABOUT FUNDAMENTALS 8
HOW TO TELL IF A STOCK IS FUNDAMENTALLY SOUND 9
CHECK THE YIELD 9
HOW TO DETERMINE A COMPANY'S GROWTH RATE 10
HOW I DISCOVERED THE MILLION DOLLAR CONCEPT 10
A 13 POINT GAIN JUST LAST WEEK 11
CHAPTER TWO
MY FIRST TOOL FOR SELECTING THE BEST STOCKS 12
THE TWO METODS I USE TO IDENTIFY ACCUMULATION
& DISTRIBUTION 12
DISCOVERING THE PROFESSIONALS 13
COMPARATIVE STRENGTH, THE SECRET TO FOLLOWING ALL
STOCKS 14
THERE'S A PATTERN TO EVERYTHING - ESPECIALLY
ACCUMULATION 15
HOW TO USE STOCK CHARTS 15
THE ACCUMULATION PATTERN 15
SOME POINTERS 17
THE DISTRIBUTION PATTERN 18
HOW TO BEST USE THE PATTERNS 20
ADDITIONAL POINTERS 21
CHAPTER THREE
MY SECOND TOOL FOR SELECTING STOCKS 22
HOW YOU CAN TRACK THE DAILY SUPPLY/DEMAND BATTLE ... 24
TRACKING THE DAILY SUPPLY/DEMAND BATTLE IS ALLIMPORTANT
24
LET'S SHATTER SOME PRECONCEIVED NOTIONS 25
WHY WE DO NOT USE YESTERDAY'S CLOSE IN OUR OBSERVATION 26
NOW WE KNOW WHO WON THE BATTLE, BUT BY HOW MUCH? ... 26
ENTER VOLUME 26
HOW TO TELL WHEN THE PROFESSIONALS ARE IN CONTROL
OF A STOCK , 27
MORE EXAMPLES FOR YOUR BENEFIT . 28
Page
CHAPTER FOUR
HOW TO PROFIT FROM THE ACCUMULATION DISTRIBUTION
FORMULA 30
HERE IT IS... THE MILLION DOLLAR FORMULA 30
WHY DO WE USE VOLUME? 31
HOW TO CONSTRUCT A FLOW LINE OF PROFESSIONAL ACTIVITY . 31
SOME TIME SAVING TIPS 33
HOW TO SPOT THE BASIC BUY SIGNAL 34
WHAT THIS MEANS 34
WHAT THE BASIC BUY SIGNAL LOOKS LIKE 35
HOW TO IDENTIFY THE STRONGEST POSSIBLE BUY SIGNALS ... 35
HOW TO SPOT THE BASIC SELL SIGNAL 36
WHAT THE SELL SIGNAL MEANS 37
HOW TO IDENTIFY THE STRONGEST POSSIBLE SELL SIGNALS . . . 37
THE IMMEDIATE PROFIT SIGNAL '. 38
THE CHINESE 39
CHAPTER FIVE
SHOULD YOU FOLLOW THE SHORT OR INTERMEDIATE TERM
TRENDS AND HOW TO DO IT 44
HOW TO FORECAST SHORT TERM MOVES 45
MY FAVORITE SHORT TERM INDICES 45
HOW TO TELL WHEN THE MARKET HAS REACHED A SHORT
TERM OVERBOUGHT/SOLD POINT 46
WHEN TO TAKE ACTION 50
AN EXPLANATION OF THE MOMENTUM INDEX 50
HOW TO FORECAST INTERMEDIATE TERM MOVES 51
MY FAVORITE INTERMEDIATE TERM INDICES 51
WHERE WILL THE MARKET GO?-"WILL GO" KNOWS! 51
YIN AND YANG, REVISITED 53
A FINAL INTERMEDIATE TERM INDEX 54
CHAPTER SIX
HOW CYCLES CAN IMPROVE YOUR STOCK TIMING 55
THE SECRET OF IDENTIFYING INDIVIDUAL STOCK TRADING
PATTERNS 56
IDENTIFYING THE PATTERNS 57
MEASURING THE CYCLE'S MOMENTUM 58
PRECISION TIMING WITH CYCLES 60
POLITICS AND THE MARKET 61
CHAPTER SEVEN
Page
WHAT YOU NEED TO KNOW ABOUT LONG TERM STOCK
MARKET TIMING 62
HOW TO IDENTIFY A SELLING CLIMAX 62
WHAT A MAJOR TOP LOOKS LIKE 64
TWO FUNDAMENTAL INDICATORS TO SPOT MARKET TOPS .... 66
HOW MONEY SUPPLY CAN HELP YOU 67
THREE TECHNICAL INDICATORS TO SPOT MAJOR TOPS 68
HOW TO CALL A MAJOR STOCK MARKET BOTTOM 72
FOUR INDICATORS TO CALL A MAJOR BOTTOM 72
THE STOCK MARKET'S MASTER CYCLICAL PATTERN 75
THE MASTER PATTERN IDENTIFIED 75
PHASE ONE 76
PHASE TWO 76
PHASE THREE 77
A LOOK AT THE RECORD 77
A 35 YEAR STOCK MARKET PROJECTION 79
POINTS TO REMEMBER 80
CHAPTER EIGHT
HOW TO COMBINE MARKET TIMING AND STOCK SELECTION . . 81
DOCTORS HAVE STETHESCOPES 81
THE SECRET TO TIMING PROFITS 81
A WORD ABOUT YOUR EMOTIONS 82
HOW TO TELL WHEN THE TIME IS RIGHT 82
ALL THAT'S LEFT TO DO 84
HOW TO AVOID BUYING TOO HIGH OR LOW 84
MY PERSONAL CHECK-LIST 84
MASTER CHECK-LIST FOR MAKING STOCK MARKET TRADES ... 85
HOW TO DEVELOP PATIENCE-OR-MY LOSS IS YOUR GAIN ... 85
HOW TO AVOID WAITING TOO LONG 86
THE TWO THINGS I WAIT FOR 87
CHAPTER NINE
HOW TO KNOW WHEN IT'S TIME TO SELL 88
THIS SCREAMS SELL 88
WHAT'S THE BEST DAY FOR SELLING? . ' 89
HOW TO AVOID SELLING TOO LATE OR TOO EARLY . 90
CHAPTER TEN Page
HOW TO BEGIN USING MY METHODS 92
START BY DOING THIS 92
WHERE TO GET THE INFORMATION YOU NEED 94
WHO WILL HELP YOU? 95
HOW TO USE BROKERS TO YOUR ADVANTAGE 95
HOW TO PAY LESS IN BROKERAGE COMMISSIONS 96
WHAT STOCKS TO FOLLOW 97
HOW TO SPOT LONG TERM GROWTH STOCKS FROM
THE CHARTS 98
A SPECIAL SECRET ABOUT SELECTING STOCKS TO FOLLOW . . . . 99
WHEN TO MAKE YOUR FIRST TRADE 99
THE FIVE MOST COMMON CAUSES OF STOCK MARKET LOSSES . . 100
CHAPTER ELEVEN
HOW TO START MAKING MONEY IN THE MARKET
.. .TOMORROW MORNING .' 102
STOCKS TO FOLLOW 102
KNOW WHAT THE PROS ARE DOING 103
HOW TO RATE YOUR TRADES 104
WHAT TO DO WITH YOUR PROFITS 105
MY FINAL COMMENTS 106
CHAPTER TWELVE
PRICELESS TRADING HINTS 107
HOW TO GET THE BEST EXECUTIONS 107
WHEN TO BUY AT THE OPENING 107
WHEN TO USE MARKET ORDERS 108
WHEN NOT TO BUY ON THE OPENING 108
HOW TO USE STOPS AND WHERE TO PLACE THEM 110
A WORD ABOUT MENTAL STOPS 111
HOW TO FORECAST DAY TO DAY ACTION 111
HOW TO CAPITALIZE ON THE THREE HOUR CYCLE 112
PREFACE
Writing an author's update for a book that was written 15 years ago is a real challenge!
The real challenge is that I am tempted to change some of what appeared in the original copy of this
book. But in reading and rereading the book I see that the book simply does not need to be reauthored or
rechanged.
The tools, techniques, indicators and strategies discussed in the book are as valid now as they were in
1969 when the book was written.
There are two things that I would like to stress upon people reading The Secrets of Selecting Stocks, for
the first time.
First, is that these indicators have stood the test of time.
I have received letters and phone calls from people who literally swear by the accumulation/distribution
technique discussed in this book. Perhaps the greatest thrill of writing this book came in the form of a
postcard sent to me from a lawyer who was on vacation in the South Pacific. The postcard simply said,
"Larry, my wife and I are taking this vacation because of the profits we made following the indicators
and especially your accumulation/distribution technique as you presented it in your book. We both are
enjoying the sunshine and thank you very much."
Much of the technical work you see being done today by leading advisors is a spinoff of what appeared
in this book, so for no other reason than historical purposes I do not want to change what was originally
written about in the book. This book seems to have been a Genesis for a great deal of thinking about
technical approaches to the market.
The indicators still work and they still work in the same fashion. As they say, if it is not broken why fix
it?
Perhaps the longest term value to come from the book is the major forecast made in the book under the
39 year pattern that I believe I have been able to isolate that has called some of the very important major
turns.
Notice that in the 15 years since the book was written there have been many doomsday calls for
economic disasters, stock market crashes, and all sorts of arguments from the purveyors of pessimism
about how bad the world is going to get. In fact, what has taken place has pretty much been in line with
the forecast made in this book.
A study of this major forecast will give you an economic road map of where the economy and stock
market is headed for a long time to come.
Yes, there will be a major crash in the stock market. The big question is not that it will occur, but when
it will occur. The answer to that is in this book.
My own trading style appears to have smoothed pretty much in gear with what I see most traders doing.
We cut our teeth trading stock and then moved into commodities. Most of my own trading experience is
now in commodities because commodities are more easily traded, especially due to the low discount rate
in stocks. Interestingly enough however, the tools that I use to trade commodities with are very similar if
not the exact same tools discussed in this book.
The markets have been my life. It has been a good one, I hope it is for you as well.
Cordially,
Larry Williams
CHAPTER ONE
MY MILLION DOLLAR STOCK MARKET CONCEPT
MY MILLION DOLLAR STOCK MARKET CONCEPT
A cold wind was blowing through Wall Street in the Fall of 1971. After a
dramatic 100 point rally ignited by President Nixon's announcement of Wage &
Price Controls, the market suddenly reversed itself and began to plummet. Things
looked bad. The DJIA had just broken its support point and fallen to a new low.
Many analysts announced that we had begun a Bear market.
I didn't think so. That was because a few of the select indicators I keep were
giving bullish readings for the stock market. Reflecting back upon it, I'm certain I
was as influenced emotionally by the break to new lows as anyone. Things looked
dismal. I felt a knot in the pit of my stomach. But when I turned to look at my
indicators, the ones I will be discussing in just a few more chapters, I noticed they
were in a distinct bullish area. Their message was clear: they were telling us to buy
stocks. So I did.
SELECTING STOCKS TO OUT PERFORM THE MARKET
Within just a very few days, the market began one of the strongest advances it had
made for many years. Shortly before the market began its tremendous 22%
up-move from the 800 area to the 960 area, I bought four stocks for my own
account.
The four stocks I purchased showed a net increase of over 52% in value during the
next six months, whereas the popular averages increased only 22%. Had one
purchased and held the same amount of these four stocks as I purchased at the
November low point, he would have had a profit of slightly over $308,000.00
some 5 1/2 months later.
I am giving you these facts to show why I believe my stock selection is of value
and to substantiate some of the things I am going to be discussing with you.
With a little bit of luck in calling important market turning points, one should be
able to buy stocks that show about the same percentage moves as the DJIA.
However, when you consider the four stocks I selected for my own portfolio
showed a gain almost three times greater than the Dow, it does appear there is
predictive value to the system.
1
I could go beyond what happened in my own personal account. You see, at that
time I was also writing a stock market letter and, of course, made specific
recommendations with our buy signals sent out during the first part of November,
and again, just a few days before the low point was reached.
The stocks we were recommending at that time were Federal National Mortgage
at 75 and AMF at 38. Levitz we recommended in the 80 area, North American
Mortgage at 35, MacDonald's at 61, Pickwick at 37, Syntex at 66, Burroughs at
131, and IBM at 292. On the 16th of November, we also advised purchasing
Lennar Corp at 45, Ponderosa Systems at 57, American Research & Development
at 44, Walt Disney at 104, and Polaroid at 90. As you can tell from the number of
recommendations we made at this time we were indeed quite bullish on the
market.
Exactly five months later, this uniquely selected portfolio showed a sizeable gain.
Ponderosa Systems, which had split two for one, was selling on an adjusted basis
at 118, up 61 points. Syntex was selling for 115, up 49 points, American
Research & Development was selling for 70, up 26 points, Disney for 165 up 61
points, Polaroid for 132, up 42 points. Federal National Mortgage, which had run
up as high as 108 on an adjusted basis for a stock split, was selling at 97, up 21
points on the adjusted basis. AMF was selling at 66, up 28 points. Levitz, which
had run up as high as 162, was selling at 135, up 55 points. North American
Mortgage was selling for 34, down 1 point, MacDonalds at 102, up 41 points,
Pickwick for 48, up 11 points, Burroughs for 175, up 44 points; International
Business Machines for 395, up an incredible 103 points. The only stock to show a
sizable loss was Lennar Corp. which was then selling at 36 down 9 points. The
initial portfolio value was $115.5 per share. Five and a half months later the value
was $168.8. The portfolio had increased 46.1%. Keep in mind that this was during
a period of time when the market itself, as measured by any of the popular
averages, was up about 20%. Our specially selected stocks performed twice as well
as the averages.
I believe this is conclusive evidence that my stock selection system, the one you
are about to learn, does have the unique ability to select stocks that are going to
out-perform the market on both the long and short sides. What happened in my
account, the $308,000.00 profit I mentioned earlier, was not a random event due
to luck or my good looks. It was due to my stock selection system that has been
proven time and time again to have significant forecasting value.
Making money in the stock market is far from simple. Don't let the above few
paragraphs lull you into feeling Wall Street is an easy path to instant riches. It
isn't. . . just like anything of value, it takes hard concerted work to be successful.
But let me also point out that I have been able to consistently make money
trading stocks in my own account as well as in public recommendations in the
advisory service I used to publish, "Williams Reports."
WHY THE WORD FORECASTING IS IMPORTANT - My abilities to usually call
market turns and individual stocks is the direct result of a good deal of study and
research into the marketplace. In the beginning, I tried to latch on to other
peoples' supposedly successful methods.
When it comes to making money in the market, I'm not proud . . . I'll try any
halfway logical method or system to generate profitable trades. That means I've
read all the books on fundamentals, methods and technical systems. In fact, I
even dabbled a bit in some interesting research on stock market and astrological
relationships.
It wasn't long before I learned that if a system is to be profitable it must forecast
what will happen in the future.
That little sentence is the real key to understanding the stock market. If an index
or approach is to work, it is because it has forecasting ability. In examining
various market theories, my first thought is to study the basics of the system to
see if the raw data has forecasting significance. If not, the method cannot work!
Along the road to the discovery of my key to the stock market, I tried and
studied many, many different approaches. I'd like to share a few of my views on
the more common systems for stock market trading and investing in an effort to
help you separate the wheat from the chaff.
WHAT I LEARNED ABOUT CHARTS
At some point in his life, every market participant, be he trader or investor, takes
a look at charts and reads a few books on how to chart your way to wealth. I
found the only people charting their way to wealth were the authors of the
books! Try for the life of me, I could not find a workable charting program,
formation, or whatever other mysterious forecasting element was supposed to
exist on the charts.
3
In today's mail I received a flyer from one of the widely followed chart services.
Their central advertising claim is that charts could help traders and investors
because, as they said, "Charts are a natural for stock trading, since they give the
full results of all supply/demand factors. They reflect insider buying and selling,
"smart money" accumulation and distribution, important news before it is
published — in fact, everything that anybody knows or does."
This is the general view of those entrenched in the chartists' camp. They feel
charts, through various formations and configurations, reflect the true supply/
demand picture and thus have forecasting value. There are many books on
charting and almost as many chart formations or patterns as there are stocks. But,
by and large, most chartists look for a few basic chart patterns.
Chart 1
Chart one shows several of the more basic chart formations such as the head and
shoulders, boxes, diamonds and a pennant. You will find these patterns illustrated
in any of the books on stock market charting.
Keep in mind that charting is based on the assumption that a chart correctly
depicts the supply/demand battle. As such, charts enable one to spot developments
that depict a bullish or bearish supply/demand pattern. Supposedly, these
patterns repeat and forecast future market or stock action. It's certainly a nice
concept.
4
But two things bother me about the frayed-cuff chartists . .. First of all, I do not
know of any chartists who are really very wealthy or doing exceptionally well in
the market. To quote economist Paul Samuelson, "They all have holes in their
shoes." Seriously, of the thousands of people I know in the market, I cannot
show you one chartist who is making money!
More importantly, when I notice charts of other activity, such as rainfall in New
York City, traffic deaths in Los Angeles, or the reproduction rate of Canadian
Lynx, those same darned supply/demand patterns show up on the charts!
This is incredible . . . when charting series of numbers that have no relationship to
supply/demand (certainly we cannot argue there is a supply/demand relationship
to the number of deaths in L.A. County) the same head and shoulders, wings,
wedges and upper case Outer Mongolian breakouts occur.
The continual re-occurence of the same "supply/demand" patterns in non-supply/
demand phenomena must splash a good deal of cold water on any forecasting
validity the chartists might try to conjure.
I suppose the validity of charts will be discussed for many years to come. There
will even be some lucky chartist who attributes his luck to charts and writes a
book or market letter about his charting system. But, as long as the same patterns
appear in rainfall statistics and traffic death records, I'm going to have to remain a
non-believer. You are urged to do likewise.
WHAT I LEARNED ABOUT MOVING AVERAGES
One of my attempts to make a killing in the market centered around the use of
moving averages. Several authors and market letter writers had turned me on to
the standard use of moving averages. I thought I'd give their methods a try.
A moving average is simply an average of a series of numbers. The only difference
is that the average changes each day as we add the new day's information and
subtract the data or information for the number of days ago for which we are
running the average. Thus, in a 20 day average we add up all values for the last 20
days and divide by 20. To make this a "moving average" we wait until tomorrow's
close, add that figure to our sum and subtract the figure from 21 days ago and
divide by twenty.
As with any mathematical average, the resulting values represent a smoothing of
the raw data. Take a look at the chart shown here and you can get a better feel
and understanding for moving averages than I can tell you in thousands of words.
5
Chart 2
One thing you'll quickly notice is that a moving average acts as a trend line or
band of resistance and support to the raw data. Also, when the raw data rises
above the moving average, it continues moving up. When the raw data falls below
the moving average, the up trend has been reversed and the raw data moves
sharply lower.
The usual moving average methods are based on penetrations of the moving
average. Thus, if a stock's price rises above its 10 week moving average, a buy
signal is given and when it falls below a 10 week moving average, a sell signal is
produced. On paper, and with some stocks, the method appears absolutely
phenomenal.
Funny thing though, try as I might I couldn't make any money using the moving
average system. I was perplexed. I re-read the rules, but again, I lost money.
Finally a bolt of lightening hit me ... the moving average method worked great
when it worked .. . but when it didn't work, Oh Brother!
6
What's more, promoters of the moving average methods selected stocks for which
their system worked best in the past. They did not bother to show stocks the
method did not work on. Nor did they bother to carry their system into the
future. What they did do was find a stock or two that had a big up move and a big
down move. Their moving averages were placed on this trend and captured a large
part of both moves. Stocks that did not have large moves but traded in narrow
confines were not shown because these situations produced losses!
Most of the moving average systems are based upon a 10 week average. The big
question is, as always, will the moving average system work and if so to what
degree?
Recently articles have appeared in the Financial Analyst's Journal discussing
various longer term moving averages. One study randomly selected 30 NYSE
issues between 1960 and 1966 and tested 100,150, and 200 day moving averages.
Signals were generated by either an absolute penetration of the moving average or
a percentage greater than the moving average — a filter — above and below the
average itself.
Using the 100 day average with no filter produced a 57% loss of capital. Using a
200 day moving average produced a drop of 34% in starting capital. Whether one
used a 100, 150 or 200 day moving average with no filter, or a 2%, 5%, 10% or
15% filter, he would have lost money during this 6 year period!
In June 1969, in an effort to devise a profitable trading method, I ran a test of 10
stocks for 450 market days using shorter term moving averages of 3, 4, 5, 7 and
10 day durations with filters of -3%, -1%, +1% and +3%.
With the benefit of hindsight and the use of what was at that time the world's
largest computer, I was still not able to devise a profitable trading strategy based
upon the moving average method!
THREE NEW WAYS TO USE MOVING AVERAGES - If moving average
systems are of little value, as the above statistical research demonstrates, is there
still some way they can be used? I think so.
To my way of thinking, there are three good ways to use moving averages. The
first method is to simply observe the trend of the moving average and as long as
the trend of the moving average is up, assume the stock will go higher. When the
trend of the moving average is down, assume the stock will go lower. In other
words, trade the long side of a stock only when the moving average is up and
trade the short side only when the trend of the moving average is down.
7
Another way to use the moving average draws upon the penetration of moving
average by price itself. At first glance this seems contradictory because I've just
shown that such penetrations do not produce very reliable signals.
What I'm suggesting is that you act upon signals from moving average penetrations
if, and only if, other technical or fundamental criteria have been met. In other
words, once you are certain a stock is bullish or bearish because of another factor,
you can then act on signals from the moving averages. In short, you need to weed
out the bad moving average signals. This is done by developing a set of criteria
that must first be met before you will act upon any moving average signal. In fact,
the moving average signal is the final indication to take action as it simply
announces that the trend has been reversed.
A third way to use a moving average involves using it to measure a stock's
momentum or cyclical harmonics. This is a more involved topic and will be
discussed in detail later on.
WHAT I LEARNED ABOUT FUNDAMENTALS
It stands to reason that if a company's fundamental position is one of great
bullishness, the stock price will stage a handsome advance. The only problem here
is identifying what fundamentals are bullish, or bearish, for that particular
company, industry and market situation at the time. Or, so it seems.
Some of the most powerful fundamental situations have never advanced or
declined while some of the most fundamentally bearish stocks doubled and
trippled in value!
Several years ago, there was a hot little number on Wall Street called Four
Seasons. Fundamentally the stock was a short sale and many knew it. But the
fundamentals did not prevent the stock zooming, from 20 to over 100! About two
years after the big run up, the fundamentals caught up with the company and
they filed for bankruptcy. But in the meantime, the fundamentalists that shorted
the stock in the $20, $30, $50, $60 and $70 area were clobbered and they too
"filed" for bankruptcy.
General Motors is another good case to study. The long term outlook for GM
can't be too bad. Yet GM made its all time high in 1965 and has never
participated in any substantial up move since then. Time and time again you'll see
many fundamentally bullish stocks take nosedives while the fundamentally
bearish stocks fly to the moon!
8
Chart 3 shows one such example. Notice how all the tops come at low yields of
just about the same valuation.
And the bottoms? It's just the reverse, all the bottoms come at a time of high
yields and all the bottoms are marked by the same general level of undervaluation
and high yield.
Short sale selections should come from stocks showing very low historical yields.
Long candidates come from the high yielding stocks.
Remember, the higher low yield for one stock, say IBM, will not be the high or
low yield for another stock, say G.M. It's all relative to each stock's individual
historical record.
HOW TO TELL IF A STOCK IS FUNDAMENTALLY SOUND - In all of my
research I have found only two reliable measures of fundamental value. One
concerns itself with yields, the other with the company´s growth rate.
CHECK THE YIELD — The first and most important fundamental statistic is the
stock's yield. Generally speaking, a low yield is bearish for a stock and a high
yield is bullish. But just what is a low yield for any given stock? This is best
obtained by checking the stock's historical 10-20 year record. Almost without
exception, you'll quickly see that all major tops in the stock come at a time of
low yields and usually this low yield will be about the same at all tops.
By the same token, all the stock's important lows will usually be found when
the stock is at a high yield and always about the same general level. Thus we can
estavlish overvalued and undervalued levels of yield for each stock based upon
that stock's historical record.
9
HOW TO DETERMINE A COMPANY'S GROWTH RATE - There are a good
many ways to look at a company's fundamental growth. The most typical are the
P/E ratios. Another method seeks to establish the company's growth rate while
others look at net sales. All are, to some degree, helpful but usually do not give us
adequate figures to compare one stock with another.
The payout time formula solves this.
This simple formula is nothing more than the number of years it will take earnings
per share, compounded at the firm's current growth rate, to reach the price of the
stock. Let's say the earning per share is $1.50, the growth rate is 20% per year,
and the current price is $30.00. It will take about 16 years for the compounded
earnings to equal the stock's current market value.
Lets's take another stock with earnings per share of $1.00, a growth rate of 15%
and current market price of $3 a share. In terms of the annualized growth, this
does not appear to be as good a buy. But its payout is only some 9 years! It
represents a better buy. The lower this payout figure is, the better a fundamental
buy you have located.
HOW I DISCOVERED THE MILLION DOLLAR CONCEPT
As you can tell, I've spent a good deal of money and effort on research trying to
crack the market's mystique. One thing that always fluttered around the back of
my mind while I looked at charts, moving averages, point and figure charts, and
fundamentals was this: all these things do not, in and of themselves, make prices
move up or down.
No matter how bullish the technical structure of a stock is or how impressive its
rate of growth and yield figure, these things do not and cannot be guaranteed to
influence prices!
Then it hit me ... the only thing that can possibly make a stock go higher is an
imbalance of buyers and sellers. It is as simple as that. When there are more
buyers than sellers, prices will advance. Conversely, when there are more sellers
than buyers, prices will go down . . . regardless of the fundamentals!
10
As simple as the concept sounds it took several years of research to arrive at a
meaningful way to break down the relationships of buyers and sellers as well as
methods to identify the difference between professional and amateur buying.
Realizing it was the imbalance of buyers and sellers that influenced prices, I began
studying the various groups of people in the market, such as the odd letters,
specialists, floor traders, etc.
Through this process, I discovered a reliable method that breaks down each day's
buying and selling activity in any stock into the approximate number of shares
bought and sold that day. This method, actually a precise formula, tells me at the
end of each day about how many shares were on the buy side and how many
shares were on the sell side. From these figures, I can begin analyzing the
supply/demand battle.
I also discovered there is one certain chart pattern that indicates if a stock is
under professional accmulation or distribution. This is a very simple pattern and
has nothing to do with traditionally known chart formations. The comparative
pattern graphically tells us what stocks have been under heavy buying and are in
strong hands as well as the stocks that have been undergoing professional selling
and are in weak hands.
A 13 POINT GAIN JUST LAST WEEK - Let me first tell you that my two phase
method for analyzing accumulation and distribution is not infallible. It has made
few errors, but, by and large, the method has worked wonders for me.
Just last week McDonalds Corp, the hamburger people, appeared to be under
heavy accumulation in my work despite a sharp market break. My figures said the
stock was ready for an upmove. I put in my order for 1,000 shares at 49%. All
measures of accumulation were impressively bullish despite the soft market. This
stock had been priced for an upmove.
As I write this, 7 market days later, MCD is selling at 62, up over 13 points from
my buying indications which came at the 49-50 range. My million dollar, two part
concept, is based upon the central tenent that stock prices advance if, and only if,
there are more buyers than sellers and decline if and only if there are more sellers
than buyers.
We analyze the buying/selling syndrome in two statistically valid ways to detect
professional accumulation and distribution. The exact formulas and patterns will
be given to you in a moment, but first you must understand the importance of
the supply/demand bearing on forecasting stock prices.
11
THE TWO METHODS I USE TO IDENTIFY ACCUMULATION & DISTRIBUTION
As I've said, the only thing that will push the price of a stock higher is a
preponderance of buyers. Conversely, the only thing that will drive prices down is
a preponderance of sellers.
My study into the accumulation/distribution area was prompted by an old timer's
casual remark in a board room. At the time, I was trying to figure out what tape
reading was all about. I spent just about every market hour watching prices
chatter by on the ticker. I wasn't making much progress and certainly wasn't
finding it possible to "read" the tape.
This particular board room was frequented by a somewhat daffy old gal who was
always going to buy or sell stock, but never did. She must have missed the boat by
just a day, or a point, on hundreds and hundreds of big winners. At least that's
what she claimed, and I'm inclined to believe her. It was unfortunate.
One day, a stock she had been following, widely touted as being a super strong
stock, began to fall. In a matter of minutes it was down three points. By the end
of the day it was off five dollars. The next day gave the lady no relief as the stock
continued to fall despite the fact the market was rallying!
The pressures of losing were getting to her, and she said out loud, to no one in
particular, "Why in the hell is that stock going down?"
My old timer friend, sitting in the back row, loudly said that he knew exactly why
this hot number was going down!
Well, that was just too much for the little lady to take. She scurried back to the
fellow, demanding he tell her exactly why the stock had been plummeting. It was
obvious she was upset that the fellow hadn't told her sooner. However, her anger
was tempered by the fact that someone finally was going to give her the secret to
her stock's activity.
The old timer, I'll call him Don, had been a broker for many years. He lived
through the crash (many brokers didn't), and in the process had acquired a great
deal of insight into people and the market. Of those of us in the board room he
was the only one with substantial amounts of money, making him the resident
guru.
12
Don could contain himself no longer. He leaned far, far back in his chair and
bellowed out, "Any fool can tell you why your stock has been going
down . . . there've been more sellers than buyers!"
Everyone roared! Old Don had "taken in" another trader. The gal didn't think it
was funny though, and insisted she be told how to know when there are more
sellers than buyers. For that Don had no answer.
The episode I've just described was one of the turning points in my career. For
years I had tried many, many stock selection and timing systems. But upon
reflection, I saw that none of them attempted to break down and identify the
amount of buying or selling taking place in the market. They were all based on
something else . . . something that might effect stock prices from time to time,
but the special forecasting ingredients were not always present.
Don had hit the nail on the head! Indeed, stocks move due to an imbalance of
buyers and sellers. All I needed to do was develop a method to measure these
components. I'm not going to bore you with the myriad of techniques I fooled
around with before I finally arrived at what I feel are the two best ways of
identifying professional accumulation and distribution. My very first studies
revealed that there are many types of buyers and sellers in the marketplace, but
that only a few, a group I've labeled "the professionals", were worth following.
DISCOVERING THE PROFESSIONALS
There's an age old question in the market that would give ample thought for the
greatest of all the masters of Zen Budhism. Usually these monks meditate upon
probing, seemingly unanswerable questions. But imagine giving them the
market's most difficult question, "For every buyer there is a seller. Therefore,
how can prices change, as buying and selling is allways equal?'' I'm no Zen monk,
and believe me it was confusing to ponder upon this unique supply/demand
relationship. My research eliminated much of this confusion as I soon discovered
that the one for one relationship has little bearing on prices. Instead, I learned it is
more important to notice at what time and price buyers are wiling to move into
or out of a stock. That´s part of the secret!
A specific example may help. In the Spring of 1971, I recommended Bausch &
Lomb in my advisory service when the stock appeared to be under accumulation
in the $50 area. In the service we rode it up to $150, for a 100 pt. gain! Then in
the 150-180 area, additional buying came into the stock; but this was not
professional buying, it was uninformed buying. We knew this because the stock
already had doubled in value! Professionals, the really smart people, were buying
in the $30 to $60 range. Those were the people who took the largest gains — the
smartest investors.
13
We also shorted Bausch & Lomb at 180-190 and had the pleasure of seeing it
topple, slamming down to the 60 level. The same situation held true on the
downside. People buying the stock in the 180 area were the uninformed, the last
to get aboard, if you will.
1. WHERE THE STOCK HAS BEEN
2. WHERE THE STOCK CAN GO
COMPARATIVE STRENGTH, THE SECRET TO FOLLOWING ALL STOCKS
Many people have been amazed that I can follow just about all stocks traded and
in an instant tell if the stock has been under basic accumulation or distribution.
There's really nothing to it other than an understanding of the preceding
paragraph.
Another important thing to notice about buying or selling is what is taking place
in the market itself. Those investors or traders aggressively accumulating stock on
days the market is down are indeed courageous in their views. The normal
reaction to a down day is to stop buying. This is best seen in volume trends. As
the market moves lower, daily volume continues to diminish.
So, when we spot buying taking place in spite of a down market, we have a sign
that someone knows what he´s doing, and we´re going to want to follow,this type
of informed trader as much as we can.
You see, to spot professional accumulation, all we need to do is find an example
of steady and determined buying in the face of a weak stock market. When this
happens we have a good idea that professional buying is taking place.
Professional selling will show up when we see consistent and determined selling in
the face of a strong market. That is, when the market is surging up, but selling
pressures enter a particular stock we can bet that we have a stock undergoing
professional, informed selling.
The effect of buying and selling is easiest to see in the price trends of individual
stocks. You will be shown other ways to fine-tune and fully analyze accumulation
and distribution, but it's imperative for. you to remember that the effects of
buying and selling will first be exhibited in the prices themselves.
14
The point I'm trying to get across is that in analyzing the buy sell relationship,
you must take two things into consideration. They are:
THERE'S A PATTERN TO EVERYTHING - ESPECIALLY ACCUMULATION
Realizing the first visible signs of accumulation or distribution appear in a stock's
price puts us far ahead of the pack. Now we can begin to concentrate on
identifying accumulation and distribution in terms of patterns with the aid of
simple stock charts.
As the many followers of my service know, I'm not particularly "big" on chart
formations and traditional chart signals. In fact, it's my opinion for the most part,
chartists "know not what they do." But that doesn't rule out the intelligent use
of charts.
HOW TO USE STOCK CHARTS
Remember, we want to detect professional accumulation and distribution. We've
established that the best way to do this is to find individual stocks whose price
action differs from the overall market. This can be done easily by taking a chart
of any of the popular averages, Dow Jones Industrial, NYSE Composite or the
Standard & Poor's and simply comparing the market average configurations to
any individual stock's price trends.
In an instant you can analyze virtually any stock by comparing its action to the
action of all stocks, as represented by a broad market average!
To further simplify this evaluation technique, I've devised what I call the
accumulation and distribution patterns. All you have to do is take note of the
market average and the action of any stock to see if the accumulation pattern is
present. If so, you have a potential candidate for a buy. If the distribution pattern
is present, you have a potential short sale.
THE ACCUMULATION PATTERN
To detect accumulation, we look for bullish divergence between the market itself
and the stock we are attempting to analyze. Bullish divergence can best be seen
when a stock fails to be as severely affected by selling pressures as the broad
market. Another way of putting this is that a stock exhibits accumulation when it
does not match the market's downward moves. Instead, the stock holds up better
than the averages on market down moves and rallies stronger on market rallies.
15
This is quickly discernable on chart 4. You can see from our example of Telex in
the summer of 1969. Notice that the Dow Jones Industrial Average repeatedly
declined to new lows, stair stepping down and down and down.
Chart 4 Chart 5
However TC not only failed to move to progressively lower prices, it actually held
above its intermediate term lows while the market fell below its corresponding
points. This is a sign of extremely strong accumulation! Study it well.
In spite of a very weak market, the holders of this stock did not panic. They held
onto their stock even though the market was taking a clobbering. Thus, we can
assume these people had special knowledge. Severe weakness did not disturb their
positions for they knew higher prices were on the way.
Additionally, new buyers were willing to come in and hold up the existing price
structure. In short, while most all other stocks were declining, someone,
somewhere, had bullish convictions strong enough to step in and buy this stock
regardless of overall market conditions.
What more could we want? Current holders of the stock simply refused to sell,
while flurrys of weakness were quickly met with additional buying. As they say,
the stock was in strong hands. It was under professional accumulation.
16
Another good example of the accumulation pattern can be seen in chart 5 of
Levitz Furniture as compared to the Dow Jones Industrial Average. Notice again
we se the market falling to new lows. But this time, instead of seeing the
individual stock price merely hold its own, as with TC, Levitz not only held its
own, but kept moving up making higher highs and higher lows on each successive
stock market move.
Let's analyze the situation once more. While the market was moving to new lows,
the Bears could not force the price of Levitz down. Why? That's an important
question.
Referring back to what I mentioned earlier, remember that a stock moves up only
if there are more buyers than sellers. What was the situation with Levitz? Were
there more buyers than sellers? Obviously, yes. Were these strong or weak buyers?
Very strong! After all, on just small market rallies, (which were actually only
reactions in a general downtrend) Levitz was able to zoom to new highs.
SOME POINTERS
I use daily charts to compare stocks with the market. There is no need to keep the
charts yourself. There are scads of chart services and I'm listing the ones I like at
the end of this chapter. All you need to do is get a clear sheet of tracing paper and
make a tracing of the market average and then overlay this with the stock's price
average. You then have an excellent comparative basis with which to begin your
analysis.
The greater the divergence between the market and your stock, the larger move
you should expect the stock to make once it begins. I guess what I'm really saying
here is that divergence of a few days will forecast moves of a few days duration.
Divergence of a few weeks will forecast moves of a few weeks and divergence of a
month or more will forecast extended, long lasting moves.
It is particularly important that you compare your stock with the market at
critical junctures. (By this, I mean important market reversal points.) The fact
your stock has held up better since last Thursday is not as significant as the fact
the stock has held up and performed much better since the last important top and
bottom.
17
THE DISTRIBUTION PATTERN
In case you haven't guessed it, the distribution pattern is just the reverse of our
accumulation pattern. What we're looking for here is a stock that has consistently
underperformed the market. The most apparent example would be a stock that
has failed to rally to a new high while the market has moved to a new rally high.
Chart 6
As you study chart 6, notice that while most all stocks, as represented by the
averages, were able to appreciate in value, this particular stock was not. Selling
was coming in at a time of overall market bullishness. Certainly we could not ask
for better signs of professional selling or distribution!
So, in a classic distribution pattern we will see the market move up to a new rally
high, while a stock under professional distribution will fail to make the same new
high. The extent to which it falls below this new high gives us an indication of
how agressive the distribution is. The greater the failure, the more hurried the
professionals are to get out of the stock.
There are other ramifications to this selling pattern. Let's take a look at a few. I'd
like to begin by showing you the Spring 1970 chart of Atlantic Richfield. We did
not have a classic pattern here. The classic pattern will not always be present.
Nonetheless, ample signs of distribution can be discovered.
In the case of ARC, we see the market staged a dynamic rally from A to B. This
rally was strong enough to lift the averages, i.e. most stocks, back above their
previous lows at point C.
18
But how about ARC? What happened here was a far different story. True, the
stock rallied along with the market, and as there was no new rally high in the
market, we did not have the classic selling pattern. But, notice how feeble the
rally was, especially in reference to the previous low point at C ... the same low
point most all other stocks were able to rally above. Did ARC follow suit? No, it
didn't even come close to getting back to this same price area. It was under
professional distribution!
Chart 7
A different version of this distribution pattern can be seen in the chart of
Natomas, another great trading vehicle. All we need do is compare the overall
stock market rally from A to B with NOM's rally from A to B at the same time.
Which displayed the greatest strength? The market. What did that tell us about
NOM? Simply that it was under distribution. While the averages rallied, NOM
barely held its own, managing only to "rally" in terms of a flat line, while most
other stocks were rallying at a much sharper angle.
Obtain a copy of any old Trendline chart book, a few sheets of tracing paper and
see for yourself how effective this simple method is in detecting accumulation and
distribution ... separating the men from the boys so to speak.
19
Chart 8
HOW TO BEST USE THE PATTERNS
%
Making money in the market involves the use of a combination of stock selection
and market timing. You can begin working right now on the first part — stock
selection — by scanning all the issues you trade or all the issues in the chart books
you have, to pre-screen and select the strong and weak stocks. It takes about 1/2
hour to scan the total universe of all stocks listed in the all-inclusive chart books.
Those of you who have your own charts, will be able to quickly ferret out those
under accumulation and distribution.
This is a real boon ... a major breakthrough, in stock selection, for it enables you
to focus your attention almost instantaneously on stocks that show promise!
There's no need to try to seek out every hot story and tip you hear. Nor need you
spend countless hours pondering over financial statements. What's more, if you do
hear an interesting story about a stock you can check it out, confirm or invalidate
it in just a matter of minutes by checking directly the stock's action in the
marketplace, seeing for yourself if it shows the broad, overall signs of
accumulation or distribution. Do the hard facts of professional action justify the
story? The answer is there in black and white in the chartbook!
The patterns I've just unveiled should be your broad, overall selective method.
After scanning many stocks you can narrow your attention to those few showing
the most bullish or bearish patterns and then begin to follow ffoese issues closely.
20
CHAPTER THREE
MY SECOND TOOL FOR SELECTING STOCKS
ADDITIONAL POINTERS
As I said earlier, the longer lasting the bullish or bearish divergence, the more
significant for longer term moves. Because of this, the method can be of real value
at what you feel may be major stock market tops or bottoms.
Indeed, one of the best long term selection method is simply this: spot the stocks
I that have not fallen to new market lows as the market enters into those
hard-hitting selling climaxes that snuff out the life in the Bears and ignite the
spark of the next Bull market.
A further refinement of this same technique uses it to compare the various group
averages, such as the Chemicals, Mobil Homes, Coppers, etc., against the broad
market averages to spot the groups of stocks showing the strongest accumulation
or distribution. Then narrow down your investigative work into those two or
three select groups showing the pattern you are looking for. By doing this you can
pre-screen all groups in about 15 minutes, virtually covering all stocks listed on
the Exchange. That's faster, and a darn sight cheaper, than any computer system
yet designed! Fortunately, most all weekly chart services include charts of the
various groups. In the event you do not want to follow a chart service, the back
page of BARRON'S contains 36 groups and gives the weekly closing price, net
change, etc., so you can chart your own group indices.
In screening stocks you will find several that fit the overall signs of professional
accumulation or distribution. You'll then need to select one or two from this
group for your account. This further screening is done by selecting the ones, that
show the largest price and time divergences with the market. Remember, check
both price and time divergences.
Frequently, I find myself "forcing" a stock to fit the accumulation or distribution
pattern. Every time I've done this it has cost me money. Do not try to read
something into your stocks that isn't there. Nor should you leave out or disregard
the bearish implications because of a pre-disposed bullish disposition.
Trendline
354 Hudson St.
New York, N.Y.
Wall Street's Top 50
Box 14096
Denver, Colorado 80214
Comparative Market Indicators
Box 1552
Bellevue, Washington
3 Trend Security Charts
208 Newbury St.
Boston, Massachusetts 02116
Mansfield Stock Service
26 Journal Square
Jersey City, N.J.
21
MY SECOND TOOL FOR SELECTING STOCKS
The newcomer to the stock market would be amazed and perplexed by the
amount of research fellow market buffs conduct in their spare time. I did, and
still do, my share of research into new indicators, trading strategies etc. The
overwhelming part of my research has produced nothing but failures and false
starts.
Fortunately, a few gems have percolated through the reams of paper, computer
printouts and squiggly charts I've drawn late at night. One such gem is the
formula I use to measure the amount of accumulation and distribution taking
place in any stock, at any time and any place.
For several years I toyed around with what market technicians call On Balance
Volume, a technique originally written about in great detail by two fellows,
Woods & Vignolia, in the mid '40's. Their work was popularized by prolific Joe
Granville in his interesting book, "A NEW KEY TO STOCK MARKET
PROFITS." The essence of either method is that one constructs a flow line of
daily volume for a stock by starting at any base number, say 5,000, and adding all
of today's volume, say 500 shares, to the base line if the stock is up for the day,
thus giving a new reading or base figure of 5,500.
Should the stock be up the next day, that volume is added to the new figure of
5,500. Thus, if the stock was up on 1,000 shares, the new number would be 6,500
(5,500 + 1,000). Should the stock run into selling pressures the following day and
decline on 800 shares, you would subtract the volume giving you a new figure for
the day of 5,700 (6,500 — 800). One continues constructing this flow line
updating it each day, keeping a running or cummulative figure.
I liked the central thesis behind this approach, but found the activities of the
market place left much to be desired. There were several ways of interpreting the
figures, and frequently bad... even disastrous signals were given.
The basic approach — that of making some sort of flow line of the amount of
buying and selling taking place in a stock — stuck with me. By trying to improve
upon this basic tenet, I eventually stumbled across my almost perfect formula for
accurately measuring accumulation and distribution.
22
As with most really good ideas, luck played a large part in my stumbling upon the
secret ingredient! I had been playing around with an idea that saw all traders as
being at war with each other — the buyers and the sellers. The results of their
war-like efforts could be measured each day by the amount of net change for the
stock. An improvement here was to look beyond the stock's net change and view
the entire range for the day.
Chart 9 shows a true picture of stock action. We start to see the beginning of a
very important relationship. The relationship is simply this: One can tell how the
daily battle has been going by noting where the stock closes for the day compared
to where it has been. If a stock has a high for the day of 62 and a low of 58, we
have reference points to compare with the closing price. If the stock closes at 59,
it is quite clear that a good deal of selling forced the stock down from its high.
Chart 9
In fact, even if the stock closed higher today than yesterday, but nonetheless
closed very close to, or at, its low for the day we would have to conclude that not
all the volume for the day was on the buy side. A good deal of it was selling!
For many months I batted this idea around, then one morning it hit me! I usually
arrive in my office 10-15 minutes before the opening. That's 7 am West Coast
time, and it's usually a good time to think. The phone hasn't started ringing yet,
no one else is in my office so I can watch what happens. This particular day I
wanted to closely follow the daily volume action of one of my favorite trading
stocks, Natomas.
23
Shortly after the opening, I saw a funny thing happen to NOM. The stock opened
down 3/4 of a point below yesterday's close on a block of 1,500 shares. From
there, trading began and when the final bell rang, NOM had managed to trade
some 44,500 shares and closed unchanged for the day, exactly where it was the
previous day.
At first glance one would say Natomas showed no net change for the day ... that
buying and selling pressures were equal. But how about that upmove from where
it opened on a mere 1,500 shares to where it closed up 3/4 of a point. What was
that?
HOW YOU CAN TRACK THE DAILY SUPPLY/DEMAND BATTLE
It is possible and quite feasible for you to closely track the true supply/demand
battle anyplace in the world where you have access to a quote machine, stock
broker or The Wall Street Journal once you grasp the importance of what I've just
written. That's because the professionals give clear cut signals of what they are
doing if you will only take the time to follow them on a daily basis.
Making money in the stock market is not easy ... it is hard work. Our goals of
immediate and substantial gains are quite high. Such goals can be reached, but
only if you will pay close attention to what you are doing. This does not mean
you have to spend all your time watching the market, but you do need to
carefully review daily stock market figures.
TRACKING THE DAILY SUPPLY/DEMAND BATTLE IS ALL-IMPORTANT
So that you fully comprehend the importance of the daily supply demand battle,
I want to shed some further light on how stocks trade. I want you to have a
thorough understanding of just what happens each and every market day and give
you a feel for the battle on the floor of the Exchange.
To do that I watch price action on a daily basis to see what the professionals are
doing ... to see who is winning the perpetual demand/supply battle. I do this in a
most unique way. In the next chapter I'll give examples of the exact mechanics of
the method, but for now I just want to impart the basics and give you a better
understanding of how to identify professional buying and selling.
24
LET'S SHATTER SOME PRECONCEIVED NOTIONS
The mere fact that a stock is up, or down, for the day implies in no way
whatsoever that it has been under more accumulation or distribution. Price
changes from yesterday to today do not reflect what is really taking place in the
stock.
That's a pretty strong statement! When you ask your broker for a quote, he'll give
you the price and then say it's up or down x points for the day. If it's up for the
day you conclude there've been more buyers, if down, more sellers. That is not
so! If you are to succeed in the market you must shake that preconceived notion
out of your head.
You see, there's a battle, I mean a real battle, every day on the floor of the
Exchange between buyers and sellers in each stock. Perhaps these encounters
explain why most stock market people are so antagonistic!
The battle between buyers and sellers ends each day with the final bell. Someone
has won that round. The next day it's a new battle, but at the end of each day we
can sit back and see who was the winner.
It's good to know the battlefield and what its parameters are. The battle begins
every morning when a stock first opens to trade. Usually, within the first 15
minutes, all stocks are opened for sale. A value point has been established, the
gloves are touched and the battle is on.
If the Bulls initially get command, they will start forcing the price up. The
contrary, of course, will occur if the Bears gain control of things. This means the
daily high for the stock is established by the bulls. The distance from the
morning's opening to the daily high shows the power of the Bulls.
The Bears show their daily power by driving prices down. Hence, the distance
from the morning's opening to the low point represents their pressures, or the
amount of selling. The bearish forces are measured as the price range from the
opening to the low. The bullish effect is the measure from the opening to the
high.
There's another figure we have to work with. That's where the stock closes for the
day. The easiest way to use this figure is simply to see if the closing price of the
stock is higher or lower than the morning's opening price.
25
If the stock opens at $56 and closes at $54, we can say the Bears won the day's
battle. After all is said and done, prices declined from the opening level. Had the
$56 opening seen a 56 1/4 close (or any amount greater than $56) we would say the
Bulls captured the upper hand.
There's a third alternative. If the stock closes for the day at the same price it
opened, we then have a stalemate day wherein neither the Bulls nor the Bears
were able to gain control.
Years of research have taught me that almost always the opening price is due to
inexperienced traders throwing in "buy at the market, on the open" orders. These
people are, so to speak, the sacrificial lambs who cheerfully enable the specialist
to set the opening price. These orders are not professional. What's more, stocks
almost always open on very, very light volume. An actively traded stock that
usually trades 35,000 shares or more per day may open up on only 2 or 3
hundred shares. Any price change from yesterday's close to this morning's
opening is highly arbitrary and not to be trusted.
NOW WE KNOW WHO WON THE BATTLE, BUT BY HOW MUCH?
As you can see, it is possible to tell who's winning the battle, but we need to
weigh the victories and losses. Here's why: Let's say we have one day where the
buyers win and one day where the sellers win. That information alone leaves us at
a stalemate. We cannot say who is really ahead.
ENTER VOLUME
But all is not lost for we can further define the winner of the daily battle by
breaking down the daily action into percentages. This is done by determining
what percent of the daily action the Bulls most likely controlled and what percent
the Bears most likely influenced. When all factors are equal, we will have a 50%
buy, 50% sell ratio.
If the Bulls are substantial victors, we may see a 60% buy and a 40% sell day. In
the next chapter you will be given my exact formula to arrive at these figures.
Right now we're just working with the concept. Just take for granted that it is
possible to construct a percentage figure for all stocks that will reflect the
approximate buying and selling action during the day.
26
This gives us another dimension. In our example we can further evaluate this by
comparing the percentage of buying on both days. Let's say the percent of buying
on the buy day was 80% buy and 20% sell. The next day, the sell day, sees a 60%
sell day and 40% buy day. Knowing this we can then tentatively identify that
during these two days the buyers were in control, as our buying percentages were
80% + 40% totalling 120%. Our selling percentages were 20% +60%, for a total of
80%. Buyers were in command over the two day period.
But even this may not be enough. That's why we compare the percent of buying
or selling with the stock's daily volume. Volume represents the true figure, the
raw data, of accumulation and distribution.
Thus, in an 80% buy day, we take 80% of the day's volume as buying volume or
accumulation. In a 20% buy day, we take 20% of the volume as buying volume and
have an accurate reflection of the amount of buying and selling taking place in
any stock, any time. Nifty huh?
While my friend Don and the little old lady are still sitting in a brokerage office
trying to tell if there are more buyers or sellers, ending up more confused than
ever, we are able to tell exactly what percent of today's volume is most likely
buying volume and what percent is selling volume! We have conquered the
supply/demand question by identifying its elements and breaking them down into
a workable structure!
HOW TO TELL WHEN THE PROFESSIONALS ARE IN CONTROL OF A
STOCK
Professional traders are a pretty nice group of people. They tend to be less
emotional than the average trader, more calculating and less eager to rush into a
stock or market move. They have enough funds that they can take their time, sit
back and see what is happening.
This is one of the reasons that real professionals seldom, if ever, buy stocks on the
opening for the day. They wait, letting other people establish where the stock will
begin trading. After that point has been determined, the professional trader, and
specialist, can then make a judgment. At the opening price, is the stock over or
under valued?
If the stock appears overvalued, they will begin selling the stock, conversely if it
appears undervalued, they will begin buying the stock. In either event, what
happens after the opening is (A) largely determined by professional traders and
therefore (B) a reflection of professional activity.
27
If you want to see what the professionals are doing in your stock, watch what
happens from where the stock opens to where it closed. The specialists do this, as
happens from where the stock opens to where it closed. The specialists do this, as
do the few professional traders, but the public just wants to know if the stock is
up or down for the day.
Let's not discount the role of the specialist in this little game. He can pretty much
arbitrarily set the opening price for the stock. Thus, if he thinks the stock is going
higher, it's no problem to open the stock down a point or more on a scant 500 to
1,000 shares. He and his buddies then load up on "cheap stock", and begin to
move the price up. This little maneuver enables them to buy stock at something
like a special discount sale held for the professional traders!
Time and time again I have seen stocks open up anywhere from l/2 to 3 points
from the previous close on less than 1,000 shares . . . then big blocks come in and
new moves begin. Perhaps this is why so few specialists ever go broke in the
market and why seats on the New York Stock Exchange are so expensive!
In summary then, to detect what the professionals are doing to your stock watch
what happens from the opening to the close. If the stock closes above its opening,
they are buyers. If the stock closes bellow its opening, they were sellers for
the day. I make both of these statements unequivocal of where the stock closed
today in relationship to yesterday's close.
MORE EXAMPLES FOR YOUR BENEFIT
The picture seen in chart l0 reflects the net change for the day as measured by the
distance from one day's close to the next, just as most people keep charts.
Directly underneath this traditional line of price action, I'm showing a line
constructed by taking the amount of price change from the opening to the close.
The line moves up if the close is higher than the open, down if lower.
You'll quickly see that this is an almost X-Ray technique that enables us to see
when the professionals are exiting or entering the stocks while simple price action
itself looks deceptively bullish or bearish. Notice how this line leads stock prices!
28
29
CHAPTER 4
HOW TO PROFIT FROM THE ACCUMULATION DISTRIBUTION FORMULA
PUBLISHER'S NOTE:
In order to perfrom some of the calculations in this book, the daily opening stock prices are
needed. While not published in the major business newspapers at this time, these prices are
readily available. A number of computer services provide this information. Your broker would
also have access to this information.
So you can either use a computer service, contact your broker, or alter the equation slightly
(as described below).
If the opening prices are not readily available to you, Mr. Williams has advised us that a still
valid representation of the daily supply/demand battle can be constructed by substituting
yesterday's close in place of the open in the formula.
This substitution will also give the same degree of accuracy and excellence in timing and
selection. The amount of accumulation is determined by taking the distance from the previous
close to today's high. This is one unit of buying.
Next take the distance from today's low to today's close, the other unit of buying. Add these
two units together and you have the total buying figure for today. The total selling figure is
arrived at by taking the distance from yesterday's close to today's low and today's high to
today's close.
Add the total buying figure and total selling figure. Then, divide the buying figure by the
total figure and you have the percent of buying for the day.
If yesterday's close is higher than today's high the first buying unit is zero. By the same
token, if yesterday's close is lower than today's low that selling unit is also zero.
The equation using the close will not replicate the equation using the open. There will be
differences. However, on balance the performance will be similar. You will take slightly
different trades, but with the same overall result.
So don't expect to get similar numbers from both equations.
Now, the correct equation is as follows:
HOW TO PROFIT FROM THE ACCUMULATION DISTRIBUTION FORMULA
Up to this point, you have learned about the importance of price patterns and
how certain signs of accumulation can be seen when a stock holds up better than
the* market. Signs of distribution are seen when the stock does not hold up as well
as the market.
You've also learned about the importance of professional activity and the vital
need to watch what happens from the opening to the close. Now it's time for you
to learn how to tell how much of the day's volume was buying or selling volume.
But before we proceed, let me again stress the importance of the chart pattern
formations mentioned in chapter two. I have the feeling that a lot of readers will
skim over that chapter finding it a bit simplistic for their sophisticated minds.
Believe me ... those patterns are as important a signal of accumulation and
distribution as the actual formula I'm going into in this chapter. Do not
underestimate the value of looking at stocks versus the market to prescreen those
under basic accumulation or distribution.
By doing this, you narrow down, your universe or field of vision to just a handful
of stocks, thereby avoiding anything but the strongest issues. You can then begin
looking at the accumulation work being done by the professionals, in terms of
volume, to select the strongest stock or two from this already dynamic list of
vehicles.
HERE IT IS ... THE MILLION DOLLAR FORMULA
The formula I finally arrived at to measure professional accumulation and
distribution is calculated by finding the difference between the stock's high and
low for the day. We then find the difference between the close and the open. We
now have two numbers, one telling us the total daily range, the other showing us
the net change from the opening to the close.
The next step is to divide the close-to-open distance by the high-to-low distance.
This resulting figure is the percentage of net buying or selling for the day.
30
The third and final step is to multiply today's volume by the figure just obtained.
Our resulting answer (the net daily accumulation/distribution figure) shows how
much volume was buying or selling volume for the day. This net daily A/D figure
is then added or subtracted to a cummulative A/D flow line just as with
traditional On Balance Volume or the more familiar advance/decline line. More on
that in just a few minutes.
If the opening price is lower than the close, your net volume figure for the day
will be positive or a buying figure. This number is added to the daily A/D line. If
the close is below the opening, it is a negative, number showing more selling
volume. The figure is subtracted from the previous day's A/D line.
WHY DO WE USE VOLUME?
It is possible to use just the price difference between the opening and close to get
a feel for the amount of accumulation taking place in a stock. However, only
volume moves stock prices and frequently, as the realities of the market place
show, volume gives signals of an impending move as it represents what big
professional money is doing. By tracking volume we can visually see what the
mutual funds, specialists and large investors are doing with their money.
This is important. As an example, if a stock is up 1/2 point from its opening two
days in a row, it's hard to tell which of these days saw the most accumulation. But
if we know it was up on 5,000 shares one day and 10,000 shares the next day, it's
an entirely different story. We then know which day saw the most accumulation
despite the fact the price move was equal on both days.
HOW TO CONSTRUCT A FLOW LINE OF PROFESSIONAL ACTIVITY
Now that we've been able to arrive at a pretty accurate reflection of the daily
buying and selling pressures we need to know how to use these figures and then
learn how to read them for their crystal clear buy and sell signals.
31
In a concise form the equation is this: Close minus the opening, divided by high
minus the low, times daily volume = net buying or selling volume for the day (net
daily A/D figure). This is equated as X total volume = net buying or
selling pressure for the day.
Earlier you were told how a traditional On Balance Volume line is constructed.
That is the same process I use to take advantage of the insight of my
accumulation work. In other words, when I first "work up" a stock, I arbitrarily
choose a base number, say 5,000 and then begin adding the net daily
accumulation or distribution volume figure as dictated from the above formula to
this base figure.
This means on days when there is more buying the net daily A/D figure is added.
On days of more selling the net daily A/D figure is subtracted. That's all there is
to this concept. No more math! It's so simple some people have trouble. They
want to run moving averages, expotentials or some other figure. I think my
research into these figures has covered just about all aspects of the numbers and
the mathematical approaches! I found the simplest was the best! Remember, the
accumulation flow line is constructed by just adding or subtracting today's net
daily A/D figure, as arrived at by the formula, to yesterday's figure.
Perhaps an example will clear up any confusion that may exist. I'm showing
below six days of trading activity for BAUSCH & LOME. The figures are pretty
much self-explanatory except the final figure ... the A/D line column which
represents the impact of today's net daily A/D figure to the previous day's A/D
line figure.
Please note that I round off all eights into decimals carrying them to just one
place. Thus, 34 1/8 = 34.1, 34 1/4 = 34.2, 34 3/8 = 34.3, 34 1/2= 34.5, 34 5/8
= 34.6, 34 3/4= 34.7, 34 7/8 = 34.8 and 35.00 - 35.0. It is much easier to convert
to decimals and work in tenths than it is to work in eights. The above conversion
table is easy to memorize.
Also, I drop the last two digits of the daily volume figure, just as most newspapers
do. Hence the volume shown for the first day of 564 actually represents 56,400
shares. I have found it is easier to work with the smaller number, and the results
are identical.
32
VOL- CLOSE HIGH
OPEN
35.2
36.2
38.3
37.3
38.0
39.7
HIGH
36.5
38.2
38.5
38.5
30.0
39.8
LOW
34.7
36.1
37.5
37.0
37.8
38.2
CLOSE
35.8
37.6
37.7
38.0
38.8
39.0
UME
564
789
414
277
425
949
-OPEN-LOW
+ .6
+1.4
-.6
+ .7
+ .8
- .7
1.8
2.1
1.0
1.5
1.2
1.8
NET
*%X DAILY
VOL =
.33
.66
.60
.46
.66
.43
• A/D
+186
+520
-248
+127
+280
-408
A/D
LINE
3208
3728
3480
3607
3887
3479
*Close minus open, divided by high minus low, equals the net % of buying or
selling for the day. Next, multiply the net % times daily volume to obtain the net
daily A/D figure.
Readers not steeped in a mathematical background,, myself included, may want to
carefully review the figures to see how the final answer was determined and how
the A/D line flows in response to the daily volume times the % of buying or
selling.
I keep a loose leaf notebook with my stock pages in it. Each sheet is ruled off to
give me a column for the open, high, low and close, volume and accumulation
line. You do not need to have a column for the % of buying or selling if you use
an adding machine. You can leave this figure in the machine then hit the
multiplication button and put in today's volume. Then add or subtract this net
daily A/D figure into the previous days A/D flow line figure.
SOME TIME SAVING TIPS
1. If the stock's opening and closing prices are the same, buying and selling were
equal and you need not do the equation. Simply carry forward yesterday's
A/D line figure.
2. If the opening price is the same as the daily high, and the closing price the
same as the daily low, all of the volume was selling volume. Thus, you need
not run the formula. Just subtract the day's total volume from the previous
A/D line figure.
3. If the opening price and the daily low are the same and the close and the high
are the same, all volume was buying volume. Again you need not run the full
formula. Just add the day's total volume to the previous day's A/D line figure.
33
At first glance the above formula may seem complicated or time consuming. Let
me assure you that it is not the case. It takes about 30 seconds per stock, per day,
to post these invaluable figures. Admittedly, it takes some time to understand the
formula, but in a little bit of time you'll be able to quickly see what is happening.
Then the figures will almost "run themselves". Really!
HOW TO SPOT THE BASIC BUY SIGNAL
My records show that superb buying opportunities present themselves when a
certain condition develops in the trading pattern of the stock's price and volume
as represented in the A/D flow line. Simply put, this pattern is one that sees the
stocks falling to a new low while at the same time this new low in price is not
matched by a new low in the A/D line.
The majority of the time the price action will be the same as the A/D action. It is
only when they diverge from each other that we can glean forecasting information
from the data. I view the price action as largely an artificial attempt by influential
money to cause people to do the wrong thing at the right time. Thus, price
frequently falls apart, the stock has apparently collapsed. That's the impression
given from studying just the price structure.
However, when we examine the volume structure we get an x-ray view of what
has been taking place in terms of real money and in terms of accumulation and
distribution. We can then see whether an apparent collapse in price is justified and
warranted in light of the volume action.
WHAT THIS MEANS
When the price decline has not been matched by a similar decline in the A/D line,
we are onto something. This pattern, a new price low not confirmed by a new
A/D low, tells us the price collapse was most likely artificial and an attempt to
draw the sellers out of the woodwork and sell their stock to the professionals.
Reasoning a bit further we learn that if the professionals are willing to manipulate
prices lower at the same time the are b u y i n g , the obviously have their sights set
on higher prices.
34
WHAT THE BASIC BUY SIGNAL LOOKS LIKE
On the insert here I'm showing what I refer to as the classic, basic buy signal given
by the accumulation/distribution figures. As you can see, the price of the stock
fell to a lower low than where it was last supported. On the surface this looks
negative.
However, on checking the A/D line, we see that this price weakness was not
equalled or confirmed by the professional buying and selling. In fact, the A/D line
stayed impressively higher and above its previous comparable low point. Indeed,
the pros supported and bought the stock on the decline. Thus, we can assume
they have greater things in store for the price structure over the next few days,
weeks or months.
Chart 11
150
BURROUGHS CORP
daily action dhart
130
ACCUMULATION/DISTRIBUTION
LINE
HOW TO IDENTIFY THE STRONGEST POSSIBLE BUY SIGNALS
Another feature of this method is that it enables you to visually select the
strongest signals. Let's say you have isolated two stocks as potential buy
candidates. Both show better price action than the market and both show
accumulation has entered them. Then compare the two to arrive at the stock
under the strongest accumulation. This is done by simply noticing the difference
between the divergence of the two stocks you have selected. What stock shows
the greatest divergence between its price action and its A/D line pattern? Find
that stock! It is the best of the two candidates.
35
Chart 12
The examples given here should give you an even better feel or indication of what
to look for. Notice how stock A clearly fits all our buying criteria, but its A/D
line has falllen a bit further than stock B.
Incidentally, sometimes you'll see stocks suffer large declines in price while the
A/D line barely, if ever, dips. This happened in Disney right at the start of an 80
point move. I also recall it happening in Polaroid. The stock had been trading in a
wide swinging trading range. But... its A/D line was shooting skyward telling us
the stock would break out of the trading range on the upside and steam ahead.
Indeed it did, from the low 80's to the 140 area!
HOW TO SPOT THE BASIC SELL SIGNAL
The basic sell signal is just the reverse of the basic buy signal! That makes things
simple. What we're looking for here is a stock that has rallied to new highs while
the A/D line refrained from confirming the new high in the price structure. When
that happens, something has got to give. It is almost always the price structure
itself.
You see, prices are maintained or held up by the underpinnings of volume. If the
underpinnings fire weak and crumbling, the price structure will soon come
tumbling down until volume and price are once more back in gear.
36
Chart 13
DAILY PRICE
A/D LINE
BASIC SELL SIGNAL
WHAT THE SELL SIGNAL MEANS
The sell signal means that professionals are distributing the stock, applying heavy
selling pressures to it, despite the apparent rise in price. This is a very bearish
omen as it forewarns the pros are bailing out. If they no longer want the
stock .. . neither do I!
The actual selling pattern you are looking for is illustrated here. In this example
we see the price rallying to a new short term high. Is this a valid up move? How
do we know? We know by checking the A/D line to see what it says about the
rally.
In this particular case, we see the A/D line did not rally to a new high. In fact, it
fell to a new low. Conclusion? The stock is under aggressive professional
distribution. It is going lower.
HOW TO IDENTIFY THE STRONGEST POSSIBLE SELL SIGNALS
This part of the A/D line study is like the section on spotting the strongest buy
signal. What you should be looking for is what stock shows the greatest divergence
between its price action and its A/D. Look for the stock that has a splendid new
high in price while its A/D line has literally fallen out of bed. That is the stock
you want to sell or sell short.
37
Some examples should help. Notice here how stock A has rallied to a new high
along with stock B. Price structure alone does not tell us which stock is the best
selling candidate. So what do we do? You guessed i t . . . we take a peek at the
A/D line to see which stock has been under the most distribution.
In this case, it's pretty easy to tell the difference. Stock A has had some rally
attempts in the A/D figures. But look at stock B. What a disaster . .. the A/D line
has fallen constantly despite the price rally. Incidentally, these are not
hypothetical examples, but right out of my personal chart book.
THE IMMEDIATE PROFIT SIGNAL
From time to time I have made immediate profits by noticing a special formation
in my A/D line work. I'd like to share it with you. This immediate profit signal
has nothing to do with the buying or selling patterns and formations so forget
those for just a minute.
The immediate profit signal occurs in just one way. It is not frequent, but when it
does come look out, a rapid price move is on its way!
38
The signal involves a comparison of the price action and a certain occurrence in
the A/D line. The price action I look for is what you know as basing or
consolidation. The chart shown here gives several examples of what we can call
basing or small trading areas. The price moves back and forth for several days or
weeks. It is locked in the narrow confines of buyers and sellers fighting each other
off at the top and bottom perimeters of price evaluation.
While this price pattern is developing, we suddenly notice a tremendous surge in
the A/D line from one day's data. That is the tip-off and your signal to get in and
buy the stock.
The one day massive accumulation figure will shoot the A/D line skyward,
breaking substantially above the trading range pattern the A/D line has also been
in. It tells us the big boys can wait no longer. They have finally begun their move
and the move will be to the upside. Buy it!
You can make a pretty good living just waiting for these jumps to occur in the
A/D line work. I admonish you not to confuse the A/D line jumps with total
volume jumps. That is not what we are looking for. We want to find large and
extraordinary increases in the A/D line itself, while the price remains in the
confines of the trading range.
The direction of the A/D line jump forecasts — in advance — in which direction
price will come zooming out of the trading range corral.
THE CHINESE
Chinese philosophy and concepts can teach us much about ourselves and the
market. Later on I want to discuss the tremendous value of their Yin and Yang
concept. But for now, I'll just refer to their great adage that one picture is worth a
thousand words and proceed to give you actual examples of the basic buy and sell
signal plus the immediate profit signal.
I've made notes right on the charts and have attempted to do my best to show
you what things I look for. Don't skim over these pictures lightly. Study them if
you wish to profit from this book. Notice the subtle nuances between the stocks
and their A/D line. I have purposely not marked all the A/D signals. Why don't
you start looking now for the basic buy and sell signals. That's exactly how I
began!
39
40
41
42
43
CHAPTER 5
SHOULD YOU FOLLOW THE SHORT
OR lNTERMEDIATE TERM TRENDS
AND HOW TO DO IT
SHOULD YOU FOLLOW THE SHORT OR INTERMEDIATE TERM TRENDS
AND HOW TO DO IT
Selecting the right stock is about 50% of the battle. The rest is a matter of
selecting the right time to buy the stock. The two decisions we have to make as
traders or investors are what stock to buy and when.
I've seen hundreds of market participants and have found that they have precious
little knowledge of what type of investor they are or what they are trying to get
out of the stock market.
One minute they are traders, the next minute long term investors. One of their
biggest problems is that they continually change their self image as well as their
goals. It's no wonder they fail.
If you are to profit in the market you must know who you are and what you
want.
This point was clearly driven home to me in the brokearage firm I used to visit.
One of the chaps in the board room was a pretty well-to-do doctor who was going
to do all he could to educate me about the market. He began by telling about his
latest purchase. I don't recall the stock, but I'll never forget the good doctor's
glowing remarks about the company. Earnings had been up 5 years in a row. They
had a better product, better sales, better financing, etc.
In fact, he was projecting that the stock, then at about 20, would sell in the low
60's in a matter of time. His logic was reasonable and convincing. He made sense.
I agreed that it looked like he sure had a good stock. All he had to do was sit back
and wait.
In about 15 minutes a block of this stock crossed on the tape. It was a down tick
and he frowned. Then another block of selling, and another. That did it. In a flash
the doctor sprinted over to his broker and told him to sell all of his holdings in
this stock — at the market!
In less than 30 minutes time, this man went from being a long term, constructive
investor to a tape trader! The two don't mix. If you trade by the fundamentals,
stick to them. Don't try to overlap another discipline and then expect that you
can function between the two opposing thoughts and goals.
44
Christ is supposed to have told another doctor, "Physician, heal thyself." I'm
certain that if he had given market advice to any trader or investor it would have
been, "Speculator, know thyself."
Until you know yourself and your investment goals, you will not know how to
approach the stock market. This means you must stop to think about your entire
way of living. How much time do you have to devote to the market? How much
time do you want to devote to the market?
How much money do you have? If you are working with limited capital, you do
not want to be a short term trader. How much emotional stress and strain can you
take? Does you current job permit you to get market quotations during the day?
Are you comfortable buying on margin and trading? Are you too nervous to sit
on "long term holdings?"
When you have the answers to these questions, you can then start to decide what
aspect of the market you are going to work with.
HOW TO FORECAST SHORT TERM MOVES
Short term market forecasting is the most difficult due to the wildly erractic
swings of short term action. There are, however, certain tools of the trade that
usually will enable one to spot the short term buy and sell points with a high
degree of accuracy.
These tools are only of value to the short term trader or person who has the time
for a closer view of market action. They are not needed by all speculators. You
intermediate and long term investors may want to follow one short term index,
just to help you spot the very best timing. By and large, however, they are not
needed by the average investor.
There are an average of 12 short term up or down moves per year. Thus, your
exposure to market risk is greater in that you have more decisions to make. There
is more chance for error.
MY FAVORITE SHORT TERM INDICES
I attempt to eliminate as many errors as possible by waiting for two developments
to occur before I take any short term action. The developments are:
1. A SHORT TERM OVER-EXTENDED MARKET
2. A TREND REVERSAL SIGNALED BY THE MOMENTUM INDEX
45

1
Curso virtual gratuito de
Análise Gráfica
Entre em www.timing.com.br
e baixe o arquivo das Aulas I e II.
Em seguida, cadastre-se no fórum de
treinamento para tirar suas dúvidas.
Análliise Ellettrôniica dos Mercados
Ano VII - No 364 – 18 de dezembro de 2.005 www.timing.com.br
Índice
¨ Fundamentos técnicos e comentários 02-12 ¨ Sugestões de compras 19-19
¨ Índices: principais tendências do mercado 13-13 ¨ Principais ações: análises individuais 20-27
¨ O Bovespa visto por fora 14-14 ¨ Inter-relações com o Bovespa 28-31
¨ Indicadores do médio prazo 15-16 ¨ Coluna do Ser 32-35
¨ Law of charts 17-18 ¨ Glossário http://www.timing.com.br/revistas/glossario
2
AVIISOS
Depois de um longo período sem um colaborador fundamentalista é com grande prazer que participamos aos
leitores da Timing a chegada de Sergio Rocha, um estudioso fundamentalista especialista na “abordagem de
valor” ou “value investing”. Quem leu “Os Magos do Mercado” sabe que a análise técnica não é o único caminho
para o sucesso nos mercados. Sem dúvida, este é mais um!
Na semana que vem a revista sairá normalmente. Aproveito para enviar a todos os nossos leitores e aos seus
familiares nossos votos de um feliz Natal e como presente que se realize a audaciosa previsão do meu amigo
Fausto Botelho de um índice Bovespa a 43000 pontos até fim do mês, afinal de contas já não está tão longe!
Marcio Noronha
Curso ao vivo no Rio de Janeiro:
Simetria Sanfonada – Uma Metodologia Alternativa de Análise Gráfica e Estratégias Operacionais
Conteúdo:
1. Curso básico de Análise Gráfica:
Aulas I e II disponíveis no site www.timing.com.br para download gratuito.
Observação: para melhor aproveitamento da parte presencial do curso será necessário que não pairem dúvidas sobre as aulas I e II.
Elas poderão ser extraídas através do fórum no site acima.
2. Definição do estado geral do mercado
2.1 Médias Móveis
2.2 Linha de Avanços e Declínios
2.3 OBV (saldo do volume) e Clímax
3. A Simetria Sanfonada
4. Desdobramentos mais prováveis dos gráficos de barras.
5. O Jogo do mercado e suas estratégias
Rio de Janeiro: 13, 14 e 15 de dezembro de 2005
Local: Praia de Botafogo, 300
Horário:
Primeiro dia: das 18:00 às 22:00 com intervalo de 15 minutos para um lanche
Segundo e terceiro dia:
Manhã: 8:30 às 12:30 (com intervalo de 15 minutos para um lanche)
Almoço: 12:30 às 13,30 (as despesas correrão por conta dos alunos)
Tarde: 13:30 às 17:30 (com intervalo de 15 minutos para café e água)
Investimento: R$1.000,00 (desconto de 30% para clientes da VIPTRADE)
Faça a sua inscrição em www.timing.com.br
3
VIISÃO GERAL DO MERCADO
Cenário Externo:
FONTE: APLIGRAF
As correções terciárias se alternam nas principais bolsas
mundiais, permanecendo o cenário favorável para a evolução
da bovespa.
Índice Primária Secundária Terciária
Bovespa Alta Alta Alta
Nasdaq Alta Alta Baixa
Dow Jones Alta Alta Alta
Nikkei Alta Alta Indefinida
CAC-40 Alta Alta Alta
Merval Alta Baixa Baixa
FTSE Alta Alta Indefinida
Hang Seng Alta Indefinida Alta
DAX-30 Alta Alta Alta
4
Cenário Interno: Os campos de tendência nominal e indexado do Bovespa divergem. Os dolarizados estão descendentes e os
nominais ascendentes.
O bovespa, evoluindo num padrão de breves correções alternadas, segue firme em tendência de alta rumo aos 36000/37000
pontos. Essa projeção não deve ser levada a ferro e fogo porque nada impede que possa ir além ou ficar aquém. Na
verdade, acho que ninguém sabe! Se o mercado tiver que continuar subindo, não serão os estudos sinalizando baixa que
impedirão. Portanto, relaxe e aproveite mantendo o foco nos seus estopes porque ainda estamos sob o predomínio das
forças altistas.
5
PARTIICIIPAÇÃO DOS IINVESTIIDORES NA BOVESPA
ATUALIZADOS ATÉ
14/12/2005
ESTRANGEIROS
PESSOAS FÍSICAS
INSTITUCIONAIS
INSTIT. FINANCEIRAS
ACUMULADO NO ANO
4.657.344.000
(2.388.057.000)
(4.747.412.000)
1.604.801.000
ACUMULADO NO MÊS
466.981.000
(369.151.000)
(129.062.000)
(127.121.000)
VARIAÇÃO 07/12 – 14/12
(75.153.000)
(140.539.000)
91.198.000
(415.775.000)
6
PARTIICIIPAÇÃO DOS IINVESTIIDORES NA BM&F
ATUALIZADOS ATÉ
16/12/2005
PESSOAS JURÍDICAS
FINANCEIRAS
INVEST. INSTITUC.
NACIONAL
INVEST. INSTITUC.
ESTRANGEIRO
C
V
S
C
V
S
C
V
S
CONTRATOS ABERTOS
(POSIÇÃO EM 31/10/05)
7830
10495
(2665)
21269
21729
(460)
22868
19508
3360
C
V
S
C
V
S
C
V
S
CONTRATOS ABERTOS
(POSIÇÃO EM 09/12/05)
8735
7545
1190
28353
35356
(7003)
25186
19750
5436
C
V
S
C
V
S
C
V
S
CONTRATOS ABERTOS
(POSIÇÃO EM 09/12/05)
7190
5780
1410
14847
26613
(12766)
27506
16108
11398
7
No confronto das forças atuantes no mercado, temos:
As forças descendentes:
01-Setor de Petroquímico sinalizando baixa
02-Setor de Brinquedos sinalizando baixa
03-Setor de Ferftilizantes sinalizando baixa
04-Setor de Ind. Mecânica sinalizando baixa
05-Setor de Papel e Celulose sinalizando baixa
15-Média Móvel de 200 dias da LAM descendente
Tendência Primária de Baixa - Índices Nominais:
Tendência Secundária de Baixa - Índices Nominais:
Tendência Terciária de Baixa - Índices Nominais:
Tendência Primária de Baixa - Índices Indexados U$:
Tendência Secundária de Baixa -Índices Indexados U$:
Tendência Terciária de Baixa - Índices Indexados U$:
16 – IBOV/IBX50/IBX/IVBX/IGC/FGVE
As forças ascendentes:
03-Setor de Energia sinalizando alta
06-Setor de Telecomunicações sinalizando alta
07-Setor de Mineração sinalizando alta
08-Setor de Alimentos sinalizando alta
09-Setor de Auto-Peças sinalizando alta
10-Setor de Transporte Aéreo sinalizando alta
11-Setor de Bancos sinalizando alta
12-Setor de Siderurgia sinalizando alta
13-Setor de Comércio sinalizando alta
14-Setor de Eletro-Eletrônico sinalizando alta
15-Setor de Fumo e Bebidas sinalizando alta
16-Setor de Petróleo sinalizando alta
17-Setor de Têxtil e Vestuário sinalizando alta
18-Setor de Mat. de Transporte sinalizando alta
23-Razão ascendente das tendências secundárias
33-Média móvel de 200 dias do Bovespa ascendente
Tendência Primária de Alta - Índices Nominais:
43 - IBOV/IBX50/IBX/IVBX/IGC/ FGV100/ISM
Tendência Secundária de Alta - Índices Nominal
48 – IBOV/IBX50/IBX/IVBX/IGC/ FGV100/ISM
Tendência Terciária de Alta - Índices Nominais
49 – IBOV/IVBX/IGC/FGV100/ISM
Tendência Primária de Alta - Índices Indexados U$:
59 – IBOV/IBX50/IBX/IVBX/IGC/ FGVE/FGV100
Tendência Secundária de Alta - Índices Indexados U$:
64 – IBOV/IBX50/IBX/IVBX/IGC/ FGVE/FGV100
Tendência Terciária de Alta - Índices Indexados U$:
64 – FGV100
01...............................................16
01............................................................................................................35
36..........................................................................................64
Com o objetivo de melhor expressar o estado geral do mercado, decidi fazer algumas alterações na metodologia de avaliação das forças que atuam no seu
direcionamento. Acho que não faz muito sentido, por exemplo, que uma tendência primária de baixa tenha o mesmo peso que uma tendência terciária de
baixa. Ou, que os índices de Telecomunicações e Energia, que são formados por mais de 40 ações cada, tenham o mesmo peso que os setores de
Brinquedos, Eletro-Eletrônico, etc, compostos por um reduzido número de ativos.
Sem grandes preocupações matemático-estatísticas, apenas usando um pouco de sensibilidade, passei a atribuir pesos diferenciados para algumas das
forças. Assim, se a maioria dos índices se encontra numa primária de alta ou de baixa passam a ter o valor de 10 unidades; se a maioria dos índices se
encontra numa secundária de alta ou de baixa valem 5 unidades; se a maioria dos índices se encontra numa terciária de alta ou de baixa continuam
valendo 1 ponto. Indicadores primários, como a direção das médias móveis de 200 dias, a razão entre as tendências primárias, etc. passam a ter um valor
de 5 unidades. Enfim, tudo que se referir ao primário, passa a valer 10 pontos, ao secundário 5 pontos e ao terciário 1 ponto.
BOVESPA
8
ÍÍNDIICES SETORIIAIIS
9
ÍÍNDIICES SETORIIAIIS
10
ÍÍNDIICES SETORIIAIIS
11
ÍÍNDIICES SETORIIAIIS
12
RAIIO X DA EVOLUÇÃO DAS TENDÊNCIIAS DAS AÇÕES QUE COMPÕEM O MERCADO
13
PRIINCIIPAIIS TENDÊNCIIAS DO MERCADO:: ESTATÍÍSTIICAS
BOVESPA
Participação Setorial
¨Teles:
¨ Petróleo: ¨ Energia:
¨Bancos:
Variações (%U$) (%R$)
¨Semanal (2,81) 1,12
¨Mensal (1,43) 4,30
¨Anual 44,43 27,08
Suportes e Resistências
¨Sup 13.536 29.948
¨Res 15.285 33.837
IBX- BRASIL
Participação Setorial
¨Teles ¨Petróleo ¨Bancos ¨Energia Variações (%U$)
¨Semanal (2,68)
¨Mensal (1,80)
As tendências primárias e secundárias, sintonizadas, seguem em alta. As terciárias divergem. ¨Anual 54,43
Suportes e Resistências (U$)
¨Sup 4.298
O Princípio da Confirmação
¨Res 4.894
FGV-100 E
Participação Setorial
¨Teles
¨Energia
Variações (%U$)
¨Semanal (3,09)
¨Mensal (2,75)
¨Anual 38,24
Suportes e Resistências (U$)
¨Sup: 371.023
¨Res: 415.893
FGV-100
Participação Setorial
¨Teles
¨Energia
¨Mineração
¨Siderurgia
Variações (%U$)
¨Semanal (2,82)
¨Mensal (0,45)
¨Anual 29,39
Suportes e Resistências (U$)
¨Sup: 208.852
Os índices seguem sintonizados, confirmando uns aos outros na tendência de baixa de curto prazo.
¨Res: 239.719
14
BOVESPA VIISTO POR FORA
O Bovespa segue em tendência de alta. As médias móveis de 21 períodos do indicador de Clímax passam a sinalizar queda. Os MACDs
semanais seguem sinalizando alta. Os estocásticos calculados sobre os dados diários divergem. No gráfico dolarizado encontra-se na
região de mercado sobre-comprado. No nominal, encontra-se na região de mercado sobre-vendido.
As razões das tendências primária e secundária seguem em alta.
15
IINDIICADORES DA TENDÊNCIIA DE MÉDIIO PRAZO
Þ O Bovespa e a LAD do mercado (nominal)
O Bovespa e a LAD do mercado
seguem em sintonia, confirmando um
ao outro na tendência de alta.
Þ A LAD do mercado e a sua média móvel de 200 dias (nominal)
A média móvel de 200 dias da LAD
segue sinalizando baixa.
16
IINDIICADORES DA TENDÊNCIIA DE MÉDIIO PRAZO
Þ A Média Móvel de 21p do Clímax convencional do Bovespa indexado pelo U$ comercial
Os indicadores passam a sinalizar
queda.
Þ A Média Móvel de 21p do Clímax convencional do Bovespa nominal
17
LAW OF CHARTS
Glauco R.C.A Santos glaucoangrafer@yahoo.com.br
Congestão
Tenho mostrado freqüentemente exemplos operacionais utilizando as formações 123Rh. Esta semana gostaria de
trazer um exemplo de congestão. O Antonio Guilherme já explicou aqui, mas como faz um certo tempo, apenas para
relembrar os leitores gostaria de salientar que pela Law Of Charts as congestões podem ser classificadas em três tipos:
quando elas não ultrapassam o limite de 10 barras, são chamadas de Ledges. Entre 11 e 20 barras, são denominadas
simplesmente de Congestions. Por fim, acima de 20 barras passamos a chamá-las de Trading Ranges. Neste último caso,
os melhores rompimentos ocorrem da barra 21 até a 29. A teoria diz que um Rh (Ross Hook) também é formado quando
uma congestão é rompida, e não apenas nas formações 123Rh. O Rh é formado assim que, logo após o rompimento da
congestão, surge a primeira barra que não consegue ultrapassar o extremo da anterior.
A seguir trouxe um exemplo recente indicando os Rhs originados do rompimento de três congestões. O gráfico é o
horário do Eurodólar.
Nele podemos observar como foram bons os rompimentos dos Rhs para realizarmos day-trades. Na realidade os
rompimentos das congestões já foram muito bons, mas a vantagem de aguardarmos pela formação do Rh é que diminuímos
o risco de entrarmos em um rompimento falso. A primeira congestão foi um Trading Range cujo rompimento ocorreu
exatamente na vigésima primeira barra e as outras duas foram exemplos de Ledge.
18
LAW OF CHARTS
Gostaria de tecer algumas considerações. Notem como nos dois casos os Ledges podem ser vistos como parte de
bandeiras de alta. Ao entrarmos no rompimento do primeiro Rh, teríamos ainda como incentivo o fato de entrarmos
simultaneamente no rompimento do primeiro Ledge. O segundo Rh se originou do rompimento deste primeiro Ledge. Como
a correção foi muito longa depois do segundo Rh, quando tivéssemos detectado o segundo Ledge, poderíamos ignorar o
rompimento deste Rh e esperar pela formação e rompimento do terceiro Rh para realizarmos outro day-trade com mais
segurança. Fiz estas considerações porque agora que o gráfico já está pronto fica muito fácil perceber que estratégias
poderíamos ter feito, mas gostaria de passar a idéia de como raciocinar da maneira mais defensiva possível num day-trade
quando o lado direito do gráfico ainda é uma icógnita.
Para finalizar, quero dizer que utilizo em minhas operações um misto de Law Of Charts e Simetria Sanfonada. Na
realidade uma teoria complementa a outra. Na minha opinião são dois métodos muito eficientes e simples e que
proporcionam excelentes trades. Quando realizo day-trades, foco um pouco mais a Law Of Charts e quando a operação é de
prazo mais longo, o foco é maior para a Simetria Sanfonada.
Gostaria de dizer que o ano já está terminando e caso não apareça mais (neste ano, claro), desejar a todos os
leitores da Timing meus mais sinceros votos de Feliz Natal e um ótimo ano novo cheio de trades vencedores para todos
vocês!
Também gostaria de desejar ao Marcio Noronha um Feliz Natal e um ótimo ano novo e mais uma vez agradecer
pela oportunidade cedendo-me este espaço e dizer que estou adorando a experiência. Espero que no ano que vem possa
continuar colaborando com sua revista e que cada vez ela tenha mais leitores!
Um grande abraço a todos!
Glauco R.C.A Santos
19
SUGESTÕES DE COMPRAS//VENDAS
ATIVO INÍCIO COMANDO ESTOPE ÚLTIMA ESTADO ALVO/RES
ALLL4 (ALLAmer Lat) 24/11/05 Comprar a 18,51 18,19 19,20 comprado
ALPA4 (Alpargatas) 17/11/05 Comprar a 50,51 58,49 65,00 comprado
AMBEV3 (Ambev) 18/11/05 Comprar a 700,01 723,89 751,24 comprado 1100,00
AMBV4 (Ambev) Comprar a 898,11 FA 870,00
ARTE4 (Kuala) Comprar a 8,61 FA 3,55
AVIL3 (Aços Villares) 11/11/05 Comprar a 338,01 299,89 300,00 estopado (11,27%)
BBAS13 (Bonus BB) 21/11/05 Comprar a 13,61 15,79 16,50 comprado
BBAS3 (BCO. DO BRASIL) Comprar a 45,01 FA 42,55
BBDC3 (Bradesco) 01/11/05 Comprar a 110,01 (EJ e B a 54,04) 62,79 64,30 comprado
BCAL6 (Bicicleta Caloi) Comprar a 0,27 FA 0,20 0,35
BESP4 (Banespa) Comprar a 333,01 FA 317,00
BRAP4 (Bradespar) Comprar a 62,51 FA 60,00
BRTO3 (Brasil Telecom) 25/08/05 Comprar a 16,31 (EJ a 15,60) 16,19 20,09 comprado
CCRO3 (CCR Rodovias) 21/11/05 Comprar a 66,11 64,89 71,89 comprado
CEPE5 (Celpe) 23/09/05 Comprar a 12,51 13,49 14,50 comprado
CGAS5 (Comgas) Comprar a 293,01 FA 256,00
CLSC6 (Celesc)
CLSC6 (Celesc)
Comprar a 1,61
Vender a 1,29
FA
TA
1,39
CMIG3 (Cemig) 03/11/05 Comprar a 70,01 67,39 73,80 comprado
CNFB4 (Confab) 02/09/05 Comprar a 3,51 (EJ a 3,47) 3,21 3,44 comprado
COCE5 (Coelce) 02/12/05 Comprar a 6,81 6,49 6,98 comprado
CPFG3 (CPFL ENERGIA) 03/11/05 Comprar a 24,51 25,69 27,70 comprado
CPFG3 (CPFL Geração) 09/09/05 Comprar a 12,71 FA 12,65
DASA3 (Dasa) 10/11/05 Comprar a 37,01 44,39 42,00 estopado +19,94%
DURA4 (Duratex) 14/12/05 Comprar a 27,61 25,39 29,00 comprado
EBTP3 (Embratel) 10/11/05 Comprar a 5,01 5,09 5,60 comprado
ELPL4 (Eletropaulo) Comprar a 114,11 FA 100,00
EMBR4 (Embraer) Comprar a 25,11 FA 23,50
GOAU4 (Gerdau Metalúrgica) 06/12/05 Comprar a 45,11 46,39 47,80 comprado
GOLL4 (Gol) 10/11/05 Comprar a 45,21 51,29 61,00 comprado
GRND3 (Grendene) Comprar a 23,51 FA 19,51
GUAR4 (Guararapes) 20/09/05 Comprar a 40,51 60,89 62,50 comprado
IDNT3 IIdéias Net) Comprar a 2,71 FA 2,50
ITSA4 (Itausa) 25/08/05 Comprar a 5,61 7,19 7,36 comprado
LAME3 (Lojas Americanas) 30/08/05 Comprar a 62,11 (EJ a 61,51) 73,89 77,50 comprado
MTSA4 (Metisa) 06/12/05 Comprar a 102,11 89,97 104,00 comprado
MWET4 (Wetzel) Comprar a 6,01 FA 5,29
NATU3 (Natura) 31/10/85 Compra 91,61 (EJ a 91,48) 102,89 104,50 comprado
PCAR4 (Pão de Açúcar) Comprar a 77,61 FA 71,84
PSSA3 (Porto Seguro) Comprar a 26,81 FA 25,50
RAPT4 (Randon) Comprar a 7,41 FA 7,30
RCLS4 (Recrusul) Comprar a 0,26 0,19 0,21
ROMI4 (Inds. Romi) 08/12/05 Comprar a 71,51 68,89 75,00 comprado
RSID3 (Rossi Resid) 07/11/05 Comprar a 1,17 1,64 1,78 comprado
SAPR4 (Sanepar) Comprar a 2,41 FA 2,12
SDIA4 (Sadia) Comprar a 7,01 FA 6,42
TAMM4 (Tam) 28/11/05 Comprar a 37,11 37,69 42,05 comprado
TCOC3 (Tele Centro Oeste) 11/11/05 Comprar a 20,61 (EJD a 19,86) 23,19 24,99 comprado
TCSL3 (Tim Part) 12/12/05 Comprar a 6,81 (EJ a 6,73) 5,89 6,42 comprado
TDBH3 (Telef. Data Br) Comprar a 0,66 FA 0,61
TMAR5 (Telemar N L) Comprar a 67,11 FA 63,89
TNLP3 (Telemar) 19/10/05 Comprar a 54,01 53,89 55,35 comprado
TRPL3 (Transm, Paulista) 14/09/05 Comprar a 27,01 (EJ a 26,37) 28,97 30,00 comprado
UBBR11 (Unibanco Unit) 03/11/05 Comprar a 24,61 27,09 28,80 comprado
UBBR3 (Unibanco) 15/08/05 Comprar a 15,31 17,79 18,44 comprado
WEGE4 (Weg) Comprar a 8,31 FA 7,47
SÍÍMBOLOS UTIILIIZADOS NA TABELA ACIIMA: #NOVA SUGESTÃO #FA: fundo anterior #SUGESTÃO DE VENDA #Fech³N: Comprar fechamento igual ou maior do que N. # Operação
encerrada.#EJ: ex-juros #ED: ex-dividendo#ALVO/RES: objetivo ou resultado#POUCA LIQUIDEZ/ALTO POTENCIAL DE LUCRO#PG: pós grupamento
20
ANÁLIISES IINDIIVIIDUAIIS
Þ Telemar pn em Real (TNLP4 – PESO NO BOVESPA: 9,081%)
Suportes
¨MP: 15,81
¨CP: 41,45/40,7/38,42/37,78/35,23
Resistências
¨MP: 45,44
¨CP: 43,45
Objetivos: Alta 45,44; Baixa 33,08
Estratégias
Se seguiu as estratégias da RV363,
continua fora do mercado.
Comprar a 45,51 com estope inicial um
pouco abaixo do fundo anterior.
21
ANÁLIISES IINDIIVIIDUAIIS
Þ Usiminas em Real (USIM5 – PESO NO BOVESPA: 5,79%)
Suportes
¨MP: 20,51
¨CP: 50,51/48,7/44,51/41,8/39,53/35,1
Resistências
¨MP: 65,10
¨CP: 54,6/56
Objetivos: alta 65,10; baixa 39,53
Estratégias
Se seguiu as estratégias da RV363, segue
comprado a 46,81. Mantenha o seu
estope em 50,39. Se vier a ser estopado,
apenas encerre a operação.
Þ Bradesco pn em Real (BBDC4 – PESO NO BOVESPA: 3,264%)
Suportes
¨MP: 10,01
¨CP: 68,16/62,72/57,87/51,55/48,71
Resistências
¨MP: 76,59
¨CP: 76,59
Objetivo: alta ?; baixa 51,55
Estratégias
Se seguiu as estratégias da RV363, segue
comprado a 116,54 (ex-bonif. a 58,27).
Suba o seu estope para 69,49. Se vier a
ser estopado, apenas encerre a operação.
Se depois de estopado o preço voltar a
subir recompre na ultrapassagem do topo
principal e coloque um estope inicial um
pouco abaixo do fundo anterior.
22
ANÁLIISES IINDIIVIIDUAIIS
Þ Petrobrás em Real (PETR4 – PESO NO BOVESPA: 7,926%)
Suportes
¨MP: 7,06
¨CP: 34,95/32,7/29,98/29,25/29/25,8
Resistências
¨MP: 37,49
¨CP: 36,95
Objetivo: alta 37,49; baixa 22,4
Estratégias
Se seguiu as estratégias da RV363,
continua fora do mercado.
Comprar a 37,61 com estope inicial um
pouco abaixo do fundo anterior.
Þ Telesp Celular Part. pn em Real (TSPP4 – PESO NO BOVESPA: 1,876%)
Suportes
¨MP: 5,89
¨CP: 8,7/7,3/6,36
Resistências
¨MP: 101,83
¨CP: 9,42/10,45/10,47/11,3/12,34
Objetivo: alta 19,37; baixa 5,89
Estratégias
Se seguiu as estratégias da RV363, segue
comprado a 8,43. Mantenha o seu estope
em 8,59. Se vier a ser estopado, apenas
encerre a operação.
Se depois de estopado o preço voltar a
subir recompre a 9,51 com um estope
inicial um pouco abaixo do fundo anterior.
23
ANÁLIISES IINDIIVIIDUAIIS
Þ Vale do Rio Doce em Real (VALE5 – PESO NO BOVESPA: 6,966%)
Suportes
¨MP: 2,76
¨CP: 79,67/77,71/74/72,54/66,36
Resistências
¨MP: 88,20
¨CP: 84,60
Objetivo: alta ?; baixa 52,39
Estratégias
Se seguiu as estratégias da RV363,
continua fora do mercado..
Comprar a 88,31 com um estope inicial
um pouco abaixo do fundo anterior.
Þ Siderúrgica Nacional ON em Real (CSNA3 – PESO NO BOVESPA: (4,377%)
Suportes
¨MP: 24,64
¨CP: 46/44,25/41/39,25/39,12/35,2
Resistências
¨MP: 61,03
¨CP: 50,19/53,79/55,25/57,21
Objetivos: alta 61,03; baixa 35,20
Estratégias
Se seguiu as estratégias da RV363, segue
comprado a 44,21. Suba o seu estope
para 46,89. Se vier a ser estopado,
apenas encerre a operação.
24
ANÁLIISES IINDIIVIIDUAIIS
Þ Eletrobrás em Real (ELET6 – PESO NO BOVESPA: 3,102%)
Suportes
¨MP: 10,71
¨CP: 37,11/36,5/33,3/31,43/28,45/28
Resistências
¨MP: 44,70
¨CP: 39,25/41,24/42,19/43,50
Objetivo: alta 44,70; baixa 26,70
Estratégias
Se seguiu as estratégias da RV363,
continua fora do mercado.
Comprar a 45,01 com estope inicial um
pouco abaixo do fundo anterior.
Þ Embratel pn em Real (EBTP4 – PESO NO BOVESPA: 2,443%)
Suportes
¨MP: 1,14
¨CP: 6,32/5,87/5,46/5,32/5,03/4,84
Resistências
¨MP: 43,92
¨CP: 6,98/7,24/7,71/8,83
Objetivo: alta 9,35 baixa: 3,42
Estratégias
Se seguiu as estratégias da RV363, segue
comprado a 6,31 (07/12). Suba o seu
estope para 6,19. Se vier a ser estopado,
apenas encerre a operação.
``
25
ANÁLIISES IINDIIVIIDUAIIS
Þ Caemi pn em Real (CMET4 – PESO NO BOVESPA: 3,945%)
Suportes
¨MP: 0,86
¨CP: 3,22/3,16/3,07/2,73/2,62/2,47
Resistências
¨MP: 3,77
¨CP: 3,60
Objetivo: alta 3,77; baixa 1,76
Estratégias
Se seguiu as estratégias da RV362,
continua fora do mercado.
Comprar a 3,81 com estope inicial um
pouco abaixo do fundo anterior.
Vender a 2,99 com estope inicial um
pouco acima do topo anterior.
Þ Itaú pn em Real (ITAU4 – PESO NO BOVESPA: 2,506%)
Suportes
¨MP: 21,40
¨CP: 55,17/54,2/52,27/49,95/48,44
Resistências
¨MP: 59,89
¨CP: 59,89
Objetivo: alta 55,45; baixa 40,98
Estratégias
Se seguiu as estratégias da RV363, segue
comprado a 55,51. Mantenha o seu estope
em 54,89. Se vier a ser estopado, apenas
encerre a operação.
Se depois de estopado o preço voltar a
subir recompre na ultrapassagem do topo
histórico e coloque um estope inicial um
pouco abaixo do fundo anterior.
26
ANÁLIISES IINDIIVIIDUAIIS
Þ Cemig pn em Real (CMIG4 – PESO NO BOVESPA: 2,593%)
Suportes
¨MP: 33,07
¨CP: 86,15/81,8/78,11/74,85/69,63
Resistências
¨MP: 91,81
¨CP: 91,81
Objetivo: alta ?; baixa 74,85
Estratégias
Se seguiu as estratégias da RV363, segue
comprado a 80,01 (ex-juros a 78,80).
Mantenha o seu estope em 85,89. Se vier
a ser estopado, apenas encerre a
operação.
Se depois de estopado o preço voltar a
subir, recompre na ultrapassagem do topo
principal e coloque um estope inicial um
pouco abaixo do fundo anterior.
Þ AmBev em Real (AMBV4 – PESO NO BOVESPA: 1,358%)
Suportes
¨MP: 412,36
¨CP: 831/795/747/730,92/720,16
Resistências
¨MP: 898,00
¨CP: 898,00
Objetivo: alta ?; baixa 747
Estratégias
Se seguiu as estratégias da RV363,
continua fora do mercado.
Comprar a 898,11 com um estope inicial
um pouco abaixo do fundo anterior.
27
ANÁLIISES IINDIIVIIDUAIIS
Þ Brasil Telecom pn (BRTO4 – PESO NO BOVESPA: 2,282%)
Suportes
¨MP: 5,58
¨CP: 11,58/9,38/8,58/7,78
Resistências
¨MP: 15,84
¨CP: 12,8/15,84
Objetivo: alta 15,84; baixa 7,78
Estratégias
Se seguiu as estratégias da RV362, segue
comprado a 11,41 (ex-juros a 10,70). Suba
o seu estope para 12,09 (ex-juros a
11,38)). Se vier a ser estopado, apenas
encerre a operação.
Se depois de estopado o preço voltar a
subir recompre na ultrapassagem do topo
histórico e coloque um estope inicial um
pouco abaixo do fundo anterior.
Þ Net pn (PLIM4 – PESO NO BOVESPA: 1,786%)
Suportes
¨MP: 0,13
¨CP: 1,02/0,94/0,85/0,82/0,71/0,68
Resistências
¨MP: 31,10
¨CP: 1,17/1,3/2,78
Objetivo: alta 30,79; baixa 0,51
Estratégias
Se seguiu as estratégias da RV363,
segue comprado a 0,91 (ex-subs. a 0,90).
Mantenha o seu estope em 1,07. Se vier
a ser estopado, apenas encerre a
operação.
Se depois de estopado o preço voltar a
subir, recompre na ultrapassagem do topo
anterior e coloque um estope inicial um
pouco abaixo do fundo anterior.
28
ANÁLIISES IINDIIVIIDUAIIS
Þ Gerdau pn (GGBR4 –PESO NO BOVESPA 3,962%)
Suportes
¨MP: 2,40
¨CP: 36,4/33,5/31,7/30,27/27,12/26,62
Resistências
¨MP: 38,18
¨CP: 38,18
Objetivo: alta ?; baixa 27,12
Estratégias
Se seguiu as estratégias da RV362,
comprou a 35,01 (06/12) e segue
comprado. Suba o seu estope para 36,29.
Se vier a ser estopado, apenas encerre a
operação.
Se depois de estopado o preço voltar a
subir, recompre na ultrapassagem do topo
histórico e coloque um estope inicial um
pouco abaixo do fundo anterior.
Þ Futuro do Bovespa
Tendências
¨Primária: ALTA
¨Secundária: ALTA
¨Terciária: ALTA
Suportes: 33210/32105/31315/30815
Resistências: 3340/37995/41535
Comentário
Se seguiu as estratégias da RV363,
segue comprado a 32710 (rolado para
fevereiro a 33420). Suba o seu estope
para 33190. Se vier a ser estopado,
apenas encerre a operação.
Se depois de estopado o índice voltar a
subir, recompre na ultrapassagem do
topo anterior e coloque um estope
inicial um pouco abaixo do fundo
anterior.
29
IINTER--RELAÇÕES DE MERCADOS COM O BOVESPA
Þ Dow Jones
Tendências
¨Primária: ALTA
¨Secundária: ALTA
¨Terciária: ALTA
Suportes
¨MP: 7197
¨CP:10729/10652/10519/10388/10156
Resistências
¨MP: 11750
¨CP:10960/10985/11350
Comentário
O DJ retorna para testar o topo de 10985.
Se ocorrer o rompimento irá testar o TH
em 11750. Se não romper deverá vir
testar o suporte proporcionado pelo fundo
de 10729 pontos.
Observação: na maior parte do tempo,
o DJ e o Bovespa costumam caminhar
na mesma direção.
Þ Nasdaq Composite
Tendências
¨Primária: ALTA
¨Secundária: ALTA
¨Terciária: INDEFINIDA
Suportes
¨MP: 1253
¨CP: 2230/2163/2064/2026/1944/1890
Resistências
¨MP: 5.133
¨CP: 2278/2328/2892
Comentário
O Nasdaq segue indefinido. Se romper a
resistência em 2328 sobe. Mas, se
penetrar o fundo de 2230 cai.
Observação: no geral, o NASDAQ e o
Bovespa tendem a caminhar na mesma
direção.
30
IINTER--RELAÇÕES DE MERCADOS COM O BOVESPA
Þ Ouro Spot (BM&F)
Tendências
¨Primária: ALTA
¨Secundária: ALTA
¨Terciária: ALTA
Suportes
¨MP: 20,50
¨CP: 37,35/35,4/35/32,2/32,11/31,9
Resistências
¨MP: 43,80
¨CP: 39,2/40
Comentário
Se seguiu as estratégias da RV363, segue
comprado a 35,11. Suba o seu estope
para 37,29. Se vier a ser estopado,
apenas encerre a operação.
Observação: o preço do Ouro costuma
se mover na direção inversa do
Bovespa, sendo por isso considerado
contra-cíclico.
Þ Eurodólar
Tendências
¨Primária: BAIXA
¨Secundária: INDEFINIDA
¨Terciária: ALTA
Suportes
¨MP: 0,8228
¨CP: 1,164/1,138/1,08
Resistências
¨MP: 1,367
¨CP: 1,208/1,212/1,221/1,227/
Comentário
Se seguiu as instruções da RV363, foi
estopado com reversão simultânea para
compra na venda feita a 1,173 em 1,191
com um custo de 1,53% e segue
comprado. Mantenha o seu estope em
1,169. Se vier a ser estopado, apenas
encerre a operação.
31
IINTER--RELAÇÕES DE MERCADOS COM O BOVESPA
Þ Futuro do Petróleo (crude oil light)
Tendências
¨Primária: ALTA
¨Secundária: BAIXA
¨Terciária: INDEFINIDA
Suportes
¨MP: 25,04
¨CP: 58,9/55,72/52,22
Resistências
¨MP: 70,85
¨CP: 61,9/62,95/64,7/68,27
Comentário
Se seguiu as estratégias da RV363,
continua fora do mercado.
Comprar a 62,01 com estope inicial um
pouco abaixo do fundo anterior.
Vender a 55,59 com estope inicial um
pouco acima do topo anterior.
Þ Futuro do Dólar
Tendências
¨Primária: BAIXA
¨Secundária: INDEFINIDA
¨Terciária: INDEFINIDA
Suportes
¨MP: 2177,00
¨CP: 2177,00
Resistências
¨MP: 6007,97
¨CP: 2362/2376,42/2434,21
Estratégias
Se seguiu as estratégias da RV363,
continua fora do mercado.
Comprar no primeiro ziguezague
ascendente com estope inicial um pouco
abaixo do fundo anterior.
Observação: normalmente, anda na
contra-mão do Bovespa.
As opiniões e análises aqui descritas são baseadas em estudos gráficos, estatísticos, matemáticos, não sendo, portanto, a expressão máxima da verdade. Resultados
passados não significam e/ou garantem resultados futuros. Sendo assim, não existem formas de responsabilidade por fatos não ocorridos.
Copyright – Todos os direitos Reservados – Proibida sua reprodução total ou parcial sem autorização da Timing.
32
COLUNA DO SER
Sergio Rocha – paginadoser@gmail.com
Análise Fundamentalista
Muitas pessoas devem estar surpresas de encontrar um artigo fundamentalista numa revista dedicada à análise
técnica. Não se assustem. Para aqueles que se interessam pelo mercado, é importante conhecer as várias
ferramentas de análise, e estar por dentro de uma segunda opinião.
“Se você conhece o inimigo e conhece a si mesmo, não precisa temer o resultado de cem batalhas. Se você se conhece,
mas não conhece o inimigo, para cada vitória obtida sofrerá também uma derrota. Se você não conhece nem o inimigo
nem a si mesmo, perderá todas as batalhas”.
Sun Tzu (Filósofo e estrategista)
Primeiros Passos
Mitos Sobre a Análise Fundamentalista:
· A análise fundamentalista indica “o que” comprar e a análise técnica “quando” comprar?
Não. A análise fundamentalista possui uma metodologia própria, uma estratégia de compra, venda e de segurança.
A parte que lida com “o que” comprar é apenas uma pequena parte da análise fundamentalista.A análise
Fundamentalista vai dizer “por quanto” comprar e não “quando” comprar.
· A Análise fundamentalista é um investimento de “longo prazo?”
Depende. Pode ser de longo e de curto prazo. Quem vai dizer isso é a resposta de preço do mercado e a qualidade
da companhia.
· Tudo o que se sabe sobre uma ação está refletida no seu preço?
Existe muita divergência sobre isso, até mesmo dentro da área acadêmica. Uma vertente é a Teoria do Mercado
Eficiente (EMH), que diz que o mercado é completamente eficiente e tudo o que se sabe sobre um papel estaria
embutido no seu preço. Outra vertente diz que existem efeitos espúrios que afetariam a eficiência do mercado, o
que é estudado pelas finanças comportamentais. Entre essas influências externas que alterariam este equilíbrio
estariam:
ü Excesso de auto-confiança;
ü Desejo de seguir a multidão;
ü Aversão a perdas;
ü Necessidade de gratificação instantânea;
ü Necessidade de provação social, etc...
33
COLUNA DO SER
A Palavras dos mestres:
Será que se aplica ao mercado brasileiro? Vamos ver o resultado dos papéis que mais subiram este ano.
Agora podemos começar a pensar que existe alguma coisa por trás disso. É claro que o investidor não deve pensar
em aplicar análise técnica em ações de baixíssima liquidez, mas pode ser um campo interessante para uma pesquisa
inicial.
· É possível saber o “preço alvo” de uma ação com grande precisão.
Não. Possível é saber uma faixa de preço onde pode estar a ação. Existirão preços em que será prudente comprar e
outros em que possivelmente será melhor vender.
Ranking Nome Variação %
1 Usin C Pinto PN 818,5
2 Santanense PN 449,7
3 Banese ON 350,4
4 Aco Altona PN 347,8
5 Const Beter PNB 345,3
6 Cemat PN 342,6
7 Santanense ON 291,9
8 Banese PN 272,9
9 Bahema PNA 258,4
10 Excelsior PN 257,1
11 Biomm ON 256,6
12 Guararapes ON 245,0
13 Rossi Resid ON 235,2
"Investimento é a arbitragem da ignorância. O investidor de sucesso acredita que sabe alguma coisa a mais
que os outros que ainda não foi totalmente precificado. Existe muito pouca coisa que não seja conhecida sobre
as grandes ações. Por outro lado,...a maioria das corretoras não pode perder tempo e dinheiro para fazer
pesquisas sobre as pequenas. Logo, é muito mais provável que você encontre uma barganha (com alguma
ignorância para arbitrar) nessa fatia relativamente pouco explorada do mercado acionário".
Jim Slater
Acionista majoritário de várias companhias na Inglaterra e autor do livro “The Zulu Principle”
34
COLUNA DO SER
Investimento – Opinião – Para Começar a pensar:
Esta semana tomamos o conhecimento de uma notícia importante divulgada pela mídia:
Será que existe uma mensagem subliminar nessa notícia? Pode ser que sim. Temos alguma chance do Real se
desvalorizar em relação ao Dólar novamente. Já vimos esse filme antes. Por que será que o Governo decidiu
antecipar suas dívidas em dólar? O investidor atento pode perceber que isso pode ser um sinal enviado pelo
Governo. O crescimento do País está abaixo do esperado, os empresários reclamam das dificuldades das
exportações e as taxas de juros sinalizam que vão cair. Quais seriam as conseqüências no fluxo da moeda para
fora? Estamos em épocas de eleições, hora de agradar o eleitorado. O investidor atento pode ouvir ao longe o
badalar dos sinos. Será que as ações das exportadoras que ficaram atrasadas em relação ao índice subirão? Será que
este é um bom hedge para o dólar? Não custa nada pensar a respeito.
Maiores exportadoras Brasileiras
Exportadora (¹) Petrobrás 4.5 bilhões
Exportador de capital
nacional (¹)
Petrobrás 4.5 bilhões
Exportadora de capital
estrangeiro (¹)
Bunge alimentos 2.5 bilhões
Em crescimento
percentual (²)
Shell 302%
Em valor adicionado (³) Embraer 1.3 bilhão
A que mais avançou no
ranking
Siemens 97 posições
Na geração do saldo
positivo
Cia. Vale do rio doce 2.9 bilhões
A líder dos estados Bunge alimentos 5 estados
"Primeiro descubro a música que será tocada nos próximos anos. Depois que grupos de
ações irão refletir melhor aquela música”.
Ralph Wanger
Presidente do Fundo Acorn e autor do Livro a “Zebra in a Lion Country”
“Rio, 14 de Dezembro de 2005 - O pagamento antecipado de US$ 15,5 bilhões ao Fundo Monetário
Internacional (FMI) e o início da quitação da dívida externa abrem caminho para a valorização do câmbio,
ajuste tão esperado por empresários. Indagado sobre a possibilidade de o governo recompor as reservas
que foram destinadas à quitação, o secretário do Tesouro, Joaquim Levy, respondeu: "é uma
possibilidade recompor". Se o governo optar pelo aumento das reservas, a compra de dólares fará a
moeda subir no mercado.”
Fonte: Gazeta Mercantil
35
COLUNA DO SER
Por setor
Fonte: Coinmex 25/11/2005
Variação de exportações por setor:
Discriminação 2004 Part.
(%) 2003 Part.
(%)
Soja mesmo Triturada 5.394.907 5,6 4.290.443 5,9
Minérios de Ferro e seus Concentrados 4.758.875 4,9 3.455.920 4,7
Automóveis de Passageiros 3.351.479 3,5 2.655.693 3,6
Farelo e Resíduos da Extração do Óleo de Soja 3.270.889 3,4 2.602.374 3,6
Aviões 3.268.848 3,4 1.938.582 2,7
Óleos Brutos de Petróleo 2.527.691 2,6 2.121.930 2,9
Carne de Frango Congelada, Fresca ou Refrig. Incl. Miúdos 2.493.929 2,6 1.709.743 2,3
Produtos Semimanufaturados de Ferro ou Aços 2.115.274 2,2 1.618.821 2,2
Produtos Laminados Planos de Ferro ou Aços 2.006.993 2,1 1.410.003 1,9
Motores para Veículos Automóveis e suas Partes 1.971.557 2,0 1.674.008 2,3
Carne de Bovino Congelada, Fresca ou Refrigerada 1.963.066 2,0 1.154.509 1,6
Partes e Peças para Veículos Automóveis e Tratores 1.960.828 2,0 1.488.271 2,0
Calçados, suas Partes e Componentes 1.898.806 2,0 1.622.173 2,2
Café Cru em Grão 1.749.810 1,8 1.302.292 1,8
Pastas Químicas de Madeira 1.721.855 1,8 1.743.556 2,4
Açúcar de Cana, em Bruto 1.510.982 1,6 1.350.039 1,8
Fumo em Folhas e Desperdícios 1.380.461 1,4 1.052.425 1,4
Aparelhos Transmissores ou Receptores e Componentes 1.374.400 1,4 1.676.167 2,3
Outros Produtos 51.754.570 53,6 38.217.188 52,3
Total Geral 96.475.220 100,0 73.084.140 100,0
Fonte: Ministério do Desenvolvimento.
Até semana que vem, um abraço e bom final de semana.
Sergio Rocha
Agroindustrial Bunge Alimentos 2.5 bilhões
Automotivo Volkswagen 1.6 bilhões
Siderúrgico Cia.siderúrgica de Tubarão 1 bilhão
Mineração Cia.Vale do Rio Doce 3.2 bilhões
Químico Braskem 600 milhões
Comércio exterior Coimex 400 milhões
Papel e celulose Aracruz Celulose 800 milhões
Eletroeletrônico Bosh 570 milhões
Maior setor exportador Agroindústria e alimentos 18 bilhões