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Advanced Charting Techniques for Strategic Investment Success

Learn how to navigate the stock market effectively with advanced charting techniques. This guide emphasizes the importance of investing only in shares that pass specific filters, identify market trends, and recognize short-term buying signals. Understand how to use stop-loss orders and centered moving averages to mitigate risks. Gain insights into market trends using the 80:20 rule, learn how to analyze price movements, and discover strategies for selecting growth shares. With clear examples and actionable advice, this resource is designed for both novice and experienced investors looking to enhance their investment strategies.

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Advanced Charting Techniques for Strategic Investment Success

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  1. Advanced charting last meeting • Only invest when: • Share passes our filters on REFS • Dominant trend in market is up • Dominant trend in share is up • Share shows short term buying signal • Always use stop loss [7.5%] and ‘time controlled selling signals’ • Use centred moving averages

  2. Googled author • Much in demand in UK and USA • Sells data and programmes via his own company • Last [expensive] book in ‘99

  3. 80:20 rule • Sectors in year when Index -16%

  4. 80:20 rule • Sectors in year when Index +1%

  5. 80:20 rule • Sectors in year when Index +25%

  6. 80:20 rule • Shares in year when Index +25% • Shares behave similarly when Index is flat or decreasing • “Most of the time, 80% of shares will follow the direction of the market while 20% will do the opposite” - don’t try to buck the market!

  7. How to determine dominant trend in market? • Use 41 week centred, moving average of FTSE 100

  8. Centred is more accurate

  9. But centred MA stops short • Extrapolate by eye to NOW • ‘Price analysis’ extrapolation • Average MA itself • Try a shorter span MA near NOW [NAS] • If share’s dominant trend has been up for >6 months, look for share with younger trend

  10. Dominanttrend changing? • Calculate % of 120 shares with rising41 week MAs; <60% is signal for caution • Lot of work or buyauthor’s data andsoftware

  11. Buy signals • Trough in 5 week MA - more accurate than 10 day MA cutting up through 50 day MA

  12. Channelanalysis • Best technique of all • Must use centred MA • Drawing by eye is fine

  13. Quick profits • Channel shows dominant trend is up • Half channel bounce gives 17% in 4 weeks • Full channel bounce gives 22% in 7 weeks

  14. Extrapolate channel to NOW • Easy and accurate to do by eye • If difficult, don’t invest! • Use weekly prices until price approaches lower boundary when daily prices are better • Lots of examples show good gains and when not to invest • No losses as market buoyant

  15. Example of CA - buying • Select growth share using Zulu and REFS • Channel is rising so extrapolate by eye and wait until price arrives at lower boundary • Buy when trough formed

  16. Example of CA - selling • Peak on upper boundary • Stop loss already triggered • Sell for 41% gain in less than 4 months

  17. Conclusions • Plot FTSE 100 and its 40 week MA using website • Centre MA by moving it left 20 weeks using tracing paper • Draw in channels to NOW; get excited if trend is up! • Draw channel for selected share and extrapolate • Buy/sell when price at a boundary • Refer to these slides on our website • I’m willing to help!

  18. Reasons for failure • Trying to pre-empt market • Buying on price fall[a trend continues until it ends!] • Misplaced patience • Holding on for dividends • Listening to advice • Not spreading the risk [8-12 shares] • CAPITAL MUST BE PRESERVED

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