The Worm A number of years ago, shortly after I had worked out the calculations covered in the last two lessons, I showed my business partner the results. He took one look and asked, “Why don’t you show the way the target moves over time?” Eureka! This was a simple yet brilliant idea, and I […]

The Benchmark Equivalence Line If the benchmark is considered as a target which is measured against itself, then the benchmark’s defensive and offensive scores are always equal to 100. For that reason, the benchmark is always located at the center of the matrix, at the intersection of the offensive and defensive benchmark indications. Location Of […]

Offense and Defense Note: In the next three lessons you will be shown, in detail, how to construct proprietary indicators for yourself. You may wish to set up your own spreadsheet to calculate these indicators. However, the calculations presented may be daunting for some. Those of you who find such calculations tedious should nevertheless read […]

One Overbought/Oversold method, the trend channel, attempts to remedy the deficiencies of Stochastic by recognizing trends. Unlike Stochastic, where maximum and minimum are determined by the fixed high and low of the recent range, this method creates a channel, or envelope, which tracks the trend. The target is overbought as it approaches the upper limit […]

Overbought/Oversold Indicators 1 “Overbought” and “oversold” are words without precise definition. Nevertheless their connotations are clear enough. Even poorly-managed, heavily indebted or loss-making company can become oversold and too cheap and therefore worth buying. On the other hand even well-managed companies like Apple or Google can at some point become overhyped, overheated and overvalued. Both […]

Trendlines 2 The most important thing to keep in mind about any trendline you draw is this: you are not the only trader drawing it. For that reason, the action of a stock in the area of a well-placed trendline reveals much about the quality and character of other traders active in the issue. Trendlines […]

Trendlines 1 The trendline is the most overused and least understood tool available to the trader. Anyone with a straight-edge and a pencil can draw straight lines on a chart, a process made even simpler by the introduction of computer charting programs. For that reason, trendlines should be used with care. At worst, drawing trendlines […]

Module 6 – Trader’s Toolkit Caution I have included the present chapter reluctantly. There is a risk to learning the use of mechanical indicators before the student has mastered the principles taught and demonstrated in earlier lessons. Beginning traders who rely too heavily on indicators, oscillators and other such devices before they have learned to […]

Price does indeed break support (see arrow), and we are stopped out of half of our long position. After a brief rally, WMT slips back to long-term support between 11 and 12. This is a price level which has been well-tested over the last three years. It is an area which has repeatedly demonstrated control […]

The Trap Closes We have traded WMT in the past both long and short. But the upside potential for the stock is now so great that we resolve to hold our shares strongly and to increase our position as new evidence adds to the bullish case. From P, the point of our initial position, the […]