Tactical Execution

Hello and welcome to Financial Audio, an information series providing listeners with detailed and tactical guidance on today’s complicated financial world. My name is Patrick and I’m your host. You can find written versions of these podcasts at FinancialAudio.com and I encourage your candid feedback at the same location. Today, we’ll be looking at a sophisticated online charting platform that’s free and available to anyone who wants to use it so let’s get started.

Before I identify the platform we’ll be discussing, let me just say I’m sure there are plenty of good platforms out there. The internet is a big place and I have NOT scoured the web, looking for competing platforms. The one we’ll be discussing today has been around for years and I think it’s powerful and effective. And it’s worth noting I have absolutely no affiliation with this particular site at all. I found it myself years ago and have been using it ever since. If you have a different platform that YOU use and that you’d like to recommend, please write me an email and I’ll include it in a future chapter.

I also suggest you make sure you’ve got a computer near by when you listen to this chapter. I’ll be making references to specific parts of the site and you can easily follow along if you’re in front of a machine.

Okay, so the platform I use is called BigCharts.com and they were actually purchased by MarketWatch a few years back. MarketWatch is owned by Dow Jones & Company and both websites – BigCharts and MarketWatch have won awards for their online resources. Anyway, you can get to BigCharts by typing BigCharts.com into a web browser or you can type BigCharts.MarketWatch.com – they both go to the same place. You’ll know you’re there because it has a bright green background and displays the most recent day’s trading activity for the Dow Jones and the NASDAQ right on the homepage.

You can click on either the Dow Jones graphic or the NASDAQ graphic and the site will show you the most recent 12 months trading activity for either exchange so you can get an idea what’s been happening. It also displays the volume below the chart so you can see the strength in the market along the way. The site also has an open field near the top that’s labeled “enter symbol or keywords” and you can enter a particular stock’s ticker symbol there. When you press enter, it will again bring you to a chart displaying the most recent 12 months along with the daily trading volume. You’ll see a drop-down menu saying “1 year” at the top and you can change that time horizon from 1 day all the way to 1 decade or longer if data exists.

I actually recommend that you pick a particular stock and look at various time horizons, ranging from a decade all the way down to a day or two. It will give you an idea how these prices move around, trending up and down all the time. Notice how sideways trading activity on the 1-year chart is full of up and down activity on the 5 day chart. This relates to the time horizons we discussed in the last chapter. Stock prices are always on the move and a generally UP day could’ve easily had significant losses during the middle of the day.

Beside the symbol field, you can select Basic Chart, Advanced Chart or Interactive Chart. If you select Advanced Chart, it’ll open a side bar along the left hand side and you can make selections under subheadings like Time Frame, Compare To, Indicators and Chart Style. I recommend you play around with these options to see what information you gain insight from. You’ll also get a feel for some of the indicators and how they’re displayed graphically on the chart. For example, the oscillators are displayed below the volume bar while the moving averages and dividend announcements are displayed on the price chart itself.

Different people like different indicators so I won’t recommend one over the other but I strongly encourage you to take an hour or two to play around with the settings and see which indicators provide the most value for you. In particular, I suggest you look at the RSI, OBV, MACD, slow Stochastic, Momentum and the DMI. I also suggest you look at the 9-day moving average as well as the 13-day and the 50-day. Notice the differences between them in terms of how closely they follow the actual trading price of the stock. The closer they tract the price, the quicker you get pulled into a trend but you also risk more false signals. If you select a slower moving average, you’ll get fewer false signals but you’ll also miss the early action of a new trend.

When you select Interactive Chart, the options on the left hand column include more options like trend lines. Check the small square box to the left of “draw trend lines” and play with it. Simply click, drag and release over the price chart to draw a line. And remember, upward sloping trend lines connect two or more low points or troughs on the way up and downward sloping trend lines connect two or more highs as the stock price falls. You can click on “draw trend lines” and an example is presented in a separate window. See if the trend lines you draw remain intact for a long or short period of time. The longer the trend line remains unbroken, the more people start watching it and the more significant it becomes. Also notice if the line is broken but only by a tiny bit as the line continues.

People draw their trend lines differently. And keep in mind that moving averages often fall close to trend lines during a trending phase. So different investors are watching different lines and their buy and sell orders are placed in slightly different places as a result. It’s not uncommon for a stock to cross its trend line or a moving average but only for a day or even half a day. This can be one of the most frustrating situations because a truly unemotional trader will sell the position as soon as that line is breached, only to see it turn around immediately thereafter and continue back upward again. It may be wise to place your sell orders slightly below the line to avoid these situations. The downside is that you’ll lose an extra percent or two when the position finally liquidates.

Next, I recommend you click on the Markets tab. This is valuable for a couple reasons. For starters, there’s a chart on the right that shows the Dow Jones, the NASDAQ and the S&P500 all on top of each other, showing the trading activity for the most recent trading day. It’s valuable because you can see they all move in tandem. Yes, they may vary in terms of the final outcome but the path is very similar for all three. From time to time, the stock markets have a mixed day where the Dow is higher and the NASDAQ is lower or vise versa. People get confused by this and wonder how markets can go in opposite directions. They don’t. It’s just that the markets contain different stocks and one sector may have had a particularly good or bad day, pushing that market to a slightly different close. But even in those situations, the path during the day was similar for all three.

The next thing that’s worth pointing out is the 30-year bond index that’s listed below the chart. Clicking on this index will bring you to a 12-month chart showing the yield on the 30-year Treasury index. Now, because it’s an index, the numbers on the right don’t mean a whole lot but the chart is great for seeing where interest rates are going. If the chart is trending up, interest rates are on the rise. And if it’s trending down, interest rates are dropping. It’s also pretty insightful to click on the drop-down menu and select “all data” as this displays the interest rate trends since 1994. Looking over the chart, you can see the effects of the 1998 financial crisis in Japan, the immediate financial affects of 9/11 and the historic lows of 2003 and again in 2005. And that’s a great example of support, by the way, as interest rates jumped up after the 2003 lows and then trended downward again during 2004 and touched the EXACT same low in 2005 and then bounced off and started rising again. Coincidence? I don’t think so.

Still on the Market tab, if you scroll down, you can see the advancing shares compared with the declining shares for that particular day. It also shows the total advancing volume compared with the declining volume. Market watchers call this the market breadth and it gives a pretty good indication of the market sentiment on that day. You may have noticed one of the options in the charting platform was the AD Line – well, that stands for the Advance Decline line and it measures market breadth over a period of time, providing yet another indicator consider.

Let’s move on by clicking on the Industries tab. A couple chapters ago, we discussed the importance of identifying the market trend as well as the stock’s trend before pulling the trigger on a trade. I also mentioned the importance of looking at the industry to see which industries are pulling the market up and which are pulling it down. Well, this tab is fantastic for making that determination. It lists the top performing industries and the worst performing industries for the past 3 months. And you can click on the drop-down menu to see the results for time horizons ranging from 1 week all the way to 5 years. This is a great tool for gaining some important insight to the driver’s behind the market at any one time. With one click, you can know immediately what industries are strong and which are weak.

Next on the list is the Reports tab. It’s called BigReports on the site and it offers a number of great reports that offer the perfect training ground for reading technical stock charts. In particular, I’m referring to the BigPics reports that are in the second section down the page. There are three options within that section: biggest % price increase, biggest % volume increase and biggest money movers. I recommend the first and the third. The second tends to yield less attractive options because the % volume increase is boosted by low average volume and that’s a sign of poor liquidity and limited interest in the stock and the sudden volume surge really doesn’t change that. The other two identify very good potential investment options for traders to consider and I’ve used these reports many times to evaluate different stocks for my OWN portfolio.

The biggest advantage of these reports is that they display 9 charts at a time with the price-volume action as well as the 20-day moving average. So you’ll get a lot of practice looking at charts and that’s what develops your ability to interpret the stock’s potential. You’ll quickly see the commonalities of these charts; namely the recent price increase normally accompanied by a volume spike. The charts show the past 3-months trading activity so you can quickly see if there’s resistance above the current trading price. In most cases, because of the nature of this report, the stocks are breaking new ground, which is exactly what you want.

This might be a good time to address “resistance” from a slightly different angle. Any time a stock has traded higher than its current trading price in the past 3 to 6 months, that represents real resistance the stock will have to fight through to advance upwards. Many people are reluctant to purchase a stock that’s sitting at a 52-week high but that’s exactly what you should be looking for. In fact, we’ll discuss ways of identifying stocks that have just recently hit 52-week highs in a later chapter because it’s such a valuable approach. Fact is; you want stocks that have NO resistance, stocks that are free to move up as quickly and as high as possible. I usually look back as far as 18 months for resistance. If the stock’s sitting at an 18-month high, I know I have absolutely no resistance to worry about – no hidden sell orders perched above me – and that’s EXACTLY what I’m looking for.

The last tab I’ll discuss here is the Advanced Tools tab. You’ll have to sign up for an account before you can use these tools but MarketWatch is a very reputable site and I certainly had no problem signing up for an account. Once signed in, you can select a portfolio analyzer, a variety of alerts and an email newsletter. Myself, I don’t use these tools but I can appreciate that other investors truly benefit from them so I thought I’d point them out here.

Obviously, there are other tools available on the site (including Historical Quotes) and I think it’s worth exploring and playing with those options to familiarize yourself with the site’s full capabilities. It’s a great site and I’ve been using it for years. Again, I have absolutely no affiliation with BigCharts whatsoever and I won’t benefit in any way if you decide to use it. I’m only giving the plug because I truly believe it’s a great resource.

This is the first specific resource I’ve identified in this series and I hope you take a second to compare it with the expensive platforms being marketed out there – platforms like WizeTrade. There certainly not identical and the WizeTrade platform has some fancy bells and whistles but BigCharts is completely free and it has some sophisticated tools of its own. I’ll be introducing some other resources in future chapters and between them all, you’ll have access to all the tools you’ll need to design and execute your very own investment strategy.

If you’d like to see what I’M doing in the market, just create a FREE account and login at FinancialAudio.com and then click on Market Position. Now, it’s important I tell you that I’m NOT a licensed Financial Advisor. This is FREE information and I do NOT accept money to give investment advice. I’m just giving you a little glimpse into my own trading activity, that’s all.

You can also read market commentary on the blog page. If you’d like to see a list of upcoming topics, just click Podcasts on the homepage. If you have a suggestion for a future topic, please use the Contact form to let us know. And finally, all the websites referenced on this podcast have been included on the Links page.

Okay, thank you very much for listening. If you like what you hear on these podcasts, please tell a friend about them. Modern technology like podcasting can help elevate new and innovative thinkers but we all have to play our part to help spread the word for those who deserve our endorsements. If I am deserving of yours, my thanks.

Again, you can find written versions of these podcasts at FinancialAudio.com and I do offer workshops, seminars and keynote speeches as well as a variety of more advanced information products so please email me at Patrick@FinancialAudio.com for more information. I’m also doing a series on innovative marketing and strategic business positioning. That series is called Tactical Execution and you can find it on iTunes.

Stay tuned. There’s a lot more to come. In the meantime, think big, take action and invest strategically. Bye for now.