Chart School! Mike Cintolo VP of Investments and Chief Analyst Cabot Market Letter, Cabot Top Ten Trader [email protected] Cabot Investors Conference 2013 www.cabot.net Primer •  Stream of Consciousness •  Looking for Familiar Faces •  “Seven-‐in-‐10 Rule” •  Supply & Demand is the Aim Cabot Investors Conference 2013 www.cabot.net Daily Chart: More detail, less perspective Chart is nine to eleven months 25-‐day moving average (thin black) Stock’s daily movement 50-‐day moving average (thick black) Cabot Investors Conference 2013 200-‐day moving average (thick green) Stock’s daily volume www.cabot.net Weekly Chart: Greater perspective, less detail Chart is three years 10-‐week moving average (thick black) Stock’s weekly movement Earnings line 40-‐week moving average (thick green) Cabot Investors Conference 2013 Stock’s weekly volume www.cabot.net Market Timing: Trends the Key Nasdaq Summer/Fall 2008 Cabot Tides Sell •  Big Moves are What Really Count! •  Simple, common moving averages work best Cabot Investors Conference 2013 www.cabot.net Support/Resistance: Nope Cabot Investors Conference 2013 www.cabot.net Secondary Measures: Defense vs. Growth XLP – Consumer Staples (Defense) SOX – Semiconductors (Growth) Cabot Investors Conference 2013 www.cabot.net AAPL January 2008 Watch the Big Leaders Nasdaq January 2008 Cabot Investors Conference 2013 FSLR January 2008 www.cabot.net Characteristics of Sound Bases •  20% to 35% Deep Usually Best •  Bullish Volume Clues •  Many Weeks Long •  Tightness at Lows and Near the End •  Smooth Pattern Cabot Investors Conference 2013 www.cabot.net Buying: Bases and Breakouts CROX ﬁrst base fall 2006 6 weeks up Tight Bases = Launching Pads Best if formed during Market CorrecZons 10-‐week New issue Lots of “tails” Vol Dry Up Cabot Investors Conference 2013 RP conﬁrms Demand www.cabot.net Base-‐Within-‐A-‐Base If Base > 40% deep, expect mulZ-‐week, Zghter base at end Tighter, proper structure (25%, 16 weeks) 55% from top to boeom Cabot Investors Conference 2013 www.cabot.net Volume Clues Market in CorrecZon, AAPL building a base Gap Up on Big Volume Support Cabot Investors Conference 2013 www.cabot.net Volume Clues When buying a breakout, want OVERWHELMING volume – 200% or more vs. average Up 60% in four months GMCR up 40% (!) on 9x Avg. Volume Cabot Investors Conference 2013 www.cabot.net In Gear vs. the Indexes? S&P 500 AMZN new highs ahead of market Cabot Investors Conference 2013 www.cabot.net In Gear vs. the Indexes? S&P 500 in obvious, clear downtrend MYGN out of gear, fails aler market gets going Cabot Investors Conference 2013 www.cabot.net Big Liquid Breakouts Always respect big breakouts from liquid growth stocks! Cabot Investors Conference 2013 STP is liquid, in good group, stages big breakout – I missed it! www.cabot.net Buying: Stocks in Uptrends 6+ weeks up in a row a sign of persistent accumulaZon Another 13 weeks in a row! 13 weeks up in a row right as bear market ends! Cabot Investors Conference 2013 www.cabot.net Smooth Uptrends NoZce how EBAY’s uptrend is smooth and persistent Cabot Investors Conference 2013 EBAY doubled from this point during next 18 months www.cabot.net Prepare for Shakeouts Don’t freak out over one-‐ or two-‐day wiggles Big reversal on huge volume Bull retreats usually sharp, brief = scare you out Cabot Investors Conference 2013 Just a blip! www.cabot.net Prepare for Shakeouts Bull retreats usually sharp, brief => scare you out Cabot Investors Conference 2013 www.cabot.net Tightness a Good Sign TASR advances 300% in next four months! Tightens up Light volume Cabot Investors Conference 2013 www.cabot.net Quiet also a Good Sign NoZce small, Zght weekly ranges and dry-‐up in volume. The eye has come oﬀ the stock! Cabot Investors Conference 2013 www.cabot.net Selling is the Hardest Part •  You’ll either be Too Early, or Too Late •  No One Perfect Rule •  When in Doubt, Trail your Stop •  Decide Ahead of Time How to Handle Cabot Investors Conference 2013 www.cabot.net Moving Averages 50-‐day line is a simple, eﬀecZve trailing stop ... but it’s not perfect A couple of shakeouts but adheres to the 50-‐
day for months Cabot Investors Conference 2013 www.cabot.net Moving Averages Weekly chart with 10-‐
week line works, too Sell on decisive break of 10-‐week line Cabot Investors Conference 2013 www.cabot.net Moving Averages With a big winner you can use 40-‐week line (200-‐day) to give stock more breathing room Sell! Hold through big correcZons b/c huge proﬁt Cabot Investors Conference 2013 www.cabot.net How Far From Last Base? No set Zme is “too long” but > 6 months without consolidaZon is long Cabot Investors Conference 2013 Running for 7 months Breakout www.cabot.net Out of Trend on Upside Harder to deﬁne but can provide a heads-‐up to book parZal proﬁts Cabot Investors Conference 2013 Above mulZ-‐
month uptrend www.cabot.net Volume Resistance Cluster of big-‐volume selling creates resistance in intermediate-‐term Cabot Investors Conference 2013 www.cabot.net Earnings Gaps 8 Zmes out of 10, a crushing earnings gap => lots of downside ahead Cabot Investors Conference 2013 Falls another 95% over next year! www.cabot.net RP divergence + Huge Selling RP fails to conﬁrm twice, each Zme followed by big selling Cabot Investors Conference 2013 www.cabot.net Two/Three Gaps in a Row Two or three gaps aler upmove can, at Zmes, put in short-‐term top Cabot Investors Conference 2013 Three gaps in a row www.cabot.net Cabot Investors Conference 2013 www.cabot.net