Streetsmart Guide to Timing the Stock Market When to Buy, Sell, and Sell Short

by Alexander, Colin

• ISBN13: 9780071461054
• ISBN10: 0071461051
• Edition: 2nd
• Format: Hardcover
• Copyright: 2005-11-30
• Publisher: McGraw-Hill Education

Summary

Whether you're a private investor aiming to retire in style or an investment professional responsible for hundreds of millions in client assets, this book is one investment resource you don't want to be without. Written by legendary trader Colin Alexander, it arms traders with proven timing tools and strategies for making market-beating profits year after year.

Author Biography

Colin Alexander has been involved with the trading industry for twenty-five years as a publisher, broker, trader, and system developer. The former publisher of The Five Stars Futures Bulletin, which was consistently ranked in the top ten advisory services, he also founded the stockscom.com advisory service. He is the author of several top-selling trading books, including Five Stars Futures Trades and Capturing Full-Trend Profits in the Commodity Futures Markets.

Table of Contents

Preface to the Second Edition	xiii
Acknowledgments	xv
CHAPTER 1 THE CASE FOR TIMING	1	(14)
What to Buy and When to Buy and Sell
Looking for Great Stocks
Avoid Stocks Going Nowhere!
The Great Reality Check
Sometimes You Should Sell Stocks and Buy Bonds
Indexes Comprise Good, Bad, and Indifferent
Six Primary Objectives
What You Need
CHAPTER 2 DEFINING A BULL MARKET	15	(12)
Upward Zigzags
Use a Line Chart
Be Confident in the Trend!
W Formations: The Start of a Bull Market
Zigzags Apply to All Indicators
CHAPTER 3 DEFINING A BEAR MARKET	27	(6)
Conditions for a Bear Market
A Bull Market Dies Hard
Downward Zigzags and M Formations: The Start of a Bear Market
Nortel in a Bear Market
Some Stocks Don't Come Back
CHAPTER 4 SIDEWAYS MARKETS	33	(4)
Endless Chop
Conditions for a Trading Range
Wal-Mart in a Trading Range
CHAPTER 5 VOLUME AND ON-BALANCE VOLUME (OBV): FOLLOW THE MONEY	37	(16)
The Difference between Persistent and Random Market Action
Short Surges May Be Meaningless
Volume Can Forecast Price
New Applications for OBV
Interpreting OBV
OBV and Exxon Mobil
OBV and Nortel
CHAPTER 6 MOVING-AVERAGE CONVERGENCE/DIVERGENCE (MACD)	53	(12)
Direction and Momentum
Using MACD
MACD and General Electric
MACD on the Weekly Chart
MACD and CR Bard
Learn to Believe in MACD
CHAPTER 7 THE BUILDING BLOCKS FOR CHARTS	65	(8)
Price Bar Action
Always Follow the Footprints
CHAPTER 8 PRICE RULES	73	(10)
When to Pull the Trigger
Price Rule Principles
Conditions for All Price Rules
Price Rules
Illustrating the Price Rules
CHAPTER 9 MOVING AVERAGES: USE WITH PRICE RULES	83	(12)
Confirming the Direction
Settings for Moving Averages
Using Moving Averages
Walgreen Co. and the Monthly Moving Averages
Buy Off the Monthly Chart
Buy Walgreen Off the Weekly Chart
Buy Walgreen Off the Daily Chart
When You Should Wait to Buy
CHAPTER 10 STOCHASTICS—OVERBOUGHT/OVERSOLD INDICATOR: USE WITH MOVING AVERAGES IN A TRENDING MARKET	95	(12)
When to Buy Low and Sell High
Settings for Stochastics
How to Use Stochastics
Stochastics and the Dow Jones Industrials
Stochastics and Apache Corporation
Buy Apache from the Weekly and Daily Charts
CHAPTER 11 SUPPORT AND RESISTANCE: TRENDLINES, CHANNEL LINES, AND LINEAR RETRACEMENT	107	(12)
Drawing a Trendline
Drawing a Channel Line
The Standard & Poor's (S&P) 500 and Linear Retracement on the Monthly Chart
Trendlines and Channel Lines on the S&P 500 Weekly Chart
Support and Resistance at Historic High and Lows
Gaps as Support and Resistance
CHAPTER 12 CHART PATTERNS THAT WORK	119	(14)
The Long-Term Saucer Bottom
The Short-Term Saucer Bottom
The Trading Range Breakout
How Success Starts
St. Jude Medical Comes to Life
The Head-and-Shoulders Top
The Reverse Head-and-Shoulders Pattern
Apple Computer Takes Flight
The Ascending Triangle
CHAPTER 13 MAJOR MARKET TURNS	133	(14)
Establishing the Conditions
The Four-Year Presidential Cycle
Sell in May and Go Away
Opinion and Contrary Opinion
Mutual Funds as a Contrary Indicator
Sometimes a Bell Rings
Euphoria at Market Tops
The New Era Syndrome in 1999-2000
The Top in 1929
CHAPTER 14 WHAT WORKS—A REVIEW AND PROSPECTS FOR THE FUTURE	147	(16)
Where to Start Looking
Some Old Indicators Don't Do What They Used To
Technical Alerts That Work
Fundamental Factors to Look For
Some Concepts for the Future
Foreign Stocks
CHAPTER 15 HOW TO MANAGE YOUR CAPITAL: RISK VERSUS REWARD	163	(12)
Don't Invest All at Once
Keep Capital in Reserve
What Gerald Loeb Did
Don't Diversify Too Much!
Routine Retracements and More Serious Ones
Give Winners Room to Breathe
Don't Average Down!
Think Positively in a Bull Market
Think Defensively in a Bear Market
Separate Income from Capital
Capital Management Summary
CHAPTER 16 ENTRY CHECKLIST: BUY	175	(10)
Bringing the Signals Together
Confirming Indicators
Negating Indicators
Stops
CHAPTER 17 CASE STUDY: HOW TO BUY	185	(20)
The Entry Checklist for Whole Foods Market, Inc. (WFMI)
Monthly Confirming Indicators
Monthly Negating Indicators
Weekly Confirming Indicators
Weekly Negating Indicators
Daily Confirming Indicators
Daily Negating Indicators
The Stop
CHAPTER 18 PROTECT CAPITAL WITH A STOP LOSS	205	(10)
The Importance of Stops
The Psychology of Stops
First Loss, Least Loss
The Initial Protective Stop (IPS)
The Trailing Protective Stop (TPS)
Where to Put the Stop
Stops for a Runaway Market
Be Prepared to Buy Back
CHAPTER 19 WHEN TO SELL	215	(10)
Reasons to Sell
If in Doubt, Run Profits but Cut Losses
CHAPTER 20 SELLING STOCKS SHORT	225	(12)
Sell First, Then Buy
Short-Sellers Perform a Service
Risk and Reward
Stocks Not to Sell Short
Short Sale Candidates
The Short Interest Ratio
Short Sale Procedures
Short Sale Margins
Calculate the Stop Loss
Start Short Sales Slowly
CHAPTER 21 ENTRY CHECKLIST: SELL SHORT	237	(8)
Differences Compared with Buying
Confirming Indicators
Negating Indicators
Stops
CHAPTER 22 CASE STUDY: SELL SHORT	245	(18)
General Motors in Decline
Monthly Confirming Indicators
Monthly Negating Indicators
Weekly Confirming Indicators
Weekly Negating Indicators
Daily Confirming Indicators
Daily Negating Indicators
Stops
CHAPTER 23 INTEREST RATES, INFLATION, AND STOCKS	263	(18)
Where Interest Rates Come From
Interest Rates and the Stock Market
How Stocks and Bonds Interact
Inflation and Stock Prices
Measuring Inflation
Recent Bubbles and the Prospect of More
The Risks of Easy Money
What Could Go Wrong
CHAPTER 24 WHAT DOES VALUE REALLY MEAN?	281	(14)
The Historical Perspective
Intrinsic Value, Discounted Value, and Market Value
Historical Valuations for the Dow Industrials
Investment Trusts in the 1920's
Valuations in the 1970's and Early 1980's
The Japanese Experience
The Value of Real Estate
Valuations: 1990 to 2005
Nortel Fools the Value Analysts
Valuation Criteria and Normality
Values Fail, Except Near the Mean
Good News for the Long Run
Reversion to the Mean
CHAPTER 25 LESSONS FROM THE LONG-TERM HISTORY OF STOCKS	295	(14)
The Upward Trend Is Very Erratic
Long-Term Problems with the Dow
The Big Market Swings
The Risk of Buying at a Market Top
Fashions in the Stock Market Change
Xerox Falls Off a Cliff
The Lesson of Market Fluctuations
CHAPTER 26 WHERE MUTUAL FUNDS FAIL: THE CASE FOR DOING THE JOB YOURSELF	309	(16)
The Record in a Bear Market
The Problem with Financial Planners
The Mandate of a Mutual Fund
Buying Mutual Funds Is Buying Retail
What a Mutual Fund Really Is
When a Mutual Fund Is the Market
Major Corporations Do the Same Job
Proven Management versus Unproven Limits to Diversification
Invest for the Long Term versus Churning Mutual Fund Management Fees
Vanguard, Low Fees—Axa's Alliance Capital, High Fees
Entry and Exit Fees
The Need for Liquidity
Index Funds
Taxes on Mutual Funds
Choices Other Than Mutual Funds
What to Do If You Own Funds
Closed-End Funds: the Best of All Worlds
CHAPTER 27 HOW TO USE OPTIONS	325	(8)
What an Option Is
Options for Speculation
Professionals and Conservative Investors Sell (Write) Options
Professionals Also Sell Put Options
The Importance of Timing
The Contrary Opinion Approach
Sell Naked Options Against the Trend
CHAPTER 28 MARKET MYTHS	333	(8)
The Savings Myth
The Myth of Corporate Profits
The Myth of Pension Profits
The Myth of Corporate Buybacks
The Myth of Cost-Free Stock Options
The Myth of Defensive Stock
The Market Fuel Myth
CHAPTER 29 THE WINNING ATTITUDE	341	(6)
The Psychological Challenge of Success
Sins to Avoid
CHAPTER 30 CAPITAL SHOULD BE FOREVER	347	(8)
Make Money and Also Keep It
There Are Times to Stand Aside
The Paradox of Cash
The Best Decisions Are Often Difficult
Buy the Strong; Sell the Weak
Taking Losses
Use Stops
Sometimes You Have to Pay Taxes!
The Foremost Rule: Preserve Capital!
Index	355