Trading Tips

How to Overcome the Vicious Cycle of Doubt

In this edition of the TradingTips.com video newsletter, we’ll be looking at a real-life pick I’ve made for my Options Insider subscribers.

Now, some picks are winners, others are not — but in this video, you’ll definitely see the logic that goes into making an Options Insider selection. With Options Insider, you get to be an “insider” — you get to benefit from “insider information,” see what the real insiders are doing, and ride the wave of bullish or bearish directional change based on what they are doing.

In this episode, you’ll learn:

- The identity of the pick — what the company is, what it does, and the basic facts about it and its underlying stock.

- The past history of the stock and its options with Options Insider. I’ll tell you right now that while we don’t know the outcome of this pick yet, this stock does have a proven history as a winner — but as a put play!

- What the insiders at the company in question have been doing in terms of buying and selling shares — and for how much!

- How the stock has been doing recently and, ultimately, why I like it as a call or put play.

Included in this video is a six-month chart of the stock, as well as a grid displaying all of the insider trading information. Did you think “insider trading” was illegal? It’s not. You can research what insiders are doing for free. Well, I should have said, “at no direct financial cost.” It will cost you time, though. If you value time more than money — as you should — than you should let Options Insider do the work for you.

The basic idea behind Options Insider is that we identify stocks with heavy insider buying and recommend their call options — and stocks with heavy insider selling and recommend their put options. This is a proven formula. Options Insider is a subscription Web site, but this week, we’re giving you one pick for free. All you have to do is watch the video to find out what it is!

Happy Trading!

Manny Backus
CEO, Wealthpire Inc.

LEAPS Put Play: International Paper (NYSE: IP)

Would you like to learn how to pocket $6,330 or more by next Friday? If you can read and follow two simple directions, you qualify to participate in this exclusive opportunity!

The information that I’m about to reveal to you is considered highly classified. Once the “top dogs” catch wind of what I’m doing here, I’m certain they will be furious! I’m exposing precisely how to execute an investing strategy Wall Street bigwigs and the super rich have been using for years to build their nest eggs.

You don’t need a small fortune to begin raking in the profits. All you need to get started is a few hundred bucks! The most amazing thing about this strategy is that it only takes 15 minutes per day! In the next few minutes, I am (with your permission) going to show you how to take advantage of this unparalleled system! Learn all of the details by watching this special video alert.

Sincerely,

Manny Backus,
President
WealthPire, Inc.

In 1967, a technical analyst named Richard W. Arms invented the Arms Index. Later, this same statistic became known as TRIN — or Short-Term TRading INdex. No matter what you want to call it, Arms/TRIN is a great indicator to have in your arsenal.

Basically, TRIN can be applied to the NYSE or Nasdaq, and is used to gauge broad-market sentiment for short-term trading. Adding a 10-day SMA can smooth out some of TRIN’s inherent volatility and make it more useful for slightly longer-term scenarios. But I’m getting a bit ahead of myself…

In this episode, you’ll learn:

- About the Advance-Decline Ratio and the Advance-Decline Volume Ratio, which are the two statistics used to calculate the Arms Index/TRIN.

- How to interpret the Arms Index/TRIN — both the standard, ultra-short term; and the smoothed-out, slightly longer-term version.

- How to use Arms Index/TRIN at StockCharts.com — including a list of ticker symbols for each exchange’s TRIN.

We also include a pair of example charts that help more clearly demonstrate how to use Arms Index/TRIN — and instructions on more advanced interpretations of the indicator.

Arms Index/TRIN can help you determine if the broad market is oversold or overbought, as well as if the market is showing general strength or weakness. Yes, there are several other indicators out there that do the same thing, but that doesn’t mean TRIN isn’t valuable. With this episode, you can see for yourself!

Happy Trading!

Manny Backus
CEO, Wealthpire Inc.

How to use the Arms Index to predict where the stock market is going

High-Low Index examines a particular index or exchange, such as the Nasdaq, the Dow Jones Industrial Average, the New York Stock Exchange, etc. Once a particular index or exchange is selected, High-Low Index takes the number of new highs that day among stocks trading on the index or exchange, and divides them by the total number of new highs and new lows — pretty simple, right?

But how can High-Low Index really be put to use? By using a derivative indicator known as Record High Percent — and that is the topic of this week’s TradingTips.com video newsletter!

In this episode, you’ll learn:

- What Record High Percent is and how it is calculated.

- How you can use Record High Percent as a confirmation tool, applied to broad indexes rather than individual stocks.

- What some of the downfalls of Record High Percent are — and how to avoid them.

- How you can add Record High Percent to your charts on StockCharts.com — it isn’t easy, but we offer step-by-step instructions.

Like last week’s episode, this one is light on calculations and therefore heavy on examples. We include several real-life charts to show you the practical applications of Record High Percent.

Record High Percent is a lagging indicator, better for confirmation than making predictions — but that’s okay. Use it to confirm your thesis on the general direction of the market, because more than 9 times out of 10, stocks trade in tandem with the broad market.
Happy Trading!

Manny Backus
CEO, Wealthpire Inc.

P.S. In our next episode, we’ll be looking at yet another indicator to add to your technical arsenal. See you next week!

Record High Percent

Net New Highs is a simple indicator that packs a powerful punch. The formula used to calculate it is straightforward: subtract the number of new 52-week lows from the number of new 52-week highs. But where the subtlety and skill come in are in interpreting this statistic.

Furthermore, Net New Highs is a stepping stone to an even more powerful indicator, also covered in this episode: Cumulative Net New Highs. To get this, you simply keep a running tally of Net New Highs. This can then be expressed as a line overlay on a chart, which can be used in a variety of ways that can help you make or save money.

Sound interesting? Keep reading, and then watch…

In this episode, you’ll learn:

- All about Net New Highs, Cumulative Net New Highs, and how you can use both with a moving average line for excellent prognostication.

- How Net New Highs and Cumulative Net New Highs are interpreted — both the basic methodology and more complex readings.

- How to add Net New Highs, Cumulative Net New Highs, and their moving average to your charts on StockCharts.com: this is the most complex part of the episode. For such a simple indicator, it is surprisingly difficult to set it up.

This episode is light on the calculations so there are plenty of real-life examples. We don’t just tell you about Net New Highs — we show you!

With Net New Highs and its derivatives, you can gauge the bullishness or bearishness of entire indices. Add this tool to your arsenal today!

Happy Trading!

Manny Backus
CEO, Wealthpire Inc.

P.S. In our next episode, we’ll be looking at Record High Percent; a breadth indicator based on the High-Low Index we covered a few weeks ago. See you next week!

Net New Highs

The High-Low Index (HLI) is an easy-to-read “market breadth indicator.” At least that’s what “they” say. The truth is, the HLI is pretty flawed at measuring the “breadth” of an uptrend or downtrend. But that doesn’t mean it is not a valuable indicator, nonetheless.

If you used HLI along with the Nasdaq and NYSE composites, you could have spotted some pretty significant trends. Rather than indicating the “breadth” of the trend, I think HLI actually works well as an indicator of strength of a trend. I also think it is rather predictive, even though “they” say it is a lagging indicator. This video contains a few example charts that will make you question what “they” say!

And that’s not all…

In this episode, you’ll learn:

- What the High-Low Index is and how it is calculated. The calculation is actually easy and straightforward, unlike a lot of convoluted indicators.

- How to interpret HLI as a trend-strength indicator. Again, I find this to be HLI’s most significant use. And one of the reasons is included below.

- How HLI is flawed as a breadth indicator. Breadth indicators are supposed to measure how “wide” a trend is — i.e., how many stocks are participating in a trend. However, HLI can give you some pretty false readings if used this way, and I’ll tell you why.

- What the ticker symbols are for HLI, and how it can be used with the S&P 500, the Nasdaq composite, the NYSE, and many more, including the Dow Jones Industrial Average — but I wouldn’t recommend it!

We look at a pair of charts in this episode to show how HLI predicted big gains for the NYSE in late 2009, and a big drop-off for the Nasdaq at another time. I also introduce the concept of the High-Low Index’s 21-day moving average and how it can be used to your benefit.

Oftentimes, great inventions end up being used for things other than those for which they were intended. This happens in pharmaceuticals all the time, and it can happen with stock-market indicators, too. I think High-Low Index is the best example of an indicator that has a lot of usefulness, just not necessarily as it was originally intended.

Happy Trading!

Manny Backus
CEO, Wealthpire Inc.

P.S. In our next episode, we’ll be looking at Net New Highs: an indicator that uses High-Low Index in its calculation.

The High-Low Index

In this week’s episode, we look at Volume Weighted Price Average, or — as the bigwigs call it — VWAP. Who are these bigwigs I’m referring to? Well, institutional investors, of course. They use VWAP to guide their trades, and also to evaluate performance. And after watching this video, you will be able to, too.

In this episode, you’ll learn:

- What VWAP is, how it is calculated, and how it can be used.

- What the limitations of VWAP are — especially for individual investors who don’t have entire server farms at their disposal.

- How VWAP is like moving averages — and how it is different.

- How to read VWAP so that you can have an idea of which way stocks are trending — and how to use it, after the fact, to see if you got a “good deal” on a stock, or bought or sold at the wrong time.

We look at a pair of charts in this episode to show how VWAP can be used. As stated earlier, not only is VWAP great for identifying trends and buy/sell points, but also to use after-the-fact to determine if you bought or sold at the right time. Why not just use VWAP beforehand every time? This episode addresses that question, too.

VWAP is good enough for institutional investors with their million-dollar servers and state-of-the-art broadband connections. You may not be able to use VWAP exactly as they do, but you can come close. And if it’s good enough for them, it should be good enough for you, too.

Happy Trading!

Manny Backus
CEO, Wealthpire Inc.

P.S. In our next episode, we’ll be looking at Record High-Low Index, a market breadth indicator used to measure the strength or weakness of a particular index. Be sure to tune in!

Using Bollinger Band %B to Identify Overbought and Oversold Stocks