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806 posts
msg #46112
7/30/2006 9:03:01 AM

found article about what the pros used to find this point---Triple Edge Alert #1:
Relative Strength Indicator (RSI)
Each day I run two pre-programmed screens scouring up to 3000 stocks for those companies, which fit my bull or bear criteria. Let me explain how these two criteria work.

First of all the screen asks two technical questions. How is each stock trending and how much momentum does the trend have?

My screens judge each stock by measuring two simple technical indicators, which I’ll explain to you now.

Most technical indicators aim to measure direction and strength of momentum of a specific time period for recent price action for a security or commodity.

The relative strength indicator (RSI) is a fantastic measure of the prevailing strength of a trend on a stock.

Key Concept: RSI takes a specific period of days and pits the average share price gains against the average share price losses.

By doing this, it assigns a value on an index scale of between 0 and 100. The higher the value, the stronger the trend.

Take a look at the chart for LSI Logic below to see an example of this trend index in action.

Figure 1

A strong intact trend (as shown above) means that rising prices outweigh falling prices – causing the RSI to increase over time. Generally speaking, values above 50 denote an intact bull trend, while lower ones indicate a declining trend.

Triple Edge Alert #2:
Moving Average Convergence Divergence (MACD)
My second technical filter is called a “Moving Average Convergence Divergence” indicator.

Let’s just call it MACD for short.

Like RSI, this indicator takes a specific period of time to measure price. Instead of a single line, MACD has two lines.

Key Concept: First, two different moving averages are calculated from the price. Then MACD measures the difference between them. Second, a moving average of this line is applied and called the “signal line.” When MACD and signal cross, buy and sell signals are generated.

See in Figure 2 below how a rising trend for shares in LSI Logic is accompanied by rising MACD values.

That’s because the longer-period moving average accelerates faster than the shorter average, indicating rising prices.

Notice how the MACD signal came earlier than the RSI, reminding us that we need to be patient in our approach.

Figure 2

My Triple Edge Alert options trading service requires an RSI value ABOVE 50 and a POSITIVE value for MACD to enter a long trade.

Conversely, the screening process requires stocks to have an RSI value of less than 50 and a negative MACD value.

Again, we do all the work for you. All you have to do is act on the Trading Alert I e-mail you and make the trade. It’s that simple.

Go here now to sign up for a risk-free charter subscription.

These two basic screening methods save a lot of time and work each day. You don’t have to go combing the news journals in search of a story that might shift a stock’s price. And you don’t have to waste time looking at thousands of stocks that don’t fit my criteria.

I do all this for you and end up with anywhere between one and sometimes 30 stocks that are candidates for my final screening process.

Triple Edge Alert #3:
Connecting the Dots For the Perfect Triple Play
So far the system is basic, and with a little work, most investors would be able to determine the health of a stock, according to what we’ve discussed so far.

Let me now share how we can tie that process together by delving into the world of Welles Wilder, the founder of modern technical analysis.

As well as developing the relative strength index you just learned about above, Wilder developed a money management technique that helps identify near-term direction and also manages the risk of a position.

That method of trade entry and management is known as “parabolic stop-and-reverse.”

Key Concept: Wilder devised a methodology that kept him either always long of a commodity or always short. He illustrated the historical direction of a position by placing a dot above or below the prices.

Once connected, the series of dots takes the form of a French curve or parabola. (Imagine for a minute the path of a diver between a high-dive board and the swimming pool.)

Dots above prices indicate a current short position, while dots below prices mean the trader is long. In Figure 3 below, you’ll see that dots above the price ALWAYS fall, while those below price (indicating a long position) ALWAYS rise.

Figure 3

Much of Wilder’s work relied on risk management, and so he aimed to devise a system that protected a trader’s profits.

If shares fall when the trader is long and hit the parabolic curve, Wilder’s rule is that the position is stopped out and reversed, flipping the trader to a short position. Only when shares rise back up to pierce the parabola again does the position change from short to long.

It’s a fantastic concept, instantly allowing the trader to see what his or her current bias should be.

When combined with the two other screening indicators, we have a perfect triple play.

Key Concept: Take a step back for just one second. We use relative strength to indicate our trend, we use MACD to judge momentum and now we take our cue from a risk-management system that confirms the medium-term direction.

Let’s take a look at some recent examples of stock changes to see what you should be looking for from this trio on a chart.

Triple Edge Alert makes 55% and 1,008% profits in IBM. 53 times more profit than selling short.
First let’s take a look at shares in IBM where this neat little triple play occurred on two occasions making us a tidy 55% and 1,008% profit in just 22 and 14 days respectively.

You can see how an investor might have gained through selling short the stock on each occasion. But I’m going to show you how – by applying a simple options play instead – the investor could have multiplied those gains 53 times over.

Figure 4

Stock IBM Share Price July 2005 Put Option
Point A 5-Jan-05 $96.50 $330
Point B 27-Jan-05 $91.44 $510
Change -5% 55%

Table 1 above shows how a savvy investor who had sold short shares in IBM on Jan. 5, 2005, at point A might have made a capital gain of 5% by the time its shares reached $91 at point B on Jan. 27.

However, here’s where our options strategy came into play, multiplying profits 11 times over those who simply decided to sell short shares in IBM.

When our three indicators generated a sell signal on Jan. 5, instead of selling shares at the prevailing $96.50, our investor bought a put option. That gave him or her the right – but not the obligation – to sell 100 IBM shares at $95 per share on or before July 16, 2005, when the option expired.

Note that the investor need not hold the option until expiration in July, nor does he or she end up selling any stock. It becomes a simple buy-and-sell transaction, taking place over a 22-day period in January.

The cost of buying that single put option on Jan. 5 was $330. Since put options allow the right to sell shares at a fixed price, they increase in value as shares fall.

Soon IBM saw its shares plunging – before the end of the month they were down more than 5%.

The put options rose in value as IBM shares fell. When the investor came to sell, the price had increased, grossing him or her $510. That’s a profit of $180, or 55% of the cost of the trade.

That means that by using an option instead of selling short shares in IBM, our investor could have made 55% instead of 5% profits.

In other words, that investor used leverage to make 11 times as much money.

If you want a shot at profits like these and you’re ready to spend less than 10 minutes a week doing it, Triple Edge Alert may be just what you are looking for.

Go here now for a special limited-time offer.

Our Key Concepts Come Together for a 1,000% gain!
Now take a look at the next opportunity – when the stars lined up, according to our system, on April 6, 2005.

Our key concepts came together just as IBM was trading

6,358 posts
msg #46116
Ignore TheRumpledOne
7/30/2006 8:40:38 PM

Welcome back, StockHolyGrail!!

What RSI and MACD parameters do they use?

24 posts
msg #46172
Ignore craigk
8/3/2006 5:33:58 AM

Hi Sounds Interesting.

Have you asked what there ROI for the year is. Most good newsletters average 10-15% per year over a 10+ year period. See hubert review or something like that. Some have amazing streaks like coolcat in 1999-2001 500% but then when to a minus.
So ask for there record, not just the few BIG WINNERS. They should have this information if they have buy sell recommendations.
RSI could be 30, 14, 10, 6 or even two day most likely 14.
macd possitive? don't know it well. positive maybe above netural or positive slope. It you subscibe or get a list of buy sells with dates could figure out.

But, if it works, just pay them the money, they earned it. Craigthinks

32 posts
msg #46173
Ignore jbrtrader
8/3/2006 12:34:22 PM

Looks like they use RSI(Close 14,50,50)

123 posts
msg #46216
Ignore chrismnu2003
8/5/2006 5:55:42 PM

Maybe something like this on the long end...

Exit Trigger #1:
set{divergence, MACD slow line(12,26) - MACD fast line(12,26)}
divergence has been decreasing for the last 6 days

Approach Information
Approach Name: RSI(14) crossed above 50 one day ago RSI(14) one d...
Test started on 08/04/2004 ended on 08/04/2006, covering 505 days
Filter used:
RSI(14) crossed above 50 one day ago
RSI(14) one day ago was below 50 for the last 4 days

set{divergence, MACD slow line(12,26) - MACD fast line(12,26)}
divergence one day ago has been increasing for 2 days
divergence > 0

Parabolic SAR(0.02,0.2) has been increasing for 3 days

price > 4
average volume(90) > 300000
volume > 300000

Trade Statistics
There were 96 total stocks entered. Of those, 94 or 97.92% were complete and 2 or 2.08% were open.
Of the 94 completed trades, 66 trades or 70.21%resulted in a net gain.
Your average net change for completed trades was: 3.48%.
The average draw down of your approach was: -5.48%.
The average max profit of your approach was: 7.76%
The Reward/Risk ratio for this approach is: 3.00
Annualized Return on Investment (ROI): 42.39%, the ROI of ^SPX was: 7.99%.

Exit Statistics
Stop Loss was triggered 0 times or 0.00% of the time.
Stop Profit was triggered 0 times or 0.00% of the time.
Trailing Stop Loss was triggered 0 times or 0.00% of the time.
You held for the maximum period of time ( days) 0 times or 0.00% of the time.
An exit trigger was executed 94 times or 100.00% of the time.

Statistics By Holding Period
 Completed2 day chg5 day chg10 day chg25 day chg40 day chg
Win/Loss Ratio:2.36:11.00:11.21:11.71:11.82:11.31:1
Net Change:3.48%0.00%0.08%0.73%3.42%3.47%

Statistics By Variable: Match Price
2 day chg19:1514:158:134:21:2----1:0
5 day chg15:1917:1311:105:13:0----1:0
10 day chg19:1519:1114:76:02:1----0:1
25 day chg21:1120:1011:106:02:1----0:1
40 day chg17:1418:128:116:02:1----0:1

Statistics By Variable: Average Volume
2 day chg45:451:10:1--1:0----
5 day chg49:422:00:1--1:0----
10 day chg57:342:00:1--1:0----
25 day chg58:311:10:1--1:0----
40 day chg48:381:11:0--1:0----

6,358 posts
msg #46225
Ignore TheRumpledOne
8/6/2006 12:30:59 PM

We can post charts here now?


123 posts
msg #46351
Ignore chrismnu2003
8/13/2006 12:55:22 PM

I dunno. It just does it automagically.

StockFetcher Forums · General Discussion · help me figure out explosion option filter<< >>Post Follow-up

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