Charting for Real People
Michael Kahn, CMT
November 2011
Agenda
The
basics
Get
the feel for the market
Does
it agree with the fundamentals?
Or at least not disagree?
Intangibles
Who am I?
Chartered Market Technician (CMT)

not a Certified Massage Therapist

trained and certified in market analysis
Columnist – Barron's Online
Newsletter Editor – Quick Takes Pro
Former charting software designer – TradeCenter II
…and beaten up enough by the markets
What do I do?
Help investors assess risk and reward.
no crystal ball
no tea leaves
no chicken entrails
Possible Goals
1.
Sanity Check

2.
Just how good is the STOCK of a COMPANY
with good fundamentals?
Determine Aggressiveness

Buy a lot? Or a little? Or none? Or Sell it?
Next – the basic concepts of what we analyze
Price Rules!

Price - The stuff you put in the bank
In price, there is knowledge.
Alan Shaw, CMT, Chief Technical Analyst.
Smith Barney, retired
Ralph Acampora, CMT, Chief Technical
Analyst, Prudential Securities, retired
Volume is next

Volume – How much money is moving
In volume, there is truth.
Dennis Jarrett, Jarrett Research
Momentum

Momentum – How fast it got there
Structure (Patterns)

Structure – Trends and Patterns
Sentiment (Fear and Greed)

Sentiment
I feel good!
Whatever
He’s gonna eat us!
We got game!





Price
Volume
Momentum
Structure
Sentiment
Looks like a cheaper place to buy
How many times have you thought, “My stock is on sale, let’s buy!”
The trend said it all
What does the market have to say?
The trend said it all
The trend said it all
Quiz – do you see anything now?
Jargon alert!
Squiggly line in next chart
Indicators said when it was time to return
Indicators tip you off to changes
Indicators said when it was time – or not
Jargon alert!
Weird terms in next chart
Indicators said when it was time – or not
O’Neil Follow-Through Day
Indicators said when it was time – or not
O’Neil Follow-Through Day
Does something look wrong here?
Does something look right here?
It’s Good to Side Step
One of hedge fund manager John Paulson’s top Q2 buys.
It’s Good to Know When to Get Back In
Redemption for a former bear.
Sanity Check

Is the trend long in the tooth?
Sanity Check

Is the trend long in the tooth?

Are you the last to be invited to the party?
Sanity Check

Is the trend long in the tooth?


Are you the last to be invited to the party?
Is your broker calling you with a new
investment in the super bull market in
*XXX that should last for years?
* how about rare earth minerals in 2011
Sanity Check

Is the trend long in the tooth?




Are you the last to be invited to the party?
Is your broker calling you with a new
investment in the super bull market that
should last for years?
Are they ridiculing the bearish commentators
(such as yours truly in April)?
Or for early 2009, were doom and gloom
forever?
Quiz Time

Question - What does it mean when the
neighborhood tavern has CNBC on the
television and not ESPN?
Quiz Time


Question - What does it mean when the
neighborhood tavern has CNBC on the
television and not ESPN?
Answer - the market is not at a bottom
Quiz Time

Question - What does it mean when the
guys on the football team are talking
about how much money they are making
trading?
Quiz Time


Question - What does it mean when the
guys on the football team are talking
about how much money they are making
trading?
Answer - the market is not at a bottom
Quiz Time

Question - What does it mean when your
doubles tennis game is talking more
about trading and less about the tuna on
rye at the coffee shop?
Quiz Time


Question - What does it mean when your
doubles tennis game is talking more
about trading and less about the tuna on
rye at the coffee shop?
Answer - the market is not at a bottom
Quiz Time

Question - What does it mean when the
banks are offering new interest only
mortgages?
Quiz Time


Question - What does it mean when the
banks are offering new interest only
mortgages?
Answer – the real estate market is not at
a bottom……(sound familiar?)
Quiz Time

Question - What does it mean when
there are whole aisles in the supermarket
dedicated to the Atkins diet?
Quiz Time


Question - What does it mean when
there are whole aisles in the supermarket
dedicated to the Atkins diet?
Answer – time to buy bread and cereal
stocks
Quiz Time

Question - What does it mean when
mutual fund and brokerage ads in
Barron’s are scarce?
Quiz Time


Question - What does it mean when
mutual fund and brokerage ads in
Barron’s are scarce?
Answer – the market is not at a top.
Quiz Time

Question - What does it mean when
Merrill Lynch closes their commodities
trading desk?
Quiz Time


Question - What does it mean when
Merrill Lynch closes their commodities
trading desk?
Answer – the commodities market is not
at a top
Quiz Time

Question - What does it mean when
everyone is talking about the Great
Depression and Financial Armageddon?
Quiz Time



Question - What does it mean when
everyone is talking about the Great
Depression and Financial Armageddon?
Answer – It’s March 2009!
The AAII survey showed 70.27% bears
on March 5. Unprecedented.
Up is good, down is bad.
Up is good, down is bad.
Up is good, down is bad.
Trailing P/E now 50
Just for Kicks
What do you see?
How about this?
or this?
There was no need to lose it all.
There was no need to lose it all.
real trading!
Up is good,
Down is Bad
The real reason we do this:
To make the buy, sell or hold
decision.
Not to predict the future
Getting the Feel Today
real trading!
Getting the Feel Today
Getting the Feel Today
Getting the Feel Today
Getting the Feel Today
Getting the Feel Today
Getting the Feel Today
Quick Takes Pro
Getting Technical
Month Ahead
www.QuickTakesPro.com
www.Barrons.com
www.MarketWatch.com
Books:
Beginner’s Guide to Charting Financial Markets
Technical Analysis: Plain and Simple – 3nd edition
Real World Technical Analysis
Quick Takes Pro
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