IBD MEETUP
Putting it all together
Organizers – Tom Ellis and Lee Tanner
Creating a Watch list - Presented By Tom Ellis
Petaluma, CA
September 12, 2012
7:00 – 9:00 PM
We Are Amateur Volunteers
Non-Professionals
• We are not offering Investing Advice.
• Not Recommending Any Stocks.
• Not Selling Anything.
• No Affiliation with IBD.
• All investing has substantial risks.
• You can suffer huge losses.
Making a watch list
“You should be looking for stocks
with High Earnings, High Return on
Equity and High Relative Strength.”
-William J. O’Neil
Making a watch list
• All of the tools we use to build our watchlist are not
premium tools. All you need is access to IBD’s website.
• In order to make a watch list we need to come up with a
list of stocks that have High Earnings, High Return on
Equity or Margins, and High Relative Strength.
• These stocks need to be near a buy point and we must be
ready and have confidence that we have selected well.
• The watch list must contain no more than 7-8 stocks. We
want the best 7-8 stocks out of the 8,000 stocks that are
trading.
Making a watch list
1 Study, Learn and
Make Plans for 2 - 6
2 Make A CAN SLIM
Watch List
Write Rules & Learn
Enough to Follow
Them
3 Buy at Right Time
and Right Way
• Market Up Trend
• Base Breakouts
• Scale-In (Pyramid)
• Only off Watch List
Pick Only The
Very Best Stocks
Weekly Watch List Routine
6 Review Results
• Keep Good Records
• Careful Review
• Honest Appraisal
• Learn from Experience
Post Analysis
5
Sell Just Right
• Down 7% to 8%
• Up 25% - Most
• Sell Rules – for
the Super Stocks
4
Manage Portfolio
• Hold Good Stocks
• Practice Patience
• Add to Best Stocks
• ID Super Stocks
• Margin Use
Saving Watch for Post Analysis
Making a watch list – Main Bullet Points Page 1
• Starting with a good screen or list. We’ll use the IBD 50
for now.
• Add columns to our list to make notes and remove stocks
we don’t want to buy.
• Include only stocks with Top Fundamentals. Remove
Stocks that don’t have High Earnings and High Return on
Equity (or Pre Tax Margins).
• See if the stocks on the list are near a buy point.
• Only include stocks when they are near a buy point in a primary
chart pattern.
• If a stock is more than 5% past a buy point do not include the stock
on your watchlist.
Making a watch list – Main Bullet Points Page 2
• Look more closely at these stocks that are near buy
points to decide whether we really want to own them.
• Review additional fundamental factors included in the IBD 50
download and remove some stocks with major flaws.
• Review Stock Checkup.
• Less than 3 flaws is very good.
• Greater than or equal to 4 flaws and less than or equal to 7 flaws is
average.
• Greater than 8 flaws is poor.
• Looking at the chart more closely.
• Is it a first or 2nd stage base?
• Is the Relative Strength good enough for me to want to own it?
• Is the Pattern Classic or sound?
• Is the Base long enough?
• Is the base depth correct?
Making a watch list
• Download IBD 50 list
Making a watch list
Making a watch list
• Save file to your hard drive. Change Type from Web to
Excel Workbook.
Making a watch list
Making a watch list – Main Bullet Points Page 1
• Starting with a good screen or list. We’ll use the IBD 50
for now.
• Add columns to our list to make notes and remove stocks
we don’t want to buy.
• Include only stocks with Top Fundamentals. Remove
Stocks that don’t have High Earnings and High Return on
Equity (or Pre Tax Margins).
• See if the stocks on the list are near a buy point.
• Only include stocks when they are near a buy point in a primary
chart pattern.
• If a stock is more than 5% past a buy point do not include the stock
on your watchlist.
Making a watch list – Main Bullet Points Page 2
• Look more closely at these stocks that are near buy
points to decide whether we really want to own them.
• Review additional fundamental factors included in the IBD 50
download and remove some stocks with major flaws.
• Review Stock Checkup.
• Less than 3 flaws is very good.
• Greater than or equal to 4 flaws and less than or equal to 7 flaws is
average.
• Greater than 8 flaws is poor.
• Looking at the chart more closely.
• Is it a first or 2nd stage base?
• Is the Relative Strength good enough for me to want to own it?
• Is the Pattern Classic or sound?
• Is the Base long enough?
• Is the base depth correct?
Making a watch list
• Go to http://www.meetup.com/petalumaibd/
• Under the more tab go to files and download the file
called “Weekly Watchlist”. Save this file to your hard
drive.
• Copy columns A-P from the most recent tab in the
“Weekly Watchlist” and Insert the copied columns into the
IBD 50 list you just downloaded. Insert these columns
before Column A.
Making a watch list
• Copy these columns (A-P) from the Weekly Watchlist and
insert into your IBD 50 download. To do this, highlight the
columns and right click while they are highlighted.
Making a watch list
• Insert Copied Columns here. If you highlight column A then
right click with the mouse button you will see this menu.
Making a watch list
• Note that only some stocks have a “Y” in Column H.
• This Expression includes High Earning and High ROE Plus PreTax Margins. See next slide for details.
•
=IF(AND(G15>=30,D15>=20),"Y",IF(AND(G15>=20,D15>=50),"Y",IF(AND(G15>=10,D15>=100),"Y","")))
• Clear any values from Columns I10 through Column P59.
Making a watch list – Main Bullet Points Page 1
• Starting with a good screen or list. We’ll use the IBD 50
for now.
• Add columns to our list to make notes and remove stocks
we don’t want to buy.
• Include only stocks with Top Fundamentals. Remove
Stocks that don’t have High Earnings and High Return on
Equity (or Pre Tax Margins).
• See if the stocks on the list are near a buy point.
• Only include stocks when they are near a buy point in a primary
chart pattern.
• If a stock is more than 5% past a buy point do not include the stock
on your watchlist.
Making a watch list – Main Bullet Points Page 2
• Look more closely at these stocks that are near buy
points to decide whether we really want to own them.
• Review additional fundamental factors included in the IBD 50
download and remove some stocks with major flaws.
• Review Stock Checkup.
• Less than 3 flaws is very good.
• Greater than or equal to 4 flaws and less than or equal to 7 flaws is
average.
• Greater than 8 flaws is poor.
• Looking at the chart more closely.
• Is it a first or 2nd stage base?
• Is the Relative Strength good enough for me to want to own it?
• Is the Pattern Classic or sound?
• Is the Base long enough?
• Is the base depth correct?
Making a watch list
• There are a few reasons we want these extra columns.
• The first filter we are going to apply to the list is to only look at stocks that have
“High Earnings” and “High Return on Equity Plus Pre-Tax Margins.” I use the most
recent quarterly earnings increase (C) for the earnings. I add the Annual Return on
Equity and Annual Pre-Tax Margins together for the ROE PTM number. In his book
HTMMIS O”Neil suggests selecting stocks with a high Return on Equity in the “A”
section. In his advanced seminars he ammends this statement and says High
Return on Equity or High Pre Tax Margins. We lump them together for our filter.
• The requirement to pass this filter is
•
•
•
> 30 ROE PTM and > 20 EPS or
> 20 ROE PTM and > 50 EPS or
> 10 ROE PTM and > 100 EPS
• Other reasons for the extra columns include:
• Add more filters later
• See some important data more clearly
• Make notes we can refer back to when trading
• Make notes we can refer to when trading during the upcoming week.
+
Making a watch list
• Apply a filter to Row H so you only see High EPS and
High ROE Stocks. By Unchecking the Blank Box you will
select the High EPS and High ROE PTM Stocks.
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• Notice in Row H that the only stocks that are shown have a Y in
Row D. Now we have a list of all the IBD 50 stocks that have
High ROE and High EPS. We are ready to begin our work.
• This takes about 5 minutes to get to this point.
Making a watch list – Main Bullet Points Page 1
• Starting with a good screen or list. We’ll use the IBD 50
for now.
• Add columns to our list to make notes and remove stocks
we don’t want to buy.
• Include only stocks with Top Fundamentals. Remove
Stocks that don’t have High Earnings and High Return on
Equity (or Pre Tax Margins).
• See if the stocks on the list are near a buy point.
• Only include stocks when they are near a buy point in a primary
chart pattern.
• If a stock is more than 5% past a buy point do not include the stock
on your watchlist.
Making a watch list – Main Bullet Points Page 2
• Look more closely at these stocks that are near buy
points to decide whether we really want to own them.
• Review additional fundamental factors included in the IBD 50
download and remove some stocks with major flaws.
• Review Stock Checkup.
• Less than 3 flaws is very good.
• Greater than or equal to 4 flaws and less than or equal to 7 flaws is
average.
• Greater than 8 flaws is poor.
• Looking at the chart more closely.
• Is it a first or 2nd stage base?
• Is the Relative Strength good enough for me to want to own it?
• Is the Pattern Classic or sound?
• Is the Base long enough?
• Is the base depth correct?
Making a watchlist
• We now want to look to see if the stock is near a buy point. Since
many people who attend these meetups don’t have a lot of experience
in identifying chart patterns, we’ll rely for now on the editorial staff at
IBD. Well look at either the print edition of the Monday paper or a pdf,
which can be downloaded from the website.
Making a watchlist
• Go through each stock on this list. See if the stock is in a buyable base.
Go ahead and include stocks that are up to 5% extended. For now don’t
worry about the base stage or whether the base is productive or not. We
are trying to get a smaller list of stocks to look more closely at.
• If a stock is in a buyable base put a Y in column I of your IBD 50 list.
Making a watch list
• Let’s look at our first stock on the list. Our first candidate is Solar Winds.
• Since we only buy stocks that are in primary chart patterns we will not add
SWI to the smaller list of stocks we will look more closely at.
• Let’s again review what type of patterns we establish initial positions in.
What is an add on
entry? What is a
tight pattern?
A 3, 4, or 5 weeks
tight pattern is a
secondary chart
pattern.
Only 4%
above buy
point, good.
If I already had
a position this
would be terrific.
For now I need
to follow my rules
and only buy the
primary chart patters.
Making a watch list
Chart School and Pattern Recognition - Review
• Primary Chart Patterns
• Many CANSMLIM investors use primary chart patterns to initiate an
initial position in a stock.
• These are the entries that are the easiest to identify, take a long
time to develop, are easy to enter, and offer the highest probability
of success.
• Secondary Chart Patterns
• Many CAN SLIM investors use secondary chart patterns to add
shares to an existing position in a stock.
• These are more difficult to properly interpret, develop more quickly,
are more difficult to enter properly, and offer a lower probability of
success.
Making a watch list
Chart School and Pattern Recognition - Review
• Primary Chart Patterns
• Cup with or without Handle - Most Important Pattern
• 7 Weeks Minimum
• 20-30% Maximum Depth, up to 50% in Bear Markets
• Double Bottom – Very Important Pattern
• 7 Weeks Minimum
• 35% Depth, up to 50% in Bear Markets
• Flat Base – Very Important Pattern
• 5 Weeks Minimum
• 15% Maximum Depth
• Square Box
• 4 Weeks Minimum
• 15% Maximum Depth
• Saucer with Handle
• 7 Weeks Minimum
• Usually more shallow than cup and more spread out
• 12-20% Maximum Depth, up to 30% in Bear Markets
Making a watch list
Chart School and Pattern Recognition - Review
• Primary Chart Patterns continued
• Ascending Base
• 9-16 Weeks
• 10%-20% Depth for each pullback
• High Tight Flag
• Flagpole
• Stock usually doubles in price (100 to 120%)
• Length is typically 4 to 8 weeks
• Flag
• Corrects no more than 10-25%
• Length is usually 3-5 weeks
• Shakeout Plus Three (Similar to Double Bottom).
• 7 Weeks Minimum
• 35% Depth, up to 50% in Bear Markets
• IPO Base
• 3-4 Week Minimum
• Usually corrects no more than 15-30%
• Initial Base
• 20-30% Uptrend not necesarily required.
Making a watch list
Chart School and Pattern Recognition - Review
• Secondary Chart Patterns - Traditional
• Correction and Rebound from 50 Day Moving Average
• Three Weeks or more Tight
• Short Stroke
• Secondary Chart Patterns – Non Traditional to be
reviewed at a later date
•
•
•
•
•
•
•
12 of 15 days Up
Confluence of 10, 21, 50, and 200 Day Moving Averages.
Momentum Gap
Stock Corrects 10%
Support at the 10 DMA
Daily or Weekly Shakeouts
Pocket Pivot
Making a watch list
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The words are not clear but it does appear that ALXN is in a base. We’ll call it
a buyable base for now and take a closer look at it later. It is 6 weeks long and
may be a flat base.
Making a watch list
Since this is the first stock that I can add buy, I’ll go over to my spreadsheet
and put a “Y” in Column I for ALXN.
Making a watch list
Apple is 10% above a recent buy point. We generally only include stocks that
are within 5% of their buy points.
Making a watch list
ALGN is less than 5% above a recent buy point.
Making a watch list
What is an add on
entry? What is a
tight pattern?
A 3, 4, or 5 weeks
tight pattern is a
secondary chart
pattern.
If I already had
a position this
would be terrific.
For now I need
to follow my rules
and only buy the
primary chart patters.
Making a watch list
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• Below 10 Week. Don’t include for now.
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• Now our Spreadsheet looks like this.
• Let’s only look in more detail at the 19 Stocks. We’ll add a filter.
Making a watch list
• Starting with a good screen or list. We’ll use the IBD 50 for now.
• Add columns to our list to make notes and remove stocks we don’t
want to buy.
• Include only stocks with Top Fundamentals. Remove Stocks that
don’t have High Earnings and High Return on Equity (or Pre Tax
Margins).
• See if the stocks on the list are near a buy point for one of our
primary chart patterns.
• Look more closely at these stocks that are near buy points to decide
whether we really want to own them.
• Review additional fundamental factors included in the IBD 50 download and
remove some stocks with major flaws.
• Review Stock Checkup score.
• Looking at the chart more closely.
•
•
•
•
•
Is it a first or 2nd stage base?
Is the Relative Strength good enough for me to want to own it?
Is the Pattern Classic or sound?
Is the Base long enough?
Is the base depth correct?
Making a watch list – Main Bullet Points Page 1
• Starting with a good screen or list. We’ll use the IBD 50
for now.
• Add columns to our list to make notes and remove stocks
we don’t want to buy.
• Include only stocks with Top Fundamentals. Remove
Stocks that don’t have High Earnings and High Return on
Equity (or Pre Tax Margins).
• See if the stocks on the list are near a buy point.
• Only include stocks when they are near a buy point in a primary
chart pattern.
• If a stock is more than 5% past a buy point do not include the stock
on your watchlist.
Making a watch list – Main Bullet Points Page 2
• Look more closely at these stocks that are near buy
points to decide whether we really want to own them.
• Review additional fundamental factors included in the IBD 50
download and remove some stocks with major flaws.
• Review Stock Checkup.
• Less than 3 flaws is very good.
• Greater than or equal to 4 flaws and less than or equal to 7 flaws is
average.
• Greater than 8 flaws is poor.
• Looking at the chart more closely.
• Is it a first or 2nd stage base?
• Is the Relative Strength good enough for me to want to own it?
• Is the Pattern Classic or sound?
• Is the Base long enough?
• Is the base depth correct?
Making a watch list
• We have 19 Stocks on our list.
• The first thing we will do is to remove BIIB since it has a negative estimate for
earnings this quarter.
• If you see Red in this box you want to eliminate these stocks. Red means either
Last Quarters Sales, Current Quarters EPS est, or Current Year EPS % change is
negative.
• Yellow tells me to be cautious. I won’t remove these now, but I will be a little
careful about adding these stocks to my final watch list.
• Next we’ll go to the Stock Checkup.
Making a watch list – Main Bullet Points Page 1
• Starting with a good screen or list. We’ll use the IBD 50
for now.
• Add columns to our list to make notes and remove stocks
we don’t want to buy.
• Include only stocks with Top Fundamentals. Remove
Stocks that don’t have High Earnings and High Return on
Equity (or Pre Tax Margins).
• See if the stocks on the list are near a buy point.
• Only include stocks when they are near a buy point in a primary
chart pattern.
• If a stock is more than 5% past a buy point do not include the stock
on your watchlist.
Making a watch list – Main Bullet Points Page 2
• Look more closely at these stocks that are near buy
points to decide whether we really want to own them.
• Review additional fundamental factors included in the IBD 50
download and remove some stocks with major flaws.
• Review Stock Checkup.
• Less than 3 flaws is very good.
• Greater than or equal to 4 flaws and less than or equal to 7 flaws is
average.
• Greater than 8 flaws is poor.
• Looking at the chart more closely.
• Is it a first or 2nd stage base?
• Is the Relative Strength good enough for me to want to own it?
• Is the Pattern Classic or sound?
• Is the Base long enough?
• Is the base depth correct?
Making a watch list
• At the Stock Checkup we will count to see how many deficiencies a
stock has. All negatives are not created equal.
• A red dot equals “1”
• A yellow dot equals “.5”
• If you have a score of 3.5, round up to 4.0.
• We must have High Earnings, High Return on Equity or PreTax
Margins, and High Relative Strength to buy a stock.
Making a watch list
• When scoring don’t include market condition.
• ALXN
• Score = 0 which is the best possible.
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• ALGN
• When scoring don’t include market condition.
• Score = 4 which is the best possible.
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• QCOR
• When scoring don’t include market condition.
• Score = 2 which is the best possible.
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• TDG
• When scoring don’t include market condition.
• Score = 3 which is the best possible.
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• LULU
• When scoring don’t include market condition.
• Score = 1 which is the best possible.
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• ROST
• When scoring don’t include market condition.
• Score = 6 which is the best possible.
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• RGR
• When scoring don’t include market condition.
• Score = 5 which is the best possible.
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• GNC
• When scoring don’t include market condition.
• Score = 5 which is the best possible.
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• TJX
• When scoring don’t include market condition.
• Score = 9 which is the best possible.
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• WDC
• When scoring don’t include market condition.
• Score = 8 which is the best possible.
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• LOPE
• When scoring don’t include market condition.
• Score = 5 which is the best possible.
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• EW
• When scoring don’t include market condition.
• Score = 6 which is the best possible.
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• ULTA
• When scoring don’t include market condition.
• Score = 4 which is the best possible.
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• FTNT
• When scoring don’t include market condition.
• Score = 6 which is the best possible.
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• TIBX
• When scoring don’t include market condition.
• Score = 9 which is the best possible.
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• BIIB
• When scoring don’t include market condition.
• Score = 7 which is the best possible.
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• V
• When scoring don’t include market condition.
• Score = 8 which is the best possible.
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• DVA
• When scoring don’t include market condition.
• Score = 10 which is the best possible.
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• PETM
• When scoring don’t include market condition.
• Score = 6 which is the best possible.
Making a watch list – Main Bullet Points Page 1
• Starting with a good screen or list. We’ll use the IBD 50
for now.
• Add columns to our list to make notes and remove stocks
we don’t want to buy.
• Include only stocks with Top Fundamentals. Remove
Stocks that don’t have High Earnings and High Return on
Equity (or Pre Tax Margins).
• See if the stocks on the list are near a buy point.
• Only include stocks when they are near a buy point in a primary
chart pattern.
• If a stock is more than 5% past a buy point do not include the stock
on your watchlist.
Making a watch list – Main Bullet Points Page 2
• Look more closely at these stocks that are near buy
points to decide whether we really want to own them.
• Review additional fundamental factors included in the IBD 50
download and remove some stocks with major flaws.
• Review Stock Checkup.
• Less than 3 flaws is very good.
• Greater than or equal to 4 flaws and less than or equal to 7 flaws is
average.
• Greater than 8 flaws is poor.
• Looking at the chart more closely.
• Is it a first or 2nd stage base?
• Is the Relative Strength good enough for me to want to own it?
• Is the Pattern Classic or sound?
• Is the Base long enough?
• Is the base depth correct?
Making a watch list
• We now have a list that looks like this. We have 19
candidates
• We will Put an N in Column J for any stock that has 7 or
more flaws in the stock checkup. We will not do any
additional chart or fundamental work on these stocks.
• We remove 6 more stocks based on the Stock Checkup.
Making a watch list
• We now have a list of 13 candidates.
• Since we want a list of no more than 7-8 stocks we will focus on the stocks that
have the fewest number of fundamental flaws. Each of these has 3 or fewer flaws.
• ALXN, QCOR, TDG, LULU
• The next group we will look at has 4 flaws.
• ALGN and ULTA
• The next group has 5 flaws.
• RGR, GNC, and LOPE
• The last group of stocks we will look at has 6 flaws.
• ROST, EW, FTNT, BIIB, and PETM
Making a watch list – Main Bullet Points Page 1
• Starting with a good screen or list. We’ll use the IBD 50
for now.
• Add columns to our list to make notes and remove stocks
we don’t want to buy.
• Include only stocks with Top Fundamentals. Remove
Stocks that don’t have High Earnings and High Return on
Equity (or Pre Tax Margins).
• See if the stocks on the list are near a buy point.
• Only include stocks when they are near a buy point in a primary
chart pattern.
• If a stock is more than 5% past a buy point do not include the stock
on your watchlist.
Making a watch list – Main Bullet Points Page 2
• Look more closely at these stocks that are near buy
points to decide whether we really want to own them.
• Review additional fundamental factors included in the IBD 50
download and remove some stocks with major flaws.
• Review Stock Checkup.
• Less than 3 flaws is very good.
• Greater than or equal to 4 flaws and less than or equal to 7 flaws is
average.
• Greater than 8 flaws is poor.
• Looking at the chart more closely.
• Is it a first or 2nd stage base?
• Is the Relative Strength good enough for me to want to own it?
• Is the Pattern Classic or sound?
• Is the Base long enough?
• Is the base depth correct?
Making a watch list
• We now have a list of 13 stocks to look at more closely. We are going to
first look at the base stage. We will eliminate most stocks if the base
stage is higher than 2.
• If the base stage is higher than 2, we will then look to see if the Relative
Strength Line is acting properly. If the stock has almost broken out, the
RS Line should be near high ground. If the stock is not close to breaking
out we will see if the RS Line is moving smartly higher.
• If the Base Stage is 3 or higher and the RS line is lagging badly we will
remove the stock from consideration, otherwise we’ll dig deeper
• If the Base Stage is OK, and the the Relative Strength is OK, we will then
look to see:
•
•
•
If the shape of the base is proper. (See chapter 2 in HTMMIS)
If the length of the base is proper.
If the depth of the base is proper.
• If it passes each of the above tests we will add the stock to our watch list.
Making a watch list
• Advanced Questions.
• For this simulation we will not answer many of these questions. In future sessions
here are a few additional questions we will ask ourselves.
•
•
•
•
•
•
•
Is it a base on base?
Are there any unusual bars on the chart that need an answer? Daily and Weekly
Is this base structure tighter or looser than the prior base? Daily and Weekly
Does the stock come straight up from the bottom? Daily and Weekly
Is the pattern in the lower half of the base? Daily and Weekly
Is there a volume dry up in the base? Daily and Weekly
Is the handle proper? Daily Only
•
•
•
•
•
•
•
•
•
•
Volume drying up?
Not wedging?
Within 15% of the high of the base?
In the upper half of the base?
Are there any Big Volume Support areas? Daily and Weekly
Is the overall action in the base tight and constructive? Daily and Weekly
Is there a shakeout in the Bottom of the chart? Daily or Weekly
Is the left side of the base disproportionate to the right side of the chart? Daily or Weekly
Is the left side of the base longer then 1 week? Daily or Weekly
Are there any?
• Accumulation Days or Weeks?
• Distribution Days or Weeks?
• Support Days or Weeks?
Making a watch list
• Here is how we get to the charts.
Making a watch list
• William J O’Neil suggest we first look at the weekly charts.
Making a watch list
Chart School and Pattern Recognition - Review
• First a quick primer on Base Counting
• Schematic showing 1st and 2nd stage base. The high of base
2 is more than 20% above the pivot point in base 1.
$120.01
$100.00
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Chart School and Pattern Recognition - Review
• Base Counting continued
• Schematic showing two 1st stage bases.
$119.99
$100.00
Making a watch list
Chart School and Pattern Recognition - Review
• Base Counting continued
• Schematic showing base count reset. The base on the right is now a first
stage base.
Making a watch list
• Base stage?

All Bases that form
below 28.78 are
first stage bases
95.01 X 1.2 = 114.01
• Relative
Strength?
• Proper Depth?
4
4
3
• Proper or
Classic Shape?
109.96
Forms more than 20%
higher than prior base
2
Forms more than 20%
higher than prior base
All Bases that form
below 28.78 are
first stage bases
23.98 X 1.2 = 28.78
• Proper Length?
28.60
1
1
1
Forms more than 20%
higher than prior base
1
Since this base does
not undercut any of the
prior bases it will be the
4th 1st stage base
Making a watch list
• Base stage?
• Relative
Strength?
• Proper or
Classic Shape?
• Proper Depth?
• Proper Length?


Making a watch list
Making a watch list
• Base stage?

1
• Relative
5
Strength?
5
4
• Proper or
3
Classic Shape?
• Proper Depth?
• Proper Length?
2
1
Since this base does
undercut the prior base,
it is a 1st stage base
Making a watch list
• Base stage?
• Relative
Strength?
Unknown, RS line
is improving.
• Proper or



Classic Shape?
• Proper Depth?
• Proper Length?
Current Base is 41% Deep.
The Nasdaq corrected 13%
Sometimes leading
stocks can correct
2.5 to 3 times the market.
This is a little too deep.
Making a watch list
Making a watch list
• Base stage?

• Relative
Strength?
All Bases that form
below 114.05 are
first stage bases
95.04 X 1.2 = 114.05
All Bases that form
below 145.78 are
first stage bases
121.48 X 1.2 = 145.78
2
1
1
• Proper or
Classic Shape?
• Proper Depth?
• Proper Length?
2
Since this base does
undercut the prior base,
it is a 1st stage base
2
Making a watch list
• Base stage?
• Relative
Strength?
• Proper or





14%
Classic Shape?
• Proper Depth?
• Proper Length?
See next slide for
explanation.
6 Week Flat Base, 14%
Deep. Base count
done on Weekly Chart.
Making a watch list
• The only news I could find on TDG for this big down day on heavy
volume was this article from Street.COM. It seems to say that the
Aerospace/Defense industry declined. The Nasdaq was up .5% on this
day. Since it is the heaviest day and week of down volume in the whole
base I will not put the stock on my watchlist. Given that everything else
about the stock seems good it would be reasonable for you to include it
on your watch list.
• TransDigm Group (TDG) pushed the Aerospace/Defense industry lower
today making it today's featured Aerospace/Defense laggard. The
industry as a whole closed the day down 1.9%. By the end of trading,
TransDigm Group fell $8.72 (-6.8%) to $120.01 on heavy volume.
Throughout the day, 1.9 million shares of TransDigm Group exchanged
hands as compared to its average daily volume of 501,500 shares. The
stock ranged in price between $117.77-$129.14 after having opened the
day at $128.55 as compared to the previous trading day's close of
$128.73. Other company's within the Aerospace/Defense industry that
declined today were: Sifco Industries (SIF), down 8.3%, Hexcel
Corporation (HXL), down 4.4%, Heico Corporation (HEI), down 4%, and
Rockwell Collins (COL), down 4%.
Making a watch list
Making a watch list
• Base stage?

5
• Relative
4
Strength?
3
• Proper or
2
Classic Shape?
• Proper Depth?
1
• Proper Length?
2
Making a watch list

• Base stage?
• Relative
Strength?
• Proper or
Unknown, RS line
is improving.



Classic Shape?
• Proper Depth?
• Proper Length?
36% Deep
Making a watch list
Making a watch list
• Base stage?

2
• Relative
Strength?
1
• Proper or
Classic Shape?
• Proper Depth?
• Proper Length?
1
2
Making a watch list
• Base stage?
• Relative
Strength?
• Proper or





Classic Shape?
• Proper Depth?
• Proper Length?
Making a watch list
Making a watch list
• Base stage?
• Relative
Strength?

5
4
4
• Proper or
Classic Shape?
• Proper Depth?
3
2
• Proper Length?
1
4
5
Making a watch list
• Base stage?
• Relative
Strength?
• Proper or
Classic Shape?
• Proper Depth?
• Proper Length?


Making a watch list
Making a watch list
• Base stage?
• Relative
Strength?


3
4
2
• Proper or
1
2
Classic Shape?
• Proper Depth?
• Proper Length?
3
1
3
Making a watch list
Making a watch list
• Base stage?

3
• Relative
Strength?
2
• Proper or
Classic Shape?
• Proper Depth?
• Proper Length?
1
3
Making a watch list
• Base stage?
• Relative
Strength?
• Proper or
Classic Shape?
• Proper Depth?
• Proper Length?


Making a watch list
Making a watch list
• Base stage?
• Relative
Strength?

All Bases that form
below 21.56 are
first stage bases
17.99 X 1.2 = 21.56
21.87
• Proper or
Classic Shape?
• Proper Depth?
• Proper Length?
1
1
1
2
Making a watch list
• Base stage?
• Relative
Strength?
• Proper or



Classic Shape?
• Proper Depth?
• Proper Length?
Making a watch list
Making a watch list
• Base stage?

5
5
• Relative
Strength?
4
• Proper or
Classic Shape?
2
2
• Proper Depth?
1
• Proper Length?
3
Making a watch list
• Base stage?
• Relative
Strength?

• Proper or
Classic Shape?
• Proper Depth?
• Proper Length?
Making a watch list
Making a watch list
• Base stage?

• Relative
Strength?
2
• Proper or
Classic Shape?
• Proper Depth?
• Proper Length?
1
Making a watch list
• Base stage?
• Relative
Strength?


• Proper or
Classic Shape?
• Proper Depth?
• Proper Length?
Making a watch list
Making a watch list
• Base stage?
• Relative
Strength?
• Proper or
Classic Shape?
• Proper Depth?
• Proper Length?

1
1
1
Making a watch list
• Base stage?
• Relative
Strength?
• Proper or





Classic Shape?
• Proper Depth?
• Proper Length?
Making a watch list
Making a watch list
• Base stage?

2
2
• Relative
Strength?
• Proper or
Classic Shape?
• Proper Depth?
• Proper Length?
1
Making a watch list
• Base stage?
• Relative
Strength?
• Proper or





Classic Shape?
• Proper Depth?
• Proper Length?
Making a watch list
Making a watch list
• Apply Filter to “Put on Watchlist.” Uncheck N and Blanks
to see Column Headings and your watchlist stocks.
Making a watch list
• Your watchlist.
• You will notice that there are not any barnburner stocks on
the watch list this week and the list is small.
• What is next?
• What else do I need to know.
Making a watch list
• Available technical resources to create watchlist.
• Small Charts in IBD 50 section of newspaper.
• How to Make Money in Stocks by William J. O’Neil
• IBD Pamphlets
• IBD University - Charting the Course Series
• Files section of Petaluma Meetup
• “PP Chart School and Pattern Recognition - Module 3”
• A detailed review of Base Counting
• “PP Chart School and Pattern Recognition - Module 2”
• A detailed review of the Primary Chart Patterns
Making a watch list
• Available fundamental resources to create watchlist.
• IBD Stock Checkup - look up fundamental information
• Investors.com Home Page - look up information about the company
and read articles. Find out what is New.
• Earnings Whisper - lookup next earnings release date.
• Earnings.com - historic record of a companies Quartely Earnings
• Market Watch look up news and articles written about a company
by date.
• Yahoo Finance – Get quarterly and annual estimates for sales and
earnings for the current and next period.