Charting for Real People Michael Kahn, CMT November 2011.

Charting for Real Charting for Real PeoplePeople

Michael Kahn, CMTMichael Kahn, CMTNovember 2011November 2011

AgendaAgenda

The basicsThe basics

Get the feel for the marketGet the feel for the marketDoes it agree with the Does it agree with the fundamentals?fundamentals?

Or at least not disagree?Or at least not disagree?Intangibles Intangibles

Who am I?Who am I?

Chartered Market Technician (CMT)Chartered Market Technician (CMT) not a Certified Massage Therapist not a Certified Massage Therapist trained and certified in market trained and certified in market

analysisanalysis

Columnist – Barron's OnlineColumnist – Barron's OnlineNewsletter Editor – Quick Takes ProNewsletter Editor – Quick Takes ProFormer charting software designer – Former charting software designer –

TradeCenter IITradeCenter II

……and beaten up enough by the marketsand beaten up enough by the markets

What do I do?What do I do?

Help investors assess risk and Help investors assess risk and reward.reward.

no crystal ballno crystal ball

no tea leavesno tea leaves

no chicken entrailsno chicken entrails

Possible GoalsPossible Goals

1.1. Sanity CheckSanity Check Just how good is the STOCK of a Just how good is the STOCK of a

COMPANY with good fundamentals?COMPANY with good fundamentals?

2.2. Determine AggressivenessDetermine Aggressiveness Buy a lot? Or a little? Or none? Or Sell it?Buy a lot? Or a little? Or none? Or Sell it?

Next – the basic concepts of what we Next – the basic concepts of what we analyzeanalyze

Price Rules!Price Rules!

Price - The stuff you put in Price - The stuff you put in the bankthe bank

In price, there is knowledge.

Alan Shaw, CMT, Chief Technical Analyst.

Smith Barney, retiredRalph Acampora, CMT, Chief Technical Analyst, Prudential

Securities, retired

Volume is nextVolume is next

Volume – How much money is Volume – How much money is movingmoving

In volume, there is truth.

Dennis Jarrett, Jarrett Research

MomentumMomentum

Momentum – How fast it got Momentum – How fast it got therethere

Structure (Patterns)Structure (Patterns)

Structure – Trends and Structure – Trends and PatternsPatterns

Sentiment (Fear and Greed)Sentiment (Fear and Greed)

SentimentSentiment

I feel good! Whatever He’s gonna eat us!

We got game!We got game!

PricePrice VolumeVolume MomentumMomentum StructureStructure SentimentSentiment

Looks like a cheaper place to buyLooks like a cheaper place to buy

How many times have you thought, “My stock is on sale, let’s buy!”

The trend said it allThe trend said it all

What does the market have to say?What does the market have to say?


Quiz – do you see anything now?

Jargon alert!Jargon alert!

Squiggly line in next chartSquiggly line in next chart

Indicators said when it was time to returnIndicators said when it was time to return

Indicators tip you off to changesIndicators tip you off to changes

Indicators said when it was time – or notIndicators said when it was time – or not

Jargon alert!Jargon alert!

Weird terms in next chartWeird terms in next chart

Indicators said when it was time – or notIndicators said when it was time – or not

O’Neil Follow-Through Day

Does something look wrong here?Does something look wrong here?

Does something look right here?Does something look right here?

It’s Good to Side StepIt’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 InIt’s Good to Know When to Get Back In

Redemption for a former bear.

Sanity CheckSanity Check

Is the trend long in the tooth?Is the trend long in the tooth?


Is the trend long in the tooth?Is the trend long in the tooth? Are you the last to be invited to Are you the last to be invited to

the party?the party?


Is the trend long in the tooth?Is the trend long in the tooth? Are you the last to be invited to the Are you the last to be invited to the

party?party? Is your broker calling you with a new Is your broker calling you with a new

investment in the super bull market investment in the super bull market in *XXX that should last for years?in *XXX that should last for years?

* how about rare earth minerals in 2011* how about rare earth minerals in 2011


Is the trend long in the tooth?Is the trend long in the tooth? Are you the last to be invited to the Are you the last to be invited to the

party?party? Is your broker calling you with a new Is your broker calling you with a new

investment in the super bull market investment in the super bull market that should last for years? that should last for years?

Are they ridiculing the bearish Are they ridiculing the bearish commentators (such as yours truly in commentators (such as yours truly in April)?April)?

Or for early 2009, were doom and Or for early 2009, were doom and gloom forever?gloom forever?

Quiz TimeQuiz Time

Question - What does it mean Question - What does it mean when the neighborhood tavern when the neighborhood tavern has CNBC on the television has CNBC on the television and not ESPN?and not ESPN?

Quiz Time Quiz Time

Question - What does it mean Question - What does it mean when the neighborhood tavern when the neighborhood tavern has CNBC on the television has CNBC on the television and not ESPN?and not ESPN?

Answer - the market is not at Answer - the market is not at a bottoma bottom

Quiz Time Quiz Time

Question - What does it mean Question - What does it mean when the guys on the football when the guys on the football team are talking about how team are talking about how much money they are making much money they are making trading?trading?

Quiz Time Quiz Time

Question - What does it mean Question - What does it mean when your doubles tennis when your doubles tennis game is talking more about game is talking more about trading and less about the trading and less about the tuna on rye at the coffee shop?tuna on rye at the coffee shop?

Quiz Time Quiz Time

Question - What does it mean Question - What does it mean when the banks are offering when the banks are offering new interest only mortgages?new interest only mortgages?

Quiz Time Quiz Time

Question - What does it mean Question - What does it mean when the banks are offering when the banks are offering new interest only mortgages?new interest only mortgages?

Answer – the real estate Answer – the real estate market is not at a bottom……market is not at a bottom……(sound familiar?)(sound familiar?)

Quiz Time Quiz Time

Question - What does it mean Question - What does it mean when there are whole aisles in when there are whole aisles in the supermarket dedicated to the supermarket dedicated to the Atkins diet?the Atkins diet?

Quiz Time Quiz Time

Question - What does it mean Question - What does it mean when there are whole aisles in when there are whole aisles in the supermarket dedicated to the supermarket dedicated to the Atkins diet?the Atkins diet?

Answer – time to buy bread Answer – time to buy bread and cereal stocksand cereal stocks

Quiz Time Quiz Time

Question - What does it mean Question - What does it mean when mutual fund and when mutual fund and brokerage ads in Barron’s are brokerage ads in Barron’s are scarce?scarce?

Quiz Time Quiz Time

Question - What does it mean Question - What does it mean when mutual fund and when mutual fund and brokerage ads in Barron’s are brokerage ads in Barron’s are scarce?scarce?

Answer – the market is not at Answer – the market is not at a top.a top.

Quiz Time Quiz Time

Question - What does it mean Question - What does it mean when Merrill Lynch closes when Merrill Lynch closes their commodities trading their commodities trading desk?desk?

Quiz Time Quiz Time

Question - What does it mean Question - What does it mean when Merrill Lynch closes when Merrill Lynch closes their commodities trading their commodities trading desk?desk?

Answer – the commodities Answer – the commodities market is not at a topmarket is not at a top

Quiz Time Quiz Time

Question - What does it mean Question - What does it mean when everyone is talking when everyone is talking about the Great Depression about the Great Depression and Financial Armageddon?and Financial Armageddon?

Quiz Time Quiz Time

Question - What does it mean Question - What does it mean when everyone is talking about when everyone is talking about the Great Depression and the Great Depression and Financial Armageddon?Financial Armageddon?

Answer – It’s March 2009!Answer – It’s March 2009!

The AAII survey showed 70.27% The AAII survey showed 70.27% bears on March 5. bears on March 5. Unprecedented.Unprecedented.

Up is good, down is bad.Up is good, down is bad.

Up is good, down is bad.Up is good, down is bad.

Trailing P/E now 50Trailing P/E now 50

Just for KicksJust for Kicks

What do you see?What do you see?

How about this?How about this?

or this?or this?

There was no need to lose it all.There was no need to lose it all.

There was no need to lose it all.There was no need to lose it all.

real trading!

Up is good,Up is good,

Down is BadDown is Bad

The real reason we do The real reason we do this:this:

To make the buy, sell To make the buy, sell or hold decision.or hold decision.

Not to predict the futureNot to predict the future

Getting the Feel TodayGetting the Feel Today

real trading!

Getting the Feel TodayGetting the Feel Today

Quick Takes ProQuick Takes Prowww.QuickTakesPro.com

Getting TechnicalGetting Technical www.Barrons.com

Month AheadMonth Ahead www.MarketWatch.com

Books:Books:Beginner’s Guide to Charting Financial MarketsBeginner’s Guide to Charting Financial Markets

Technical Analysis: Plain and Simple – 3Technical Analysis: Plain and Simple – 3ndnd editionedition

Real World Technical AnalysisReal World Technical Analysis

Quick Takes ProQuick Takes ProFree Chart of the DayFree Chart of the Day

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Sign up at the website Sign up at the website www.QuickTakesPro.com

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Charting for Real People Michael Kahn, CMT November 2011.

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Transcript of Charting for Real People Michael Kahn, CMT November 2011.