Technical Analysis Training Video

Here is a good video on technical analysis explained in easy terms. It includes an overview of MACD (moving average convergence/divergence and stochastics)

Buy & Hold is a Losing Proposition

When it comes to investing in the stock market, especially during current times, investors should know when to hold on to stocks and know when to unload them.

Most financial experts believe that the buy-and-hold strategy of the traditional 401k methodology is a thing of the past if you want to gain the system. Buy and Hold which requires investors to buy stocks and then keep them for the long term has actually lost money over the last 10 years according to the S&P 500. The rational behind the “buy and hold” strategy is that, while the markets will likely experience ups and downs stemming from numerous factors, over time the stock markets tend to push upwards. Which means that those who use the buy-and-hold strategy stand to make money over time. This method has worked well for momentum traders that exit at the right times but leaves the rest of novice investors in the lurch.

While there are many experts who still hold to this Fortune 500 diversified strategy, others point to some of the more catastrophic stock market crashes of the past as proof that investors can literally lose everything they had gained in a bull market to the impact of the bear market. US economy of 2008 is proof positive.

Consider those who lost all their wealth during the stock market crash of 1929, which ushered in the infamous Great Depression. Many of the people who, back in the 1920s, held to the buy-and-hold strategy were the subject of riches-to-rags articles in newspapers worldwide. There is money to be made in today’s time, but timing and accuracy is more important than ever.

Experts say that bear markets materialize about every four or five years and bear markets can easily eliminate gains made in bull markets. History has proven this over and over. But for the ten year buy hold patterns we have beared witness to different results.

One researcher mentions that bear markets have hacked portfolio values an average of nearly 40 percent. This figure the buy-and-hold crowd would do well to consider and take notice.

Rather than adopt a buy-and-hold strategy, some financial professionals recommend that investors take a more sophisticated approach to buying and selling stocks. This necessitates monitoring market conditions and making changes as fluctuations in the markets warrant change. This is better known as trading the momentum and buying low and selling high. Ride the rips and sell the dips. This can be accomplished with the right data and the right market timing from Stocknod.com alerts.

Investors should also be wary of the advice they adhere to. While experts do provide a wealth of information on the markets and on individual stocks, it is up to investors to sift through the data and ultimately make the decisions.

Some investors choose to go with a broker so as to bypass the pressures of managing their own stock portfolios. Doing so requires them to look around for a good broker, one who has a proven methodology and a solid track record.

When all is said and done, however, investors are advised by a number of experts to avoid the buy-and-hold strategy still advocated by some on Wall Street. While patience is a virtue, investors should also reflect on how past stock market crashes burned those who held on too long. Team up with Stocknod stock alerts or the HotSheet for today’s bullish stocks.

Read the latest Free Investing Tips  from Stocknod expert Gregg Andreski

US Economy November Analysis

Global business sentiment is as dark as it has ever been since the 1930′s, although the free fall in confidence may be temporarily truncated by the Obama cabinet selections. Some are even fearing the worse of the glooming fear of the stock market crash of 1929.  Our survey results have been broadly unchanged since early November. Pessimism is pervasive across the world, with the only distinction being that Asian businesses are somewhat less nervous than elsewhere. Equipment and software investment did fall last week to a new record low, as did demand for office space and sales strength. Pricing pressures and interest rates are falling rapidly, although they are not yet consistent with outright deflation. The global economy is suffering a severe recession according to the business confidence survey results.

There was nothing but gloom and doom in the release of November U.S. economic reports. Economic headwinds are expected to have retailers expecting a slow holiday shopping season. But early indications per Black Friday only 1.6% lower than 2007. These are numbers we hope to see consistent through the remainder of the holiday shopping periods.

Construction spending for September came in at $1.060 trillion, a decline of 0.3% from August and down 6.6% from September 2007 as total construction—particularly for residences—continues to decline in the wake of a declining economy. We can expect the continued ripple effect of the home mortgage crisis to continue to hit the construction sectors.  Private construction increased by 0.1% for the month, but private residential construction fell by 1.3% from August to September. Total public construction also fell for the month. With the financial crisis still restricting credit to new projects, total construction will most likely decline in the coming months also. Expect construction related sectors to feel the first blow of initial first year recession waves.

The Institute for Supply Management’s manufacturing index fell 4.6 points to 38.9 for October. The larger than expected fundamental analysis decline puts the ISM index at its lowest level since the early 1980s. Conditions for manufacturing were very restrictive in October. Businesses’ and consumers access to credit was essentially cut off, leading many to reduce overhead, employment and production. The ISM index is consistent with an economy in a severe recession and opens the door for the Federal Reserve to lower interest rates below 1%. 

The U.S. personal income report revealed a bigger-than-assumed 0.3 percent October gain, although the increase followed sizable downward third-quarter revisions that were revealed in the third-quarter GDP report released Nov. 25. We also saw the expected 1.0 percent drop in October consumption, but a much-weaker-than-expected -0.5 percent figure in real (inflation-adjusted) terms, as personal consumption expenditure (PCE) chain prices fell “only” 0.6 percent in October. The real consumption shortfall implies a hefty 2.4 percent fourth-quarter rate of decline alongside a 7.1 percent rate of decrease for nominal spending, and a much-stronger-than-assumed 4.2 percent pop in the fourth-quarter GDP chain price measure, as falling import prices are slow to “pass through” to consumption. We now project a big 4.0 percent real GDP decline in the fourth quarter.

In summary the US Economy is right where we would expect it to be during this quagmire, and the Obama administration has done much to put a tunicate around the financial and stock market bleeding. But we can expect unemployment to grow to 11-12% and slowly start feeling the stronger waves of recession until consumer confidence and fundamentals have been restored. The NASDAQ and other majore indices are showing a modest recovery.

Top 5 Mistakes Beginner Traders Make

1. Trading too often: Beginner traders often buy/sell their securities too much. They hear a hot tip on TV or a friend and feel they need to sell their current holdings and buy that stock instead. Generally, the only person who gets rich off of this is the investor’s broker, who rakes in trading fees. Trading frequently is also tax inefficient, since these investors often end up paying short-term capital gains tax instead of the lower long-term capital gains tax. Stock education as well as tax education is very important for stock market for basics maximum success.

2. Panicking: One emotion detrimental to investors is fear. Yes, you should use caution and prudence when making investments. However, panicking whenever the stock market goes down never solves anything. Investors that are quick to panic often end-up buying high and selling low.

3. Being Greedy: Jim Cramer frequently says “bulls make money, bears make money, hogs get slaughtered.”

4. Homerun Swings: Investors looking to find the next Microsoft generally focus on stocks with a high potential for growth. In a similar fashion to the value strategy, these investors seek to find stocks that they believe will grow faster than the market expects.

5. Poor Technical Analysis: Some people use charts to predict a stock’s movement. These traders are known as ‘chartists’ and this method of trading is known as technical analysis. Technical analysis tends to be used for short-term trades and if professionally traded will yield higher returns. This is why it is important to use technical analysis for momentum trading. Stocknod Automated Stock Alerts provide this much needed support via monthly subscription.  Technical stock analysis is an absolute for successful traders and now with Stocknod.com this critical technical homework can be provided to you via SMS or Emal alerts.

Take control of your finances with the technical stock alerts of Stocknod.com. Start trading with confidence and start trading with the Nod!

Securities Analysis 101

The goal of any financial analyst or stock technicians is simple: to beat the market. This victory metric is typically measured against the S&P 500.  This goal is basically boiled down to ones ability to predict the direction of the stock market and identify undervalued stocks that are poised to outperform. This may sound like a simple concept, but where it becomes murky is within the debate on which values are to be used in this determination. For example a fundamental analyst would insist that this underlying value can be determined best from the forces that affect the economy, industry groups and related companies. Essentially identifying the supply and demand forces that affect the stocks prices for the products & services offered. While a technical analyst will attempt to forecast future price movements based on examination of historic price movements.

 So which theory is best? Which strategy produces higher returns?  As a contributor of Stocknod my answer is both types of analysis should be used when analyzing securities, as the two strategies compliment each other in a full evaluation at both the micro and macro levels. To expound on this let’s look further at the question of whether markets are efficient. Just what is dictated by the current pricing of a security? Is the current pricing a fair market value? Or are there underlying forces that exist that have somehow skewed pricing? These are the questions and opportunities that we must uncover to identify the stocks that are undervalued and subsequently poised to outperform.

An “efficient market” in the academia level is defined as a market in which the price is an unbiased estimate of the true value of the investment. Simply stated, the current price of a security fully reflects all available information and is the fair market value. “All” being the sum value of all views whether bull, bear, or other held by market participants. It is a fair value based on the supply and demand value of the market. Any deviations above or below what is deemed as “fair value” is considered to be random and over the long term will reflect the true value. So it is this period of deviations where the opportunity exists in making profits trading stocks. So in short, the goal of any trader is to identify these existing anomalies or potential future anomalies and move in and out of the market accordingly. These anomalies will disappear almost as fast as they are identified and again is primary reason that Stocknod alerts have been such an effective trading tool in staying in tune with pricing strikes.

Most within the academia realm believe that security prices are deemed as “semi-strong” efficient. Remember by semi-strong we are referring to the fact that public knowledge is factored into the stock prices and it is relatively difficult to identify these deviations from the true value based on public information. And only new information should affect the price. Reviewing price reaction to breaking news, there seems to be evidence to support this theory. The flow of information and detection times have been increased due in large part to the internet, and market news are factored into the pricing almost immediately. Few will argue that a surprise, either negative or positive will drastically move the price of a security. I think we can all attest to this fact based on popular case history.

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Moving Averages and the Trend

Moving Averages and the Trend

One of the key tenets of technical analysis is that “the trend is your friend”.  There are many tools in a Technical traders toolbox, and the Moving Average indicator is one of them.   It can be helpful in identifying trend reversals and continuances.  As long as you trade in the direction of the trend. 

Trend reversals may occur at any time.  One of the important skills a trader must possess is the ability to identify a reversal.  It is easy to exit a position too early by over anticipating a trend reversal, and just as easy to loose money by not exiting a trade quick enough.  

The use of a moving average is an excellent tool to help us identify trend reversals.  By plotting the proper moving average on a stock chart, we can watch for the stock’s price to penetrate the moving average to know that a reversal may be occur.

Moving averages come in two common forms: simple moving average (SMA) and exponential moving average (EMA) – also known as weighted moving average.   As a general rule of thumb, the exponential moving average weights more heavily the latest stock prices.

The chart to the right on First Solar shows a good example of how exponential moving averages can help us identify the trend.  Although the price of FSLR started moving down at the beginning of the year, the moving average indicator shows us that the overal trend is still moving up.  We know this because the 10 day exponential moving average line bounced off the 90 day moving average line and continued on its path upwards.   As long as the security is in trend, the moving average is relevant.

Sometimes a stock will consolidate (move sideways in a tight range), and in this case, the value of the moving average as a useful indicator diminishes. Consolidations are a bit more trickier to analyze and predict future price movement, and we will cover consolidations in another article in much more detail. 

Below are some of the key take aways to remember about moving averages:

• Moving averages are good trend indicators as long as the stock is not consolidating
• Exponential moving averages place more emphasis to the most recent data and are better indicators to use with high volatility stocks
• Simple moving averages are good trend indicators for low volatility stocks