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Blueprint for Trading Success | |
| July 6-8 |
How to Develop a Winning Trading System that Fits You | |
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Feature
Market Efficiency Portfolio
by
Van K. Tharp
This market certainly looks like it has resumed its uptrend. The percentage of stocks that show positive efficiency is near the high it set about 15 months ago, now standing at 76.5%. That means that three out of four stocks are showing a positive efficiency. However, only four of our portfolio stocks are more profitable than they were last month and one of them is our short.
We now only have four stocks in our database (none tradable) with efficiencies below minus 15 compared with 38 stocks with efficiencies above plus 15. We also have 21 stocks with efficiencies below minus 10 and 328 stocks with efficiencies above plus 10. That�s a 15.6 to 1 ratio. Pretty extreme and it could turn on a dime. I�m definitely nervous that our portfolio is slightly down while the market is giving us these readings.
2007 has continued to be good for the efficiency portfolio. The current portfolio continues to be up nearly 10R. And we only have one losing stock: our Singapore ETF that hasn�t recovered from the China debacle several months ago. Table 1 shows our portfolio as of the close on May 8th, 2007.
| Table 1: Portfolio Values on close May 8, 20007 | ||||||||
| Stock | Entry | Cost | Shares | Stop | Price Now | Value | Profit/Loss | R-multiple |
| Longs | ||||||||
| LQU | $54.05 | $1,960.80 | 36 | $56.93 | $71.80 | $2,584.80 | $624.00 | 1.58 |
| CXW | $42.33 | $1,919.85 | 45 | $40.22 | $60.50 | $2,722.50 | $802.65 | 2.03 |
| MWP | $35.54 | $1,756.46 | 49 | $47.70 | $60.06 | $2,942.94 | $1,186.48 | 3 |
| EWP | $52.12 | $1,734.96 | 33 | $44.35 | $57.45 | $1,895.85 | $160.89 | 0.41 |
| LFL | $57.80 | $1,749.00 | 30 | $56.44 | $76.41 | $2,292.30 | $543.30 | 1.51 |
| NU | $26.52 | $1,765.32 | 66 | $25.03 | $32.80 | $2,164.80 | $399.48 | 1.01 |
| CHL | $42.32 | $1,750.12 | 41 | $38.54 | $45.80 | $1,877.80 | $127.68 | 0.32 |
| SGF | $18.75 | $1,908.75 | 101 | $15.00 | $16.95 | $1,711.95 | ($196.80) | -0.5 |
| ALB | $71.55 | $1,732.20 | 24 | $65.30 | $84.00 | $2,016.00 | $283.80 | 0.72 |
| Shorts | ||||||||
| MNI | $31.56 | $1,878.60 | 60 | $37.82 | $28.91 | $1,734.60 | $144.00 | 0.42 |
| Totals | $4,075.48 | 10.51 | ||||||
Last month, we were not stopped out of any of our positions, although I�m going to eliminate the Singapore ETF this month because two months is plenty of time for a stock to recover if the trend is to continue.
Once again, I want to mention that ALB has split two for one since we bought it. Rather than confuse people, I have kept the unadjusted price in the table.
I�m not showing the closed positions this month because we have not added any new ones yet. However, our closed positions total minus $4379.44 while our current portfolio is up $4075.48. Thus, we are down only $303.96 to date and would be up without the mistakes that I pointed out two months ago.
Table 2 shows the current efficiency of the stocks in our portfolio. Obviously, there are some stocks or funds that we need to eliminate. The two that stand out the most are those from the Asian markets, CHL and SGF. The Asian market hasn�t held up well since the China Market Collapse.
We also need to eliminate ALB and EWP, which have fallen way below 10. We will sell these four stocks at the open on Wednesday. I will continue to keep MWP as it is only just below 10 and still has some promise.
|
Table 2: Current Efficiency Rating of Our Portfolio Stocks |
|
|
CHL |
4.01 |
|
SGF |
5.03 |
|
ALB |
7.43 |
|
EWP |
8.15 |
|
MWP |
9.84 |
|
MNI |
-11.01 |
|
NU |
11.10 |
|
CXW |
11.19 |
|
LFL |
12.83 |
|
LQI |
16.11 |
I will also buy four new positive efficiency stocks at the open on Wednesday to refresh our portfolio. These will be DRYS (18.73 efficiency), MWF (18.37 efficiency), NRG (17.75 efficiency) and ENR (16.67 efficiency).
I think Deluxe Checking is very interesting. In 2001, it was the purest example of a positive efficiency stock that I had ever seen. In 2005-2006 it was a superb example of a negative efficiency stock. And now it looks almost as good as it did in 2001. I would consider buying this one, but it is now going through levels that should give it a lot of resistance. I�ll just watch this one.
DRYS (Dryships) is a relatively new stock and it now seems to be going up very rapidly, perhaps too rapidly, but we�ll take a chance on this one. When this company came out in 2005, it was a prime example of a negative efficiency stock, and it was on my radar screen as a possible short. But it certainly doesn�t look that way now.
MFW (M&F Worldwide) took off from a base of about $15-17 in January this year and has now reached $67. It always feels like we�ve missed the boat on one like this, but perhaps there is some left for us. It�s not consolidating yet.
NRG (NRG Energy) was a new stock in 2004 and it is a prime example of a positive efficiency stock. It�s gone up the whole time. I really like this one.
ENR (Energizer Holdings) looks a little like Enron. However, this company has been going up since 2000 except for a pause in 2005-2006. I also like this one a lot.
Until next month�s portfolio review, this is Van Tharp.
About Van Tharp: Trading coach, and author Dr. Van K. Tharp, is widely recognized for his best-selling book Trade Your Way to Financial Fre-edom and his outstanding Peak Performance Home Study program - a highly regarded classic that is suitable for all levels of traders and investors. You can learn more about Van Tharp at www.iitm.com.
Van Tharp's
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The
Ultimate Home Study Course for Traders. 
Contains the five books listed above, and four CDs. �Your course is the
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Top Notch Internet Resources
Part V
Another Favorite Site
By D.R. Barton, Jr.
Today
I�m going to start our discussion about online no-cost charting.
(For those of you looking for more information on the
stockcharts.com site, I�ll be covering that in a future article).
The good news: there are loads of excellent online charting sites available.
The bad news: there is no one site that is the best for everything.
The first reason for the lack of the �perfect� charting site is the segmentation between stocks, futures and forex. Great charting sites that cover one area don�t cover others.
We�ll have lots of fun looking at the wide-ranging options for stock charting sites. But for today, I want to cover futures. And the reason is pretty simple � there are far fewer quality sites for futures than for stocks. As a matter of fact, there is one site that really trumps all the others in a field of limited competition. More on that site later.
In the runners-up category for futures charting, you can get charts from each of the exchanges, for example www.cbot.com , www.cme.com, www.nymex.com, etc. The problem here, of course, is that you have to go to separate sites and the charting tools are rather elementary. There are some others that cover all of the futures contracts from the different exchanges, but have other limitations. One worth noting is www.futures.tradingcharts.com , if only to point out that it has all the contracts you should need, but is lacking in chart sophistication with no customization available. Also the user interface is fairly cumbersome requiring lots of clicks to get where you�re going.
Now, onto the reigning champ in the area of futures charts: www.futuresource.com . This site has lots of advantages over a notably weak field of rivals. It allows you to look up contracts by symbol instead of clicking through a labyrinthine maze of options. It has delayed intraday data for quotes and charts. The basic charts, available without signing up, have half a dozen useful indicators that you can add. Of course you have to put up with some advertising (including watermarks on the charts themselves) but if you want charts without ponying-up for exchange fees, you have to expect that.
Futuresource.com also has a new premium charting service that is no-cost but requires a sign-up. I just spent a little time with the charts and they�re really quite good. They are java based and allow you to see OHLC (open, hi, lo, close) on any bar with a rollover of the cursor. There are about two dozen indicators that you can add to the charts. And you can chart on many different timeframes from tick up to monthly. You can chart more than one symbol on a chart for comparisons and you can also do some fairly sophisticated spread charting. The bottom line is that the best no-cost online futures charting site has gotten significantly better. And given the high cost of exchange fees, for many folks who want just a casual glance or even deeper study of different futures contracts, this site could save you lots of time and money.
Next week we'll keep working on the no-cost online charting tools. Keep sending in your favorite sites to [email protected] . This week, I�d be particularly interested in any sites you use for online charting including stocks, futures and forex. And let me know if you�ve found this discussion useful! Until next week�
Great Trading!
D. R.
About D. R. Barton: A passion for the systematic approach to the markets and lifelong love of teaching and learning have propelled D.R. Barton, Jr. to the top of the investment and trading arena where he is one of the most widely read and followed traders and analysts in the world.
He is a regularly featured guest analyst on both Report on Business TV, and WTOP News Radio in Washington, D. C., and has been a guest analyst on Bloomberg Radio. His articles have appeared on SmartMoney.com and Financial Advisor magazine.
Unplugged but Still Connected
by Melita Hunt
Last week I was in New York for a couple of meetings over a 24 hour period. What I thought was going to be a long dinner meeting actually wound down at about 8pm so I unexpectedly had a free night on my hands. Heading back to my hotel I realized that I had a choice of going out for a while or just reading and getting some work done in my room.
Well, I was in New York, and being the social butterfly that I am, the �going out� idea won hands down. So I headed to Times Square which was only a couple of blocks away from my hotel and ensconced myself onto a bar stool at the Blue Fin where I could watch the hustle and bustle of people passing by. But what did I do? I grabbed my phone and started sending text messages. Sitting to my left was a guy chatting on his phone and to my right there was another guy reading the newspaper on his palm pilot. How disconnected were we!
It took all of 30 seconds for the penny to drop and I looked at them both, held up my phone and we all started to laugh. In this new world of technology we so often think that we are connected to everything and everyone when in fact we are totally disconnected from one another. Where has the human element gone?
Sitting at a bar text messaging was not my idea of being social and instead, over the next two hours I thankfully made two new friends. Maybe we�ll never see nor hear from one another again but in that one moment we all decided to connect and talk. We all put our gadgets away and I got to meet two fascinating people. One had caught the last plane out of Bosnia 15 years ago after losing both of his parents and he had subsequently worked and struggled his way to a nice life in New York, the other was a father of two who had recently triumphed over cancer. We talked about good things in our lives, bad things, rough times and ultimately how blessed we all are.
I have no idea why these guys opened up to me so readily, and shared part of their life stories (maybe the bottle of wine helped), I think they were even shocked with how much we spoke about, yet I would hazard to guess that it was because deep down people really do want to connect and be heard without judgment. In that moment, instead of texting, reading and cutting off from one another we decided to take the opposite route and spend a really enjoyable couple of hours connecting, being real and enjoying the company of other humans.
It�s a lesson that we should be conscious of each and every day. How many of us work near someone and don�t really know them at all? This week I encourage you to put down the gadgets every so often and really talk to someone face to face about their life, not just a message through a text, an email or phone. Whether it�s a family member, a friend or a stranger, because you might just find out something new and fascinating.
You can contact Melita at [email protected]
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