- In the Previous newsletter 12-24-2001, I predicted a reversal in
the NASDAQ 100 because of a break in the trend. You will notice
that others use past data to show you how technical analysis
works. Hindsight is always 20-20. I predict the future using
the principles taught in Princeton's TradeTutor courses. Below
is the weekly chart as of 2-4-2002.
- My Prediction was for a downtrend that would create a higher
low. The resistance held creating a double top and the trend
is now downward because of the break in support. The last newsletter
topic was about buying and holding for the next bull market.
If you understand trends you will notice that the overall trend
is down and has been confirmed by the lower high. Now, I am looking
for either a higher low, a double bottom, or a break in the low
of September.
- Averaging Down is a method of trading that is tempting to most
traders in an attempt to avoid taking a loss. It has probably
caused that most devastating loses. The fact that it works frequently
is what sucks the trader in. The few times it does not work will
usually wipe out the traders entire account. You just received
one of the most important tips of all time.
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- Averaging down works when a trader wants to accumulate stock
at the lowest price. In this daily chart of Qualcom, suppose
you decided to buy 100 shares of stock on 12-19-01. When the
stock breaks the low and moves down, you buy another 100 shares
on 1-8-02. It breaks the low again and you buy another 100 shares
on 1-20-02. It looks like the low has been broken again and you
will be buying more. Assuming that the market will turn after
the last buy you will have accumulated 400 shares of Qualcom
at an average price of "say" 43. You have already determined
before hand that you would buy and hold up to 400 shares and
you then hold your investment. Now assume that the first buy
you did was 500 shares. Why not 500 shares? You thought at the
time that it was a good time to buy. In the same scenario you
would own 2000 shares and could have your entire account at risk.
If this was Enron, you would have lost alot of money in the first
example, but would still have an account, but in the second example
your entire account might be lost. The moral of the story is
to only use averaging down as a planned method of stock accumulation.
Princeton's TradeTutor courses go into much more detail about
this subject.
- New IPO I expect the IPO PayPal Inc. to open on 2-5-2002.
If it doesn't open too high, I'm getting in. Check it out!
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This is the exact same training we offer in our trading room
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