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Putting It All Together

Tom Ventresca
Tom Ventresca
Market Edge.com
Access the Market Edge website for 14 DAYS – FREE! You will get unbiased, computer-generated Buy-Hold-Sell opinions for over 4,700 stocks along with market commentary, an interactive charting package, trading signals, industry group analysis, point & figure charts and alerts and much, much more.

Using Market Edge to develop a disciplined, consistent approach to the stock market.

The foremost elements of Market Edge (www.marketedge.com) are the market timing models that produce the 'Market Posture'. Being on the right side of the market is more than half of the battle. Much of the success of using Market Edge is determined by this. If the Market Posture is bullish you are looking for Long ideas only. Conversely, when the Market Posture is bearish, you will either hedge current long positions, look for short sale candidates or be out of the market altogether. It is strongly recommended that you familiarize yourself with the 'Market Letter' and 'On The Edge' so that you will always be aware of what is happening with the market.

Once the Market Posture has been determined, go to the Stock Watch module. Create two lists of stocks. The first list should contain your holdings. The second list should be a watch list that is comprised of stocks that you consider to be either good long or short sale candidates depending on the status of the Market Posture. Now you are ready to get down to business.


Market Posture Bullish

On a daily basis, select the Stock Watch module, click on "Select A List" and highlight your holdings or position list. Next click on Opinions/Conditions and then select Deteriorating Conditions. Stocks in this list will be experiencing technical deterioration. Their Score, which is located in the last column of the report, will range from -1 to -4. You want to concentrate on the stocks that have a Score of -3 or -4 since the odds are that the opinion will be downgraded to Avoid over the near term. Therefore, defensive action is warranted once the -3 or -4 level is reached. The first option would be to simply sell the stock or use a protective sell-stop order to let the market take you out of the position. However, if the stock is a long term holding that you don't want to sell, another option would be to sell covered calls against the position.

Assuming one or more of the positions are liquidated, the next step would be to find a suitable replacement. From the Stock Watch module, select your watch list. Next, click on the Opinions/Conditions drop down and then on either Long, Upgrades or Improving. You can also click on Situations and then on Early Entry Buys. Depending on how you created your list, the stocks that are selected should be fundamentally strong stocks that also contain favorable technical characteristics. You have just found the best of both worlds.

Gold subscribers can retrieve another source of strong buy candidates from the Money Runner module which is located in the Analysis Tools module. Starting with a list of stocks which have been upgraded by a major Wall Street firm during the previous thirty days, Money Runner buys the stocks when Second Opinion upgrades them to a Long. Each selection has a suggested Target as well as Sell Stop which is updated daily.

Platinum subscribers have access to the Industry Group, Trading Ideas and Point & Figure Chart Breakouts and Alerts modules. Click on Industry Group Analysis and choose groups rated either Strong or Improving and then select stocks with a Long Opinion. Short term traders should check out Trading Ideas-Long. There you will find stocks that have satisfied entry point conditions as defined by thirteen different technical trading systems. Also, the P&F Breakouts and Alerts reports include stocks that have or are in the process of breaking out of significant resistance areas, a short term positive condition.

Finally, subscribers who have access to the ETF (Exchange Traded Funds) Center should select a category which is rated as either Strong or Improving and then choose ETF's with a Long Opinion. All levels of subscription with the exception of Basic have access to the ETF Center.


Market Posture Bearish

Now let's take a look at what to do when the Market Posture changes to bearish. The obvious thing to do is to sell all your holdings. Another tactic would be to use sell stop orders to let the market take you out. As a stock's price continues to move higher, increase the sell stop so as to protect your gains. If the stock is a long term holding that you don't want to sell, another option would be to either sell covered calls against the position or purchase puts. Any of the above strategies will provide downside protection in the event of a market decline.

Aggressive investors who would want to participate in a market decline by shorting stocks have several options at their disposal. From the Stock Watch module, select your watch list which should include stocks that you view as having weak fundamentals and a bleak future. Click on the Opinions/Conditions drop down and then on either Avoid, Downgrades or Deteriorating. You can also click on Situations and then on Early Entry Shorts. Depending on how you created your list, the stocks that come up should all be fundamentally weak stocks that also contain poor technical characteristics.

Gold subscribers can retrieve another source of short sale candidates from the Money Runner module which is located in the Analysis Tools module. Click on the Today's Shorts list. Stocks in this list have been downgraded by a major Wall Street firm during the previous thirty days and the Second Opinion has downgraded them to an Avoid. Each selection has a suggested Target as well as Sell Stop which is updated daily. Stocks in Money Runner should only be shorted the day they appear in the Today's Shorts list.

Platinum subscribers have access to the Industry Group, Trading Ideas and Point & Figure Chart Breakouts and Alerts modules. Click on industry Group Analysis and chose groups rated as either Weak or Deteriorating and then select stocks with an Avoid Opinion. Short term traders should check out Trading Ideas-Short. There you will find stocks that have satisfied entry point conditions as defined by thirteen different technical trading systems. Also, the P&F Breakout and Alerts reports identify stocks that have or are in the process of breaking down through significant support areas, typically a good sign that further weakness is in the future.

Lastly, click on the ETF Center tab and select a category which is rated as either Weak or Deteriorating. Choose ETF's from these categories with an Avoid Opinion as potential short-sale candidates.

As short sale positions are opened, enter their symbols in your position list in Stock Watch. On a daily basis, click on "Select A List" and highlight your position list. Next click on Opinions/Conditions and then select Improving Conditions. Stocks in this list will be experiencing technical improvement. Their Score, which is located in the last column of the report, will range from +1 to +4. You want to concentrate on the stocks that have a Score of +3 or +4 since the odds are that the opinion will be upgraded to Long over the near term and defensive action is warranted.

Tom Ventresca will be available to take your questions until Monday, February 6. Please use the form below to submit your questions.

 
 
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