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 ------------------------------------------------------- Up Cycle ------------------------------------------------------- The following chart contains the selections published for the week of April 5, 2002. We will use UNTD to illustrate a conservative and aggressive placement of orders with a broker.   UNTD - United Online, Inc. Created in 2001 by the merger of leading US Internet service providers NetZero and Juno Online Services. United Online business model offers free Internet service with hopes of converting the free users into paying customers. Free users are bombarded with advertisements with reminders to cut down on the advertisements simply convert to a paying customer. With the combined subscriber bases of the two companies, United Online has 5.6 million active users, with nearly 1.5 million paid subscribers, under the Juno and NetZero brands. The company offers market research through its CyberTarget Division. The executive team from NetZero, whose shareholders received 63% of the new company, manages United Online; Juno Online stakeholders received 37% of United Online's stock. The UNTD chart from StockCharts.com depicts the last three months price movements. UNTD has been moving through a 26.4 days range bound cycle. For approximately 13.1 days UNTD goes up 72% in price. This up cycle is followed by a down cycle lasting on average 13.4 days going down 33.6% in price. The April 5 Weekly Picks chart shows UNTD currently at $9.03 with +13 days left in the up cycle and approximately $1.75 left in the average upside move. There are two methods that each investor may use to place orders for UNTD. They are:
Remember technical analysis is the study of past performance. There is not any guarantee that the +13 days or the $1.75 will repeat in the future. These are indicators that are used to select order types.  The conservative play assumes that there are many more forces at work in the market that affect prices. Knowing that technical analysis is not an exact science, the conservative play defines parameters to pull out a small profit by anticipating an upward move lasting something less than the average +13 days and something less than $1.75 up ward move. A stock chart only identifies a potential investment candidate. Technical analysis involves looking many indicators and computing the statistical average price moves of the stock during its range bound cycle. From the April 5 Weekly Picks Table you can calculate your risk, reward and breakeven for UNTD.  You are placing an order to buy 200 shares of UNTD at $9.03 or better for the day. If by 4:00 pm (est) the order has not executed it is cancelled automatically by your broker’s computer system. If the order does not execute you would not attempt to place this order the following day (Tuesday in this case). By not executing the price cycle has been broken, therefore we pass on this stock. Once the BUY LIMIT order executes (i.e., you can not place a Stop or Sell orders on stocks that you do not own) the conservative play is as follows: The +13 days remaining is an indication of how long you may expect to hold the stock before the price target is met. In the above example, a yield of $1.40 ($10.43 - $9.03) is realized. Keep in mind the definition of a Sell Limit order is the broker will sell at $10.43 or better! On April 11, 2002 UNTD opened at $9.87 and had a trading range during the day of $9.86 - $10.80. The Sell Limit Order 200 shares at $10.43 would have been triggered during the day. Depending on how quickly your broker executes the trade and how quickly someone on the trading floor buys your 200 shares determines the sell price. Therefore, the sell price would be somewhere between the open at $10.43 and the high for the day of $10.80. For a review of liquidity and volume click here. If you have time during the day, you can check prices and make adjustments to the SELL LIMIT order as needed. Good times to check prices are 30 minutes after the open, 10:30 am or 2:30 pm (all times are eastern standard time). For the novice investor an invaluable training aid involves tracking the stock prices daily. The Excel spreadsheet below is one example of how you can track prices at the end of each trading day. There are several sources to obtain daily prices. First your broker should have this functionality available to you at no cost. Second, a free source of good information can be found at Microsoft Money Deluxe Portfolio Manager or YAHOO Finance.   The aggressive play assumes the prices may breakout of the range bound pattern and continue moving up. The hypothesis of the stock market is to create a market place that allows companies to raise money by giving up ownership. Conventional money raised from sources such as family, friends and banks usually comes with terms and conditions. Examples of terms and conditions are:
The stock markets primary instinct is to go up in price. The theory is quite simple! Each quarter the company announces earnings, the investors are happy and the stock price moves higher. Sounds so simple! Just like buying low and selling high! Fundamentals form the cycles of low and high prices. Technical analysis allows us to identify those cycles. A stock may break out of its cycle for any number of reasons. Impact on price cycles can include more than changes in a companies fundamentals. Other impacts include political, legislation, announcement of a new product, or change in management are only a few examples. The point here is cycles can be broken for many reasons. With technical analysis we attempt to recognize price cycles that may break out to the upside or downside. Thereby continuing to make money. Initially the Stop Loss limits the loss we are willing to absorb if the stock price does not move in the direction expected. Once the stock starts to move up in price the Stop Loss becomes a play to lock in the profits being accumulated. In the Aggressive play we keep adjusting the Stop Loss as the stock price moves higher. Eventually the price will go down and the Stop Loss will be triggered. As in all trades, the first action is to compute our investment, break even, potential loss and potential profit.  You are placing an order to buy 200 shares of UNTD at $9.03 or better for the day. If by 4:00 pm (est) the order has not executed it is cancelled automatically by your broker’s computer system. For those new to investing, if the order does not execute you would not attempt to place this order the following day (Tuesday in this case). By not executing the price cycle has been broken, therefore we pass on this stock. Once you are more familiar with reading stochastics and other indicators you can keep this order open through Thrusday of the current week. DO NOT CHASE THE PRICE. Once the BUY LIMIT order executes (i.e., you can not place a Stop or Sell orders on stocks that you do not own) the Aggressive play is as follows: SELL LIMIT 200 shares UNTD $12.53 Good Till Cancelled Remember, the Buy Trigger is the price to enter in your order. You would compute the Stop Loss by multiplying your actual purchase price by .97. There are times during the day when the stock price gaps up by $3.50 or more. Such an action could mean the cycle is changing. If your broker allows conditional trades it is a good idea to also issue a Sell Limit order adding $3.50 to your actual buy price. The +13 days remaining is an indication of how long you may expect to hold the stock before the price target is met. If you have time during the day, you can check prices and make adjustments to the SELL LIMIT order as needed. Good times to check prices are 30 minutes after the open, 10:30 am or 2:30 pm (all times are eastern standard time). If you can not check during the day, then each night check the price of the stock. As the stock price moves upwards you would compute a new Stop Loss by multiplying the close price by .97 and Sell Limit by adding $3.50 to the close price. Notice on the whentobuy.com Buy Worksheet below on 4-13-2002 UNTD closed at $11.49 with a Stop Loss of $11.15. On 4-14-2002 UNTD reversed its upward momentum. The Stop Loss of $11.15 would have been triggered for a gain of $2.12 ($11.15 - $9.03 = $2.12). The Aggressive Play produced $.37 more than the expected $1.75. For the novice investor an invaluable training aid involves tracking the stock prices daily. The Excel spreadsheet below is one example of how you can track prices at the end of each trading day. There are several sources to obtain daily prices. First your broker should have this functionality available to you at no cost. Second, a free source of good information can be found at Microsoft Money Deluxe Portfolio Manager or YAHOO Finance.    Back | Up Cycle | Down Cycle | | Weekly Research | My Playbook | | Order Now | Return Home | Home Business | Digital Economy | Sign In | Disclaimer | Training Center | FAQ | What's New | Contact Us | |
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