Hi everybody. Let s take a look at the stock market and these really big trades. These super long-term situations.

Transcription

1 Long-Term: Stocks Hi everybody. Let s take a look at the stock market and these really big trades. These super long-term situations. First of all we ve got Nashville 50 divergence. That is Knoxville divergence set to go back only 50 candles. That means you can essentially plot smaller divergence lines. So there s Nashville 50 divergence. It s bearish divergence. And we re also going to look at the monthly and the yearly pivots. The monthly are purple and the yearly is gold. There are a lot of missed monthly pivots as LinkedIn shoots for the moon here. Three monthly pivots in a row were missed on LinkedIn. That s pretty significant. Pretty crazy. Most of my trading with really big trades is going to be counter-trend, not trend trades. We can talk more about trend trades in the other video of course, but I want to start off by saying most of what I m going to do is going to be a counter-trend situation, just like you re seeing here. Because we ve been in a bull market in the technology sector we re going to focus on some sell trades right now because that s what we re going to see a lot of. There are going to be other examples of trades, but let s just move forward here and I ll show you a couple examples. LinkedIn was a darling of the tech industry and really, I would say, one of the strongest players. It had revenue before all of the other social networks. It was more business oriented from the beginning. It had a great founder and original CEO that had a lot of credibility on Wall Street and Silicon Valley. Just a good company overall. Still growing as well. But as LinkedIn creeped up in April of 2013, it printed Nashville divergence. And I m going to go out on a limb here and say the divergence trumps the missed pivots. The divergence is more important than the pivots. You could almost trade a really big trade without a missed pivot, but if you get the divergence you re going to get the pivots as well. The reason I want to take the focus off the pivots is that there could be in some cases none, and in other cases there could be so many you wouldn t know which one to choose for a profit target. In this case LinkedIn is rising and it s printing Nashville 50 divergence, and then we ve got a missed monthly pivot directly below, and another missed monthly pivot directly below that, and then the yearly pivot for the year What do we do there? Well, the first thing that we do is not worry so much about the target. Let s get a trend line in place once those divergences print. And that trend line is really easy to draw, right underneath the major movement that has happened and the major divergences. And we re going to sell LinkedIn if it breaks those levels. Now selling a stock like LinkedIn sounds like a completely maniacal thing to do, and you may not even want to do it, ever. I would recommend not doing that on the short-term charts, but if it s on a macro big-picture level, a really big trade level, I actually don t think it s much of a problem.

2 In this case you might use an options trade. You might buy a long-term put and see if that can expire worthless with a strike price that s far lower. You re only going to commit a small portion of your capital, and in this case that option is going to expire worthless. LinkedIn doesn t fall. LinkedIn drops from the time that you might enter the trade at $176 a share. It drops down to $160. Now that s a reasonably good drop. That s a 10% drop. And if you sold these shares outright short you would make some serious money there. That s wouldn t be a problem. I don t think you d have to worry about that. However, we re looking for more substantial moves on the really big trades. On these really long term trades. We re looking to at least get down to this monthly missed pivot and it didn t do it. This trade wouldn t close. If it were an option with a two month expiration window and a fairly close strike, you could buy the put with a strike that s pretty close and make some money on this. If you sold those shares short, you could begin to take profit, and buy back some of those shares, and close that out a bit. So you could make money on it. It s theoretically possible. It s not a giant loser. However, LinkedIn continues to rise. In late 2013 in September, we get another Nashville 50 divergence. That is super important. As soon as that Nashville 50 divergence prints, as soon as it s drawn, we re going to draw a trend line underneath those candles. And as soon as that trend line is broken we re going to sell LinkedIn. At this point we re then going to look at what we ve got for targets. We ve got two missed monthly pivots and we ve got the 2013 yearly pivot. I m going to encourage you to focus on the longer-term target. The big money. The big, big target. And I m going to walk you through one of the ways you might manage this trade. You re going to sell this short or you re going to buy a put. I don t know if you can buy a put that has a long enough expiration. I don t even know if you can do that. So let s just say you re going to sell LinkedIn short, sounds dangerous. It s a technology stock. You can always get out of the trade. I mean you can always close that thing out. There s going to be enough liquidity on this that you re probably going to be all right. You sell it at $240 a share. It rises up and retests the monthly pivot for the month of October I want you sell more of it here on a retest of that pivot. It rises up in November of 2013 at $230. I want you to see a little bit more at that level. And then it jumps up above that, and then it hits the December 2013 pivot and around that area I want you to sell a little bit more. You can just sell twice or once, or every time it retests a monthly pivot. It drops then in January of It drops to this missed monthly pivot from August of We ve now reached essentially a gain of $40 per share, or a 20% drop in this stock. That s pretty significant from the moment you got in it. If you added to the trade as it fell, you re doing quite well on this trade. We re approaching the 2014 pivot at $194. You might just want to get out of the whole trade at that level. You might, however, want to add to the trade in the January pivot when that s tested at, I don t know, wait for a daily candle to close, $227. Add another round here and watch this drop even further. We eventually do get down to the missed monthly pivot from July of We don t reach that level until March of the next year, long-term trade here. But by this point we ve dropped $60 on a $240 stock.

3 Correct me if my math is incorrect, but that s like a 25 30% drop. That s pretty significant. And it seems like we were on the way down to this missed yearly pivot, all the way at $100 a share. Now I don t know if LinkedIn is going to fall to $100 a share. But at this moment in time I think you could recognize that this methodology doesn t print very much divergence and it s pretty spectacular, and you ve got something to go on here. Whether you get out at the first missed monthly pivot or the second one, or you wait, you ve got a nice trade going on there. And now LinkedIn is recovering a bit, and I don t have much to say about it, other than there was money to be made. Maybe a tiny bit of money the first time, and more money the second time we got the divergence. All right, I m going to pause here and come back to another stock. Now we re looking at Exxon. I m sure it s a highly optionable stock, or at least I suspect that it is. I don t know that for sure, but I would guess that Exxon is an optionable financial instrument. We don t often talk about it. And we ve got a bullish Nashville 50 divergence in September of Now what we want to do next is draw a trend line across the tops of those candles. We want to buy a break through that trend line. It is accompanied by a bullish reversal tab, that s brilliant and awesome. And it s bouncing off of a yearly pivot. Not a requirement, but very nice. And it jumps upward pretty substantially. You can see here we pretty much have a missed monthly pivot from August of What a great target that is. If we buy it at $87 a share, it rises to $93 a share. Exxon Mobile is not known as a highly volatile stock. It s a $5 move over the course of a month. It s not a lot. It s 5% move. What I like about the idea here though is that you could leverage this a little bit more. You could say, all right, if I have a $10,000 account, so I have a $10 K account to work with, I m going to buy a call here, and I m going to go in a little bit heavier than I would ordinarily. Or you could say, I m going to commit all $10 K to that move, all $10,000 to that move. I m going to dedicate all of it, and that way if I make the gain I m going to make a substantial gain on that if it moves up. You might even use margin, which I don t necessarily care if you use or not. And then if it drops below the lows you can just close that trade out. Later on in December of 2013, even as early as November of 2013, we start to print some divergence. When we print that divergence we re going to draw a trend line underneath those candles. Let s say you draw the trend line there. I m going to draw this trend line and color it blue, so you can distinguish it from other lines on the chart. You could draw it there. Maybe even draw a really steep trend line here. You ve got a missed monthly pivot down here from November of Then you get another one in December of Let s say you sell it first at $94.40 a share and then let s say you sell it again at $99 a share. It drops and hits almost both of those monthly pivots. It drops down to $89. Drops almost 10%. If you ve traded it twice, you re going to make 4% on the first trade, 9% on the second trade. And you re going to have to sell Exxon Mobile to do that. I don t know if that s dangerous. You ve got to figure that

4 out for yourself, but there s money to be made there. And then Exxon s just been moving up ever since, and it s looking pretty non-divergent, so there s no new trade here. Let s move on, let s look at another one. Some stocks don t have a lot of volatility. Some stocks don t move very much. This is Kimberly-Clark. It s a consumer products company. And I wanted to look at it for a particular reason because sometimes, you know, we only look at super volatile stocks and we get really excited about those. But here is a bearish divergence in 2009, August of 2009 on Kimberly-Clark. Bearish divergence. Breaks a trend line. And let s say you sold Kimberly-Clark at $58 a share. It doesn t even drop more than a $1. If you re going to trade a consumer products company like Kimberly-Clark or something like that, you might look for a gain of 1%, 2% or something, even though they re from these super long-term charts. The power that you have is that these signals are going to be ultra-reliable. You re not going to get a lot of the signals, but they re going to be super reliable. We don t get another signal on Kimberly-Clark for, it s obviously a while. OK, here we are. Then we get into June of 2012 and we get some more signals here, and we draw some trend lines. So we draw a trend line underneath price here. It prints more divergence, so we maybe steepen the trend line that we ve drawn, and we get into a short trade on Kimberly Clark around $84 a share. We ve got multiple missed monthly pivots at this point and the 2012 yearly pivot. So I would encourage you to go for the bigger target, but see what you can get out of it. And as you ll see here, it plays around with us I guess. Drop a bit from there. Drop to that missed monthly pivot at $81. We got in where? $85, $84. Goes sideways and then it jumps upwards. So we had a ton of targets. We absolutely had the divergence that we were looking for. But once again, it s a lower volatility stock, and it s in a bullish trend, and we got to $81 a share. There s money to be made here, but you re looking at a stock that maybe doesn t move as far. Then in 2013 we get more divergence. Super steep trend line there. Maybe we enter a trade at $94 a share. Prints more divergence, but we don t break a trend line until $103 a share. So you re still only down like $10, that s not a lot to be down. You can ride that our pretty well. So you re in maybe at $94, $104, and then Kimberly Clark starts to drop, and it gets down to $95 a share, and it even goes as far as $92 a share. There s money to be made. And then of course it s going to pop upward again, and it s going to produce more bearish divergence, another Nashville 50 divergence. And it s going to drop pretty easily to that missed monthly pivot that s it s got on the screen. And then maybe it s going to go up from there. So every one of these stocks is going to have its own characteristics. It s going to have its own personality. It s going to have its own behaviors. And you re going to know that as you look at them over time. The consumer products companies really fascinate me.

5 Let s see, is Unilever tradable? Let s see here. I don t know which one of these I want to look at. UL or UN, I don t want to look at that. Yeah, I don t want to look at either one of those. That s not heavily traded enough. I thought that might be. All right, so I got it wrong. Procter and Gamble. I ve never looked at Procter and Gamble once in my life, but I m sure that there s money to be made randomly. Now we re in a bull market, so you re seeing a lot of these examples which are bullish trades, I mean bearish trades. Nashville 50 divergence, break of a trend line and a move down to a monthly pivot and almost all the way to this monthly pivot over here. But it s not going to be a substantial move. You re going to get into the trade at $78 and we re going to move down to $74. We re not talking about a giant move here. But any of these moves, there s money to be made in these, and I like that. Here s a Nashville 50 divergence back in And a move from, let s say we draw the trend line somewhere in this area. Maybe we ignore that, maybe we don t. Maybe we get in at $61 to $63 a share. We move not only to $65 a share in just a few days, but we move much, much higher than that. And then we print bearish divergence, and we go short, and we make a couple bucks in the opposite direction. I mean it can work for bullish and bearish trades. I don t know how far back I can go on Apple, but let s take a look at Apple. Apple s now been split, so everything looks a little bit different. We ve got two examples on Apple. Nashville 50 divergence back in 2012 in September. Draw a trend line here. Break that trend line; make it down to that pivot. Makes it a lot further than that, but just because it made it further doesn t mean we would have gotten all that much money. Then in 2013 in January we print bullish divergence. Let s draw a trend line over the tops of those candles. And we don t buy it necessarily until it reaches $63 a share. And then we move forward and see if that recovers at all. We re going to hold on to that. We re going to try to get up to maybe the yearly pivot. We re going to try to get up to a missed monthly pivot. Any of those is possible. You re going to be in that trade for a while. But Apple s the kind of, I think, the kind of trade that if you found bullish divergence on it, you would want to ride something like that for a long time, long time. And if you saw bearish divergence on it, you d be willing to hold on to it maybe for a shorter amount of time. That seems completely reasonable to me. So we ve looked at an oil company, consumer products company, we ve looked at technology companies. And I invite you; take a look at really big trades on some of your favorite stocks, or all stocks, or whatever. I don t even know what TKMR is. Tekmira Pharmaceuticals, does it work on pharmaceutical stocks? Here s a daily chart. We re looking back at Bearish divergence and a slight drop, not very far. We have bearish divergence here, but we don t break a trend line until, maybe all the way over here at $4.93 a share and we drop to the yearly pivot at $4.40 a share. That s reasonable. And then we print

6 bearish divergence on the daily charts. With some missed monthly pivots. I don t even know what this pharmaceutical company is. I don t know what it is, but it produces some gains here. Let s look at a more, let s look at Pfizer. Does it work on a pharmaceutical stock that s a little bit larger? I think it does. The larger the stock, the less volatile it s going to be. But for some of these trades it s probably a great idea. And there we have it, look at that, bearish Nashville 50 divergence. A break of this at $31 and a move down to $30, even a move all the way down to the yearly pivot at $29. That s a long trade to be in for a long time. And you re selling a stock, which can be more difficult. You can probably find some examples of bullishness somewhere in here. Probably find some bullish divergence if we go back far enough. I don t really know that for sure, I ve never looked at Pfizer in my life. There s bullish divergence back in 2008 in June. These are rare right? They don t happen very often, but look at this, super high probability, right? Tiny Nashville divergence, break of a trend line, a reversal tab. Get in at $17.50 a share and we rise to $20 a share, whatever it is, we get up to 20. That s a great gain. That s a super duper gain. There is no problem with that. I m going to pause here and see if I can come back and look at maybe an insurance company. All right, I jumped on to street.com and I pulled up an article for the 10 best insurance companies. And the article is apparently dead. A lot of people print that kind of stuff, that s stupid. So I just Googled 10 best insurance companies. Motley Fool, five days ago, Three High-Value Insurance Stocks Trading at Large Discounts. All right. Great. Reinsurance Group, RGA, AEG, and AEL. Let s just go with the first one, AEG, Netherlands based AEG. Let s take a look at that. So now we re in the financial products industry. AEG, I don t even know what this company does. Bearish Nashville divergence, a break of a trend line would happen right here, $9.10 a share. It does fall to $8.36 a share. I think pretty much anybody could make some cash off of that. We didn t quite make it down to the yearly pivot, but when we printed Nashville divergence before that in 2013 we broke a trend line and we did fall. I d like to see some buy trades here people. Hello. There we go. There we go. There s a buy trade back in 2011, September of We break above a trend line at $4.37 a share. We ve got a missed monthly pivot here and here. If we get in at $4.37 and we want to get out at this one, it might take us months and months and months, but we ll make $1 on a $4 stock. It s not a bad one. AEL was another one and RGA. Let s just take a look at RGA. I don t know what RGA is, but it prints some pretty nice trades here. There you go bullish Nashville divergence in May of An entry on a break of a trend line at $50, let s say $51, and we rise up to $58. No problem with that. No problem at all. Let s look at something like Morgan Stanley, MS, financial services. Now I don t know if Bank of America or Morgan Stanley is going to operate in the same way. Some of these financial companies. I don t know. Let s see. This is Missed monthly pivot, bearish divergence. Draw a trend line underneath those candles. Maybe an entry at $16. Maybe another entry on another break of a trend line right there at $ We drop as far as $ There is money to be made on shorting that.

7 I don t like a lot of short selling and I don t want to make this video into exclusively short selling stuff, so let s look at some buy trades. So as it s falling it prints some Nashville divergence. Let s say it prints that divergence, that s the worst trend line that anybody ever saw. So we got a break of the trend line in two places, one at $22.84, one at $21 and we rise up almost to $24. There s money there. You could get into this and then just get out at breakeven once it starts to reverse. You could do that. It eventually comes back though. You saw that it eventually sky rocketed. You could hold on to that for a while. I mean you re owning Morgan Stanley. That was probably a problem in the financial crises, probably not much of a problem now. Tired of looking at that one. Let s look at Berkshire Hathaway. Berkshire Hathaway A and B. Let s go A, that s the big one right. So would you sell Berkshire Hathaway, probably not, right? You probably wouldn t want to sell Berkshire Hathaway. You probably would want to stay long. It s divergent now. And I think you could probably say it broke a trend line, and it has a missed monthly pivot down below. If you ve got $180,000 per share to burn. OK, that was a dumb idea. Let s look at the B. That just was too much for me. There s some divergence, no real break of a trend line there. And there s a break of a trend line on a sell. You can make maybe $10 on that break. Maybe $3 on that break. So some stocks you re going to say, Well, I only want to buy those. So maybe on a stock like Berkshire Hathaway, or Goldman Sachs, or Apple you would only look for buy trades. There s a Nashville divergence at the bottom. Draw a trend line across the tops. You buy Berkshire Hathaway at $71 a share, and there s a missed monthly pivot right up there. Get out at $80 a share. Or because you want to hold on to it for a long time, you hold on to that stock for a very long time. I don t know if there s any stock that you can t apply this to. I don t know, I don t even know what s in the Dow Jones Industrial Index. I don t think 3M is in there anymore. I typed in the number 3M. 3M you could probably run this scheme, I m calling it a scheme now, you could probably run this scheme on 3M if you wanted. There s one stock I want to finish off with here that I ve been really looking forward to. But I wanted to just take a look at maybe something like 3M. I was going to look at a chemical company too. 3M doesn t look like it works very well. 3M seems to break trend lines and then not go very far in our favor. That seems like it s a dangerous one. So you re going to want to do your own research and make sure. But I wanted to look at Herbalife. Ackman, Pershing Square is going to make a gazillion dollars on Herbalife. Herbalife is eventually going to capitulate and just go nuts. Herbalife is eventually going to be completely worthless. You can see now that it s, I think Ackman is short at like $38 a share or something like that. And he s short a billion dollars worth of it. But it was recently bearish divergent, and if you weren t Pershing Square Capital wanting to blow this company up, you probably could have made a few bucks selling Herbalife and then getting out at 49.

8 I mean there weren t even any missed pivots here to target. Well maybe one all the way down here. That s probably where it s eventually going. He ll probably get out of the whole thing there and give up. I don t know. Here s another example, it was at $72 a share back in Bearish divergent, missed pivots, hit them all. Same back here in 2011, it broke down a bit. There s money to be made on trading, kind of, fly by night names, penny stocks and stuff like that. There s money to be made trading those and waiting for bearish divergence, and then trading the ever-loving heck out of those. But anyway I m Rob Booker and you ve been watching the Trifecta really big trade section, long-term trade on stocks.