Cabot Investors Conference 2013 Chart School! Mike Cintolo VP of Investments and Chief Analyst Cabot...

Cabot Investors Conference 2013 www.cabot.net

Chart School!

Mike CintoloVP of Investments and Chief

Analyst Cabot Market Letter, Cabot Top

Ten [email protected]


Primer

• Stream of Consciousness• Looking for Familiar Faces• “Seven-in-10 Rule” • Supply & Demand is the Aim


Daily Chart: More detail, less perspective

50-day moving average (thick black)

200-day moving average (thick green)

Stock’s daily movement

Stock’s daily volume

25-day moving average (thin black)

Chart is nine to eleven months


Weekly Chart: Greater perspective, less detail

Stock’s weekly movement

Chart is three years

Stock’s weekly volume

40-week moving average (thick green)

10-week moving average (thick black)

Earnings line


Market Timing: Trends the Key

Nasdaq Summer/Fall 2008

• Big Moves are What Really Count!• Simple, common moving averages work best

Cabot Tides Sell


Support/Resistance: Nope


Secondary

Measures:

Defense vs.

Growth

XLP – Consumer Staples (Defense)

SOX – Semiconductors (Growth)


Watch the Big

Leaders

AAPL January 2008

FSLR January 2008Nasdaq January 2008


Characteristics of Sound Bases

• 20% to 35% Deep Usually Best• Bullish Volume Clues• Many Weeks Long• Tightness at Lows and Near the End• Smooth Pattern


Buying: Bases and Breakouts

Bases = Launching Pads

Best if formed during Market Corrections

New issue

Tight

Vol Dry Up

Lots of “tails”

Demand

6 weeks up

10-week

RP confirms

CROX first base fall 2006


Base-Within-A-Base

If Base > 40% deep, expect multi-week, tighter base at end Tighter, proper structure

(25%, 16 weeks)

55% from top to bottom


Volume Clues

Market in Correction, AAPL building a base

Support

Gap Up on Big Volume


Volume Clues

When buying a breakout, want OVERWHELMING volume – 200% or more vs. average

GMCR up 40% (!) on 9x Avg. Volume

Up 60% in four months


In Gear vs. the Indexes?

AMZN new highs ahead of market

S&P 500


In Gear vs. the Indexes?S&P 500 in obvious, clear downtrend

MYGN out of gear, fails after market gets going


Big Liquid Breakouts

STP is liquid, in good group, stages big breakout – I missed it!

Always respect big breakouts from liquid growth stocks!


Buying: Stocks in Uptrends

6+ weeks up in a row a sign of persistent accumulation

13 weeks up in a row right as bear market ends!

Another 13 weeks in a row!


Smooth Uptrends

Notice how EBAY’s uptrend is smooth and persistent

EBAY doubled from this point during next 18 months


Prepare for Shakeouts

Big reversal on huge volume

Just a blip!

Don’t freak out over one- or two-day wiggles

Bull retreats usually sharp, brief = scare you out


Prepare for Shakeouts

Bull retreats usually sharp, brief => scare you out


Tightness a Good Sign

TASR advances 300% in next four months!

Light volume

Tightens up


Quiet also a Good Sign

Notice small, tight weekly ranges and dry-up in volume. The eye has come off the stock!


Selling is the Hardest Part

• You’ll either be Too Early, or Too Late• No One Perfect Rule • When in Doubt, Trail your Stop• Decide Ahead of Time How to Handle


Moving Averages

50-day line is a simple, effective trailing stop ... but it’s not perfect

A couple of shakeouts but adheres to the 50-day for months


Moving Averages

Weekly chart with 10-week line works, too

Sell on decisive break of 10-week line


Moving Averages

With a big winner you can use 40-week line (200-day) to give stock more breathing room

Hold through big corrections b/c huge profit

Sell!


How Far From Last Base?

Running for 7 months

Breakout

No set time is “too long” but > 6 months without consolidation is long


Out of Trend on Upside

Above multi-month uptrendHarder to define but can

provide a heads-up to book partial profits


Volume Resistance

Cluster of big-volume selling creates resistance in intermediate-term


Earnings Gaps

8 times out of 10, a crushing earnings gap => lots of downside ahead

Falls another 95% over next year!


RP divergence + Huge Selling

RP fails to confirm twice, each time followed by big selling


Two/Three Gaps in a Row

Two or three gaps after upmove can, at times, put in short-term top

Three gaps in a row


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