1

December 12, 2012

Introducing the ConnorsRSI®

1

Disclaimer: The Connors Group, Inc. ("Company") is not an investment advisory service, nor a registered investment advisor or broker-dealer and does not purport to tell or suggest which securities customers should buy or sell for themselves. The analysts and employees or affiliates of Company may hold positions in the stocks or industries discussed here. You understand and acknowledge that there is a very high degree of risk involved in trading securities. The Company, the authors, the publisher, and all affiliates of Company assume no responsibility or liability for your trading and investment results. Factual statements on the Company's website, or in its publications, are made as of the date stated and are subject to change without notice. It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results of any individual trader or trading system published by Company are not indicative of future returns by that trader or system, and are not indicative of future returns which be realized by you. In addition, the indicators, strategies, columns, articles and all other features of Company's products (collectively, the "Information") are provided for informational and educational purposes only and should not be construed as investment advice. Examples presented on Company's website are for educational purposes only. Such set-ups are not solicitations of any order to buy or sell. Accordingly, you should not rely solely on the Information in making any investment. Rather, you should use the Information only as a starting point for doing additional independent research in order to allow you to form your own opinion regarding investments. You should always check with your licensed financial advisor and tax advisor to determine the suitability of any investment. HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING AND MAY NOT BE IMPACTED BY BROKERAGE AND OTHERSLIPPAGE FEES. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. The Connors Group, Inc. 10 Exchange Place, Ste 1800 Jersey City, NJ 07302 Copyright © The Connors Group, Inc., 2012.

2

Welcome!

3

Meet Our Speakers

4

Larry Connors

5

Mr. Connors is the Chairman, Chief Executive Officer and co-founder of The Connors Group. He has over 30 years of direct experience in the financial markets industry. Mr. Connors is widely regarded as one of the leading professionals in the trading industry. He has authored top-selling books on market strategies and volatility trading, including How Markets Really Work and Street Smarts (with Linda Raschke). Street Smarts was selected by Technical Analysis of Stocks and Commodities magazine as one of “The Classics” for trading books written in the 20th century. Mr. Connors has been featured and quoted in the Wall Street Journal, New York Times, Barron's, Bloomberg TV & Radio, Bloomberg Magazine, Dow Jones Newswire, Yahoo Finance, E-Trade Financial Daily, Futures Magazine, Technical Analysis of Stocks and Commodities, and many others.

Cesar Alvarez

6

Cesar Alvarez is the Director of Research for Connors Research. He leads a team of quantitative researchers to create day trading and short-term trading stock methods and data that are used by hedge funds, private traders and the trading public. Mr. Alvarez has co-authored three books on short-term trading including Short-term Trading Strategies That Work, High Probability ETF Trading, and How Markets Really Work Second Edition. Prior to joining Connors Research, he was involved in a various roles in the technology industry. From 1990-1997, Mr. Alvarez was a Design Engineer for Microsoft with primary responsibilities with Excel where he eventually went on to lead one of their teams.

ConnorsRSI®

7

Introducing ConnorsRSI

• ConnorsRSI is a new composite indicator consisting of three components.

• Like the familiar Relative Strength Index (RSI) developed by Welles Wilder in the 1970’s, ConnorsRSI is a momentum oscillator, i.e. an indicator that fluctuates between 0 and 100 to indicate the level to which a security is overbought (high values) or oversold (low values).

8

Wilder’s RSI

• RSI is typically applied to the (closing) prices of a stock or other security over some look-back period. Wilder himself believed that 14 periods was the ideal look-back.

• Our previous research has shown that using shorter look-back periods makes RSI more effective in predicting short-term price movements.

9

Components of ConnorsRSI

• Two of the three ConnorsRSI components utilize the RSI formula.

• The first component is a 3-period RSI of the closing prices. This is what we might consider a “standard” use of RSI.

10

Components of ConnorsRSI

• The second component is a 2-period RSI of the length of the current up streak or down streak.

• The math will be explained later, but basically the longer a stock is moving upward, the more its ConnorsRSI value is amplified. Conversely, a longer down trend will dampen the ConnorsRSI value.

11

Components of ConnorsRSI

• The final component of ConnorsRSI considers how the most recent price change compares to historical changes for the stock by ranking it against the 100 previous price changes.

• Price changes are measured on a percentage basis.

• Large negative price changes will have rankings closer to zero, while large positive price changes will have rankings closer to 100.

12

Putting It All Together

• ConnorsRSI combines three factors that our research has repeatedly shown have significant predictive ability: – Price Momentum – Duration of Up/Down Trend – Relative Magnitude of Price Change

13

Putting It All Together

• By combining all three components into a single indicator, we allow a “majority rule” approach that would not be possible if considering the three components individually.

• For example, sufficiently high scores on the Price Momentum and Relative Magnitude components might be enough to overcome a more average score in the Trend Duration component.

14

ConnorsRSI Formula

ConnorsRSI(3,2,100) = ( RSIa(Close,3) + RSIa(UpDownStreak, 2) + PercentRank(ROC1, 100) ) /3

15

RSIa(Close, 3)

• This is the 3 period RSI of closes • AFL: RSI(3)

16

RSIa(UpDownStreak, 2)

• First we need to compute the UpDown streak • UpStreak = Number of days in row that stock

has had Close Today > Close Yesterday. Closes down or the same have value of zero.

• DownStreak = Number of days in row that stock has had Close Today < Close Yesterday. Closes up or the same have value of zero.

17

RSIa(UpDownStreak, 2)

UpDownStreak = If UpStreak greater than zero, then UpStreak value Else If DownStreak greater than zero, then negative of DownStreak value Else Zero

18

RSIa(UpDownStreak, 2)

• The result will be an array of positive and negative numbers, with each element representing one price bar (day).

• Positive numbers indicate the numbers of days in a row the stock has closed up.

• Negative numbers are the number of days in a row the stock has closed down.

• Zero means the stock closed unchanged from the previous close.

• Now take the 2 period RSI of the UpDown array

19

RSIa(UpDown, 2) Ticker Date/Time Close UpDays DownDays UpDownDays RSI(UpDown,2)

SP-500 1/3/2012 1277.06 1 0 1 59.94

SP-500 1/4/2012 1277.30 2 0 2 72.49

SP-500 1/5/2012 1281.06 3 0 3 83.09

SP-500 1/6/2012 1277.81 0 1 -1 20.36

SP-500 1/9/2012 1280.70 1 0 1 54.62

SP-500 1/10/2012 1292.08 2 0 2 68.27

SP-500 1/11/2012 1292.48 3 0 3 80.19

SP-500 1/12/2012 1295.50 4 0 4 88.69

SP-500 1/13/2012 1289.09 0 1 -1 16.77

SP-500 1/17/2012 1293.67 1 0 1 49.52

SP-500 1/18/2012 1308.04 2 0 2 63.77

SP-500 1/19/2012 1314.50 3 0 3 76.85

SP-500 1/20/2012 1315.38 4 0 4 86.55

SP-500 1/23/2012 1316.00 5 0 5 92.69

SP-500 1/24/2012 1314.65 0 1 -1 14.32

SP-500 1/25/2012 1326.06 1 0 1 45.21

SP-500 1/26/2012 1318.43 0 1 -1 26.27

SP-500 1/27/2012 1316.33 0 2 -2 18.51

SP-500 1/30/2012 1313.01 0 3 -3 11.64

SP-500 1/31/2012 1312.41 0 4 -4 6.68 20

RSIa(UpDown, 2) AFL: UpArray = BarsSince(C <= Ref(C,-1)); DownArray= BarsSince(C >= Ref(C,-1)); UpDown= IIf(UpArray > 0, UpArray , DownArray > 0, - DownArray, 0)); RSIa(UpDown, 2);

21

PercentRank(ROC1, 100)

• PercentRank, also known as Percentile, tells us how a specific value compares to other values in a set. In this case, we want to compare the one-day return to the previous 100 one-day returns. We use ROC1 to represent the one-day return values.

• A value of 100 indicates that the current ROC1 is the highest for the given 100 day lookback while a value of 0 indicates that the current value is the lowest for the given 100 day lookback.

22

PercentRank(ROC1, 100)

• To calculate Percent Rank, count the number of times that today’s ROC1 is higher than or equal to each of the previous 100 ROC1 values.

• Divide this number by the lookback period, 100 in this case.

• Multiply by 100 to get a Percent Rank between 0 and 100

23

Example: PercentRank(ROC1, 10) on1/24/2012

Ticker Date/Time Close ROC1 PR(10)

SP-500 1/3/2012 1277.06 1.55 90

SP-500 1/4/2012 1277.30 0.02 40

SP-500 1/5/2012 1281.06 0.29 50

SP-500 1/6/2012 1277.81 -0.25 20

SP-500 1/9/2012 1280.70 0.23 50

SP-500 1/10/2012 1292.08 0.89 70

SP-500 1/11/2012 1292.48 0.03 50

SP-500 1/12/2012 1295.50 0.23 60

SP-500 1/13/2012 1289.09 -0.49 0

SP-500 1/17/2012 1293.67 0.36 80

SP-500 1/18/2012 1308.04 1.11 90

SP-500 1/19/2012 1314.50 0.49 80

SP-500 1/20/2012 1315.38 0.07 30

SP-500 1/23/2012 1316.00 0.05 30

SP-500 1/24/2012 1314.65 -0.10 10

24

Example: PercentRank(ROC1, 10) on 1/25/2012

Ticker Date/Time Close ROC1 PR(10)

SP-500 1/3/2012 1277.06 1.55 90

SP-500 1/4/2012 1277.30 0.02 40

SP-500 1/5/2012 1281.06 0.29 50

SP-500 1/6/2012 1277.81 -0.25 20

SP-500 1/9/2012 1280.70 0.23 50

SP-500 1/10/2012 1292.08 0.89 70

SP-500 1/11/2012 1292.48 0.03 50

SP-500 1/12/2012 1295.50 0.23 60

SP-500 1/13/2012 1289.09 -0.49 0

SP-500 1/17/2012 1293.67 0.36 80

SP-500 1/18/2012 1308.04 1.11 90

SP-500 1/19/2012 1314.50 0.49 80

SP-500 1/20/2012 1315.38 0.07 30

SP-500 1/23/2012 1316.00 0.05 30

SP-500 1/24/2012 1314.65 -0.10 10

SP-500 1/25/2012 1326.06 0.87 80

25

PercentRank(ROC1, 100)

• AFL: PercentRank(ROC(C,1), 100)

26

ConnorsRSI AFL Put this code in the top of your AFL file. function ConnorsRSI(lenRSI, lenUD, lenROC) { upDays = BarsSince(C <= Ref(C,-1)); downDays = BarsSince(C >= Ref(C,-1)); updownDays = IIf(upDays > 0, upDays, IIf(downDays > 0, -downDays, 0)); crsi = ( PercentRank(ROC(C,1), lenROC) + RSIa(updownDays,lenUD) + RSI(lenRSI))/3; return crsi; } Buy = ConnorsRSI(3,2,100) < 20; 27

ConnorsRSI AmiBroker Charting

• Copy the provided ConnorsRSI.afl file to: C:\Program Files\AmiBroker\Formulas\Custom

• In AmiBroker, under Charts/Custom, you will find the ConnorsRSI indicator

• You can now use this indicator on a chart like you do with other indicators

28

Created with AmiBroker - adv anced charting and technical analy sis sof tware. http://www.amibroker.com

1,280.0

1,320.0

1,360.0

1,400.0

1,440.0

1,480.0

May Jul August September October

SP-500 - Daily 10/10/2012 Open 1441.48, Hi 1442.52, Lo 1430.64, Close 1432.56 (-0.6%) MA1(Close,200) = 1,367.72

1,432.56

1,367.72

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0 SP-500 - ConnorsRSI(3,2,100) = 12.10

12.0967

ConnorsRSI AmiBroker Charting

29

ConnorsRSI Results

30

ConnorsRSI Base Performance

31

ConnorsRSI(3,2,100) Bucket 5-Day Return

0 2.28% 5 1.18%

10 0.56% 15 0.41% 20 0.31% 25 0.20% 30 0.23% 35 0.20% 40 0.14% 45 0.13% 50 0.28% 55 0.32% 60 0.21% 65 0.18% 70 0.08% 75 0.02% 80 0.04% 85 -0.14% 90 -0.46% 95 -1.42%

ConnorsRSI Base Performance

32

-2.00%

-1.50%

-1.00%

-0.50%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95

5 Day Return of Stocks with a ConnorsRSI(3,2,100) Value of X

ConnorsRSI Pullbacks Strategy

33

ConnorsRSI Pullbacks Strategy Rules

34

Here are the entry rules for the ConnorsRSI Pullback Strategy:

1. The stock price must be above $5 per share.

2. The stock’s average daily volume over the past 21 days (one trading month) must be at least 250,000 shares per day.

3. The stock’s 10-day Average Directional Index (ADX) is above 30.

4. Today the stock’s lowest price is at least W% (W = 2, 4, 6, or 8) below the previous day’s close.

ConnorsRSI Pullbacks Strategy Rules

35

Here are the entry rules for the ConnorsRSI Pullback Strategy (cont.):

5. Today’s close is in the bottom X% (X = 10 or 25) of the day’s range.

6. The ConnorsRSI(3,2,100) value of the stock is below Y, where Y = 5, 6, 7… 15.

7. If the above rules are met today, buy the stock tomorrow on a further intraday limit Z% below today’s closing price (Z = 4, 6, 8, 10).

8. Exit the position when the stock closes with a ConnorsRSI(3,2,100) value above N (N = 50, 60 70 or 80), exiting at the closing price.

ConnorsRSI Pullbacks Strategy Exit Test Results

36

ConnorsRSI Pullbacks Strategy Top 20 Variations Based on Avg % P/L

# Trades Avg

% P/L

Avg Days Held Win %

Sell Off %

Closing Range

Connors RSI Entry

Entry Limit Exit Method

472 14.97 7.03 78.81 8 10 5 10 CRSI(3,2,100) > 80 557 14.70 7.16 78.64 8 10 6 10 CRSI(3,2,100) > 80 628 14.66 7.21 78.66 8 10 7 10 CRSI(3,2,100) > 80 706 14.63 7.34 78.33 8 10 8 10 CRSI(3,2,100) > 80 796 14.04 7.41 77.39 8 10 9 10 CRSI(3,2,100) > 80 588 13.87 7.01 78.40 6 10 5 10 CRSI(3,2,100) > 80 869 13.76 7.50 77.33 8 10 10 10 CRSI(3,2,100) > 80 473 13.72 3.21 79.70 8 10 5 10 CRSI(3,2,100) > 70 870 13.72 7.29 77.47 8 25 6 10 CRSI(3,2,100) > 80 473 13.64 2.14 80.55 8 10 5 10 CRSI(3,2,100) > 60 697 13.61 7.11 78.48 6 10 6 10 CRSI(3,2,100) > 80 999 13.56 7.45 76.88 8 25 7 10 CRSI(3,2,100) > 80 734 13.51 7.34 76.57 8 25 5 10 CRSI(3,2,100) > 80 558 13.47 3.23 79.75 8 10 6 10 CRSI(3,2,100) > 70 786 13.47 7.21 78.37 6 10 7 10 CRSI(3,2,100) > 80 655 13.40 7.06 78.17 4 10 5 10 CRSI(3,2,100) > 80 668 13.34 7.08 78.29 2 10 5 10 CRSI(3,2,100) > 80

1120 13.32 7.58 76.70 8 25 8 10 CRSI(3,2,100) > 80 473 13.29 1.84 80.34 8 10 5 10 CRSI(3,2,100) > 50 883 13.19 7.33 77.35 6 10 8 10 CRSI(3,2,100) > 80

Download a Complementary Copy of

“An Introduction to

ConnorsRSI®” Guidebook Report Here:

http://trd.mk/1M

38

Thank You!

39

Disclaimer: Connors Research, LLC ("Company") is not an investment advisory service, nor a registered investment advisor or broker-dealer and does not purport to tell or suggest which securities customers should buy or sell for themselves. The analysts and employees or affiliates of Company may hold positions in the stocks or industries discussed here. You understand and acknowledge that there is a very high degree of risk involved in trading securities. The Company, the authors, the publisher, and all affiliates of Company assume no responsibility or liability for your trading and investment results. Factual statements on the Company's website, or in its publications, are made as of the date stated and are subject to change without notice. It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results of any individual trader or trading system published by Company are not indicative of future returns by that trader or system, and are not indicative of future returns which be realized by you. In addition, the indicators, strategies, columns, articles and all other features of Company's products (collectively, the "Information") are provided for informational and educational purposes only and should not be construed as investment advice. Examples presented on Company's website are for educational purposes only. Such set-ups are not solicitations of any order to buy or sell. Accordingly, you should not rely solely on the Information in making any investment. Rather, you should use the Information only as a starting point for doing additional independent research in order to allow you to form your own opinion regarding investments. You should always check with your licensed financial advisor and tax advisor to determine the suitability of any investment. HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING AND MAY NOT BE IMPACTED BY BROKERAGE AND OTHERSLIPPAGE FEES. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. Connors Research, LLC 10 Exchange Place, Ste 1800 Jersey City, NJ 07302 Copyright © The Connors Group, Inc., 2012.

40