Investing in Education Analysis of the 1999 World Education Indicators
Rule #1 Investing Technical Indicators
Transcript of Rule #1 Investing Technical Indicators
Rule #1 InvestingTechnical Indicators
Technical Indicators
• 3 Arrows
• Floors and Ceilings (FACs)
• Trendlines
• Fibonacci Retracements
Technical Indicators
• Where financial statements are the language of investing, technical indicators are the language of trading
• Technical Indicators help us see patterns
3 Arrows
• Used for broad based Mutual Funds and ETFs– Not for investing in individual companies
• Helps us see big institutional dollars sneaking in or out – we can follow them
• Settings:– 10 period simple moving average (SMA)– MACD (8,17,9)– Slow Stochastics (14,5,0)
• 10 Year Monthly Chart
Testing the Arrows
• SPY – S&P 500 Index Exchange Traded Fund (ETF)
• Get in on 3 green arrows
• Get out on 3 red arrows
• Compare results using the arrows vs buy and hold
SPY Sep 2007 – Sep 2017
SPY Sep 2007 – Sep 2017
Arrows vs Buy and Hold
SPY PORTFOLIO
DATE $ BUY SHARES $ SELL $100,000
Jan-00 140 714
Sep-00 145 $103,571
Mar-02 112 925
Apr-02 110 $101,722
Apr-03 90 1,130
Apr-05 116 $131,108
Jul-05 121 1,084
Dec-07 146 $158,197
Jun-09 92 1,720
Aug-11 125 $214,941
Feb-12 134 1,604
Aug-15 203 $325,620
Jul-16 213 1,529
Sep-17 250 $382,183
IN NOW CAGR
ARROWS $100,000 $382,183 7.9%
HOLD $100,000 $178,571 3.3%
Trendlines – Helpful for our Trades
• Helps us see the patterns that are already there – like looking up in to the clouds and seeing a shape
• Nothing goes up or down in a straight line
• Trends:
– Trending Up – higher highs and higher lows
– Trending Down – lower highs and lower lows
– Channeling – moving sideways
Up Trend
Down Trend
Channeling
Floors and Ceilings (FACs)
• At least 2 points of contact
• Areas where we’re not surprised when the prices reverse – we expect it
• Very often Ceilings become Floors and Floors become ceilings
FACs
Fibonacci Retracements
• Fibonacci Spiral is found all through nature, art, architecture
• Shows up in Stock Charts too
• Can use Fibonacci Retracements to help us see FACs that may not be obvious at first glance
• Draw between a floor and a ceiling• Generally use a 6-9 month timeframe• Day Chart• Looking for a good fit
Fib Retracements