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Ben
----- Original Message -----
From: "Herm" <WINs@xxxxxxxxxxxxx>
To: <profitok@xxxxxxxxxxxxx>
Sent: Monday, June 14, 2004 10:56 AM
Subject: WINs Investor Educational Updates - Mid-June 2004
> You are receiving this email newsletter because you signed up for the
> educational newsletter updates or downloaded files at
> http://www.coveredcallsWINs.com. This contact is being made to verify
member
> email addresses. If you wish to be removed, simply write REMOVE in the
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> area and email back to WINs@xxxxxxxxxxxxx
>
> Good Morning!
>
> In the last issue (May 2004) newsletter, I touched upon several topics
that I
> will follow-up on and finish this month. First, was June 2004 going to be
a
> bearish month for stocks? Second, what is the status of the DOW, UTIL, and
TRAN
> indicators relative to their 39-week moving average? Finally, my brief
mention
> of the Bullish Percent Index otherwise known as the BPI. You will enjoy
this
> information and application. I just really learned about the BPI index
(that is
> how to really effectively apply it). You will see that my three topics
above do
> relate and make sense.
>
> ---------------------------------------------------
> STATUS OF THE DJIA, UTIL, and TRAN 39-week SMA?
> ---------------------------------------------------
>
> For the past 15-years, I have used and watched a very simple market
indicator
> tool to invest in mutual funds based on the three major DOW components
DJIA,
> UTIL, and TRAN. The indicators work fine for mutual funds. But, I needed
> something more specific for broad moves of stocks so that I could better
> exploit weekly option or monthly call writing opportunities by just
reading the
> charts.
>
> In summary, when ALL THREE (DJIA, UTIL, and TRAN) indexes are ABOVE their
> 39-week simple moving average, the stock market trend is bullish. Writing
> covered calls and LEAP call spreads, or buying call index options the like
DIA
> and QQQs would most likely be profitable.
>
> When ALL THREE are BELOW and remain below their 39-week simple moving
average,
> the stock market trend is bearish. Shorting stocks or indexes, writing
LEAPs
> put spreads, and buying QQQ or DIA puts would most likely be profitable.
>
> Remember, all three indexes must REMAIN above or below their respective
> 39-weeks moving average to spook enough the markets to result in the
beginning
> of a MAJOR bull or bear market. That is what determines what will be the
> trigger to the starter pistol.
>
> We came very close in May 2004 last month when those three indexes did
fall
> below 39-week BRIEFLY for a few days. All three indexes are now ABOVE
their
> 39-week moving average from the recent run up. Miraculously, each of the
major
> indexes retraced from four consecutive weekly declines, falling to 2004
lows,
> as investors seemed unwilling to buy equity stocks before a consensus
emerged
> on what the Federal Reserve was going to do with interest rates at its
next
> meeting at the end of June 2004.
>
> I pondered for a long time, what else is out there that could better serve
as a
> technical indicator for the major market trends that could help with
writing
> covered calls, LEAPs spreads, or plain options trading? Also, I wanted a
way to
> really know when to hedge for protection and pound out mega profits using
PUTs.
> You can make a fortune in a very short time of a few days to one or two
weeks
> if you know when to purchase PUTs.
>
> Sure, I have developed trading instincts complimented with the use of sure
fire
> investor technology. For example, on the recent Sunday that the
announcement
> came about the death of former President Ronald Reagan, that early Monday
> morning I knew from reviewing the futures that Monday was going to be a
strong
> killer up day. Sure enough, by the late afternoon run-up, I was writing
> expensive ATM JUN04 DIA, QQQ and SMH call LEAPs spreads. After the recent
> recover off the bottom, the markets were close
> to the overhead resistance price level. By late Tuesday, after the Alan
> Greenspan negative comments about interest rates, I was closely looking at
my
> real-time data QuoteTracker software (www.quotetracker.com) for the
perfect
> covering opportunity which came two days later. Example, I collected $1.25
for
> QQQs ATM calls, and I get to buy to close at $.80 cent for a whopping .45
cent
> profit (6.25% ROI) based on what I originally paid for my JAN05 QQQ LEAPs.
> Sure, I plot and chart the QQQ, DIA, and SMH.
> Additionally, what really helped my investment decision was the BPI
breadth
> indicator as well.
>
> ---------------------------------------------------
> INTRODUCTON TO THE BULLISH PERCENT INDEX (BPI)
> ---------------------------------------------------
>
> Like I said last month, essentially, what I have discovered is that the
BPIs
> breadth technical charts are particularly useful to all astute investors
> because they highlight subtle and minor price trends within a major index
that
> are not readily apparent from stock headline numbers.
>
> If a stock (or index like the QQQ, DIA, or SMH) price is stalled and
trading
> sideways, but its BPI is increasing, it can be a healthy technical sign
that
> the rally is continuing (bullish) and that index is due to increase
higher. But
> if a stock is stalled and its BPI is falling, it can be an early warning
sign
> of an impending trend (bearish) change to bear mode again.
>
> The BPIs can highlight falling stock prices of index components underneath
the
> surface before the headline index number itself begins to fall in earnest,
> extremely valuable data to have! If a stock technical foundation is
crumbling,
> a fall in its headline number can't be too far behind. To the trained eye,
you
> can easily read that information in the chart which I will discuss. Now,
> I'm not going into the nerd details of how the BPI is derived and the "how
it
> works" background. Let me point out that you could use the BPI to read the
> chart and invest to reach your investment goal. Be it, bullish or bearish.
You
> could also use the BPI to play the reversal timing game. You know, buy low
and
> sell high. Sell high and buy low. Both will make you money.
>
> ---------------------------------------------------
> THE NYSE BULLISH PERCENT INDEX (BPI)
> ---------------------------------------------------
>
> The Bullish Percent Index (BPI) is a popular market breadth indicator that
is
> calculated by dividing the number of equity stocks in a given group (an
> exchange, an industry, etc.) that are currently trading with Point and
Figure
> buy signals, by the total number of stocks in that group. Bullish Percent
> levels that are above 70% are considered overbrought, whereas levels below
30%
> are considered oversold. Strong buy signals occur when the Bullish Percent
> Index falls below 30% and then reverses up by at least 6%. Conversely,
> promising sell signals occur when it goes above 70%, and then reverses
down by
> at least 6%. Therefore, investors can use the BMI to stage such investment
> objectives like option trades, LEAPs spreads, and even covered calls. It
is
> important to note that the Bullish Percent Index is not something that can
be
> applied to a single stock but rather an index that is calculated for a
group of
> equity stocks. Remember the phrase, "all ships rise in a rising tide."
Well,
> the equity stocks listed in the NASDAQ-100 which has a BMI itself might
shed
> some early warnings about which direction the group is heading. Therefore,
you
> pick a stock that just reached the bottom and wait for the group to
perhaps
> help rise the price of the stock.
>
> The most popular version of this chart is the NYSE Bullish Percent
($BPNYA)
> which is mentioned prominently in Thomas Dorsey's book, Point & Figure
Charting
> however it is important to remember that the Bullish Percent index can be
> calculated for any grouping of stocks. You can view a chart I plotted at:
>
http://stockcharts.com/def/servlet/SC.web?c=$BPnya,uu[w,a]dallynay[dd][pb11!a!f]
> [iut!Lp12,3,3!Lb8]&pref=G
>
> I personally have decided to trade the QQQ, DIA, and SMH indexes using the
BMI.
> Example, if I want to play the QQQs I can use the $BMCOMPQ (NASDAQ) and
$BPNDX
> (NASDAQ-100)to gauge when to buy/sell QQQ calls, QQQ puts, or sell QQQ
LEAPs
> spreads. For the DIA which tracks the DOW, I use $BPINDU (DOW INDUSTRIALS)
or
> $BPNYA (NYSE) which is the best known and followed BMI. The DOW BMI is
choppy
> looking because there are only 30 stocks to follow in that BMI. You get a
much
> smoother picture with the others.
>
> Because the NYSE's Bullish Percent Index is so closely followed, each day
they
> also publish the list of NYSE stocks with P&F buy signals as well as the
list
> of all stocks in the current NYSE "universe." Those lists can be found on
our
> NYSE BPI Components page at http://www.stockcharts.com.
>
> Traditionally, the Bullish Percent indicator is charted on a Point and
Figure
> chart using a 2 point box size. However, the indicator can also be charted
and
> studied using standard technical charts as well. I use the 10 or 11 SMA,
> Full-STO set to 12,3,3 and the RSI set to 5 to 8 days. I'm putting the
> finishing touches on the entire BMI study (give or take) for my
subscribers
> in the next two weeks.
>
> ---------------------------------------------------
> THE CURRENT LIST OF BULLISH PERCENT CHARTS
> ---------------------------------------------------
>
> Current Bullish Percent charts are listed below. Note! Some of the listed
URLs
> may get truncated because of the limited length of a line for our
newsletter.
>
> NYSE ($BPNYA)
>
http://stockcharts.com/def/servlet/SC.web?c=$BPNYA,uu[w,a]dallynay[dd][pb11!a!f]
> [iut!Lp12,3,3!Lb8]&pref=G
> Nasdaq ($BPCOMPQ)
>
http://stockcharts.com/def/servlet/SC.web?c=$BPCOMPQ,uu[w,a]dallynay[dd][pb11!a!
> f][iut!Lp12,3,3!Lb8]&pref=G
> Nasdaq 100 ($BPNDX)
>
http://stockcharts.com/def/servlet/SC.web?c=$BPNDX,uu[w,a]dallynay[dd][pb11!a!f]
> [iut!Lp12,3,3!Lb8]&pref=G
> Dow Industrials ($BPINDU)
>
http://stockcharts.com/def/servlet/SC.web?c=$BPINDU,uu[w,a]dallynay[dd][pb11!a!f
> ][iut!Lp12,3,3!Lb8]&pref=G
> S & P 500 ($BPSPX)
>
http://stockcharts.com/def/servlet/SC.web?c=$BPSPX,uu[w,a]dallynay[dd][pb11!a!f]
> [iut!Lp12,3,3!Lb8]&pref=G
> S & P 100 ($BPOEX)
>
> Toronto Stock Exchange ($BPTSE)
> S&P Consumer Discretionary Sector ($BPDISC)
> S&P Energy Sector ($BPENER)
> S&P Financial Sector ($BPFINA)
> S&P Healthcare Sector ($BPHEAL)
> S&P Industrial Sector ($BPINDY)
> S&P Information Technology Sector ($BPINFO)
> S&P Materials Sector ($BPMATE)
> S&P Consumer Staples Sector ($BPSTAP)
> S&P Telecom Services Sector ($BPTELE)
> S&P Utilities Sector ($BPUTIL)
> Dow Jones Transportation Sector ($BPTRAN)
>
> ----------------------------------------------
> TRADING IDEAS - NASDAQ COMPOSITE BMI: SPREADS
> ----------------------------------------------
>
> As of this writing, I notice in the technical charts that the QQQs are on
the
> rise and due for a small bout of profit taking. I want to confirm that QQQ
> overhead resistance is approaching. I look at the NASDAQ-100 BMI for more
clues
> of when that might occur.
>
> My plan is to do the following:
>
> Scenario #1. If the BMI drops below it's 11-day SMA and at the same time
the
> RSI drops and the STO drops I call either write an ATM QQQ July spreads or
buy
> QQQ July04 ATM PUTs to take advantage of the pull-back. If I sell the QQ
> spreads I could use the extra income to offset the price of the QQQ puts.
I
> call that my sideshows.
>
> Scenario #2. If the BMI continues to rise above it's 11-day SMA, I could
buy
> July04 ATM QQQ calls to gain some price appreciation.
>
> -----------------------
> EMAIL FROM THE READERS
> -----------------------
>
> Hello Rick,
>
> Before I forget, I have attached a sample of what that BB scan report now
looks
> like on the web site. Now, for your questions.
>
> >>>>>> I had a scenario I wanted to run past you. I have had some success
over
> the past few months finding good movers with
> >>>>>> the CANSLIM method. One of the tenants of smart trading is to have
a
> stop loss 8% below the stock price. If
> >>>>>> you are taking profits at 25% and your stop loss is 7% you can be
wrong
> 3 times for every one time you hit your >>>>
> >>>>>> profit goal. This seems very feasible if you are also buying the
best
> stocks, in the best industries. THEN IT
> >>>>>> OCCURED TO ME...WHAT IF I TURBOCHARGED AND MINIMIZED MY RISK THIS
> STRATEGY
> >>>>>> WITH WINS METHOD?
>
> Hummmm? Watch the investing math on the 7% losses of three times. For
example,
> $1,000 starting capital with a 25% ($+250) profit yields $1,250. If you
had
> just one 7% loss (-$70) would leave you with $930. Thus, to get a true 25%
gain
> off the original $1,000 you would then need to make $1,250 - $930 = +$320.
That
> $320 means you need to earn at least +34.41% ROI. In short, you have to
work
> harder to get that 25% true rate of return.
>
> >>>>>> What if instead of buying deep in the money calls I purchased at
the
> money leaps and sold far out of the money calls >>>>>> in these explosive
> stocks. THE GOAL WOULD BE THAT THE PREMIUM SOLD FROM THE SHORT TERM CALLS
COULD
> OFFSET
> >>>>>> AT LEAST PART OF AN 8% DROP AND YET STILL ALLOW ONE TO HIT A 25%
PROFIT
> TARGET (in the underlying stock) THEN YOU
> >>>>>> HAVE AN AWESOME AND POWERFULL SYSTEM!!!
>
> To summarize what you said, you buy the ATM LEAPs calls, wait for some
price
> appreciation, and then write OTM call spreads a few months out. If you
pick the
> right stocks or indexes you could make out. Mind you! You need to only
select
> stocks or indexes which are going up in price in order to make this work.
Once
> (if) the current price drops below your original LEAPs strike price, you
are
> starting to get into the pickle. Your rate of return is impacted and your
> written calls spreads will bring in less income.
>
> >>>>>> What are your thoughts on the best way to structure that position?
I
> know in the manual you talk about just buying
> >>>>>> the leap to increase the "nut" and then selling the calls. There is
also
> the strategy of selling only 70% of
> >>>>>> the short term calls. In addition to those 2 things is there
anything
> you would add to my logic?
>
> Correction! To DECREASE the "nut" by generating income. Good questions
Rick.
> It's good that you are thinking things out FIRST!
>
> ============================================================
> $79.95 BUCKS FOR 6-MONTHS AUTO-RENEWABLE WINs SUBSCRIPTION
> http://www.coveredcallswins.com/promo/index.html
> First 30-Day Money Back Refund If Not Happy!
> Weekly QQQ, DIA, and SMH Model LEAPs Portfolio Updates
> Witness How To Make +100% Plus Target Annual Returns!
> ============================================================
>
> A few more happy WINs investors. "Hi Herm, I've been checking out your
site and
> have been pretty impressed with what I've seen.
> You definitely are very knowledgeable with what you do and I am interested
in
> finding out if you are available to do one-on-one
> consulting. I would like to talk to you on the phone to discuss. Hope to
hear
> from you soon. Thanks, Al G."
>
> Rick S. wrote me asking for a way (or web site) to find stocks to buy puts
on
> using the Bollinger Bands as the technical indicator. After some thought,
we
> tweaked our scanning software to do just that. That is find stocks with
buy or
> sell recommendations based on the BBs. That is our another one of our
> subscriber WINs reports on our web site now.
> https://www13.secure-website.net/%7Ecovered/promo/ Rick's response after
beta
> testing the report, "You rock!! Thanks
> for your help. Rick S."
>
> The more profits for readers like you, the more happy customers for us.
You
> need to take action now and subscribe now! You are only going to get so
far by
> just reading the free stuff. One more quote from the list this month was
from
> George M. who wrote, "Hi Herm, Just wanted you know how much I appreciated
your
> detailed response to my request on the potential "S" trade. Many thanks
George
> M."
>
> ------------------------------------------------
> CLICK TO ORDER NOW...and Help Me Help You:
> http://www.coveredcallswins.com/promo/index.html
> ------------------------------------------------
>
> That's it for this month! Wishing you all the "best of good buys!" Visit
our
> web site: http://www.CoveredCallsWINs.com
>
> - Herm
> (Email: WINs@xxxxxxxxxxxxx )
>
> --------------------------------------------------------------------------
----
> ANY STATEMENTS OF FACT HEREIN CONTAINED ARE DERIVED FROM SOURCES BELIEVED
TOBE
> RELIABLE, BUT ARE NOT GUARANTEED AS TO ACCURACY, NOR DO THEY PURPORT TO BE
> COMPLETE. NO RESPONSIBILITY IS ASSUMED WITH RESPECT TO ANY SUCH STATEMENT,
NOR
> WITH RESPECT TO ANY EXPRESSION OF OPINION HEREIN CONTAINED. THE RISK OF
TRADING
> OPTIONS MAY BE SUBSTANTIAL. ONLY RISK CAPITAL SHOULD BE USED FOR SUCH
> INVESTMENTS.
>
> Copyright © 1998-2004 www.CoveredCallsWINs.com, LLC All Rights Reserved.
>
>
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