* Buy => Mode turns bullish. Buy at next Open or put in a limit order to buy on weakness.
* Sell => Mode turns bearish. Sell at next Open.
* Weak Buy (wBuy) => Mode turns bullish, but MoM still points down. Weak Buy signal. Buy at next Open or put in a limit order to buy on weakness.
* Speculative Buy (spBuy) => Good potential for a short term bounce. Can be used with QuickTarget.
* Speculative Buy+ (spBuy+) => Good potential for a short and medium term bounce. Can be used with QuickTarget.
* Speculative Buy++ (spBuy++) => Very good potential for a short and medium term bounce. Can be used with QuickTarget.
* Partial profits (pP) => Good chance to take some money off the table. Can also be used for shorting with QuickTarget.
* Partial profits+ (pP+) => Very good chance to take some money off the table. Can also be used for shorting with QuickTarget.
* Add => Bullish continuation. Can add to long positions if you took partial profits earlier on.
* Add short (AddSh) => Bearish continuation. Can be used to add to short positions.
* Divergence Buy (dBuy) => Bullish divergence. MoM indicates increasing upside potential. Can be used as a speculative early Buy.
* Divergence Sell (dSell) => Bearish divergence. MoM indicates increasing downside potential. Probably a failing rally. Can be used to take some profits or exit early.
* Empty => no action. Hold if mode is bullish/green. Stay out (or short) if mode is bearish/red.
* Risk-averse investors and new users should focus on the standard buy and sell signals and avoid using speculative buys or short selling. This is a trend following method, which aims to participate in the bulk of a move with a minimum of risk. So we will not buy at the bottom and there will be some “give-back” at the end of a move. Once you start using the more advanced strategies it is still recommended to keep a good portion of your portfolio in this basic strategy.
* Speculative buying opportunities (spBuy, spBuy+ and spBuy++) offer the potential to purchase stocks shortly after a major low. When implementing this strategy, consider taking profits when the stock nears its daily reversal level and holding the rest for a possible breakout above the daily reversal level (which would become a standard buy signal). Note: struggling companies may not recover, so it is advisable to use this method only on ETFs or on stocks of financially stable companies.
* Short term swing trading can be done with all the spBuy signals, and the QuickTarget is then used as a limit sell price to take profits. This target can be reached within days, allowing you to earn a quick 2-5%.
The pP and pP+ signals can be used for swing trading on the short side, with the QuickTarget used as a limit buy price to take your profits. Additional information about this method is available as a strategy article for subscribers.
* Short selling for medium and longer term can be done using Sell, pP, pP+ and dSell signals.
Shorting is not for everybody and requires some experience. If you believe the market (or a specific stock) is overvalued and likely to decline, these signals can be used to initiate a short position. Profits (or losses) on short positions are best taken when the next regular buy signal appears. The spBuy and dBuy signals can also be used to take some quick early profits on short positions.
More detailed information and examples are available in the strategy articles for subscribers.
Note: QuickTargets are available for subscribers only.
The MoM indicator
The MoM indicator displays market momentum on a numeric scale ranging from +10 to -10, acting as a kind of market thermometer.
The following levels correspond to various market moods:
* +8 to +10: very optimistic – euphoric
* +5 to +8: optimistic
* +3 to +5 : positive
* -3 to +3: neutral
* -3 to -5: negative
* -8 to -5: pessimistic
* -10 to -8: very pessimistic – depressed
In addition to the level itself, the direction of the MoM indicator is also important. Here is what to look for:
* In a healthy market advance, the MoM indicator generally rises along with the stock or index.
* If the MoM indicator begins to decline after a significant rally (in green mode), it is an indication of a possible peak or the start of a consolidation phase. This changes the market mode to light green.
* If the MoM indcator begins to rise after a sustained slide (in red mode), it is an indication of a possible bottom or the start of a sideways phase. This changes the market mode to pink.
* For a rising stock or index, MoM is typically between +3 and +10, and the mode may change between green and light green several times before a sell signal happens.
* For a declining stock or index, MoM usually fluctuates between -3 and -10, and the mode may switch between red and pink several times before a buy signal is generated.
* Ordinary pullbacks usually end with MoM bottoming out in the neutral zone (-3 to +3) before turning back up.
* Bear market rallies often end with MoM peaking in the neutral zone (-3 to +3) before turning back down.
* Major peaks often occur with MoM reaching the high +8 zone. When this happens, there is an increased risk of a sudden pullback or the start of a sideways pause.
* Major lows are often marked by MoM dropping into the -8 zone. This may be a good time to consider buying a starter position. However, it's not uncommon to see a second low or double bottom several weeks later, acompanied by bullish divergence (MoM making its second bottom at a higher level). It's important not to rush in and try to buy on a down day.