This is so next step. Most money managers and traders will not share their approaches. You can understand why. A few will talk about their methodologies in generalizations, knowing that the essential fuel that runs the investing engine is discipline and carefully designed routines. It is these routines that take decades to get right, and it’s these routines they seldom share.
It is specifically for those two reasons that I believe the release of my Tensile Trading ChartPacks will be a pivotal event in the lives of many individual investors. You’ll soon find that carefully organized ChartLists become the magical workhorse to help you uncover the best investment opportunities in the shortest period of time and then give you the confidence to act upon what you’ve uncovered. In addition, your monitoring and sell-side efforts will benefit immediately. To put it simply, the ChartPack will enhance your abilities as an investor to make profitable trades. Let me describe the basis of the Tensile Trading ChartPack and the four tenets upon which it’s based.
First, it’s based on the fundamental tenet that to shift the probabilities to your benefit, investors must do the following:
- ascertain the correct trend of the market
- identify the most attractive sector
- find the best industry in that strong sector
- zero in on the best stocks in the most attractive industry
Aligning all four of these elements puts the proverbial “winds at your back”.
The second tenet of Tensile Trading requires the investor to take an initial long-term picture of the equity in question. Appropriate here might be a 10-year price chart. The next picture would be a mid-term or intermediate chart, followed by a short-term chart and eventually looking at a few days of minute-to-minute data. An appropriate metaphor would be to imagine going from a telescope to binoculars to a magnifying glass and then to a microscope. Your equities deserve this sort of scrutiny.
The third tenet deals with indicators. At last count, there exist software packages that offer over 300 different technical charting indicators. Insert here your cliché of choice to describe this absurdity. Tensile Trading utilizes a carefully selected basket of 10 essential technical indicators that address the 5 crucial questions a ChartList investor needs to know.
- Is the equity outperforming the market, the sector and the industry?
- What is the trend?
- Volume analysis & money flow
- How does the momentum look?
- How does the potential reward compare to the risk?
It only takes 10 indicators to answer these questions and no more. This is a classic example of “less is more”.
The fourth and final tenet is that it is built upon a methodology that I use called “BATTLE V”, which stands for 7 items:
- Breakout in price
- Technical strength
Obviously, some of these are fundamentals, but most are plotted on the Tensile Trading charts.
The doctrine of Tensile Trading is that it captures the massiveness of the markets and boils it all down to a small number of organized and manageable groups of ChartLists. This facilitates stalking by investors for the most attractive high probability trades the market has to offer. Now let me describe the structure of the Tensile Trading ChartPack.
A) ChartLists 10.1 thru 10.3: These three ChartLists together comprise the “Permission to Buy” module. Just as the name implies, this series of charts offers up detailed insights as to the explicit behavior of the present market. ChartList 10.1 is populated with 6 pre-formatted charts that answer the crucial question, what is the trend of the market. ChartList 10.1 is populated with 5 charts that address the asset allocation questions. ChartList 10.3 and its 12 charts address market breadth, volume analysis and volatility. Together, they render an unambiguous verdict, therefore the name “Permission to Buy”.
B) ChartList 10.9: This contains 12 different sample chart styles which can be copied and saved as one of your preferred default chart styles. For example, if you like the layout of the 20-day chart with one-minute data, you can install it as one of your pull-down chart styles. If the mutual fund chart style appeals to you, then you can do likewise.
C) ChartLists 100 thru 108: These are prepopulated and preformatted with over 100 essential market indexes, as well as the most actively traded ETFs (based on volume).
D) ChartLists 110 thru 120: Key asset allocation charts address whether the market is presently favoring Large Caps, Mid Caps or Small Caps and also whether Growth stocks or Value stocks are in favor.
E) ChartLists 200 thru 217: These 5 ChartLists are organized to offer up accurate insights about global markets. Pre-populated with the 100 most important international indexes, currencies, commodities and gold equities, these ChartLists facilitate sifting through the most appropriate charts to expose the true condition of international markets. Whether for discovery or monitoring existing positions, it’s all here to make it much easier and quicker for you.
F) ChartList 220: This ChartList includes bonds, yields and interest rates, as well as 13 tradable ETFs, both domestic and international across all bond term horizons.
G) ChartLists 300 – 320: These ChartLists includes 15 Market Breadth charts, 5 Market Sentiment charts, 19 Bullish Percentage Index charts and 11 Inter-market Charts.
H) ChartList 400: These Indexes, Performance Charts and Sector ETFs offer you a clear picture of the most attractive broad market sectors. All 9 S&P Sector ETFs are highlighted in both individual charts, as well as grouped together onto Performance Charts. In addition, the 9 Bullish Percent Charts for each of the sectors are included.
I) ChartLists 401 thru 409: These 9 ChartLists each highlight specifically one of the 9 S&P Sector ETFs. Each ChartList contains the specific sector ETF chart, a performance chart, including the largest individual holdings of that particular sector ETF, and then individual charts of these individual equities that comprise each sector ETF.
J) ChartList 420: This ChartList contains the 39 Fidelity Select Sector Mutual Funds. The beauty of this ChartList is that it makes it possible to fine-tune and dissect the S&P Sectors into 39 smaller, more specific subsectors. By applying Market Carpet or CandleGlance pull-down analysis menus, an investor can easily and quickly ascertain where market strengths and weaknesses exist. Also, note that for each of the symbols, the fully named subsector is labeled in the summary list for ease of use and reference.
K) ChartLists 420-12 thru 420-88: These 39 Chartlists describing each Fidelity Sector Fund in detail offer two major benefits. The first is that, since mutual funds do not offer volume data, by listing the top individual equity holdings in each Fidelity Select Fund, an investor can apply volume and money flow analysis to the individual equities and therefore by default to the mutual fund as well. The second major benefit is that it offers investors virtually x-ray vision into the best and most preferred equities being acquired and accumulated by Fidelity portfolio managers company-wide across all of their mutual funds. We’ll update these ChartLists on a regular basis as Fidelity reports its most recent acquisitions and positions.
L) ChartList 450: At StockCharts.com, they use the 9 S&P Sector ETFs to segment the market into broad sectors. Each of these 9 sectors consists of a number of industries which are groupings of equities and companies with relatively similar businesses. This ChartList contains all 96 Dow Jones Industries that StockCharts.com assigns to the 9 broad sectors. Having them all in one ChartList offers you a number of advantages. It makes it quick and convenient to apply Market Carpet or CandleGlance analysis via pull-down menus to identify the most appealing and least appealing industries in the entire universe. Then drilling down into a few specific industries can be done in a minimum of time.
M) ChartLists 500, 505 & 510: Think of these as cascading buckets of folders through which you pass potential equities. Chartlist #500 is for you to place interesting ideas and possible candidates in a relatively unfiltered manner. In other words, the entrance hurdle is relatively low, as you are merely committing to come back and take a second look and aren’t really doing much analysis at this point. With ChartLists #505 and #510, you begin applying some gatekeeper functions, and only vetted candidates get “tagged” and move forward to the next ChartList.
N) ChartLists 600, 610, 620 & 630: Similar to the 500 series of ChartLists, here again you are cascading actual potential buy candidates from one ChartList to the increasingly scrutinized ChartList of more important equities, possibly pulling the trigger and executing a trade. The key difference with series 600 is that you are monitoring these on a daily basis, unlike with the 500 series that you explore whenever you have free time. Indeed, with the 620 ChartList, action is imminent so you are watching and waiting for the market to let you know it’s time to buy. The labels should be customized to express your individual stalking mentality. After all these years, my Tag Watch, Tag Core and Tag Action labels work for me and would be tough to rename. But that’s just me. Come up with your own memorable labels. ChartList 630 is my blue-sky big idea trends basket for long-term themes.
O) ChartList 700: This ChartList contains everything you own, regardless of whether it’s an equity, ETF, mutual fund, etc. If you only have 5 minutes on a particular day to allocate eye-ball time to your positions, this is the go-to ChartList. Pull down the CandleGlance charts, install an indicator and roll through a review of all you own in a matter of minutes. When you have time, then edit each symbol’s chart and save it so that you are using appropriate chart layouts for what you are analyzing.
P) ChartList 710: Unlike the previous ChartList, this collection is only the stock equities that you own. The reason is twofold. Yes, the chart layouts are all the same and it gives your review a visual oneness which I find causes the outlier chart to stand out – the equity that needs your immediate attention. The other reason is that you should be reviewing individual equities with greater frequency than ETFs or mutual funds simply because they are more volatile and we don’t like surprises. For these reasons, they deserve their own separate ChartList.
Q) ChartList 720: This collection houses all your ETFs. You may or may not have a large assortment depending upon your personal investment methodology, but increasingly the chances are that you do own some ETFs. Once again, the layouts should be consistent for the reasons mentioned in #710. I know very successful traders who only trade ETFs and no individual equities or mutual funds. One investor rotates his trades only amongst the 9 S&P Sector funds. Each to his own!
R) ChartList 730: Mutual funds are unique creatures. Many would suggest that in time they will be replaced with ETFs. For now, most investors still find themselves owning some mutual funds. Since they do not offer us volume to aid our analysis, we must focus on relative performance, trend and momentum. I find that adding unique color borders aids in visual consistency, and this subconsciously focuses your mind to remember that, for example, green borders mean “I’m looking at a mutual fund.” Once again, grouping symbols by category allows you to perform CandleGlance and Market Carpet analysis on the entire ChartList quickly.
S) ChartList 740: This is a sample ChartList, assuming you were to own Johnson & Johnson. The structure is based on a very profitable approach I use called the “sisters strategy” which assumes that equities are like people. It’s very likely that you know all there is to know about an individual if you know the company they keep. In other words, one becomes the company one keeps. Similarly, equities seldom levitate in the markets by themselves. Their behavior is determined in large part by the sector and industry to which they belong. Their sister stocks tend to have a high correlation amongst themselves.
My rule is to buy the best of breed. In that way, when the lesser sister stocks in the family catch the flu, they’ll begin deteriorating first, resulting in an early warning system of sorts for my best of breed stock which catches the flu a little later on. The 12 charts are self-explanatory once you appreciate this sisters stocks strategy.
T) ChartList 760: The principal applied with ETFs we own is somewhat different than the sisters strategy we use with equities. Because ETFs are created from individual equities, our analysis is two-sided. On one side, we unbundle our ETF into individual industry groups on the premise that to understand the parts is to better understand the whole. In this sample ChartList, we own XLV – the S&P Healthcare Sector. Therefore, we look closely at all 5 industry groups that together represent the Healthcare Sector, which are Biotech, Healthcare Providers, Medical Equipment, Medical Supplies and Pharmaceuticals. On the other side, we consider the largest individual equities that comprise XLV. All of these charts are included in our XLV ChartList. Remember, they are the company they keep!
U) ChartList 780: The sisters strategy applies nicely to mutual funds. This ChartList assumes you own the Vanguard Healthcare Fund (VGHCX). There are wonderful Morningstar.com tools that allow you to easily and accurately identify similar sister funds, such as FSPHX, RYHIX, PRHSX, and SWHFX. Add in a few appropriate Healthcare Indexes, the key individual equities that comprise the largest holdings, and voilà – you’ve discovered how to add volume analysis to your mutual fund holdings. Not an insignificant benefit.
All-Important Caveat #1: Please always remember to first copy any populated ChartLists you are working with, and then work with the copy itself. For example, if you decide to filter through ChartList #450 – the Dow Industries – say in CandleGlance mode and delete the visually unappealing industries, you don’t want to be doing this on your own master ChartList. Once you delete the symbol, it’s gone.
Caveat #2: I welcome and look forward to hearing suggestions from other investors and traders about how to improve this ChartPack. There will be regular updates, and everyone will benefit from your input.
The bottom-line is that the combination of your good discipline and the organization of these ChartLists should lead to routines that will optimize and maximize your abilities as an investor. The fact remains that a good number of the most profitable investors and traders I know have the meticulously organized soul of an accountant and the strategic composure of a trial attorney.
If instead you like to live life as a bumper car, forget investing – take up roulette!
Trade well; trade with discipline!
-- Gatis Roze
Here is a Quick Link to the Tensile Trading ChartPack: