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Index 12b-1 fee, 68–69 combining with Western analysis, 3M, 157 122–123 continuation day, 116 ABC of Stock Speculation, 157 doji, 115 accrual accounting, 18 dragonfl y doji, 116–117 accumulated depreciation, 46–47 engulfi ng pattern, 120, 121 accumulation phase, 158 gravestone doji, 116, 117, 118 accumulation/distribution line, hammer, 119 146–147 hanging man, 119 Adaptive Market Hypothesis, 155 harami, 119, 120 Altria, 29, 127, 185–186 indicators 120 Amazon.com, 151 long, 116, 117, 118 amortization, 47, 49 long-legged doji, 118 annual report, 44–46 lower shadow, 115 ascending triangle, 137–138, 140 marubozu, 116 at the money, 192 real body, 114–115 AT&T, 185–186 segments illustrated, 114 shadows, 114 back-end sales load, 67–68 short,116, 117 balance sheet, 46–50 spinning top, 118–119 balanced mutual funds, 70–71 squeeze alert, 121, 122, 123 basket of stocks, 63 tails, 114 blue chip companies, 34 three black crows, 122, 123 Boeing, 134–135 three white soldiers, 122, 123 book value, 169 trend-based, 117–118 breadth, 82–83, 97 upper shadow, 115 breakaway gap, 144 wicks, 114 break-even rate, 16–17 capital assets, 48, 49 breakout, 83–84, 105–106 capitalization-based funds, 71 Buffett, Warren, 152 capitalization-weighted average, 157 bull and bear markets,COPYRIGHTED 81, 174–175 Caterpillar, MATERIAL 52–54, 55, 57, 58, 59, 131 Bureau of Labor Statistics (BLS), 15 CBOE Volatility Index (VIX), 170, 171 Buy-and-hold strategy, 32, 204–205 Chaikin Money Flow (CMF), 146 buy to open/sell to open, 96 channel, 131–132 charting calendar spreads, 200–201 candlesticks, 110 calls, 197–199 Eastern indicators, 110 candlestick entry and exit, 109–110 basics, 113–114 types, 110–113 chart construction, 109–110 Western indicators, 110, 122–123 227 JJWBT389-Index.inddWBT389-Index.indd 222727 111/23/101/23/10 77:57:57 PPMM 228 INDEX chartist, 91 distribution phase, 158, 159 Chevron, 157 diversifi cation Chicago Board Options Exchange (CBOE), company-based, 34 170 ineffective, 33 circuit breaker, 13–14 mutual fund-based, 36–37 Citigroup, 140 strategies, 39–41, 186–188, 206 closed-end fund, 62, 64 under- and over-, 37–39 closing order, 96 dividend timing strategy, 183–186 Coca-Cola, 29 dividend yield, 24 common gap, 142 dogs of the Dow, 171–172 common stock, 37 doji, 115 conduit investments, 61,72, 73 dollar cost averaging (DCA), 39–41 confi rmation, 80178 dot.com fad, 88, 151–152 congestion, 104 double top or bottom, 136–137 consolidation, 5–6 Dow Jones Industrial Average (DJIA), Consumer Price Index (CPI), 15 156–157, 185 contingent deferred sales load (CDSL), Dow Theory, 156–160 67–68 Dow, Charles, 156, 157, 158 continuation day, 116 downtrend, 101–102 contrarian dragonfl y doji, 117, 118 bull or bear, 166–168 DuPont, 137–138 concept and value, 164–166 convergence theory, 165–166 earnings per share (EPS), 50, 55 indicators, 169strategies, 170–172 Eastern technical indicators, 110 theory, 7, 163–164 Eastman Kodak, 142, 143 value investing, 168–169 eBay, 151 views in perspective, 174–176 effective tax rate, 16 convergence theory, 164–165 effi cient market theory (EMT), 150–152, convergence/divergence, 97 206 Cootner, Paul, 154 engulfi ng pattern , 121 core earnings, 45–46 enterprise value (EV), 36 cost of goods sold, 49, 51 entry and exit signals, 70–80, 103–108, covered call, 197–200 109–110 current assets and liabilities, 46–48 equity mutual funds, 69–70 current ratio, 56–57 exchange-traded fund (ETF), 36–37, 38 Customer’s Afternoon Letter, 156 ex-dividend date, 41–42, 183–186 exercise, 191–192 day trading exhaustion gap, 144–145 closing order, 96–97 experience risk, 89–90 entry and exit, 98–99 expiration date, 190–191 intra-day, 98 exponential moving average (EMA), momentum, 99 145–146 opening order, 96 extreme reaction risk, 86–89 system, 95–101, 205 extrinsic value, 192–194, 196 debt ratio, 58 ExxonMobil, 29, 142–143 deferred assets, 47, 49 deferred credits, 48, 50 failed signal, 89–90 descending triangle, 139, 141 fair value, 169 disruption risk, 13 Fannie Mae, 72, 73 JJWBT389-Index.inddWBT389-Index.indd 222828 111/23/101/23/10 77:57:57 PPMM Index 229 fear index, 170–171 IBM, 131–132, 157 Federal Home Loan Mortgage Corporation implied volatility, 170, 193, 194 (FHLMC), 72 in the money, 193 Federal National Mortgage Association income statement, 48–50 (FNMA), 72 index funds, 71–72 Financial Industry Regulatory authority infl ation risk, 14–17 (FINRA), 69, 92 insider trading, 205 fi nancial ratios, 27 institutional investors, 44–45 fi nancial statements, 44–46 intangible assets, 47, 49 fi scal year, 47 Internet, 160 fi xed-income mutual funds, 69 intra-day trading, 98 footnotes to fi nancial statements, 44 intrinsic value, 192–193, 194 Ford Motors, 136–137 investment clubs, 61–63 forward P/E, 51–56 Investment Company Institute, 65, 66 Freddie Mac, 72 investment strategy, 31–32, 33–39, front-end sales load, 66–67 177–178, 186–188 fundamental analysis contrarian, 173–174 Japanese candlesticks, 110, 111 defi ned, 43–44 Jones, Edward, 156 fi nancial statements and, 43–44, 53–56 management, 56–59 Kendall, Maurice, 154 mixed with technical, 178–183 knowledge and experience risk 8–10 fundamental risk, 17–19 large cap, 34, 35 Galileo, 175 last trading day, 198 gaps, 89, 105, 107 leverage risk, 6–7, 83–85 General Mills, 52, 54, 55, 57, 58, 59 line chart, 111 Ginnie Mae, 72 liquidity risk, 13, 15 global mutual funds, 70 listed company, 44, 45 Google, 151 Lo, Andrew W., 155 Government National Mortgage Association long candlestick, 116 (GNMA), 72 long option strategies, 194–197 Granville, Joseph, 174–175 long position, 86 gravestone doji, 116, 118 long-legged doji, 118 greed and panic risk, 88 long-term assets and liabilities, 46–48, 50 gross profi t, 51–52 lost opportunity risk, 19–20 growth stocks, 27 lower shadow, 114–115 Hamilton, William P., 157 MACD, 97, 98, 146 hammer, 119 MacKinley, Archie Craig, 155 hanging man, 119, 120 magical thinking, 203–204 harami, 119, 121 Malkiel, Burton, 154 head and shoulders, 133–134 management fee (mutual fund), 68 hedge funds, 71 margin account, 6–7 historical P/E, 51 market capitalization, 34 Home Depot, 111, 112, 113, 115 market culture, 90–93 homeowners’ equity line of credit market cycle, 3–4 (HELOC), 84 market risk, 4–6 horizontal spreads, 200 marubozu, 116 JJWBT389-Index.inddWBT389-Index.indd 222929 111/23/101/23/10 77:57:57 PPMM 230 INDEX McDonalds, 29, 36, 140, 157 Nelson, S. A., 157 mega-cap, 34–35 net asset value (NAV), 69–70 Merck, 29 net profi t, 53 micro-cap, 34–35 net worth, 34 Microsoft, 137–138 New York Stock Exchange (NYSE), 13, 100 mid-cap, 34–35 no-load funds, 65–67 minor trend, 156 momentum trading, 96, 99 OHLC chart, 112–113 money market mutual funds, 71 open-end fund, 64 mortgage pool, 72 opening order, 96 moving average (MA), 97, 145–147 options mutual fund at the money, 192–193 12b-1 fee, 68–69 calendar spreads, 200–201 back-end sales load, 67 call, 190 balanced, 70 covered call, 197–198 capitalization-based, 71 defi nitions and basics, 85, 190–191 CDSL fee, 67–68 exercise, 191–192 classifi cation by features, 70–72 expiration date, 190–191 closed-end, 62, 64 extrinsic value, 192–194, 196 conduit investment, 61 fl exibility, 200–201 diversifi cation with, 36–37 horizontal spreads, 200 equity, 69 implied volatility, 170 ETFs, 36–37, 64–65 in the money, 192–193 family of funds, 74 intrinsic value, 192–194, 209 fees, 66–69 last trading day, 198 fi xed-income, 71 leverage, 189–190 front-end sales load, 66–67 long strategies, 196–197 global, 70, 71 naked call, 199 hedge, 71 out of the money, 192–193 index, 71–72 premium, 192 investment statistics, 65–66 put, 190 management fee, 68 rolling strategy, 198–199 money market, 71 spreads, 200–201 net asset value (NAV), 69–70 straddles, 201 no-load, 65, 67 strike, 190 open-ended, 62, 64 synthetic position, 201 prospectus, 68–69 terms, 190–191 redemption fee, 67–68 time value, 192–194 sales load, 64, 66 uncovered call, 199 shareholder service fee, 68–69 underlying security, 190–191 specialty, 70–71 valuation, 191–194 tax-free bond, 72 vertical spreads, 200 types, 64–66 writer, 199–200 oscillators, 145–147 naked call, 199 out of the money, 192–193 narrow range day (NRD), 101–102, 115, 170 NASDAQ Composite, 151, 157 P/E ratio, 50–56, 166, 169 National Association of Investors paper trading, 8–9, 194–195 Corporation (NAIC), 62–63 pattern day trader, 91–92 JJWBT389-Index.inddWBT389-Index.indd 223030 111/23/101/23/10 77:57:57 PPMM Index 231 percentage swing, 106–108 technical, 90–93 Pitney Bowes, 185–186 tolerance, 20 political and economic risk, 12–14 trading defi ned, 79 preferred stock, 35–37 volatility, 24, 80–83 premium, 191–192 rolling strategy, 198–199 prepaid assets, 47–48 round-trip trade, 95–96 price-weighted average, 156 runaway gap, 144–145 primary trend, 158 prospectus, 68–69 S&P indices, 38, 157, 170 public participation phase, 158–159 sales load, 64, 66–67 pump and dump, 205 secondary market (real estate), 72–73 purchasing power, 14–15 secondary trend, 158 puts, 190 sector risk, 10–12 Securities and Exchange Commission (SEC), random walk theory, 153–155, 206–207 69, 205 range fl ip, 126–127 sell to close/buy to close, 96–97 real body, 113–114 set-up signals, 101–102 Real Estate Investment Trust (REIT), 73 shadows, 113–114 Real Estate Mortgage Investment Conduit shareholder service fee (mutual fund), 68–69 (REMIC), 72 shares, 5 record date, 183 short candlestick, 116–117 redemption fee, 67–68 short covering, 159 reinvested dividends, 30 short position risk, 86 Relative Strength Index (RSI), 146–147 small cap, 34–35 resistance zone, 130 specialty mutual funds, 70–71 resistance,