Index

12b-1 fee, 68–69 combining with Western analysis, 3M, 157 122–123 continuation day, 116 ABC of Speculation, 157 , 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 , 137–138, 140 , 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 , 63 tails, 114 blue chip companies, 34 , 122, 123 Boeing, 134–135 , 122, 123 book value, 169 trend-based, 117–118 breadth, 82–83, 97 upper shadow, 115 breakaway , 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 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

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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), , 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 (EMA), , 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

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fear index, 170–171 IBM, 131–132, 157 Federal Home Loan Mortgage Corporation , 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 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

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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 (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

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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 Index (RSI), 146–147 small cap, 34–35 resistance zone, 130 specialty mutual funds, 70–71 resistance, 82–83, 123 speculation, 81–82, 177–178 retail investors, 44–45 spinning top, 118 retained earnings, 34 spreads, 200–201 return calculations, 179–182 squeeze alert, 121–122 revenue, 49–50 myths, 203–207 reversal day, 102–103 straddles, 201 reverse head and shoulders, 134–135 strike price, 190 risk supply and demand, 5 defi nition of, 3 support zone, 130 disruption, 12–13 support, 82–83, 123 experience, 89–90 swing trading extreme reaction, 86–89 congestion, 104 fundamental, 17–19 defi ned, 101 greed and panic, 88 downtrend, 101–102 infl ation, 14–16 entry and exit, 103–108 knowledge and experience, 8–10 narrow range day (NRD), 101–102, 115 leverage 6–7, 83–85 percentage system, 106–107 liquidity, 13–15 reversal day, 102–103 lost opportunity, 19–20 set-up signals, 101–102 market, 4–6, 80–83 system, 101–103, 206 political and economic, 12–14 trader overreaction, 166 sector, 10–12 true range, 107 short position, 86tax, 14–17 uptrend, 101 technical knowledge, 89–90 spike, 102, 104

JJWBT389-Index.inddWBT389-Index.indd 231231 111/23/101/23/10 7:577:57 PMPM 232 INDEX

synthetic position, 201 time value, 192–194 tails, 113–114 tolerance, risk 20 tangible book value, 29, 169 Toll Brothers, 142 tax risk, 14–17 total capitalization, 58 tax-free bond funds, 79 trading halt, 13 trading range, 81–83, 97–98, 126–133 accumulation/distribution line, 146–147 trend, 23, 28, 158 ascending triangle, 137–140 trend-based candles, 117, 119 breadth of trading, 97, 193 triangle, 137–141 breakaway gap, 144 true range, 107 breakout, 83–84, 105–106, 141–145 tulip mania, 86–88 channel, 131 CMF, 146–147 U.S. Oil Fund, 131 common gap, 142, 144 uncovered call, 199 confi rmation, 80 underlying security, 190–191 contrarian, 173–174 unit investment trust (UIT), 70–71 day trading and, 90–91, 205 upper shadow, 63–64 defi ned, 79–80 uptrend, 101 descending triangle, 139 double top or bottom, 136–137 value investing Eastern, 110 contrarians, 168–169 exhaustion gap, 144–145 controls, 24–25 failed signal, 89–90 defi ned, 21–22 gaps, 89, 141–145 myths and facts, 25–27 head and shoulders, 133–134 standards, 27–30 indicators, 125–126 variable annuity, 73–74 mixed with fundamental, 178–183 Verizon, 139 moving average (MA), 97, 145–146 vertical spreads, 200 oscillators, 146–147 volatility of stocks, 24, 81–82, 170, 182 popular price patterns, 133–139 volume spike, 102, 104 range fl ip, 127–128 volume, 89 reverse head and shoulders, 134–135 RSI, 146–147 Wall Street Journal, 156 runaway gap, 144–145 Wal-Mart, 128, 154 , 82–83, 123, Weber, Martin, 155 126–133 Western technical indicators, 109–110, trend lines, 139–141 122–123 triangle, 137–141 Western Union, 156 Western, 110, 122–123 wicks, 114 technical knowledge risk, 89–90 working capital, 56–57 technical risk, 90–93 writer, 199–200 terms, 190–191 three white soldiers or black crows, 121–122, Yahoo, 134, 136 123

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