The Bull Hunters Guide

Moving along to the next excerpt of The Bullhunters Guide to the US Stock Market we will be tackling the old Fundamental vs Technical analysis which is always rather interesting.  I have met and been in contact with many graduates of the Jamie McIntyre homestudy who are all right about there trading strategies as some only take on the Fundamental analysis and others take on the Technical analysis, and then some use a bit of both.  If it suits your trading system then that’s great.  Whatever works for you is the right thing to do.  Let’s see what Sean has to say in his eBook.

Value investors most commonly prefer fundamental analysis.  This is the rigorous approach of determining the value of a stock and whether or not it is under or overvalued.  Technical Analysis by contrast, examines the price history and the chart patterns of a stock.  Aggressive growth investors are more concerned with the technical analysis and will never buy a stock without first consulting a chart.

Support and resistance constitute the basics of technical analysis.   As a stock’s price fluctuates over time, it might routinely go down to one price (but no lower) and then rise to another price (but no higher).  This low price is considered its support and the high price is its resistance.

For example, if a stock traded in a range of $25 and $35 over the course of six months, $25 would be thought of as its support and $35 would be considered its resistance.  Support can be thought of as a price floor - the stock isn’t likely to fall through that floor.  Resistance is like a price ceiling.

If a stock does fall through its support (floor), this is a very bearish sign.  Who knows how far it will fall.  Technical investors think it will keep going down until it hits an earlier support level.  By the same token, if a stock breaks through its resistance (ceiling), growth investors think the sky is the limit.

At first glance technical analysis may seem a bit silly but there are several reasons to take it seriously.  For one, if several other investors believe in it (which they do) then their actions will create a self-fulfilling prophecy.  Secondly, support and resistance often represent psychological barriers.  Perhaps a lot of buy and holders keep adding to their position each time the stock hits $25.  But if it ever fell much lower, they all might bail causing the stock to plummet in value.

For these and other reasons it is a good idea for even the most fundamentally focused of value investors to consult a chart before buying a stock.  Luckily, several sources on the internet provide charts free of charge.

To have access to these websites and their free charts please download the eBook now if you haven’t already done so.  This also means that you will have all the information at hand when you need to refer to it.  You will find the links on page 27.

I would like to thank all our readers for the votes you have been giving this blog as it spreads the message that can help many stock market traders out there.  Keep it up and it will send us to the top of the charts.  If you haven’t voted, the icons can be found in the right hand column.  Thanks for your continued support.

To Your Success

Angela Recchia
Graduate Support
Universal Wealth Creation © 2004 - 2007

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Hello fellow Bullhunters

The Bullhunters Guide to the US Stock Market has certainly been an eye opener for me and I think we got more than what we bargained for when Sean wrote this eBook and offered us a free download of it.  Although the information provided us is short and sweet, it is all very useful information which gives us a look behind the scenes at the goings on of the US Stock Market.

Today we will be discussing some other ways that you can make money from the stock market so here is the next excerpt…

Conservative stock investors like to buy undervalued stocks and hold them until they are fairly valued (or even overvalued).  Many times, these investors concentrate on dividend-paying stocks. 

Buy and hold proponents feel that the market is often irrational in the short-term.  Good stocks can go down; bad stocks can go up.  But in the long run, they believe that the cream rises to the top.  Buy and holders aren’t concerned with the day-to-day fluctuations of their portfolio.  They take their time before buying a stock and by the time they pull the trigger, they’re confident that they’ve made the right decision.  When their stocks suffer substantial losses, they often buy more.  This is called buying on the dips.

By buying on the dips, investors lower their cost basis.  For example, if an investor bought 100 shares of Ford for $10 and then bought another 100 at $9, his basis would be $9.50 per share - ((100*$10)+(100*$9)) / 200.  When the stock hit $11 he would have a profit of $1.50 per share instead of just $1.00 per share.

Not everyone agrees with the buy and hold strategy.  Aggressive investors think that they can maximize their profits by trading more frequently.   They see no reason to hold a stock when they think it is going to go down.  Why not just sell it, and then buy it back when it has bottomed.

Buy and holders think this sort of philosophy is conceited.  They say that frequent traders are trying to outsmart the market which is something that cannot be done on a consistent basis.  Buy and holders also point out that the commissions associated with frequent trading can take a big bite out of profits.  But aggressive investors still say that their way produces better results.

These two strategies are from one end of the scale to the other.  They speak for themselves.  So whether you want to make a quick profit or be on the conservative side and buy and hold, there are pro and cons for both.  It also depends on if you are building a portfolio or trading for cashflow.  This is something that only you can consider and also be aware of whether these strategies fit into your trading system.  They may or may not and there are other strategies to consider like renting shares for cashflow which is more conservative than day to day trading.

We are not done with the Bullhunters Guide yet.  There is more on the way so keep an eye out until next time.

To Your Success

Angela Recchia
Graduate Support
Universal Wealth Creation © 2004 - 2007

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Hello fellow Bullhunters

Okay… so we have discussed how a corporation works.  We have taken a look at how to determine the value of a stock and if a stock is just a piece of paper.  We have even considered the components of the DJIA and how they cycle.  Now it is time to look at HOW we are going to make money on the stock market by weighing up growth as opposed to value of stocks.  More of The Bullhunters Guide to the US Stock Market.

The name of the game in investing is maximizing your returns.  Simply put, you want to buy stocks that are going to make you money.  There are two ways that this can be done - capital gains and dividends. 

We’ve already discussed dividends.  They are distributors of company earnings to shareholders on a per share basis.  But most of the 13,000 publicly traded stocks don’t pay any dividends at all - does this mean that they are worthless… of course not.

You realize capital gains when you sell a stock for more than you paid for it.  Gains in a stock that you have not yet sold are said to be unrealized capital gains.

Stocks go up because people want to buy them - it’s all about supply and demand.  People decide they want to buy a given stock because they think that it offers them a good chance of maximizing their future.  Institutional investors (banks, pension funds, etc.) who purchase the bulk of shares are looking further ahead - 5, 10 or even 20 years (or longer).  The question they ask themselves is At what rate will this stock grow its earnings into the future.  Once they answer that question they ask How much am I willing to pay today for those future earnings.

One way to evaluate a stock is by looking at its price-to-earnings ratio  (P/E ratio or just P/E).  A stock’s P/E ratio compares its current selling price to its earnings share (EPS)  If Wal-Mart’s most recent selling price were $48.32 and its most recent EPS number were $2.56, then its trailing P/E ratio would be $18.88 (48.32/2.56 = 18.88).  If Wal-Mart expected EPS of $2.80 next year, then its forward P/E ratio would be $17.26 (48.32/2.80 = 17.26).  Some people like to look at the trailing P/E because it is a historical fact and not a projection.  Others like to look at the forward P/E because what happened in the past is irrelevant - it’s the future that’s important.

Who’s good at maths because that was a lesson and a half.  Well Sean really worked on this and all the links go to his Stock Market Glossary of course so you can follow those in to see what they all mean just in case you are not quite clear on all the terminology.

It’s all a science that must be studied to know the ins and outs of the stock market and know what you are trading and how much you could potentially make.  So whether you think the trailing P/E ratio is the marker or the forward P/E ratio is the marker is entirely up to you.  As long as it follows your trading system is what is important.

To Your Success

Angela Recchia
Graduate Support
Universal Wealth Creation © 2004 - 2007

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So today’s little excerpt is about the DJIA Tech Stocks.   Remember when the big thing was to buy tech stocks.  Well lets find out a little more about them here.  If you are new to the Bullhunters Guide blog, I am dissecting the eBook so that we can  understand the workings of the US stock market a little better.  The Bullhunters Guide to the US Stock Market is downloaded hundreds of times every week so get  your free copy now just to your right of this screen so that you have your own copy to read whenever you like.  Let’s continue…

Hewlett Packard, IBM, Intel and Microsoft are the pure tech stocks in the Dow.  AT&T and Verizon are telecommunications companies.  While all of these companies benefit from a strong economy, corporate customers often invest in technology and telecommunications in the period directly before a recession.  This makes tech stocks somewhat counter-cyclical.

Technology stocks are also more individualistic than most stocks.  For example Hewlett Packard (HP) has a strong direct competitor in Dell.  While what’s good for GM is typically good for Ford, HP and Dell go in opposite directions.  The same can be said for Intel and its prime competitor, Advanced Micro Devices (AMD).

As one of the largest companies in the world, Microsoft is often the creator of cycles.  Every time ‘Mr. Softy’ (as it is known on Wall Street thanks to its MSFT ticker symbol) releases a new operating system, millions  of businesses must upgrade.  This alone causes a bullish tech cycle, with many business and individuals  purchasing new computers and other hardware.

So as we can see from this little excerpt, the tech stocks perform best when the economy is in the later stages of the business cycle which are the predictable cycles of economic activity that repeat over time. The five stages of the business cycle are growth, peak, recession, bottom (or trough), and recovery.  They would be great on your watchlist even if you don’t trade them to give you some idea of how the market is performing.

Let me know how this is helping you by leaving me a comment.  Yes you have to register and it only takes less than a minute to do.   As I mentioned in the last post, I was happy to hear form supporters of the Bullhunter blog by emailing me and leaving me messages to say that we are providing some good information here.

Sean Rasmussen has been working on the next instalment of the Bullhunters Guide and you have been waiting patiently for it.  In it he will discuss the renting shares strategy that Jamie McIntyre teaches in the 21st Century Academy homestudy and how to apply it to the US stock market.

To Your Success

Angela Recchia
Graduate Support
Universal Wealth Creation © 2004 - 2007

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Thank you to all those readers that have sent me emails and left me messages showing  their support.  It’s great to be in good company and you may have noticed that you can vote for this blog by clicking on the Feed the Bull icon further down the page to help us reach more readers with this information.

I will keep charging through The Bullhunters Guide to the US Stock Market  as we get into the DJIA Consumer Cyclicals and Non-Cyclicals today.   Here we go with another excerpt…

These stocks are easy to understand becasue most of us are intimately familiar with them.  It only makes sense that Disney, Home Depot, McDonalds and Wal-Mart would do best when the economy was strong and therefore their customers had more money to spend.

Of these stocks the two retailers are on the opposite ends of the cyclical spectrum.  Home Depot is the most cyclical with its business tied directy to the housing market.  As a discount retailer Wal-Mart is the least cyclical of this bunch.  Although it loses business during a recession it also gains customers who have previously shopped at pricier venues.

The consumer cyclicals ae dependent on a strong economy because consumers use discretionary income to purchase their power saws, Wrangler jeans, Big Macs and Disneyland tickets.  If people have less money to spend they can do without these things.  But can they do without drugs or  how about Deoderant or Soda or Cigarettes?  No… these are things that people have to buy whether they like it or not which is why these companies are called consumer non-cyclicals.

Our spending habits are what drives the cyclicals and non-cyclicals in the Dow Jones.  We cannot do without our Coca-Cola or cigarettes as they both have an addictive hold on some.  Coca-Cola even does well in times of a recession and cigarettes would still be able to be found even in the event of a nuclear holocaust.  Personal hygiene products just go without saying.  When you are next out buying your consumables, I wonder whether you will cast your mind back to this article and perhaps put the company you are purchasing from on your watchlist.  Interesting thought. 

The Bullhunters Guide to the US Stock Market continues to have 100’s of downloads every week so get your copy now and have it altogether for your own personal reading. 

Angela Recchia
Graduate Support
Universal Wealth Creation © 2004 - 2007 

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