The Bull Hunters Guide

Hello fellow Bulhunters

Looking back at the last post, I sincerely hope that you have sorted out the Fundamental Analysis and the Technical Analysis and know how to use both to your advantage. Reading charts is something I love to do and when the various patterns show up, looking for entry and exit points can be fun when you know what to look for. Of course trading is a lot more than just looking at charts so today we will be discussing an advanced strategy known as going short or shorting a stock. More from the Bullhunters Guide eBook…


Going Short - The Napoleon Dynamite Example

When you own a stock, you are said to be long it. The owner of 100 shares of Wal-Mart would be long 100 WMT. When you sell a stock you own, you cancel out your position. You are no longer 100 WMT nor are you short of any shares. But did you know that you can actually sell a stock that you do not own.

Imagine your friend got an autographed picture of John Heder who is the star of Napoleon Dynamite, right after the movie was released on DVD. A few days later you noticed that Heder’s autograph was selling for $500 on eBay. You ask your friend if you can borrow it for a while and he says yes. So you take Heder’s autograph and sell it online for $500.

Six months later Heder has faded back into obscurity. Your friend asks you if he can have his autograph back and you say sure. You go online and see that eBay is flooded with Heder autographs and you buy one for $10. As soon as you receive it in the mail you return it to your friend. He doesn’t even know that you made $490 in the process.

In Wall Street gibberish, you shorted the John Heder autograph. Instead of the old adage, buy low, sell high, you sold high and then bought low. You can do this with stocks and the good news is that you don’t even have to ask permission.


Great Trading Strategy

Well who would have thought. Thanks Sean for bringing this to our attention. How many of you out there even knew this existed. It is another way to bring in some cashflow although it may take some time to actually see the cash depending on how volatile the stock is.

We are powering through The Bullhunters Guide to the US Stock Market and next we will look at an introduction to trading options. That’s right renting shares will be the topic of my next article so stay tuned and subscribe to the feed so you don’t miss out on any of these strategies.

To Your Success

Angela Recchia
Graduate Support
Universal Wealth Creation © 2004 - 2007

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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

Let’s look at another excerpt from the Bullhunters Guide to get you a little more acquainted with the material.

If you could purchase a security such as a stock or bond, that would pay you a guaranteed $1000 a year for thirty years, how much would you pay for it.   Clearly, you would pay at least $1000, since you would make your money back after only one year.   Just as obviously, you wouldn’t pay $30,000 or more, because it wouldn’t make sense to pay $30,000 just to receive it back in $1000 increments over the next three decades.  So the vaue of our imaginary security is between $1000 and $30,000. 

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Hello Fellow Bullhunters

What I would like to give you today is a brief overview of the different types of analysis you can use to help you in selecting shares. The methods most commonly used to select shares to invest in are:

1. Fundamental Analysis is when we use the history of a company, combined with their financial status and the management of the company as a whole. Basically, what we hear on the news and read in the papers gives us this information.

2. Technical Analysis is charting the stocks and backtesting historical data to look for various patterns that the stock might be producing. By using this method, we see that history has a way of repeating itself. Especially in the blue chip stocks.

3. A combination of both.

These methods are widely used. In fact, Warren Buffet, the second richest man on the planet uses just fundamental analysis. He has been doing this for many, many years.

Personally, I like to use technical analysis. Reading charts is a simple method of learning about a stock. The more practice you do, the better you get at it.

Bullhunters, I learnt how to chart stocks by hand when I was first interested in trading the stock market. Drawing candlestick charts took plenty of discipline, but it was well worth it for me. It has given me a background in understanding charts.

The software available today makes it unnecessary to chart stocks by hand as you have it all at the click of a button now. There is a vast array of charts available to you on the internet as well. You can have a look at bigcharts.com, marketwatch.com and finance.yahoo.com.

I would like to recommend for those of you who are here to learn about trading that you start to look at some charts to get an idea of some of the trends that certain stocks have.

Has this article helped you?

Are you getting what you need from this blog? Let me know how I can best help you to learn about the US Stock Market.

I have just returned from Barbados… I enjoyed a little R & R, and got in with the locals and all that Calypso music. Unfortunately, there wasn’t any cricket in town while I was there… they certainly love their cricket… there are signs up everywhere you go about how much they love their cricket. Everybody should get there at least once… it really is a nice place to visit.

Angela Recchia
Graduate Support
Universal Wealth Creation © 2004 - 2007

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