Soropa Blog

Identifying important Turning Points in the markets, as early as possible, is as much
art as science.

Studying charts of the markets that one is interested in can provide useful information,
however, charts become dangerous when they become interesting.

That being said, a disciplined systematic approach to the problem might prove helpful.

Significant support points are defined as a bar on a chart that is lower than the four
bars preceding and the four bars following the low bar. Significant resistance points are
the opposite; a high above the four bars on either side. They’re easy to recognize. They
stand out.

One useful analytical tool is the application of what is called the “Significant” trend
line. It takes its name from the fact that it connects one significant support point with
another and the same with significant points of resistance.

One more thing: Support lines are always sloping upward; never downward. Resistance lines
are always sloping downward; never upward.

Bull markets have no resistance; only support. Bear markets have no support; only
resistance.

As soon as a new rising significant support point is formed, the connecting trend line is
drawn and the previous significant low as an important Turning Point is identified. A new
rising trend is now “confirmed” and remains in effect until the trend line is penetrated.

The classic definition of a rising market is a pattern of higher lows followed by higher
highs.

Conversely, as soon as a new lower significant resistance point is formed, the connecting
trend line drawn, the previous significant high is identified as an important Turning
Point. A new declining trend is now “confirmed” and remains in effect until the trend line
is penetrated.

The classic definition of a declining market is a pattern of lower highs followed by lower
lows.

When two opposing trend lines are in effect, the market is said to be “consolidating”.

As the converging trend lines close the distance on each other heading for a collision,
only the most nimble traders try to profit in those more difficult circumstances.

Remembering, “the trend is your friend”, prudence dictates disengage to the side lines
and await the next Turning Point.

Another useful exercise is to apply the same techniques to charts of different time frames.

Daily charts are good for “fine tuning” but they also reflect “noise”.

Weekly charts not only view things from a longer vantage point, they “smooth” out the
noise, giving more reliable signals.

Monthly charts are very long range and not as tradable. A significant point wouldn’t
appear until four months have elapsed.

However, by extending significant trend lines in each time frame and observing when they
all tend to converge at the same point in price and time, a possible future important
Turning Point is indicated. Fore warned is fore armed.

The fact is that most people continue to work for a living, because they don’t have the means to live without that income. Do not get me wrong. You may enjoy doing what you do. If you do not have to worry about making a living out of this, could you do better, on your own terms?

Perhaps work fewer hours and spend more time with your family? Perhaps choose to take a few days to travel, without worrying about needing to ask for permission. Maybe spend a little time helping out your favorite charity?

There are a great many people who would not go to work, if they did not have to earn a living. Total Financial Freedom is about having that choice. If you quit your job, the organization will not shut down. They will find a replacement to do your job. They will continue their business. However, if you quit working for yourself, nobody will replace you. You owe it to yourself and the ones near and dear to you. When you have the choice, you may still continue to work. The big difference is in knowing that you have a choice.

Sometimes, we get so busy with our work and lives that we forget the potential within. You may be able make a huge difference in your community. You may be able to touch a lot of lives in a way that only you can. If you had the choice, you could explore this possibility. As I have already stated, your net worth is directly in line with the number of lives that you have positively affected.

I could be totally boxed in my profession of software engineering, management etc. I love that side of me. I had to take the time to write this book. I know that this book is going to make a difference in many lives. Why do I know that? I know that, because I firmly believe that I have something to offer. I know that, because I started this work with the steadfast desire to write a book that will have such impact. Above all, I know so, because I prayed that I be the instrument to deliver such a powerful message.

You have a purpose in life. You have tremendous potential. Don’t let the power of a paycheck hold you back from becoming all that you can be. You deserve to retire early, so that you may spend your time fulfilling your dreams.

Do you need a Million dollars to retire? Not necessarily. You may choose to retire a lot sooner than that. No, I am not asking you to shrink your dreams. You may still go on to gain wealth far beyond a Million dollars. That is entirely possible. But, when you have made it possible to replace your current income from some other means, you can retire and pursue your dreams full time.

Get out of that bondage. Have the choice. Then do what you choose to. Retire early and enjoy your life.

This is an excerpt from a book titled Totally Financially Free by Vishy Narayanan http://totallyfinanciallyfree.com/specials. You are free to use this article in your publication as long as it is not modified and this resource box is included.

About The Author

Vishy Narayanan is the author of the now famous book Totally Financially Free. His philosophy is to help others help themselves to a life of wealth and abundance.

vishy@totallyfinanciallyfree.com

“I bought that stock a month ago and it hasn’t done anything. My broker said it was going to take off.” Yes, and pigs can fly.

How about, “I bought that stock 5 years ago and it went up and now is selling for less that it did when I bought it”. Do I hear the violins playing?

There is an old, old saying; THE STOCK MARKT WILL DO WHAT IT WANTS TO DO, BUT NOT WHEN YOU WANT IT TO”. You may have heard that one and today’s market is doing just that.

When there is an obvious trend up and people are buying as we had from 1982 to 2000 everyone is happy. Each person thinks he is a stock market genius. For 18 years it was difficult to make a mistake. Even if you bought a dog (no reflection on man’s best friend) it would go up.
When the market started down the geniuses looked at each other and did not know what to say. There was silence in the boardroom and commiseration by the water cooler. Everyone was losing.

Probably one of the most frustrating investment periods of all is the sideways market that we have had for the past year. The talking heads on CNBC-TV say it is not a broad market in which you can buy any equity, but a market of particular stocks. In other words you have to turn into stock picker. Unfortunately, most stock pickers end up with smelly fingers.

The investors who have owned index funds find they have made no money for the past year. In fact the S&P 500 Index is just about where it was 5 years ago. Pretty darn frustrating. Is there any way to make money in the market without raising your blood pressure?

Yes, and it is ideal for the long term trader, but frustrating to those who like to trade all the time. Not only will it make money in the bull market, but it will have you in cash while the bear is decimating everyone’s stocks. It is a very simple market timing method. You can expect your broker to tell you it won’t work, but you can easily prove to him that it does.

On your computer go to www.bigcharts.com and put in the symbol of your mutual fund. Add a 200-day simple moving average with a 5-year time period. Click. If your fund is above the 200 line and the line is ascending keep it. If the line turns down and the price of the fund is below it, sell. Do a historical study on all your funds. You would have been out from the end of 2000 and bought back in about April 2003. Prove this to yourself. Then do it.

Your market frustrations are over.

Al Thomas’ book, “If It Doesn’t Go Up, Don’t Buy
It!” has helped thousands of people make money
and keep their profits with his simple 2-step
method. Read the first chapter at
http://www.mutualfundmagic.com
and discover why he’s the man that Wall Street
does not want you to know.

Copyright 2005