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Using the Crossing of the 3 & 8 EMA to Time entry into the SPY, IWM, STOCK AND OPTION POSITIONS

Using the Crossing of the 3 & 8 EMA to Time entry into the SPY, IWM, STOCK AND OPTION POSITIONS. Jack Leibel Nov 20, 2013. Disclaimer.

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Using the Crossing of the 3 & 8 EMA to Time entry into the SPY, IWM, STOCK AND OPTION POSITIONS

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  1. Using the Crossing of the 3 & 8 EMA to Time entry into the SPY, IWM, STOCK AND OPTION POSITIONS Jack Leibel Nov 20, 2013

  2. Disclaimer The information contained in this presentation is nothing more than my view on investing in the stock market and is by no means a recommendation to buy stocks described within this presentation. This presentation is not intended to replace individual research and your personal decision to act or not to act on anything presented. This presentation is for information only and is not a replacement for licensed investment advice. Thank you

  3. CHOP Periods (Inventory Adjustment) vs. Inflection Points • The market constantly and continuously tests price levels to ensure agreement, • Money management centers take advantage(maybe facilitate) this testing to buy/sell their inventory (Stocks, Options, etc), • This presentation focuses not on the CHOP time period of the market but rather those major trend inflection points. Can we determine when they are about to ensue and how to manage your risk and reward during those periods?, • Assumption: If you can understand when those inflection points are occurring on the upside and therefore feel objectively confident to invest a larger portion of your capital during those periods into the best sectors and the best stocks in those sectors you risk/reward will be higher. Alternatively, if you can understand when the inflection points are occurring on the downside you can reduce your capital exposure and thereby allow for preservation of capital until the market offers a better risk/ reward scenario.

  4. 2008 – 2009 Time Period

  5. Daily Chart IWM July 2008 to Dec 2009

  6. Weekly Chart IWM July 2008 to Dec 2009

  7. Daily Chart SPY July 2008 to Dec 2009

  8. Weekly Chart SPY June 2008 to Dec 2009

  9. The 2008-2009 Period • In both the SPY and the IWM Weekly Charts from 2008-2009 we find that the weekly charts showed very distinct inflection points with minimal churn SPY Charts IWM Charts • The Daily charts indicate that over a similar time period we received many more entry/exit signals IWM Charts SPY Charts

  10. The 2008-2009 Period • In both the SPY and the IWM Weekly Charts from 2008-2009 we find that the Trend, once identified, held for an extended period of time • When the reversal trend was identified in May 2008 the investor could have: • Stop buying long positions • Reduced/eliminated peripheral positions • Hedged core positions • When the reversal trend was identified in early 2008 the Trader could have: • Stop buying long positions • Reviewed Short Watch List for opportunities • Reviewed Shorting strategies • Cut losses from long trades • Hedged core positions • In early 2009 the entry point using the EMA Signal was on March 12th for the Daily SPY, March 13th for the Daily IWM, April 3rd for both the SPY and IWM. Early enough to have sustained a substantial profit by being Long and having the convection to deploy a larger percentage of capital

  11. 2012 – 2013 Time Period

  12. Daily Chart IWM Nov 2012 to Nov 2013

  13. Weekly Chart IWM Nov 2012 to Nov 2013

  14. Daily Chart SPY Nov 2012 to Nov 2013

  15. Weekly Chart SPY Dec 2012 to Nov 2013

  16. The 2012-2013 Period • In both the SPY and the IWM Daily and Weekly Charts from 2012-2013 period we find that the charts showed very distinct inflection points with minimal churn SPY Charts IWM Charts • The Daily charts indicate that over a similar time period we received more entry/exit signals SPY Charts IWM Charts

  17. Data Analysis

  18. Inflection Points to the Upside • In the 2012 to 2013 Period the IWM Daily Chart led the SPY Daily Chart to the upside 6 X out of 8 opportunities, with a 1 – 11 day advanced notice • If this relationship holds it would allow for early entry into positions which reduces your risk significantly

  19. Inflection Points to the Upside • For the 2012 to 2013 Period; The entry points using the 3 EMA crossing the 8 EMA showed the following percent moves versus the theoretical maximum potential moves for each cycle • Seven (7) cycles in 12 months • Using the 3 X 8 EMA Signal averaged 55% of the theoretical Max Move

  20. Inflection Points to the Upside • For the 2012 to 2013 Period; The entry points using the 3 EMA crossing the 8 EMA showed the following percent moves versus the theoretical maximum potential moves for each cycle • Seven (7) cycles in 12 months • Using the 3 X 8 EMA Signal averaged 58% of the theoretical Max Move

  21. Inflection Points to the Down Side • In the 2012 to 2013 Period the IWM Daily Chart led the SPY Daily Chart to the down side 4 X out of 7 opportunities, with a 1 – 2 day advanced notice

  22. Inflection Points to the Upside What rules can we apply that will aid our investing? What rules can we apply that will aid our trading? Examples of Rules: • On the SPY Daily Chart - When the 3 EMA crosses above the 8 EMA perform following steps: • On the SPY Weekly Chart - When the 3 EMA crosses below the 8 EMA perform following steps: • And the same issues would apply for the IWM Charts • Other:

  23. Recent Examples of Application

  24. Gold and the Miners Still Not an Entry Point

  25. GoldCorp-GG I was looking at Silver and Gold miners, had some minor positions and after looking at these two charts decided to change course. DUST Anyone?

  26. 2 Day Option Trade: OAS Sold a Nov 16 50 Put for $ 0.47@ 12:28 PM 11-13 Put expire worthless Trade Initiated

  27. 2 Day Option Trade: OAS Reasons for taking the trade: • OAS is an oil & gas company with exceptional growth opportunities in the Bakken • My take on the spike down in price is that they would bounce due to a short term reversal and/or the underlying value of the company would be quickly reflected in the stock price • The S&P and IWM were indicating strength via the 3/8 EMA- therefore no downward pressure from general market bias • The premium credit of $ 0.47 (~1%) for 2 days of risk seem a high risk/reward • The last piece was the 3 EMA crossing over the 8 EMA on the 60 minute chart – and my belief it would hold for 2 days

  28. 3 Day Option Trade: DUST

  29. 3 Day Option Trade: DUST

  30. 3 Day Option Trade: DUST Reasons for taking the trade: • DUST is a Bear 3X Gold Miners ETF • Gold and the Gold Miners have been in a long term down trend • This down trend appeared to me to have another leg down; therefore I was looking at DUST for a trading opportunity • I use 2 and 3 X type ETF for very short term trading purposes • The weekly chart indicated support for DUST via MACD and 3 and 8 EMA • The daily chart indicated another entry point: • The MACD indicator Slope show support for entry • The 3 EMA crosses over the 8 EMA to confirm entry point • The premium credit of $ 0.60 (~1.7%) for 3 days of risk seem a high risk/reward

  31. 27 Day Option Trade: COG 3rd signal 2nd signal 1st signal

  32. Thank You

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