TRADING 101

From Waaco Forum: Deep Green, the Computer-based Trading System developed by Dr. Art Adams, who heads CapMark's Investor Technologies Division. Deep Green summarizes some very interesting trading strategies below. Some strategies are probably more pertinent to trading in larger cap stocks than Waaco usually covers, but other points below have direct relevance to small caps trading. Plus, as we all know, we should be looking to trade and invest in stocks over and beyond the stocks we discuss in Waaco, in order to develop a more balanced overall portfolio of equities within our overall personal financial plans.

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TechTalk

In this issue we’ll talk about when the best times to buy and sell stocks are according to traditional timing and historical patterns.

1. Within Any Calendar Quarter: Buy just before the end of the reporting period for the institutional investors – going forward from here, December 31, March 31, June 30, and September 30. The rationale here is aggressive money managers add to their winning positions to improve their reported performance. Their heavy buying can propel prices several points higher.

2. Within Any Month: Sell during the first five trading days. For the past 25 years this has been profitable about 67% of the time. The rationale is most institutions operate on a monthly basis and make their decisions soon after the end of the month and start their buying promptly. Demand then exceeds supply and prices tend to move higher.

3. Within Any Week: Buy Monday morning and sell Friday afternoon. Over a 42 year period, it has been discovered that the Dow Jones Industrial Average (DJIA) went down 54% of the Mondays and went up on 63% of the Fridays.

4. Within Any Day: The first and last hours of the day are usually the most active. The first hour is boosted by overnight decisions and many traders review the market in the last hour and make their trades before the market’s close. In the last hour, prices tend to decline as professional traders take their daily profits or losses.

5. Before Holidays: The market tends to rise about 67% of the time heading into a one day holiday and about 75% of the time heading into a multi-day holiday.

6. January Effect: Perhaps you have heard the saying "As January goes, so goes the year." About 80% of the time, if the S&P 500 and DJIA rises in January, the December close for that year will be at a higher level (and vice versa!).