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Strategies & Market Trends : Point and Figure Charting

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To: Challo Jeregy who wrote (18322)	4/19/1999 5:18:00 PM
From: james ball	Read Replies (5) of 34811

Lets talk Internuts. I just came in from NY on CNBC and found that I had taken a good wolloping in my NUT portfolio. That's ok as I understand the risks involved in owning these stocks. Many do not. I got a call today from one of our individual investors wondering why we did not do a big fandango write up on the Nuts last week when they were lambasted. I asked him if he understood the process of the P&F's and his answer was no. It turns out he was not aware that volatility goes both ways. Most investors only think or hope volatility is an upside phenomenon but are absolutely dumbfounded that it also works the other way. If you look at the bell curve on the side of each stock we have in the system you will see that the NUT stocks exceeded their top expectation of volatility by probably 3 standard deviations. Put another way these stocks moved past the TOP level on the chart and this suggests that the rubber band is stretched to the limit. One of two things must happen, the volatility reading must expand to accomodate an extended rubber band or the rubber band will contract back to a more normal state given the volatility calcualtion is right. Stocks like YHOO simply pulled back to the middle of the distribution. AOL did the same as did most others. Go to your favorite chart and if it is a NUT stock (internet) use the 5 or 10 point box to slow the chart down so the Bot, Med, Top readings show up. This will give you an idea of where your stock lies on its own bell curve. This might help allay some of your fears that the bottom is falling out. These stocks are simply moving back to normal. This is why when a stock punches through the "TOP" reading of your chart you should take note and at least think about how extended the stock is . It might suggest selling some of those incredibly over inflated calls against the position. At least it might suggest cooling your enthusiasm a little. My NUT portfolio was up 78% in 3 months and this last week the value has moved back to a more normal profit given the risk I have taken in this one portfolio. Today we got more buy signals than sell signals and this is positive for the market. The rally was broad today but most of you who own NUT stocks will not feel like that. To give you and idea why the cyclical stocks have moved up so much in such a short period think for a second how many chemical stocks you can name in 20 seconds. Then think about how many tech stocks you can name in 20 seconds. I bet you only get about 3 or 4 chemical stocks and 20 tech stocks. These stocks have been all but forgotten and their capitalizations are much smaller than the techs. It doesn't take much buying pressure to make them ove significantly. The internet bullish percnet sector has simply moved back to a more normal conditions givent the rest of the tech sectors. Tom

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