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    of 6
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    Some of the key takeaways are that certain sectors like energy, materials, and natural resources are currently performing well according to long-term trends, while sector ETFs can be used to track the overall business cycle by applying strategies like the 50-50 Trading Plan. It is also advised that the 50-day moving average can help guide risk management and that understanding trends and sector rotation is important for timing trades profitably.

    According to the document, energy, basic materials, and natural resources sectors are currently above the 50-week moving average, which represents the long-term trend, while most other sectors are below it.

    The document advises that sector ETFs covering different industries can be used to track the overall business cycle by applying the 50-50 Trading Plan to their charts in order to know when to be in and out of the market based on the cycle.

    Webinar brought to you by TDAmeritrade, July 23, 2008

    Dr. Charles B. Schaap is the author of ADXcellence—Power Trend


    Strategies, and Invest with Success: Big Profits for Small Investors.
    All rights reserved © Dr. Charles B Schaap. Our articles, columns, stock lists and other
    features should not be construed as investment advice, nor does their appearance imply
    an endorsement of any specific security or trading strategy. An investor's best course of
    action must be based on individual circumstances.

    Thank you for attending!


    Email us at StockMarketStore@yahoo.com or Traderdoc5050@yahoo.com.

    We have three free sites for learning


    www.stockmarketstore.com over view of the market
    www.5050Strategy.com the 5050 Strategy
    www.ADXcellence.com ADX lessons

    Lessons come free in the Journal for Excellence in Trading, published by


    Candy Schaap. In the July 18 Journal letter, Dr. Schaap covers systemic risk.
    Email if you would like a copy.

    There are no magic picks or formulas. One needs a list of possible candidates
    and then watch for a set up and an opportunity. Look to some different sectors.
    When one is rotating into favor, another is rotating out of favor. Dr. Schaap says,
    "It's not how many times you trade right; its how many trades you
    time right." So have a small list of opportunity and learn strategies and entries.
    Practice will make you a more consistently profitable trader.

    For anyone having trouble with the concept of pivots, you might want to review
    the March 22 webinar, archived at TDAmeritrade.

    Sector ETFs are a way to get the big picture.


    The iShare ETFs, or exchange traded funds, trade like stocks and are based on
    indexes. Currently, the majority of the sector ETFs are below the 50-week MA
    which represents the long-term trend. Only energy (IYE), basic materials (IYM)
    and natural resources (IGE) are above the 50-week MA. Energy and precious
    metals are late bull market sectors. In the early bear market, consumer non-
    cyclical and healthcare are good performers, and they are both defensive for
    your portfolio. The following 12 iShare sector ETFs can be used to track the
    overall business cycle, simply apply the 50-50 Trading Plan to the chart, then you
    will know when to be in and when to be out.
    Diagram of Stock Market Cycle posted at www.StockMarketStore.com Learn wealth strategies
    with Dr. Charles B Schaap – his new book Invest with Success.

    Basic Materials IYM


    Consumer Services IYC
    Consumer Goods IYK
    Energy IYE
    Financial IYF
    Healthcare IYH
    Industrial IYJ
    Natural Resources IGE
    Technology IYW
    Telecommunications IYZ
    Transportation IYT
    Utilities IDU

    The iShare family has over 150 ETFs to break down the above sectors into
    industries and to cover all aspects of the US and foreign economies. Learn more
    at ishares.com. Once you target a bullish sector, drill down and find a stock within
    the sector that meets your criteria.

    Here is an example of time frame dynamics:

    Gold has been up trending. There was a period of consolidation early 2007, and
    this weekly chart of gold shows that since late 2007, gold has been in an uptrend.
    This is a 60 minute chart of gold. Prices fluctuate up AND down and it takes
    understanding sector rotation and trend hierarchy to time your trading for the best
    profits. Momentum precedes price, learn more from the book ADXcellence.
    Chapter 6 is entirely on momentum.

    The previous two charts show price with ADX/ DMI - you can learn more about
    this indicator at www.ADXcellence.com. Price looks the same whether you use
    ADX or the 50 week moving average. Don’t confuse indicators with price. Price is
    what matters.

    More Advanced:
    Momentum is a great set up for options trading. Review the archived options
    webinar at TDAmeritrade, the date was June 27. The hand out is at the link
    mentioned below.
    Time frame analysis was the basis of the AMSC trade featured at
    www.StockMarketStore.com. While I used options as a strategy, PRICE gave me
    the trade.

    Keeping it simple:

    The 50-50 Trading Strategy is a way to understand market direction. You can
    apply the strategy to any chart and tell immediately what price is doing. No ifs,
    ands or buts – now you know. www.5050Strategy.com is the site; Invest with
    Success is the book.

    Now let’s look at some charts:


    Energy and commodities are still up trending, but it is a mature trend. Notice that
    price has not made a new high since last year.

    This chart of XOM, a leader in the energy sector, is not up OR down, price is
    sideways. Would you be ‘surprised’ if price goes back to the recent highs? The
    professional trader is prepared, never surprised.

    Sectors rotate over periods of years and months. FLO is part of consumer non-
    cyclical sector, or consumer staples.
    Here is a daily chart of XBI – the SPDR ETF for biotech. Biotech and health care
    are part of the ‘defensive’ sector of the economic cycle. Compare what you now
    know and what you see on this chart with daily charts of MYGN, BIIB, DNA,
    OSIP, CELG, and AMGN – all stocks from that are part of this ETF.
    Price fluctuates. The 50 EMA is not a magic point on the chart, it is a guide, and
    it represents a time frame to use as a plan for managing risk and reward. In his
    new book, Invest with Success, Dr. Schaap explains exactly how to do that.

    Profits are a choice. You can do what you want, or learn to do what makes
    cents. Now you have the right stuff!
    2008 © All Rights Reserved Candy and Charles Schaap

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