Hmmn, So you think your Strong??

When I was a kid I always had a fascination with Strong Men and the Strong Men competitions. I couldn’t wait for Saturday afternoons when Wide World of Sports on ABC would air. Every year they would have The Worlds Strongest Man Competition and back in those days Bill Kazmaier from Wisconsin U.S.A. was The Man! He seemed unstoppable and unbeatable and I wanted to be just like him. So I would go down to our basement and put the 10 Lb concrete filled plastic weights from Sears on the bar and try not to rupture my underdeveloped adolescent body……

I was motivated, I was determined and more importantly I believed.

As an adult I would go on to enter Alligator Wrestling Competitions, yes  you read that right, that’s another story for another day, very fortunate to still have all 10 fingers and 11 toes!! Honest! I still have all 10 fingers!!

One thing I do still compete in when time allows (and when my overly beaten up body is up for it ) is Scottish Highland Games.  Those are the big guys in the Kilts who as most say, flip telephone poles, ummm noooo, we ‘Turn Cabers ”  And since I am umm  over 50 now, I compete in “The Masters” class, Some think it’s a fancy word for Old Guys but those of us in it know it actually means “True Strength”

Anyone who think it’s easy to get out there and ‘Turn Cabers ” past 50, hey I can sign you up, come on out…

In Investing we need our Stocks to have True Strengh.. I Trade Options, but I Invest with Stocks, and sometimes when appropriate have Options on them.

There are many many different ways to make money in the markets, and then take stock investing for example, you can have different ways of finding or holding your stocks. Some might do Fundamental Analysis other may prefer Technical, or if you are astute you understand that Fundamentals tell you what to buy and that the Technical s tell you when to buy.  And of course the Options tell you who is buying.

One common thing we all have is once we are in a position we are in it. How do we decide what we do from there? For me it is not always about the straight Technical s, yes I use the Simple Moving Averages for entry and add on points.But what is our stock doing against the General Market? How is it performing? If the general Market is up and our stock is down, I cannot for the life of me think of one SOLID reason to keep it. Those who say “Oh well they are expecting Great things next year” Ummm okay, your Crystal Ball works but mine is still in the shop. What we can do is measure our Stocks for their True Strengh. We do this very very simply and easily by calculating its Relative Strength ourselves. We aren’t talking about the RSI indicator created by Wes Weilder, we are talking about the stocks True Strength. Today lets look at how that is determined. This is not as applicable to those who are intraday trading, or in and out in 2-3 weeks. This is for Investors with Stocks who want to know how they are doing against the General Market.In my IRA ( not my intraday accounts)  at the end of the week, most often on Sunday nights I will analyze them like this.

We take the weekly close and divide it by the close of $INDU then multiply it by 1000.

So hypothetically if your XYZ Stock is closes at 58.25 for the week and $INDU closes at 17,002.00 you would have a RS of 3.42  then you do the exact same thing on the exact same day the next week. You want the weekly averages to filter out the noise. You will soon begin to see if your stock RS is rising or if it is falling. Those that rise or stay steady when the General Market is done will typically be leaders in a Bull Run. Remember this does not include any dividends that might be paid. But rarely will those ever make a difference if your stock is declining. Like I stated earlier if your RS is declining and the market is not, Why would you hold a Laggard?  I don’t know abut you but I’m in this to make money, not what might maybe could possibly happen. You cant take the family out on vacation with ‘Well that Company has better plans for next year”

Its no great secret that Gold has had a huge run up this year, lets take a look at a stock related to it that I have and how it has done using our RS model.. It is $NEM

Now we are going to go back the last 6 Weeks to demonstrate the Weekly Average for our stocks Relative Strengh.

Remember we only do this once a week to filter out the noise, and on the same day each week but with a Weekly average, not the average for that day.And also because different stocks have different prices you cannot compare one stock to another with their RS numbers, you can only compare them by if one is rising and one is not and then the rate of rise if they both are. It is incredibly easy yet unbelievably effective.

Weekly Avg ending 7/1/16          $INDU                        $NEM                         RS

6/24/16            17,678.28                    38.42                2.17

6/17/16              17,765.43                     35.69               2.00

6/10/16            17,685.45                       35.70              2.01

6/3/16             17,942.83                      35.48               1.97

5/27/16           17,816.14                       35.21               1.97

5/20/16          17,590.46                      32.42               1.84

There you have it, has our stock steadily increased weekly with Relative Strength?? Yes, yes it has. A solidly proven and mathematically fact based signal of ‘True Strength”

Trade smart, live charitably and be well…… Bill Mc

DISCLAIMER: All content provided and shown in this newsletter, blog chart and or video is for Educational and Entertainment purposes only. Nothing included or mentioned is meant to be construed or used as trading / investment / financial advice. Trading / investing carries risk of loss, losses can and do occur. Know your risk and risk of loss before taking on any financial endeavors. Past performance is NOTa guarantee of future success.