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After introducing the MONTHLY STOCK MOVER (MSM) INDICATOR last week I have had many inquiries about the correct way to use this focused weapon. The bottom line: there is no “correct” way, only a few suggestions, which I briefly touched on when I originally introduced this WEAPON. Now, I will discuss in a little more detail how you can use this weapon when determining whether or not you should enter battle.
The MSM is no substitute for your own technical analysis. It is not designed as a signal to enter or exit a trade. If you have a good set of rules for entering and exiting the market, then a weapon such as MSM should only be used as further confirmation of your historically based research. In other words, if I have a bullish CROSSHAIR on a particular stock at the beginning of November, I could then check the MSM to see if this same bullishness has been present in past Novembers.
A recent student of mine clued me in on a very good example (thank you Bill!). He has noticed that steel stocks, particularly NUE and X, have a tendency to find a bottom in the middle of November and then move up into the middle of December. Here is how we would run the test.
THE MONTHLY STOCK MOVER FOR US STEEL (2000-2008)
Notice the MSM reveals a bullish pattern the last five days of November eight out of the last 9 years.
THE CHARTS:
Look at the charts and see if you find a pattern from past years where there may have been a bottom. Here are the last three NOVEMBERS for US STEEL (X):
2006
2007
2008
See anything here? Bottoms 16th, 19th, and 20th. Other years are quite similar.
CURRENT CHART:
Historical numbers are just that but what are the current charts telling us about X?
The current charts could be indicating a bottom as we find support along the 200 TANKS. This could be the same pattern that has formed 8 of the last 9 years. If I have a CROSSHAIR over the next few weeks and the bottom is still in place above the 200 TANKS, then I may have a very high probability trading opportunity. I will be prepared and will be ready to enter battle if and when my CROSSHAIR forms. Until then I wait.
No matter your trading strategy, you may be able to benefit from the MSM as it helps you confirm high probability trading opportunities. Who knows, you may find it offers just the confirmation you need to enter battle with greater confidence.
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