Many equity traders strive to identify stocks that are ready to break out and begin a sustained move higher in price.  The difficulty lies in identifying which stocks are setting up to break out and determining when the breakout will occur.

One technique I like to use in identifying breakout setups is the Stochastic Pop.  This situation arises when the stochastic indicator goes above the 70 – 80 level.  Instead of reversing, however, the market tends to pop and momentum continues to rise. 

The Stochastic Pop is not a new technical indicator; Jake Bernstein wrote about this phenomenon years ago. To increase the odds of success, I have added a few refinements, requiring confirming signals from both the daily average directional index (ADX) and weekly stochastic signals. 

When I first showed this indicator to a colleague, he immediately named it the PopSteckler.

I identify a PopSteckler setup when the following set of conditions occur:

1. Recent

This is the second installment of a rerun of periodic series chronicling the history of the street. The series originally ran in Technically Speaking beginning in September 2000.

Last month, I noted that the Dutch not only came up with the idea of selling part ownership in trading adventures in the form of stock, but that they were also responsible for making those shares of ownership salable, or fungible.  While the latter truly is a strange word, if not disgusting imagery, it’s just a financial term for something which can be readily exchanged or sold for something just like it, such as stocks or bonds.

The idea of selling your shares before your ship literally came in, allowed investors to cut their losses or take early profits.  Either way, the arrangement gave the investors some peace of mind when they couldn’t see the day to day events of the excursion itself.

Early Colonies

It

Please tell us what you do professionally.

Currently I am the Executive Director and CEO for the TAN Association.

How did you get there?

I started my career on Wall Street on the buy-side in Chicago at a long-only institutional equity manager, with a value orientation. I say value orientation, because when you look back at the process, it was really more of value process with a momentum overlay. The firm managed $10-12 billion and only held 40 full positions with several in flux at any time. I had the good fortune to have responsibility for the tech sector within a value fund (a lot to potentially unpack here, but we won’t go into that now).

After a few years there, I moved to New York and joined a sell-side tech sector boutique shop covering semiconductor stocks. Ultimately, I moved into managing research and research products and then had the opportunity to run

Please tell us what you do professionally.

I run a small 40-year-old research firm focused on price momentum covering all major asset classes. Our clients are hedge fund managers, mutual fund managers, and corporate treasurers.

How did you get there?

I was lucky! Lucky that my junior year Portfolio Management & Securities Analysis class textbook had a chapter on technical analysis. Reading that chapter was like the proverbial light bulb turning on. Market action was all about demand and supply! Therefore, price movement reflected the ever-shifting balance of demand and supply in the market.

From there I went to William O’Neil’s chart books and joined the student investment fund. Then I’d go down to the TV room after lunch before my fraternity brothers came down to watch the Three Stooges. I’d watch the primitive cable news channel that had a ticker tape running across the bottom and updated market average prices every two minutes.

Gathering his insights from a five-decade career, Walter Deemer published a book titled, “When the Time Comes to Buy, You Won’t Want To.” The name derives from a 1970’s incident at Putnam Investments.

At that time, when he headed up Putnam’s Market Analysis Department, the market started a correction. Fortunately, he had anticipated it. However, some of the perma-bull money managers, who were generally skeptical of technical analysis, were annoyed that the market was going down as he had predicted. They started coming into my office almost immediately: “Is it time to buy yet?”

“No, not yet,” he replied.

This continued day after day as the market kept going down. After tiring of the routine, Deemer shrugged his shoulders and said “When the time comes to buy, you won’t want to.”

He learned that in order to make a point he had to hit money managers quickly and succinctly. That’s why this book consists

Members on the Move

The TAN Association would like to congratulate the following members on their new positions:

• Rohit Mandhotra, CMT, CFTe, Financial Products at Bloomberg LP
• Michael Mobley, Co-Owner at Hidden Ridge Farm LLC
• Adnan Younis, CFA, CMT, Chief Strategy Officer (CSO) at Data Whizz Academy
• Michael Kahn, CMT, Technical Analyst at Lowry’s Research Corp.

If your membership is about to lapse, don’t forget to renew!  Login to www.cmtassociation.org and on the My Account page, select Join/Renew TAN Association.

Updating Your Profile

Have you moved recently or changed jobs? Now is the time to update your profile!  Updated profiles guarantee continued and accurate communication with the TAN Association and its members. To update your profile, login to the CMT website and under My CMT select My Account.  On the following page, under My Account select Edit My Information.

Your cooperation is greatly appreciated!

CMT Exam

Don’t forget to schedule your exam at Prometric for the December 2019 test administration.