WW Buy Setup

Today Toni Hansen asked me to help her out with her Tradingfrommainstreet chatroom on othernet. One of the trades I was watching with the group was WW, and here is the reasoning behind it as well as the chart. If anyone has questions please feel free to ask away.



[11:57] well here is the realtick chart of WW
[11:57] ill give people a few more minutes
[11:57] as i can see people are still clicking too it
[11:58] looks like Romney dropped out
[11:58] that stinks, I worked for his campaign in Iowa the didicated little democrat that i am
[11:58] awright
[11:58] here is WW
[11:59] my trading is really influenced by several things
[11:59] first is just classic T/A and chart reading
[12:00] as I was saying
[12:00] my trading started out based purely on TA
[12:01] I learned a lot from what Linda Rashke does and has written
[12:01] Edwards and Magee
[12:01] then I become friends with Chris Terry and he helped my chart reading ability a ton
[12:01] so when im looking for a stock to buy or short
12:02] in early 2000 I was interviewed for innerworth
[12:02] and Peter Moon who was funding it really liked my interview
[12:03] he was one of the first commodity managers in Europe in the 80s to go over 100million AUM
[12:03] but he wanted me to not trade purely technically
[12:03] so I had to learn about some fundamentals
[12:03] I started off reading William Oneils book
[12:03] Brandon you need to pod cast this stuff
[12:03] and also listening to Gary Kaultbaums Radio program ( i still listen to it from time to time)
[12:04] if someone shows me how to i will
[12:04] and probably the strongest outside of the basic T/A is Mark Bouchers work
[12:04] I would strongly urge anyone who is serious about managing money to read his book the hedge fund edge
[12:04] and get to know mark if you can
[12:04] so anyway
[12:05] all of this is just to give background
[12:05] I hate it when people claim to have invented the wheel
[12:05] coz no one has
[12:05] you just put the wheel together in your own way
[12:05] so
[12:05] I start off with my scanning
[12:05] Im looking all the time for relative strenght and relative weakness
[12:05] what does that mean?
[12:05] when the market is up, im looking for stocks that cant get going
[12:06] when the market sinks
[12:06] im looking for stocks that it cant shake down
[12:06] and WW is one such stock
[12:06] now for a lot of people
[12:06] the T/A is all that matters
[12:06] for example Stan Weinstein would say sector and stock
[12:06] just go with the charts and thats all you need
[12:06] and its an effective way to go
[12:06] * cduncan has joined #mainstreet
[12:06] but Im more comfortable wtih more info
[12:06] speaking of which ...could you share with us the relative stength weakness formula
[12:07] and i know from my own experience it works better
[12:07] in my scanning I found WW to be stronger than the market in its declines
[12:07] and also as you can see in the weekly chart
[12:07] it was making a nice pullback
[12:07] and its breaking that downtrend line
[12:07] so there you are geting the buy setup
[12:08] as i said, i then look at the fundamentals
[12:08] now im not as in depth as my anthoney is
[12:08] but i look at the basics that Daily Graphs gives u
[12:08] and when I do that I see a few things about WW that make me happy
[12:08] first its got a good return on equity
[12:08] 16%
[12:08] thats better than most investors are able to do
[12:08] so it shows us an effeciently run company
[12:09] next its debt is relatively low at 13%
[12:09] the group also has a decent RS rating at 70
[12:09] next I look at its earnings
[12:09] specifically the last 30 qtrs
[12:09] 3 qtrs
[12:09] not 30 sorry
[12:09] the last three qtrs
[12:09] I see that the last reporteed qtrs are +41, +38 and +22
[12:10] going back four that was was +10
[12:10] so here we have a company with four consecutive qtrs of earnings accelerting
[12:10] that is excellent
[12:10] I then look at sales
[12:10] heres what i hate to see
[12:10] a company does 40% EPS growth
[12:10] but its sales are flat or barely up
[12:10] because when you see that
[12:10] you know they have to be doing something with the numbers thats not real and long lasting
[12:10] laying people off
[12:10] doing share buybacks
[12:11] stupid stuff that makes the EPS look good
[12:11] but might not be the best long term kinda thing
[12:11] in this case with WW
[12:11] that is not the case
[12:11] Sales growht is relativelly solid as well
[12:11] 22, 20, 12,15
[12:11] not as solid as earnings
[12:11] but its close to those numbers
[12:11] and most important its not flat
[12:11] or way far away from the earnings
[12:11] next i like to have a low relaive PE
[12:11] and this stock has that as well
[12:12] the PE is 15
[12:12] I did an article on why the PE can be so important
[12:12] you can find it on my blog or on seeking alpha
[12:12] and maybe tradingmarkets too
[12:12] but i know its on seekingalpha and my blog
[12:12] a low PE gives you additional leverage in a stock
[12:12] I dont want to go into the exact formula i use
[12:12] but this one fits it
[12:12] so we are good there
[12:12] so now we have the weekly setup
[12:13] daily too but i dont have that chart up
[12:13] now
[12:13] we go down to this weekly timeframe
[12:13] and its great
[12:13] daily rather
[12:13] sorry
[12:13] im not all with it today as I had my nipple tore off and put back on yesterday
[12:13] so you will have to forgive little mistakes here and there
[12:13] anyway
[12:13] on the 15 minute chart
[12:13] you can see that WW was very strong out of the gate
[12:13] good volume
[12:13] then it made its base
[12:14] that is the best entry
[12:14] when it broke over 49.50
[12:14] the daily setup is 50
[12:14] but what you will have happen in many many cases is this
[12:14] the momentum that is created by the daytrade setup
[12:14] will carry it over to the swingtrade setup
[12:14] and then the swing crowd gets in etc
[12:14] brings it up more
[12:14] and also in this case
[12:14] what your also able to do
[12:14] is put your stop lower
[12:15] you dont have to risk as much
[12:15] so you can have more shares
[12:15] you have more freedom to move around with it etc
[12:15] so thats it
[12:15] any questions?
[12:15] if someone could PM me and tell me how to do a podcast id love to do them
[12:15] im just a tech idiot
[12:15] i only know how to turn my computer on