Providing investor education, product enhancements and software solutions on how to become a more successful online trader with The Investrio Mentor Center. Understanding the Stock Market The purpose of today's column is to provide you with invaluable insights into the Stock Market. Today’s Topic: Detailed Description of a Five-Year Trading Activity for General Motors Corporation using The Investrio Wall Street Mentor Center. Now see the chart of General Motors below which tracks the fluctuating price of GM over the past five years. Notice that the trend for the first three years was up, and substantially down for the last two years. But, overall for the five year period was basically flat— it began at $56 and ended at $53. Let's illustrate the difference in timing as it applies to GM during the same last 5 years. You would have started out with the same 100 shares at $56 per shares in February 1997. The First Climb By October 1997, the price had climbed up and peaked at $72. As the price began to weaken, the software gave you a strong sell signal at $64. At that point, your $5,600 would have grown to $6,400, a profit of $800 or 14% in 8 months—not too shabby, right? The price of GM continued downward through November and December bottoming at $55. Then as it began to rebound, you got another buy signal in January, 1998 at $58. Your $6,400 bought you 110 shares this time at $58 per share. The Second Climb GM stock then rose $18 per share up to $76 before you received your next sell signal at $69. You would have realized $7,590 when you sold your 110 shares at $69. Your profit on this trade in just five months is $1,190 or 19%. It's good you sold at this time, because the price fell all the way down to $47 before you got another buy signal at $52 in October, 1998. At $52, you bought 146 shares with your $7,590. It Soared this Time During the next five months, GM stock soared again finally peaking at $92 in January, 1999. It bounced around between $85 and $90 until May, when you got a strong sell signal at $86. Selling at $86 would have yielded $12,556 by selling your 146 shares. For this seven month period, your profit was a whopping $4,966 or 65%. Please notice, you are NOT buying at the very bottom nor selling at the peaks, a feat that would be difficult to accomplish. However, when you get the strong signals of change in short term trend from the software, if you act quickly and decisively, you can still make very nice profits. There is an old saying in the commodities and stock market, "Pigs get fed—Hogs get slaughtered." The stock market is not the place to get greedy. Again, it was a good time to sell, because in just two months, it plummeted to $60 before turning around again. Your next buy signal came in September 1999 at $62. Reinvesting your $12,556 at $62, would buy 202 shares this time. Put Yourself in these Shoes Let's pause and imagine here for a moment. What if you had just bought for the long term and didn't have a tool to alert you to these changes in short term trends? Can you imagine the scary roller coaster ride you would be taking as you watched your shares soar, then plummet, and soar again, only to crash back down time after time? Could you sleep nights? At what point would your emotions take over and you panic and call your broker to sell out? The emotion of fear of loss of your money, on the other hand, becomes so overwhelmingly powerful, that it prevents most people from selling and selling quickly when they should. These feelings happen to all investors, who are just going for the ride and who have little or no clue to when, why and what is happening. The Price Soared Again From $62 in September, 1999, your 202 shares worked their way back up to $94 by April, 2000. It didn't stay there very long, as it began another very steep slide that didn't stop until it bottomed out at $57 in only three months. Fortunately, you got another strong sell signal at $86, capturing another handsome profit of $4,816 or 38% Your 202 shares at $86 netted you $17,372. It Climbed Yet Again Your next buy signal appeared in August, 2000 at $63 as the price had climbed from $57. At $63 per share, your $17,372, would purchase 275 shares. The next top and sell signal came quickly in just one month when the stock peaked at $76 and began its next decline that didn't stop until it reached $49. Once again your sell signal arrived at $70, preserving a $7 per share profit of $1,925 or 11% in just one month. Is the Trend Changing? If you will look at the chart again, the peak this time was substantially lower than the previous peak and it appears that the upward trend is now turning down. This certainly corresponds with the overall stock market that began turning into a bear market after several years of upward bull market. Still Making Money in a Declining Market Also please notice, GM stock has been in a definite downward decline ever since it peaked back in April, 2000. However, by following the buy and sell signals of the software, we still make three more profitable trades. Notice, also, these last two most recent purchases are made at lower prices than your first purchase nearly five years ago. More Evidence of a Bear Market The next purchase is at $52 per share in December, 2000. Your original investment plus accumulated profits totaling $19,250 buys 370 shares. By August, 2001, the price of GM as well as the overall stock market seems to be in a strong bear market as the price barely gets back up to $66 before reversing itself again. You sell your 370 shares at $59 and count a smaller but still worthwhile profit of 13% or $2,591 for 8 months. You sold at $59 in August and watched the share price continue to fall to $51.58 per share where it closed on September 10, 2001. The stock market never opened on September 11 on that terrible day when disaster struck New York and Washington. When the market reopened again on September, 17, the price opened at $46.50 and continued diving until it finally bottomed out at $39.17 on September 21. Click Here for a free 10 day trail of our Software, Education & Trading System. September 11 Wasn't the Beginning of the Steep Drop in Stock Prices The stock market and General Motors didn't just fall out of bed on September 11. GM, as well as the rest of the market, had been falling steadily since May 2001 and had already fallen halfway to their eventual bottom by September 10. The events of September 11 took it the rest of the way. The point here, those using the Wall Street Mentor Software, were warned months earlier to take defensive positions or sell their stocks. Another great buying opportunity presented itself a month later in October at $43 per share. Your initial investment and accumulated profits purchase 508 shares this final time. And finally by February, 2002, you make your final sale at $53. OK, let's summarize, if you have the right tools, which strategy is better? Buy and Hold Strategy: Date Shares Price Bought Date Price Sold Loss 2/97 100 $56 2/02 $53 ($300) Total Loss ($300) Buy and Sell On the Cycles: Date Shares Price Bought Date Price Sold Profit 2/97 100 $56 10/97 $64 $800 1/98 110 $58 6/98 $69 $1,190 10/98 146 $52 5/99 $86 $4,960 9/99 202 $62 4/00 $86 $4,816 8/00 275 $63 9/00 $70 $1,925 12/00 370 $52 8/01 $59 $2,591 10/01 508 $43 2/02 $53 $5,083 Total Profit $21,371 Same amount invested, same company, same time period, yet quite a difference from a $300 loss wouldn't you say? Until now, investors had little choice but to buy, hold and hope and pray for the best. Now with the Internet, the massive amount of information available and tools like the Mentor Center, you truly do have a choice. You can continue to guess and gamble with your money, you can turn your money over to mutual fund managers or you can learn how to manage your own money. Who cares about your money more than you do anyway? You can test drive The Mentor Center absolutely risk free. 100% Money Back Guarantee! START INCREASING YOUR KNOWLEDGE & RETURNS TODAY. Click Here Thank you again, for the opportunity to share our knowledge and experience with you. “More Millionaires have been created from the stock market than any other source” --Bloomberg Magazine Copyright © 2000-2003 Wall Street Mentors Inc. All Rights Reserved. Member Access |
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