This presentation has been approved by Wells Fargo Advisors Compliance Advertising Review (CAR) for the PCG/ISG channels a...
Point & Figure Analysis The analysis in this presentation is known as a technical analysis. You may also want to consider ...
Point & Figure Analysis <ul><li>A Disciplined Approach to Buying and Selling Stocks, ETF’s, and Mutual Funds </li></ul>The...
Fundamental Analysis vs. Technical Analysis <ul><li>What to Buy </li></ul><ul><li>Company Management </li></ul><ul><li>Ear...
Supply and Demand <ul><li>We all understand the basic forces of supply and demand.  </li></ul><ul><li>The same forces that...
© Dorsey, Wright & Associates 2009
© Dorsey, Wright & Associates 2009 ORIGINAL POINT & FIGURE CHART
Point & Figure Basics X’s = Price is rising O’s = Price is falling Alternate columns of X’s and O’s Minimum of 3 X’s or O’...
© Dorsey, Wright & Associates 2009 Chart Source:  www.dorseywright.com
Stock (XYZ) © Dorsey, Wright & Associates 2009 Did the fundamental analysts learn from the 2000-2002 Technology Bubble? Th...
© Dorsey, Wright & Associates 2009 Chart Source:  www.dorseywright.com
© Dorsey, Wright & Associates 2009 Chart Source:  www.dorseywright.com
Causes of Price Movement <ul><li>Market and sector forces together typically cause 80% of the price movement in a stock.  ...
Typical Resource Allocation <ul><li>Most people, however, spend 80% of their time on stock evaluation and only 20% on sect...
The Five-Step Game Plan <ul><li>Step 1: Market Analysis </li></ul><ul><li>Step 2: Sector Analysis </li></ul><ul><li>Step 3...
© Dorsey, Wright & Associates 2009 Step 1:  Market Analysis
The Buy-and-Hold Myth <ul><li>Buy the “Market” in 1929… </li></ul><ul><li>It took 25 years to get back to even. </li></ul>...
© Dorsey, Wright & Associates 2009 Source:  http://www.nytimes.com/interactive/2009/01/06/business/20090106-comeback-graph...
© Dorsey, Wright & Associates 2009 <ul><li>Leg # 1:  Equity Exposure and Managing the Trade </li></ul><ul><li>Leg #2 & #3:...
Leg #1:  Measuring Supply & Demand Double Top One column of X‘s exceeds  a previous column of X‘s. Double Bottom One colum...
Leg #1:  NYSE Bullish Percent © Dorsey, Wright & Associates 2009 <ul><li>X’s = Offense – Wealth Accumulation </li></ul><ul...
Leg #2 & 3:  Compare One Asset Class to Another © Dorsey, Wright & Associates 2009 US Stocks Cash Fixed Income Int’l Stock...
The Way Investors Invest -- Who Do You Believe is Going to Be a Better Football Team Next Year?
<ul><li>All major sports have a ranking system.  The Point & Figure Relative Strength tool is the ranking system we use.  ...
Cash or Stocks?  © Dorsey, Wright & Associates 2009 <ul><li>Relative Strength:  A Ranking System </li></ul><ul><li>X’s = C...
Cash or Commodities? © Dorsey, Wright & Associates 2009 <ul><li>Relative Strength:  A Ranking System </li></ul><ul><li>X’s...
Leg #2 & 3:  Asset Class Evaluation © Dorsey, Wright & Associates 2009
X Equity Commodities Fixed Income Int’l Cash Reaching Your Destination
Technical analysis is based on the study of historical price movements and past trend patterns.  There is no assurance tha...
Copyright © 2009  Dorsey, Wright & Associates, Inc. Keep in mind that there is no assurance that this or any strategy will...
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A Point and Figure Introduction

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Point and Figure Analysis

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A Point and Figure Introduction

  1. 1. This presentation has been approved by Wells Fargo Advisors Compliance Advertising Review (CAR) for the PCG/ISG channels and a reference number is included on the cover slide. As this presentation does not require re-submission to CAR it must be used in its entirety and cannot be edited. Remember to add your name and firm approved title to the cover slide. If you are part of the Wells Fargo Advisors FINET channel please contact your CAR analyst for a FINET approved version.
  2. 2. Point & Figure Analysis The analysis in this presentation is known as a technical analysis. You may also want to consider quantitative and fundamental analysis before making any investment decisions. Please be aware that Dorsey Wright research can and will differ from the research provided by Wells Fargo Advisors own technical analysts. Wells Fargo Advisors, LLC is a registered broker-dealer and a separate non-bank affiliate of Wells Fargo & Company. CAR 0209-2697 J Duncan Black, M.B.A. Senior Vice President - Investments PIM Portfolio Manager Wells Fargo Advisors 900 Elm Street Manchester, NH 03101 603-644-0646 Securities and Insurance Products: Not Insured by FDIC or any Federal Government Agency May Lose Value Not a Deposit of or Guaranteed by a Bank or Any Bank Affiliate
  3. 3. Point & Figure Analysis <ul><li>A Disciplined Approach to Buying and Selling Stocks, ETF’s, and Mutual Funds </li></ul>The Company fundamentals looks great. All the analysts love it. So why is the stock going down? © Point & Figure Coaching and Research GmbH
  4. 4. Fundamental Analysis vs. Technical Analysis <ul><li>What to Buy </li></ul><ul><li>Company Management </li></ul><ul><li>Earnings Quality </li></ul><ul><li>Price/Earnings Ratio </li></ul><ul><li>Product Acceptance </li></ul><ul><li>When to Buy </li></ul><ul><li>Trend Analysis </li></ul><ul><li>Relative Strength </li></ul><ul><li>Momentum </li></ul><ul><li>When to Sell </li></ul>What is Fundamental Analysis? What is Technical Analysis? © Dorsey, Wright & Associates 2009
  5. 5. Supply and Demand <ul><li>We all understand the basic forces of supply and demand. </li></ul><ul><li>The same forces that affect prices in the supermarket also affect prices in the stock market. </li></ul><ul><li>Stocks, sectors, and asset classes move in and out of favor just like produce in the supermarket. </li></ul>© Dorsey, Wright & Associates 2009
  6. 6. © Dorsey, Wright & Associates 2009
  7. 7. © Dorsey, Wright & Associates 2009 ORIGINAL POINT & FIGURE CHART
  8. 8. Point & Figure Basics X’s = Price is rising O’s = Price is falling Alternate columns of X’s and O’s Minimum of 3 X’s or O’s in a column Time = First action in month use number. (1 for January, etc.) Use daily high & low for charting price action. © Dorsey, Wright & Associates 2009 Chart Source: www.dorseywright.com
  9. 9. © Dorsey, Wright & Associates 2009 Chart Source: www.dorseywright.com
  10. 10. Stock (XYZ) © Dorsey, Wright & Associates 2009 Did the fundamental analysts learn from the 2000-2002 Technology Bubble? The following is a quote from the February 9 th New York Times article, “Why Analysts Keep Telling Investors to Buy” “ At the top of the market, they urged investors to buy or hold onto stocks about 95 percent of the time. When stocks stumbled, they stayed optimistic. Even in November, when credit froze, the economy stalled and financial markets tumbled to their lowest levels in a decade, analysts as a group rarely said sell. “ Chart Source: www.dorseywright.com
  11. 11. © Dorsey, Wright & Associates 2009 Chart Source: www.dorseywright.com
  12. 12. © Dorsey, Wright & Associates 2009 Chart Source: www.dorseywright.com
  13. 13. Causes of Price Movement <ul><li>Market and sector forces together typically cause 80% of the price movement in a stock. That means the company fundamentals usually account for less than 20% of a stock’s price movement. This is the reason a company’s stock price sometimes seems to move independently of the fundamentals! </li></ul><ul><li>Source: “The Latent Statistical Structure of Securities Price Changes” Benjamin F. King </li></ul>© Dorsey, Wright & Associates 2009
  14. 14. Typical Resource Allocation <ul><li>Most people, however, spend 80% of their time on stock evaluation and only 20% on sector and market evaluation. </li></ul><ul><li>In other words, they ignore where the greatest amount of risk lies – the market and sector forces. </li></ul><ul><li>Source: “The Latent Statistical Structure of Securities Price Changes” Benjamin F. King </li></ul>© Dorsey, Wright & Associates 2009
  15. 15. The Five-Step Game Plan <ul><li>Step 1: Market Analysis </li></ul><ul><li>Step 2: Sector Analysis </li></ul><ul><li>Step 3: Fundamental Analysis </li></ul><ul><li>Step 4: Technical Research </li></ul><ul><li>Step 5: Risk management and Follow-up </li></ul>© Dorsey, Wright & Associates 2009
  16. 16. © Dorsey, Wright & Associates 2009 Step 1: Market Analysis
  17. 17. The Buy-and-Hold Myth <ul><li>Buy the “Market” in 1929… </li></ul><ul><li>It took 25 years to get back to even. </li></ul><ul><li>Buy it in 1973… </li></ul><ul><li>It took 7.6 years to get back to even. </li></ul><ul><li>Note: Past performance is no guarantee of future success. </li></ul>© Dorsey, Wright & Associates 2009
  18. 18. © Dorsey, Wright & Associates 2009 Source: http://www.nytimes.com/interactive/2009/01/06/business/20090106-comeback-graphic.html
  19. 19. © Dorsey, Wright & Associates 2009 <ul><li>Leg # 1: Equity Exposure and Managing the Trade </li></ul><ul><li>Leg #2 & #3: Two of the Following </li></ul><ul><li>Domestic Equities </li></ul><ul><li>International Equities </li></ul><ul><li>Commodities </li></ul><ul><li>Foreign Currencies </li></ul><ul><li>Fixed Income </li></ul><ul><li>Cash </li></ul>3 Legged Stool Approach to “How Offensive or Defensive Should I Be?”
  20. 20. Leg #1: Measuring Supply & Demand Double Top One column of X‘s exceeds a previous column of X‘s. Double Bottom One column of O‘s exceeds a previous column of O‘s. © Dorsey, Wright & Associates 2009 39 O 38 O 37 O 36 O 35 O X 34 O X X 33 O X O X 32 O X O X 31 O O 30 39 38 X X 37 X O X O 36 X O X O 35 X O O 34 X O 33 X 32 X 31 X 30 X
  21. 21. Leg #1: NYSE Bullish Percent © Dorsey, Wright & Associates 2009 <ul><li>X’s = Offense – Wealth Accumulation </li></ul><ul><li>O’s = Defense – Wealth Preservation </li></ul><ul><li>Two Lines of Demarcation: 30% and 70% </li></ul><ul><li>Measures Risk in the Market </li></ul><ul><li>Does not have to move in tandem with the S&P 500 or the Dow Jones. </li></ul>Chart Source: www.dorseywright.com
  22. 22. Leg #2 & 3: Compare One Asset Class to Another © Dorsey, Wright & Associates 2009 US Stocks Cash Fixed Income Int’l Stocks Foreign Currencies Commodities
  23. 23. The Way Investors Invest -- Who Do You Believe is Going to Be a Better Football Team Next Year?
  24. 24. <ul><li>All major sports have a ranking system. The Point & Figure Relative Strength tool is the ranking system we use. </li></ul><ul><li>Daily Calculation : </li></ul><ul><li>Cash X 100 = Relative Strength </li></ul><ul><li>US Stocks Reading </li></ul><ul><li>This reading is plotted on a Point & Figure chart which then tells us whether we want to be in cash or US stocks </li></ul>Relative Strength Calculation
  25. 25. Cash or Stocks? © Dorsey, Wright & Associates 2009 <ul><li>Relative Strength: A Ranking System </li></ul><ul><li>X’s = Cash – Wealth Preservation </li></ul><ul><li>O’s = Stocks – Wealth Accumulation </li></ul>Cash: 2001-2002 Cash: 2008-Present Chart Source: www.dorseywright.com
  26. 26. Cash or Commodities? © Dorsey, Wright & Associates 2009 <ul><li>Relative Strength: A Ranking System </li></ul><ul><li>X’s = Cash – Wealth Preservation </li></ul><ul><li>O’s = Commodities – Wealth Accumulation </li></ul>Chart Source: www.dorseywright.com Date Range Column Cash - Money Market Continuous Commodity Index 7/15/98 - 10/15/02 X - Cash 18.41% 10.11% 10/15/02 - 8/15/08 O - Commod. 16.87% 115.71% 8/15/08 - 1/31/09 X - Cash 0.23% -26.97%
  27. 27. Leg #2 & 3: Asset Class Evaluation © Dorsey, Wright & Associates 2009
  28. 28. X Equity Commodities Fixed Income Int’l Cash Reaching Your Destination
  29. 29. Technical analysis is based on the study of historical price movements and past trend patterns. There is no assurance that these movements or trends can or will be duplicated in the future. Dorsey, Wright & Associates developed the indicators described in this presentation. They have been prepared without regard to any particular investor’s investment objectives, financial situation and needs. Accordingly, investors should not act on any recommendation (expressed or implied) or information in this presentation without obtaining specific advice from their financial advisors and should not rely on information herein as the primary basis for their investment decisions Any statements nonfactual in nature constitute only current opinions and interpretations of their indicators, which are subject to change without notice. There may be instances when fundamental, technical and quantitative opinions may not be in concert. This and/or the accompanying information was prepared by or obtained from sources that Wachovia Securities believed to be reliable but does not guarantee its accuracy. Any opinions expressed or implied herein are not necessarily the same as those of the Wachovia Securities research department. Any market prices are only indications of market values and are subject to change. The material has been prepared or is distributed solely for information purposes and is not solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Data and opinions are current as of May 19, 2009. Additional information is available on request. © Point & Figure Coaching and Research GmbH
  30. 30. Copyright © 2009 Dorsey, Wright & Associates, Inc. Keep in mind that there is no assurance that this or any strategy will ultimately be successful or profitable. © Point & Figure Coaching and Research GmbH

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