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1. The Author is not an investment advisor, nor a securities broker. The information provided in the letter and on the website is for informational purposes only. The information is made to investors, traders, and speculators in general and without regard to your investment goals, financial circumstances, your investment knowledge or your investing or trading abilities. The information and statistics in the letter are obtained from sources I deem reliable but are not warranted to be accurate or complete. Consult a financial advisor before purchasing any security.

2. Information on the website or in the newsletter is not to be construed as an offer to buy or sell any security. Contrary to what is written in "brookinsbuys," or on the web site, all references to "You Should Buy," etc, and all buy or sell point statements should not be construed as a recommendation that you in fact should buy the securities. It merely expresses my personal views which evolve from my personal trading strategy and my personal reward-risk tolerances.

3. You may lose money from investments or trades in the letter or on the web site. Past performance may not be indicative of future performance.

4. Occasionally I add what I believe to be uplifting and motivational quotes in the letter, to include Bible Verses, ancient Chinese proverbs, and various quotes from anonymous and famous authors. Sometimes I'll comment on  highly controversial issues, but hey, you get to know me. You are welcome to provide feedback. And if you are offended you may request a pro-rated refund on your subscription. You may not hold the author, HB Trading Company Inc, brookinsbuys, myself or any other of my associates liable for any reason. You simply can have the unused portion of your subscription money returned.

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Newsletter Purpose

I designed the newsletter primarily to help an investor/trader narrow down 10,000 plus stocks to a few potential winners. There are many “uses.”  (Some people actually subscribe for the Market direction I provide. They either trade options, or just want to know when to move in and out of their Mutual Funds)

Newsletter Value

     Even I subscribe to a few newsletters. I do so because there are so many stocks in the market moving, that my screens might not catch them all. Many eyes are better than one. I decide to subscribe to a newsletter simply by determining if I get a good return on my investment (ROI).  If I pay $500, I have to be able to make at least $500 during the year on 1 of the letter’s picks, whether I eventually buy the stock or not. If a guy can give me 1 winner, it can pay for my costs. I usually trade 1000 shares at a time, so all I need is a .50  move.  If he gives me two picks in a year that move, then I “should” be in the money. I don’t base my subscription on whether or not I actually trade the stock or not. I pay someone simply to narrow down my research time at night.

Choosing a Stock

     Some stocks I choose are based on fundamentals (earnings, etc) and technical analysis (TA), or in other words chart pattern. Right now, I am using fundamental (financial) screens to find stocks that are undervalued. I then look at them each night and see which ones have favorable chart patterns for a move up over the next few days. I usually place these type stocks in the model portfolios. I also place these in the watch sections. I also scan for stocks moving on news, and/or that has heavy volume starting to enter the stock. These are often the biggest winners and don’t even have earnings yet! (TZOO $11 to $100).

Over the years I have made good money with both techniques. Whether I use both fundamental and TA, or just TA, depends on Wall Street’s perception of “value.” Back in 95-98, the internets were flying through the roof, gaining several hundred percent in a week, with NO earnings. Thus during that latter period of the Bull Market, valuation meant nothing whatsoever to Mutual Funds that pushed the markets higher. Some “Value Funds” even changed their definition of “value” so that they could purchase internet stocks (with no earnings) in their funds. Growth funds were killing them return-wise. So back then we traded largely on chart pattern so we could get in on the moves. After all, we are interested in percent return, not with the name of the company. 

 Newsletter Guide - Markets section

     Fact: the market is like the ocean, and your little stock is like a boat……when the tide rises, little boats rise with it. When the tide falls, the majority of “boats” fall because people get scared. The Indices in themselves are not that important when trading individual stocks. However, we track them because a strong market will tend to cause people to be jubilant and buy stocks – natural reaction. They perceive the market is “good.” And when an index falls, people worry that their stock will fall, and they exit. It often becomes a self-fulfilling prophecy.

     There’s another thing called “computerized trading.” Large Mutual Funds trade “baskets” of stocks. Many stocks are bought and sold with a computer, at once, when the indices break support or rise through resistance. This is done automatically. So I monitor important support and resistance areas in the markets.

     The 9-day moving average is a very important short-term support area. A stock (or market) should not drop below that level unless there is some serious selling. I have found that if a stock (or market) closes two days in a row below the 9-day ma, that it tends to move on down to the 21-day ma (which can be a 10-15% correction). And once below the 21-day ma, it tends to move on down to the 50-day ma. Then the 200-day ma. So I monitor important support and resistance levels.

     In general, if the market is above its 9-day ma, it’s ok to buy and hold. If it closes 2 days in a row below the 9-day ma, I take profits off the table, and hold off buying a lot of stocks. Sometimes we just enter a short-term pause, but many times we enter a large correction. That is why my subscribers have NEVER been caught holding stock in a market correction over 8%. We have always been in cash or short. My subscribers were practically unbothered by the largest bear market of the past few years if they followed the letter.

     Remember, if you don’t bet, you can’t win. But if you don’t have chips, you can’t bet……so we try to keep our chips. There will always be another stock to get tomorrow.

Guide

     Before I cover further sections of the newsletter, I want to discuss the types of orders that I commonly place when trading, and the types you’ll see in the newsletter. I also want to cover some market facts and philosophy of trading.

     There are two directions to trade in the market to make a profit. The first is called “going long.” Going long means buying a stock at a lower price and selling at a higher price. The second is called “selling short.” This is when we sell a stock at a given price and buy it back at a lower price. If you look at a 200-year chart of the DJIA Index, you’ll see a slightly upward sloping price graph, at an approximately 30 degree angle. Within that upward sloping graph, you’ll see numerous “sine waves.” It basically looks like ocean waves, with peaks and troughs. The time periods when the market prices were rising is generally called a “bull market,” and lasts on average approximately 3.5 years. Then you have the periods of downward sloping prices, called “Bear Markets.” These down times usually average 1.5 years. Because we have these up and down price swings, with the upward sloping times outlasting the downward sloping times, AND still have an overall upward sloping price chart, then you can make a general conclusion that all things considered, it is better (safer, odds of winning are higher) to “buy long” than to “sell short.” A larger amount of time is spent during which the market rises. This is a general concept that you need to keep in the back of your mind, especially during periods when I have us sit in cash in the 100k model. It’s likely because I’d rather wait for a market upswing, than to play the higher risk game of selling short.

Ok……philosophy of entering and exiting a stock………..

     Imagine me asking you to go outside and push my car down the street. It would be tough to get the car moving. But once the car began rolling, once you have achieved “momentum,” it would be easier to continue pushing the car in the same direction. On the other hand, let’s say a car is rolling down the street already, and I asked you to go push it to make sure it continued moving. Which would be easier? And finally, imagine a car rolling down a hill, and I ask you to get the car rolling back uphill.

     Point is……my method of investing/trading involves buying a stock that is already moving up, and selling short a stock that is already moving down. We are trading in the direction of the present motion. This increases our odds of winning.

Buying Long

I had to develop a way to trade while I was working a full-time in the military. The “Buy Stop Order” and the “Limit Buy Order” are my weapons of choice. If a stock is “basing,” I want that stock to be moving up when I buy it…..I want it to show me strength. So I place a “Buy Stop Order.” Here’s an example.

     Stock  ABC has been bouncing up and down for a week now, between $5.00 and $6.00. I want to buy it just as it leaves that “base,” or just above $6.00. That’s called a “break out.” So I’ll place a “Buy Stop Market Order, good for the day.” The “stop price” will be $6.01. Then I go off to work.  While at work, the stock moves up and hits $6.01. At that time, my order becomes a “market” order.  My stock is bought automatically. It may or may not be $6.01 exactly, because at $6.01 it has to stand in line and wait for shares to be available at $6.01. If there are no shares available until $6.03 (which happens if there is strong demand for the stock), then my execution could be $6.03. In any case, I am off at work and I don’t miss the move on the stock.

Buy Limit Order

     You’ll see me placing a “Buy Limit Order” when I want to buy a stock at a LOWER price than it is currently trading. Or I’ll place this type order when I don’t want to pay more than a specific price.

Example:  Stock XYZ just took off out of a base and is flying higher, trading at $10. I want to get in it but don’t want to pay the high price. I will place a buy order, at a limit price of $9.25. I then take off to work. If the stock keeps going higher, I won’t get in. But if the stock drops to $9.25 during the day, my order will automatically execute at $9.25.

Protective Sell Stops

     Once I am “long” a stock, I want to place a “sell stop order” to protect me against a sudden drop in my stock while I am off at work, or on the golf course. Sometimes I place these orders to “protect my profits.” I usually pick the sell stop price to be just below the 9-day moving average. I place it like this…..

     Let’s say I own the stock at $10. The 9-day moving average is at approximately $9.30. I will place a sell stop order at approximately $9.20, then take off to work. If the stock drops to $9.20 during the day, then my order executes and my stock sells. It may execute lower than $9.20, depending how many shares are “available” for sale at $9.20. But in any case, I’ll be out near $9.20.

Specific section sin the newsletter:

TRADES IN PROGRESS

Stocks that I am actively trading, that hit my buy targets as mentioned in the newsletter. I try to characterize them by their chart patterns and price/volume behavior. “Breakouts” - when a stock has been trading in a range (ex: between $5 and $6) for a period of time, that is called "basing;" when it finally breaks above $6, that is a major buy point and the stock is "breaking out" of its range. I buy from this section occasionally, but usually use a “limit buy” order. Trending up - the stock is in the middle of a trend; more risky to buy in this chart pattern. “Basing” - when a stock bounces between two price levels; these stocks become "buys" if they break above their price resistance (high end of trading range). I try to buy from this section usually with a “buy stop” order. Pullback to Support - stocks that have moved, or are moving back price support. Weak Stocks - have broken price support or acting weak; consider selling.

WATCH LIST

 I am watching the stocks in this section, and am waiting for buy points to be hit.

MODEL PORTFOLIO

I try to place stocks in the model portfolio that have both fundamentals (value) AND have a nice chart. There are other selection criteria, but that’s not of real importance here…

Most stocks in the model are meant to be bought for the long term (> 1 year). However, personally I don't like to sit through 20% declines and "hope" they come back. So I tend to cut losses in the 5-7% range, sometimes much quicker.