249line type, 251, 252point-and-figure type, 251–253sentiment analysis and, 354chat rooms, 108–109Check Point Software Technologies, Ltd.,105Chicago Board of Trade, 416Chicago Board Options Exchange(CBOE), 119, 416Chicago Mercantile Exchange, 314, 315churning, 41–42Cisco Systems, 271–272closed-end fund, 17, 305CNBC, 306, 383–384, 421CNNfn, 92, 384, 421commission, 41–42commodities, 22–24
INDEXcommon shares, 61, 62comovement, 180companiesaccessing information on, 214–216accounting irregularity, 386–387description of, 60–61earnings, 385interest rates, 163investigating, 221investor relations package, 221–223largest computer, 408largest Nasdaq, 413largest NYSE, 407leaks of information, 387management changes, 386management effectiveness ratios,236–237Nasdaq by sector, 408Nasdaq non-U.S. by global market cap,409new product announcement, 385–386Peter Lynch and, 326ratio analysis, 238–239stages of growth, 61, 63takeover, 387See also annual report; fundamentalanalysiscomparison indicators, 312–313complaints, 49, 53consolidation, 264consolidation patternsnarrowing formation, 350–352rectangular, 345–349construction spending, 171, 176Consumer Price Index (CPI), 167–168,169, 175continuation trend line, 268–269contrarian stancedescription of, 166, 291implied volatility and, 298John Neff and, 327–328reversal and, 341short interest ratio and, 302correction, 361covered call, 139, 141, 149, 150–152,400covered put, 149, 152–155, 400covered writes, 148–155
433cover the short, 70crossover method, 256–258current assets, 231current liabilities, 231current ratio, 233–234, 430day trading, 14–15, 52debt, 22debt-to-equity ratio, 234–236, 430decline, indicators of, 360deep discount broker, 44–45delayed quote, 46delta, 129, 132, 405delta neutral, 129descending triangle, 350, 351, 352directional trade, 346discount broker, 44discount rate, 163divergence, 361dividend, 6, 238dollar and interest rates, 164double bottom, 342, 343double top, 342Dow, Charles, 181–183Dow Jones Industrial Averagecurrent dividend yield, 301description of, 18, 66, 183importance of, 92origins of, 181price-to-book value ratio, 301price-to-earnings ratio, 301Dow Jones Transportation Average, 185,187Dow Jones Utility Average, 185, 186downgrade, 360, 385Dow Theory, 182, 210, 311Duke Energy Corporation, 103earningsdescription of, 6fundamental analysis and, 385interest rates and, 164earnings acceleration, 227earnings estimates, 228economy, cycles in, 158–159electronic communications network(ECN), 20–21Elliott Wave theory, 359
434EMC Corporationbalance sheet, 232–233current ratio, 234debt-to-equity ratio, 235fundamental data and ratios, 237–238as growth example, 103–104quarterly income statement, 224statement of cash flows, 239, 240emotion, see sentiment analysisEmployment Cost Index, 167, 175employment report, 166–167, 174EPS (earnings per share), 206exchangesdescription of, 6–8, 9international, 9listing requirements, 8volume, 10–11See also specific exchangesexchange-traded funds, see index sharesexecuted, 9, 10expiration date of option, 123–124, 126,178, 403exponential moving average, 255–256factory orders report, 172–173, 176failed rally, 264–265fair value, 295federal funds rate, 25, 161–162Federal Reserve Board (the Fed), 25, 26,160–161, 163, 166Fidelity Magellan Fund, 326financial professionalsCertified Financial Planner (CFP), 51insurance professionals, 51–52money manager, 50–51Registered Investment Adviser (RIA),49–50financial profile templates, 394–395financial situation, assessment of, 29–30,87–88, 394–395Fisher, Philip, 324float, 9, 27floor trader, 9, 10formulas, 430full-service broker, 40–44fundamental analysisanalyst coverage, 212–214basics of, 207–208
INDEXdescription of, 248, 384–387financial statements, 222–223industry leaders, 208–209information, accessing, 214–216insider holdings, 209–210management interviews, 210–211overview of, 75, 205–207, 216–217,242–243qualitative elements of company, 222statement of cash flows, 223, 239–240technical analysis compared to, 204See also balance sheet; incomestatement; ratiosfutures contract, 23Gabelli, Mario, 306gamma, 132gap down, 21Gates, Bill, 331–332Getty, J. Paul, 330–331going long, 67, 69, 70gold price, 313government reports, 166–176Graham, Benjamin, 322–324Greenspan, Alan, 163Gross Domestic Product (GDP), 170–171,176growth investing, 95–96, 100growth rates, 224growth screen, 363growth stock, xvii, 95–96Hamilton, William P., 182head and shoulders, 342, 344–345hedging, 14, 117histogram, 275, 276historical volatility, 130HOLDRS, 188–189hot stock, chasing, 108housing indicators, 171, 176IBM (International Business MachinesCorporation), 332identifyinggrowth stock, xviiindustry leaders, 208–209market trends, 91–93stocks on rise, 362
INDEXimplied volatility, 130–131, 293, 295–298,358–359income before taxes, 226income statementdescription of, 223earnings and earnings per share,226–229monthly, 30, 394price-to-earnings ratio, 229–230, 231price-to-sales ratio, 230–231profit margin, 229research and development, 225–226revenues or sales, 223–225top line of, 223, 225indexesdescription of, 180–181, 183list of, 183–188top, 414index funds, 18–20index futures, 314, 315index sharesdescription of, 8, 9, 20, 188–189pros and cons of, 28Industrial Production Index, 171, 176industry leaders, identifying, 208–209inflationbonds and, 25, 26broad market analysis and, 159–160effect of, 168inflation risk, 4informationaccessing, 214–216filtering good from bad, 3Internet and, 60, 242research offerings, 46–47sources of, 15–16initial public offering (IPO), 39, 99, 101,410insider holdings, 209–210institutional investor, 11insurance professionals, 51–52interest rate, 25, 160–161, 163–164intermarket relationships, 406international factors in market, 178–180International Securities Exchange (ISE),120in-the-money (ITM) option, 127intrinsic value, 127–129, 347
435investinggrowth type, 95–96, 100long-term, 11–12mastering art of, xvimethods of, 27–28momentum type, 97–99, 100value type, 97, 100investment bank, 37investment company, 16–17investment goals, 295investment profile, 77, 79–82investor, types of, 11–12investor relations department, 216, 222Investor’s Business DailyDaily Graphs Online, 366description of, 15, 16, 384earnings per share rank, 228–229industry leaders, 209moving average, 256Options Guide, 418sector performance, 190sentiment indicators, 93, 298–302web site, 422William O’Neil and, 16, 327Investors Intelligence, 308–309IRA (individual retirement account), 50iShares, 188–189January effect, 177John Bollinger’s EquityTrader.com, 88,106–107knowledgeacquiring, 382specialized, xviLabpuppy.com, 188lagging indicator, 269, 271Lane, George, 278large-cap stocks, 65–66last sale, 124LEAPS (long-term equity anticipationsecurities), 124life-cycle funds, 90–91limit, defining, 2–3limited risk, 72limit order, 77line chart, 251, 252
436liquidity risk, 27load fund, 18, 19long call strategy, 134–137, 346–347,398long put strategy, 143–146, 399long stock positionlong call compared to, 135–137overview of, 69, 70, 398risk profile, 141, 142, 148long straddle, 402long-term investing, 11–12losses, dealing with, 107–108, 109low-cost transaction, 47Lynch, Peter, 41, 101, 326–327M1, M2, and M3 reports, 161MACD histogram, 275, 276magazines, 418management effectiveness ratios, 236–237management interviews, 210–211margin, 10, 69, 73margin account, 69, 304margin call, 73, 74margin debt, 304margin trade, 73market action, 93market average, 92market bottom, 261, 292, 311–312,361–362market breadth, 191, 192, 354–355market capitalizationfundamental analysis and, 206indexes and, 184–185Nasdaq non-U.S. companies by, 409stocks and, 65–66market evaluation, 340–341Market Guide, 237market maker, 14market order, 47, 77market pricing, 357–358market risk, 4. See also riskmarket share, 208market time line, 397market top, 261, 291–292, 311–312,361–362market trends, see trendsMax Pain web site, 178McClellan Oscillator, 270
INDEXmediamarket sentiment and, 305–309picking stock and, 383–384web sites, 421–423micro-cap stocks, 66, 67Micron, 309–310Microsoft, 332–333mid-cap stocks, 66minimum value, 129minor trend, 182momentum, 271–272momentum indicator, 272momentum investing, 97–99, 100momentum screen, 364momentum trader, 296–297, 298money manager, 50–51money market account, 41, 48money market funds, 22monopoly, 330monthly income statement, 30, 394Morningstar web site, 88moving average, 93–95, 255–258, 280,388moving average convergence/divergence(MACD) indicator, 273–275, 276Murdoch, Rupert, 331mutual fundsdescription of, 16–18load funds, 18, 19pros and cons of, 28sentiment analysis and, 299–300, 304top companies, 411, 412naked option, 139narrowing formation, 350–352Nasdaq-Amex Market Group, 8Nasdaq Composite Index, 184Nasdaq (National Association of SecuritiesDealers Automated Quotationssystem)after-hours trading, 20companies by sector, 408description of, 7, 8, 416drop in, 117largest companies, 413non-U.S. companies by global marketcap, 409volume, 300
INDEXNasdaq 100, 185National Association of PurchasingManagement (NAPM) Index,169–170, 175National Association of Securities Dealers(NASD), 8, 9, 43, 49Neff, John, 327–328negative earnings surprise, 228net, 124net asset value (NAV), 17new highs/new lows ratio, 193–194news events, 306–308New York Stock Exchange Index, 184New York Stock Exchange (NYSE)description of, 7, 8, 417largest companies, 407Niles, Dan, 306no-load fund, 17–18North American Free Trade Agreement, 179October jinx, 177odd-lot short sales, 302Omega Research software, 365–366on-balance volume (OBV), 258–259, 304,360O’Neil, William, 16, 327, 366online broker, 45–46online brokerage directory, 428–429online tradingdeep discount broker and, 44–45pros and cons of, xvtypes of sites, 48open-ended fund, 17–18open interest, 125, 303operating income, 225Optionetics.com web sitedescription of, 426overview of, 132–133, 384Platinum service, 298, 357Portfolio Tracker, 106optionscall vs. put, 121–122characteristics of, 121–124covered writes, 148–155description of, 117–119expiration date, 123–124, 126, 178, 403Greeks, 132–133history of, 119–120
437intrinsic and time value, 127–129popularity of, 120–121premium, 124pricing process, 126–132quotes, 124–125sentiment analysis and, 298–299, 303strike price, 122–123symbols, 125–126underlying asset, 122uses of, 119volatility, 129–132See also call option; put optionOptionStation (Omega Research),365–366order entry, 352–353, 382order process, 12–15ordersdescription of, 47techniques, 75, 77, 78types of, 415oscillator, 98–99, 269–271out-of-the-money (OTM) option, 127, 129over-the-counter (OTC) market, 9Pacific Stock Exchange, 417par value, 64–65P/E ratio, see price-to-earnings (P/E) ratioperformance, monitoring, 80–82performance of stocks, 1, 27, 29, 80–82personal balance sheet, 394personal income and consumptionexpenditures, 172, 173, 176Philadelphia Stock Exchange, 417PHLX Box-Maker Index, 186–187PHLX Semiconductor Index, 186picking stock, 101–102, 362, 383–384,389–390“Pink Sheets,” 9plan, importance of, 2, 383point-and-figure chart, 251–253portfolioaggressive growth example, 104–105analysis of, 105–107asset allocation and, 79–80designing, 102–108growth and income example, 103growth example, 103–104losses, 107–108, 109
438portfolio tracking service, 82positive earnings surprise, 228positive operational cash flow, 239preferred shares, 61, 62premarket trading, 21premium of option, 124price and volume, 310–311price envelopes, 259–260price oscillator, 270price-to-book value ratio, 301price-to-earnings (P/E) ratiodescription of, 206, 229–230, 231Dow Jones Industrial Average and,301formula, 430PEG ratio and, 240price-to-earnings-to-growth (PEG) ratio,240–241, 430price-to-sales (P/S) ratio, 230–231price-weighted index, 181, 183primary trend, 182private company, 61Producer Price Index (PPI), 168–169,175profit margin, 229proprietary investment, 51prospectus, 101psychological market indicators, 298–302psychology of trade, 381–382public company, 61public offering, 36. See alsoinitial public offering (IPO)put optionbasics of, 141–142description of, 118, 121–122formula, 430intrinsic and time value of, 128long put example, 143–146sentiment analysis and, 298–299, 303short put example, 146–148, 149qualified account, 88quarter-end fluctuations, 177–178quotation, 14quotesoptions, 124–125real-time, 46stocks, 74–75, 76
INDEXRadio@WallStreet, 211rally, 360Rampart Time Index, 305Raschke, Linda Bradford, 328rate of change (ROC) oscillator, 98–99,270ratiosadvance/decline (A/D), 304–305current, 233–234, 430debt-to-equity, 234–236, 430limitations of analysis of, 238–239new highs/new lows, 193–194price-to-book value, 301price-to-earnings (P/E), 206, 229–230,231, 240, 301, 430price-to-earnings-to-growth (PEG),240–241, 430price-to-sales (P/S), 230–231return on assets (ROA), 236–237return on equity (ROE), 236–237risk to reward, 5, 24, 165–166short interest, 302real-time quote, 46rectangular consolidation, 345–349Red Herring, 384regional exchanges, 8Registered Investment Adviser (RIA),49–50Relative Strength Index, 273, 274,277–278, 430research, 46–47resistance, 94, 95, 149, 263–266retail sales report, 170, 176return, 72return on assets (ROA), 236–237return on equity (ROE), 236–237return on investment (ROI), 72reversal patterns, 341–345reversal trend line, 268, 269, 340–341reverse split, 361rights of stockholders, 5–6riskassessment of, 4–5description of, 2forms of, 4investment profile and, 79–80management of, 382–383success and, 2
INDEXtolerance for, 2–3, 30, 395unlimited vs. limited, 72risk profile, 137–141risk to reward ratio, 5, 24, 165–166“Roadmaps to Success,” xviii–xixRockefeller, John D., 329–330Roddick, Anita, 334–335root symbol, 126rounding bottom, 342, 344Rule 144, 9rules of the game, 381–383Russell 2000 Small Cap Index, 184savings, 88Schwab, Charles, 325–326screens, 362–364search engines, 423–424seasonal factors, 177–178secondary offering, 39secondary trend, 182sectordescription of, 65as forecasting tool, 189–190indexes and, 185–188Nasdaq companies by, 408Securities and Exchange Commission(SEC)description of, 7, 417EDGAR, 214–215, 425IPO and, 99, 101Rule 144, 9“selective disclosure,” 387sell-off, 360sell signals, 364–365sentiment analysisadvance/decline ratio, 304–305capitulation, 311–312charts and, 354closed-end fund indicator, 305comparison indicators, 312–313description of, 75, 248, 290–292implied volatility, 293, 295–298index futures, 314, 315Investor’s Business Daily and, 93margin debt, 304media and, 305–309mutual funds and, 299–300, 304option open interest, 303
439option trading volume, 303psychological market indicators,298–302Rampart Time Index, 305technical analysis and, 339–340use of, 314–316volatility, 293–295, 296volume, 309–311Sentiment Indicators Quick Checklist,341–342, 354Series 7, 41shareholder rights, 5–6shareholders’ equity, 236short call strategy, 137–141, 142, 399shorting stockdescription of, 21, 69–72, 302long put strategy compared to,144–146margin and, 73short call strategy compared to,139–141short interest ratio, 302short put strategy, 146–148, 149, 399short sale, 21, 69–72, 73, 298, 302short stock position, 398short straddle, 402short-term trading, 12, 15sideways market, 149, 339simple moving average, 255–256“skateboard effect,” 62skews in volatility, 131small-cap stocks, 66Small Order Execution System (SOES),14–15, 52SmartMoney 's Map of the Market, 106snapshot, 205software, 365–367Soros, George, 334S&P, see Standard & Poor’sspecialization, 2spread, 14, 75standard deviation, 275, 276Standard Oil Company, 329–330Standard & Poor’sMidcap 400 Index, 184ranking system, 209Stock Reports, 215web site, 423
440Standard & Poor’s Depositary Receipts(SPDRs), 20, 188–189Standard & Poor’s 500, 50, 183–184statement of cash flows, 223, 239–240statistical volatility, 130stochastics, 278–279, 353, 365stock analysis template, 81, 396stockbroker, see brokerstock certificate, 64–65stock exchange, see exchangesstock index, 92stock market, 2stocksadvancing behavior, 361buying, 67, 69common vs. preferred shares, 61–63declining behavior, 360description of, 2evaluation chart, 90hot, chasing, 108life cycle of, 323methods of investing in, 27–28performance of, 1, 27, 29, 80–82price cycles, 359quotes, 74–75, 76rights of owners of, 5–6Schwab and, 325–326selecting, 101–102, 362, 383–384,389–390selling signals, 364–365short selling, 21, 69–72, 73, 298, 302TSize value, 300types of, 65–67, 68volatility of, 130See also index funds; mutual fundsstock split, 300, 361, 386Stock Worm.com, 209straddle, 351, 402strategypicking and managing, 383types of, 398–402Street.com Internet Index, 187stressas liability, 79risk and, 4strike price, 118, 122–123, 126, 404success, steps to, 2–3, 391SuperCh