Pristine.com Presents
Trading The Pristine Method Part I The Refresher Course With Oliver L. Velez
Co- founder of Pristine.com, Pristine.com, and co- Author of the best selling selling book, Tools and Tactics for the Master Day Trader Copyright 2003, Pristine Capital Holdings, Inc.
Disclaimer It should not be assumed that the methods, techniques, or indicators presented in this book will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples in this book are for educational purposes only. This is not a solicitation of any order to buy or sell. “HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES IN THIS BOOK HAVE NOT ACTUALLY BEEN EXECUTED, THE THE RESULTS WE STATE MAY HAVE UNDER OR OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ARE ALSO SUBJECT TO TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.” The authors and publisher publisher assume no responsibiliti responsibilities es for actions taken by readers. The authors and publisher publisher are not providing investment advice. The authors and publisher do not make any claims, promises, or guarantees that any suggestions, systems, trading strategies, or information will result in a profit, loss, or any other desired result. All readers and seminar attendees assume assume all risk, including but not limited to the risk of of trading losses. Active Trading can result in large losses and may not be an activity suitable for everyone. Copyright Copyright © 1994-2002 1994-2002 by Pristine Capital Holdings, Inc. Inc . All rights rights reserved. reserved. Printed in the United States of America. Except as permitted under the United States Copyright Act of 1976, no part of this publication may be reproduced or distributed in any form or by any means, or stored in a database database or retrieval system, without prior prior written permission of the publisher.
Disclaimer It should not be assumed that the methods, techniques, or indicators presented in this book will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples in this book are for educational purposes only. This is not a solicitation of any order to buy or sell. “HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES IN THIS BOOK HAVE NOT ACTUALLY BEEN EXECUTED, THE THE RESULTS WE STATE MAY HAVE UNDER OR OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ARE ALSO SUBJECT TO TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.” The authors and publisher publisher assume no responsibiliti responsibilities es for actions taken by readers. The authors and publisher publisher are not providing investment advice. The authors and publisher do not make any claims, promises, or guarantees that any suggestions, systems, trading strategies, or information will result in a profit, loss, or any other desired result. All readers and seminar attendees assume assume all risk, including but not limited to the risk of of trading losses. Active Trading can result in large losses and may not be an activity suitable for everyone. Copyright Copyright © 1994-2002 1994-2002 by Pristine Capital Holdings, Inc. Inc . All rights rights reserved. reserved. Printed in the United States of America. Except as permitted under the United States Copyright Act of 1976, no part of this publication may be reproduced or distributed in any form or by any means, or stored in a database database or retrieval system, without prior prior written permission of the publisher.
Table of Contents
Introduction Trading w/ the 20MA Trading the 4 Different Stages Pristine Trendline Techniques
Pristine Method Trading the PBS & PSS Trading the CBS & CSS Trading the PBZ & PSZ Trading the PBO& PBD
The Exams Pristine Quizzes Pristine Trading Exercises Pristine Trading Exams
Pristine ESP Product Review Pristine ESP: The Climactics MasterTrader Pro Pristine ESP & MT Combined
Introduction
Trading With The Trend & The Mighty 20 MA
The Pristine Railroad Tracks
1) 2) 3) 4)
Up Trend Formula Rising 20ma (r20ma) + Rising 40ma (r40ma) + r20ma > r40ma + Relatively even space in between Nice space
Nearly all dips should rebound sharply r20ma r40ma
Find and circle 7 Pristine Buy Set -ups (PBS)
The Pristine Railroad Tracks
1) 2) 3) 4)
Up Trend Formula Rising 20ma (r20ma) + Rising 40ma (r40ma) + r20ma > r40ma + Relatively even space in between
Nearly all dips should rebound sharply r20ma r40ma
Circles show 7 Pristine Buy Set -ups (PBS)
Playing the Uptrend Marking up charts in this fashion builds trading skills Far move from 20ma and trains the eye to find Sell opportunity. Do it often! -COG w/ TT far from 20ma Sell
Breakout Buy RLs
PBS
Breakout Buy PBS
r20ma
r40ma
RLs
Note the rising lows (RLs) before the breakouts Note the railroad like moving averages
The Macro Swing Trade
PSS in the PSZ Breakdown d20ma d40ma The Macro Swing Trader rides the trade as long as the stock stays below the d40ma. The Macro Swing Trader would consider covering if: 1) The MAs began to narrow; 2) A Climactic Buy Set -up (CBS) formed
Trading with the 20ma There are Core Trade & Swing Trade opportunities in Nortel (NT) d40ma
Narrowing moving averages indicate a near end to stage 4
The Pristine Trained Trader (PTT) trades in the same direction of the 20MA 92% of the time.
d20ma
Trading with the 20ma There are Core Trade & Swing Trade opportunities in Teradyne (TER) d40ma d20ma
The Pristine Trained Trader (PTT) trades in the same direction of the 20MA 92% of the time.
The trader considers covering some here
Trading with the 20ma PTT shorts rallies with the d20MA
Note the nice spaces between the moving averages. They move like railroad tracks on the way up and down.
r20ma r40ma r20ma r40ma
PTT buys dips in the same direction of the r20MA = Pristine Trading Opportunities
Foundation
The Four Different Stages Of The Stock Cycle
Three Major Stages (2 -3-4) Stage 3
Pristine Bear Mortgage Play
Stage 2
PBS
Breakdown Stage 4
PBS
The Moving Average Story Stage 3
Narrow MAs
Stage 4
Stage 2
Breakdown
20ma
40ma
Note how the moving averages can reveal what stage a stock is in. In stage 2 we have the upward railroad track MAs. In stage 3, we have narrow to flat and wavy MAs. In stage 4 the MAs convert to a downward railroad track pattern . = Pristine Trade Opportunities
Three Major Stages (2-3-4) Stage 3
MAs Cross & Flatten
Breakdown
Stage 2 d20ma d40ma
Did the moving averages warn of a possible Stage 4?
Stage 4
All 4 Major Stages (1-2-3-4) Stage 3
Flat & Wavy MAs
Stage 2 r20ma
Stage 1
r40ma
Stage 4
What are the moving averages saying right now?
Three Major Stages (2-3-4) R&F
Stage 3 R&F = Retest & Failure
Stage 2
Whippy MAs
r20ma r40ma = Pristine Trading Opportunities
Stage 4
Three Major Stages (2 -3-4) R&F
Stage 3
MAs say sell rallies & B/Ds MAs say buy dips & B/Os Stage 2 PBS
PBZ
MAs say use support & resistance techniques
PSS B/D
Stage 4
Note how the moving averages dictate how to trade
Three Major Stages (2 -3-4) Peek -a- boo Breakout Stage 3
Stage 2
Breakdown
Pristine Tip: 70% of all breakouts fail, resulting in many “peek -a- boo” attempts. When bullish bar breakouts fail to follow through on the very next bar, a major reversal is usually at hand.
PSS
Stage 4 50% CBS
The Three Stages (2-3-4) Stage 3
Peek -a- boo New High Wavy MAs
Breakdown
Stage 2
r20ma r40ma
Stage 4
Note how the moving averages tell the story of the stages
Three Major Stages (2 -3-4) Stage 3
Stage 4
Stage 2
Wavy MAs
20ma 40ma
Note how the MAs reveal how to trade the stock = Pristine Trading Opportunities
Ending Stage 4 Stage 3
Flat & Wavy MAs
Breakout
Breakdown
Stage 2 PSS Stage 4
Pristine Tip: The CBS usually ends (finalizes) Stage 4
CBS
The Completed Cycle Stage 3 = Pristine Trading Opportunities
d20ma r40ma
Stage 2 r20ma
Stage 1
r40ma
Stage 4
Major Area of Support
Volume Ignites Move
Volume Ends Move
Three Major Stages (4-1-2)
What are the Moving Averages telling us?
Stage 4
Stage 2
Stage 1
Flat and Narrow MAs
Trend Line Technique
The Pristine Trend Line Technique
Uptrend Line Break (UTB) Stage 3 Transitional Phase ‘B’
2
Best Short Opp. R&F
Stage 2 1 Point 1 Point 2
Buy, but don’t look for a New High
Breakdown
Up Trend Line Break (UTB) Stage 3 Transitional Phase ‘B’
2
Best Short Opp. R&F
3
Stage 2 Buy, but don’t look for a New High
1
Point 1 Point 2
Breakdown Stage 4
Pristine Pop Quiz
1) 2) 3) 4) 5)
Instructions & Questions Draw a Down Trendline Number the Trendline events Which Transitional Phase? What is the next likely move? Where could the move go?
Pristine Pop Quiz
Point 2
1) 2) 3) 4) 5)
Instructions & Questions Draw a Down Trendline Number the Trendline events Which Transitional Phase? What is the next likely move? Where could the move go? 3?
Point 2 1
Transitional Phase D 2
Trading The PBS & PSS
Trading The Pristine Buy & Sell Set-ups
60-minute Chart of ROK CSS
Trading Tip: The Pristine Trained Trader (PTT) uses the 60 -minute chart to find Swing, Guerilla & some Day trading opportunities. PBS
Circles = Pristine Trading Opportunities r20ma
PBO
r40ma -Trap
30-Min Pristine Buy Set-up (PBS) Pristine Buy Set-up on a 30-min chart
Note: The best intra-day PBS’s occur when the 20ma is above the 200ma r20ma
200ma
15-minute Chart of GSF Trading Tip: The Pristine Trained Trader (PTT) uses the 15-minute chart to find ‘day trading’ opportunities.
CSS
Circles = Pristine Trading Opportunities
PBS
200ma PBS PBS @ MPS
r20ma
5-minute Chart of RCL Trading Tip: The Pristine Trained Trader (PTT) uses the 5-minute chart to find ‘micro trading’ opportunities.
Circle = Pristine Trading Opportunity
r20ma Plays
r20ma 200ma
2-minute Chart of COST
PSS
d20ma
Trading Tip: The Pristine Trained Trader (PTT) uses the 2-minute chart to find ‘scalp trading’ opportunities.
PSS
PSS
Circles = Pristine Trading Opportunities
PBS
PBS
15-min Pristine Buy Set-up (PBS) Pristine Buy Set-up on a 15-min chart
Note: The best intra-day PBS’s occur when the r20ma is above the 200ma Stage 2
r20ma
Stage 4 200ma
Stage 1
Anticipating w/ the Bearish COG
d40ma d20ma
Bear COG 1) 2) 3) 4)
3 or more green bars plus A relatively solid red bar that closes near the low at A declining 20ma equals Anticipation Short Play * Reverse this technique for the Anticipatory Long
The Power of the 200ma
Using the PBS with MAs & Major Support
r20ma
r200ma
The Complete Pristine Buy Method Pristine Buy Criteria
1) 2) 3) 4) 5) 6)
Stock in Uptrend Rising 20ma Rising 40ma Rising 20ma < 40ma OBV rising (not shown) ADX above 25 (not shown)
Pristine Buy Set-up 7) PBS’s (4) 8) CCI(5) Signals
Follow Action Steps: 9) Enter; 10) Stop; 11) Target; 12) Manage
The Complete Pristine Sell Method
d20ma
Pristine Sell Criteria 1) 2) 3) 4) 5) 6)
d40ma
Stock in Downtrend Declining 20ma Declining 40ma Declining 20ma < 40ma Pristine Sell Set-up OBV declining (not shown) 7) PSS w/ -COG ADX above 25 (not shown) 8) CCI(5) Signal
Follow Action Steps: 9) Enter; 10) Stop; 11) Target; 12) Manage
Trading Against the 20ma
The Pristine Climactic Buy & Sell Set-ups
Trading Against the 20 MA 5+ Red Bars
Climactic Buy Set-up (CBS)
1) 2) 3) 4)
5 or more Red Bars (or lower highs) Far from 20 MA (8% or more) Bottoming Tail (BT), NRB, and/or +COG Pick -up in Volume Volume BT
The Climactic Buy Set-up & the PSS d40ma d20ma
PSS Note: The CBS will often deliver a playable PSS a week or so later. Therefore, CBS’s represent dual profit making opportunities. But don’t expect a new low on the the decline! decline! The same applies in reverse.
5 Red
CBS
Climactic Buy Set-up (CBS)
It should always be noted that the CBS will lead to sell opportunity as well; however, the subsequent PSS must be played based on the 40/60 Rule. The same applies in reverse. Tip: The decline after a CBS will often be a shallow one.
PSS
5 Red Bars
Big Volume
50% CBS
Climactic Buy Set-up (CBS) PSS
r20ma
5+ Red Bars
r40ma
CBS
Marking it Up Major Resistance
PSS/R&F Failed PSS
Major Support PBS
CBS w/ Darling Doji Climactic Volume
Wide Range Bars (WRB) Wide Range Bar (WRB) PSS w/ Doji In the PSZ The WRB (the widest bar of the base) dictates the next direction. Another WRB that originates not far from the d20ma indicates more downside is on the way. WRBs far away from d20ma indicates move is near complete.
The PBZ & PSZ
Trading The Pristine Buy & Sell Zones
The Pristine Buy Zone The zone between the rising 20ma & 40ma acts as a very powerful area of support.
r20ma r40ma
Pristine Sell Set-up in PSZ
d40ma
After a CBS, KSE has formed a: 1) PSS (Pristine sell set-up); 2) with a –COG (bearish COG); 3) And a TT (topping tail) 4) In the PSZ (Pristine Sell Zone) 5) After a 40/60 (% retracement) 6) At the EOM (end of the month)
d20ma
See circle for all 6 items
CBS
The Pristine Buy/Sell Zones 1: Which of the two trades could have been anticipated? Buy or Sell? PSS in the PSZ
2: Can you find other signals? 3: Point out the first warning of an up trend change.
PBS in the PSZ
Area of Macro Support
