Pristine The Refresher Course.pdf

Pristine.com Presents

Trading The Pristine Method Part I The Refresher Course With Oliver L. Velez

Co-founder of Pristine.com, and co-Author of the best 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, TH 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 ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE 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 assume no responsibilities for actions taken by readers. The authors and publisher are not providing investment advice. The authors and publisher do not make any claims, promises, or guarantees that suggestions, systems, trading strategies, or information will result in a profit, loss, or any other desired result. readers and seminar attendees assume all risk, including but not limited to the risk of trading losses.

Active Trading can result in large losses and may not be an activity suitable for everyone. Copyright © 1994-2002 by Pristine Capital Holdings, Inc. All rights 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 or retrieval system, without prior written permission of the publisher.

Table of Contents

Introduction

The Exams

Trading w/ the 20MA

Pristine Quizzes

Trading the 4 Different Stages Pristine Trendline Techniques

Pristine Trading Exercises

Pristine Method Trading the PBS & PSS Trading the CBS & CSS Trading the PBZ & PSZ Trading the PBO& PBD

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 Up Trend Formula 1) Rising 20ma (r20ma) + 2) Rising 40ma (r40ma) +

3) 4)

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) Find and circle 7 Pristine Buy Set -ups (PBS)

Chart Courtesy of Mastertrader.com

The Pristine Railroad Tracks Up Trend Formula 1) Rising 20ma (r20ma) + 2) Rising 40ma (r40ma) +

3) 4)

r20ma > r40ma + Relatively even space in between

Nearly all dips should rebound sharply

r20ma r40ma

Circles show 7 Pristine Buy Set-ups (PBS) Circles show 7 Pristine Buy Set-ups (PBS)


Playing the Uptrend Marking up charts in this fashion builds trading skills and trains the eye to find opportunity. Do it often!

Far move from 20ma Sell

Breakout Buy RLs

-COG w/ TT far from 20ma Sell 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 SetSet-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 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

Stage 2

Narrow MAs

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. pattern. = Pristine Trade Opportunities


Stage 4


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? 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

MAs say use support & resistance techniques

PSS B/D

Stage 2 PBS

Stage 4

PBZ

Note how the moving averages dictate how to trade


Three Major Stages (2-3-4) Peek-a-boo Breakout Stage 3

Stage 2

Breakdown

PSS

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

Stage 4

next bar, a major reversal is usually at hand.

CBS


50%

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 Note how the moving averages tell the story of the stages



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 Major Area of Support Volume Ends Move

Volume Ignites 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

Buy, but don’t look for a New High

Point 2


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 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


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


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

Stage 1


200ma 200ma

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) 3) 4) 5) 6)

Stock in Uptrend Rising 20ma Rising 40ma Rising 20ma 40ma < 40ma Rising 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 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 srcinates 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 Area of Macro Support


The Pristine Buy/Sell Zones R&F 1st Warning of a Trend Change

1: The PBS can be anticipated due to the +COG closing near the high.

PSS in the PSZ

2: Circles show other Pristine signals. 3: R&F is the 1st sign of a trend change.

PBS in the PSZ

Area of Macro Support Area of Macro Support


Pristine Sell Set-up in the PSZ Stage 3

Stage 2

20ma 40ma

Stage 4

PFGC forms a: PSS; with a -COG; and a deadly Doji; in the PSZ; after a 40/60%; on the 1st pullback of a breakdown.

See Circle for items listed above


Trading Breakouts

The Pristine Breakout Method

1-2-3 Breakout Pattern

1) 2) 3)

3 Parts of the Breakout Buy aggressively if you find it Look for the PBS and Buy Buy only if not extended

1


3

2

The Pristine Breakout

Notice the Pristine Trained Trader (PTT) does not wait for volume. The PTT helps to the volume. Volume will usually liftcreate the committed PTT on breakouts. Pristine Breakout Stop Volume comes after the PTT buys


The Breakout Play In Stage 2 the Pristine Trained Trader (PTT) buys: 1) Dips and 2) Breakouts Buy Breakout

Pause Stop

Stage 1

Buy Breakout Stop

Big Volume


Pristine Breakout Buy Tip: A strong breakout, accompanied by big volume, typically leads to

B/O

multiple buy opportunities PBS Breakout Buy

r20ma r40ma

Stop Big Volume


The Pause That Refreshes Note the narrow nature of the base Note the drop off in volume PBS

Why is the PBS considered high risk? Answer: Because its too far from the 20ma

Breakout Buy

Stop

Drop in Volume


The ‘Pause’ That Refreshes At or near the point of contact with the r20ma, CBE breaks out and explodes to the upside.

Buy

d20ma d40ma

Drop off in Volume


The “Pause” That Refreshes Breakout A Asideways sideways“pause” “pause”into intoan an r20ma r20mawill willtend tendto toproduce produceaa very Breakout verypowerful powerfulbreakout breakout r20ma

200ma

Volume drop off


Volume drop off

The Pristine Breakout Play Note the narrow base accompanied by rising lows and narrowing moving averages. Breakout r20ma r40ma


Pristine Combos

Trend is down PSS w/ TT Stop at mPR

Pristine Tip The PTT will usually play a PBD from a narrow base very aggressively.

PBD 50% Ant. CBS Ant. CBS


Transitional Phase ‘A’

What’s next for IBM? Up move or Down move?

Answer: The next move should be up

3

1


2

Trading Tests

Pristine Trading Exams

Identifying ‘Clean’ Pristine Trades

Identify the three cleanest trading opportunities 1)_____________ 2) _____________ 3) _____________


Identifying ‘Clean’ Pristine Trades 3

Identify the three cleanest trading opportunities 1) Pristine Breakout 2) Pristine Buy Set-up (PBS) 3) Climactic Sell Set-up (CSS) 2 1


Find The Clean Trading Opportunities

1) Circle each clean trading opportunity 2) Name each clan trading opportunity


Find The Clean Trading Opportunities 1

Be cautious of PBSs after CSS

Breakdown that is not as clean 2

3

4 5 7

1) CSS; 2) PSS; 3) PBD; 4) PSS; 5) PSS; 6) CBS; 7) PSS

6


Finding The 4 Best Pristine Plays Find the 4 best Pristine Trades 1) Circle the trades 2) Name the trades 3)

Choose your favorite


Finding The 4 Best Pristine Plays

CSS 2 4

3

1

1) PBS; 2) PBO; 3) PBS; 4) PBS My Favorite is 4: PBS w/ a doji at mPS, off the r20ma


PBS PBS

Pristine Trading Test Find and Name the Following: 1) Nine Possible Plays 2) The best Breakout Play 3) The best two PBSs 4) The best short set-up

Can you find a 1-2-3 Breakout Pattern?


Pristine Trading Test Best Short 7

1) PBO; 2) PBO; 3) PBS; 4) PBS; 5) CSS; 6) PBS; 7) CSS; 8) PBS; 9) PSS

9

Best Breakout Play: 1, due to the tight and narrow base. Best two PBSs: 6 and 8 due to the prior peaks being new monthly highs Best Short Set-up: 9 due it also being an R&F (Retest and Failure). 1-2-3 Breakout Play: The red numbers 1, 2 and 3

5

3

8

1 2

2 6 3

Best B/O Play

4

1


2 Best PBSs

Pristine Trading Test

1) 2) 3)

Instructions Circle and name the last 2 Guerrilla trades in this chart Which Pristine Entry Method you use for trade 2 Point out the area you look to exit each trade



2 Bear 20/20

Guerrilla Trade 1: Gap n’ Snap Play Guerrilla Trade 2: Bear 20/20 Play Entry Method for Guerrilla Trade 2: 3030-minute Sell Rule Exit for Guerrilla Trade 1: In the area of the 20ma Exit for Guerrilla Trade 2: In the 40/60 Retracement Area

Exit

Exit

Gap n’ Snap 1



1) 2) 3)

Instructions & Questions How many Buy Opportunities? Circle and name them Find the failed Pristine Sell Set-up



Failed PSS

3

PBS 2

CBS 1


PBS


d20ma d40ma

Questions 1) 1) Find Findthe the33best best trading trading signals signals 2) Which trade can be anticipated? 2) Which trade can be anticipated? 3) Why can it be anticipated? 3) Why can it be anticipated?



d20ma d40ma

2 PSS

Answers 1: CBS; PSS; PBS 2: Trade 2 (CBS) can be anticipated 3: The CBS’s +COG closed near the high 1 CBS Big Volume


3 PBS


1) 2)

Instructions & Questions How many Pristine (long) trades can you find? Name the trade types

3) 4)

Which trades can be anticipated? Find 4 high risk short points


Pristine Trading Test 4

Answers 1: Four Long Trades 2: 1-CBS; 2-PBS; 3-PBS; 4-PBS

3: Anticipate trade 4, the PBS 4: Red circles and numbers

3

2 1

4 3

2 1


Mark This Chart Up


Mark This Chart Up Rounded top V Top

3

PBO off r20ma

A 2 1

PBS off 20ma

r20ma r40ma PBS at MPS


A = Skeptical PBS

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Pristine The Refresher Course.pdf

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