Email: jeyassoc@pathcom.com      A Weekly Newsletter published by JEY & Associates Research Analysts                Fax: 905-450-7032

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11-Jan-2002                                                   James E. Young, CMT                                                         Volume 1 Issue 1

 

Welcome, to the first issue of “THE JEY Analytica”.

This weekly newsletter will contain educational items about Technical Analysis and how it can be used in the pursuit of one’s financial intelligence. We will not be making any specific recommendations as to the purchase of any financial security. What we will show you is how Technical Analysis can define investment opportunities.    

This issue will contain an introduction about myself, an educational feature on one of the concepts of TA, what happened in the futures market during that last week and where we think it may be going for the next week.  There are eight major components that make up the Commodity / Futures market so we will be targeting a different one in each issue. We will also include a running summary on how our different simulations are performing. 

Who is JEY & Associates Research Analysts?

We are a market research firm specializing in the use of Technical Analysis to determine if a financial instrument is bullish or bearish. We also specialize in developing trading systems for the various markets, and training individuals in the fundamentals of Technical Analysis. The standard for training is to permit individuals to proceed towards acquiring their CMT accreditation. James Young, our president and C.E.O, performs all analysis. This is the third career for James. His first was in the RCAF until unification and then in the Canadian Armed Forces (Air) for a total of 30 years. The next fourteen years saw James working in the aerospace industry as a Database Administrator.  He retired from this position last July to passionately develop his trading knowledge and skills.  

In 1999 James completed his formal studies of technical analysis by completing the Chartered Market Technician (CMT) program sponsored by the Market Technicians Association in New York. This monumental task involved writing two exams and writing an original research paper, copies of which are attached, that took five years to complete. Upon having his paper published in the MTA Journal in the Summer-Autumn 1999 issue, he applied for full membership in the MTA and upon being accepted was then entitled to formally use the CMT accreditation.  

James is also a member of the Canadian Society of Technical Analysts and currently serves as Secretary. He was also Director of Education for nine years where he co-ordinated and taught Technical Analysis to many professionals and interested private investors or traders. Many of the students have gone on to also complete the CMT program and obtain their accreditation. 

What is Technical Analysis?

      “Technical Analysis is the study of market action primarily through the use of charts for the purpose of forecasting future price trends.” These few words, by John J. Murphy, can lead to a lifetime of study and interaction with Stocks, Futures, and Mutual Funds just to name a few types of investment instruments. To express John’s definition a little differently, Technical Analysis studies past market action and attempts to forecast future prices. In other words, that which has happened in the past may happen again in the future.  

The chart, consisting of the market action of open, high, low, close, volume and maybe open interest, is the only data that a Technician needs. Oh some mechanical items like a ruler, some coloured pens, a calculator, some graph paper, and lots of patience would be a great asset.  With these tools and data, a good Technical Analyst can tell you almost to the day and time when a particular stock or future will hit a specific price.  I have not had the pleasure of determining both at the same time yet, but I have determined, in advance, the price of the Canadian dollar within two ten-thousandths of a cent. I have also been able to forecast within a day or two when a stock will hit a bottom or top.  To do this consistently takes years of study and practice in applying specific tools and concepts. 

Can a person make money from using technical analysis?  The answer to this question relies on many factors, the least of which is the abilities and personal characteristics of the individual. Therefore the answer is YES. Are a

lot of resources required? In order to trade Commodities one must set up an account with some initial seed money. The minimum set by most brokerage firms is $5,000 US. From this an initial margin, defined by the exchange, is required. To trade one contract of say Wheat would require a margin of $743 US. Can one bear financial loss by trading futures? Yes, and this to a certain extent is normal; the very important point here is to minimize this amount to a very small portion of the amount invested. When planning a trade we want to know our entry price, our exit point when there is a profit, and our stop loss price should the trade is not in our favour. As a general rule of thumb we would like to see as a minimum a 3:1 ratio of returns, that is for every dollar at risk we want at least 3 returned. This would include commission costs. 

Further to the question, “is it possible to make money trading futures”? I certainly think so. For the past fifteen months I ran a simulation in which I traded various futures contracts.  The number of contracts started with one at a time until sufficient funds were available then, increased the quantity to five per trade. We started the simulation with $2,738.41 US and when I closed it on the 4-Jan-02 it was at $229,819.47 excluding commissions and any slippage.  

We started a new simulation on Jan 4^th with $5,000.00 US. In this simulation we are only going to take trades that meet very specific conditions. You may have asked. Why trade in a simulated environment? In a simulated environment you need to do the same things that would be done in real trading. It teaches you the many disciplines required to ensure success.  

Want to learn more?

Then complete the registration form and attend three one-day seminars at the Brampton Holiday Inn Select, Mayfield room. The seminar will be held on three consecutive Sundays from Feb 10^th to the 24^th from 9:00 a.m. to 4:00 p.m. James will provide three days of intense study complete with Lunch, handouts, and a text book written by one of the world’s leading Technical Analysts a $120.00 value. The fee including taxes is $495.00. Registration is limited to the first 25 paid registrants. So, don’t delay, book now and be sure of a place.  

Did you know that Technical Analysis is now being taught at more than ten Universities and Colleges in the U.S. At present there is only one university in Canada teaching TA and that is McMaster’s business school in Hamilton.  

Subscribe to our Newsletter.

James is also offering a subscription to his weekly newsletter The JEY Analytica. The newsletter will highlight the actions of the past week in the futures market. Each issue will also discuss one of the many tools used in Technical Analysis. This is our first issue and covers what happened last week and where we think the action will be for the next week. The subscription fee is $25.00 per month or $250.00 for a full year. That’s a savings of $50.00.  

Futures Trading Club

We are also planning to start a Futures trading club that would trade low risk commodities. For more details please add your name to the club list or send me an Email. We would like to get the club up and running by the end of February. 

Figure 1 is a daily chart of March Oats from July ’01 to Jan-10^th. The chart shows a Symmetrical Triangle ST from the end of Jul to the end of Aug. In this situation the ST is performing the role of a continuation pattern. Price is seen entering from the lower left and exiting from the upper right of the ST. The break out occurred on the 27-aug at $1.37Ό, The chart also has three simple moving averages SMA of the closing price and does an excellent job of showing us where future areas of support exists. The values of the SMA’s are 4, 18                                    Figure 1. March Oats showing a symmetrical Triangle breaking out at 1. 
                                                                            The three lines are Simple Moving Averages of 4, 18, and 40 days.

and 40, with the shortest closest to the price data. AT each of the numbered positions it can be observed that price, the 4, and 18 SMA converged and then continued the upward trend. AT each numbered location opportunities for gain exist at a very low risk of loss.

Table 1 shows a summary of the advantages in using multiple contracts. In this manner we are able to maximize the trend commensurate with the resources available. Basically when sufficient funds to cover the margin requirements become available we add to our holdings. It is very important to maintain very strict money management rules and practices at all times.

  

Table 1 showing the various returns possible.