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Sterling Weekly for August 18th, 2003

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For the last couple of weeks I have been commenting in the Sterling Prime Stock Letter about the apparent narrow trading range the overall market has fallen into. Not only does this make it difficult to identify new trends in individual stocks for trading opportunities, but it causes increased volatility combined with smaller moves in what you may be attempting to trade. What this results in is smaller moves in the expected direction, the need to be willing to take profits sooner, and re-emphasizes the need to correctly use "stops" to protect your positions. One of the key things to maintaining profitability in trading is to protect your profits and limit your losses.

Over the years I have developed 11 "Rules for Trading." I am currently in the process of writing a series of articles for Stock Upticks covering these 11 Rules for Trading. In last week's Sterling Weekly, I covered the Third Rule Rule for Trading, "Move Your Stops Up (or Lower for Short Sales) to Lock in a Profit as Soon as Possible." In the 'Today's Comments' section August 14th edition of the Prime Stock Newsletter I provided an example of how I would apply the Third Rule of Trading to the day's recommendation on Newmont Mining 'NEM'. I am reprinting that portion of the August 14th edition for this week's edition of the Sterling Weekly to further explain the Third Rule for Trading. Hopefully you will find this useful and helpful.

Today's Comments (from the August 14th Prime Stock Newsletter)Tuesday's economic news was released without much impact on the market. The majority of the indices I looked at last night appear to be moving higher. I am expecting the overall market to continue to move higher. I am taking this opportunity to briefly describe how I would trade shares of our recommendation on the open for the benefit of our readers.

I am looking to buy the shares of today's recommendation as close to the open as possible. If the shares look unexpectedly week then I will see if they pullback and I can get them at a price closer to the stop price, otherwise I will try to buy the shares as close to the open as possible.

If the shares move lower for some unexpected reason and they are below my cost basis, then I will hold the shares until the stop price is triggered.

Once the shares move profitable by more than $0.10/share, then I will raise my stop to $0.05/.share above my cost. I will repeat this process when the profit is more than $0.25/share above my cost, resetting my stop to $0.10-$0.15/share above my cost. Then if the stock continues to move higher, I will do either one of the following.

If a stock has a lower level of volatility, then I will keep my initial stops in place, and allow the stock to move higher and wait for the chart pattern to indicate the next stops level or if the gap between my cost basis greatly increases then I will raise my stop again to further lock in the profits, but leaving some room for volatility. (I'll explain more on this in later issues)

If a stock has a higher level of volatility, then after I have set my initial stops to help ensure a profit, then I'll seek to maximize my profits over a short time frame, by constantly adjusting the stops to within a predetermined price of what is at that point in time the intra day high. In the case of Newmont Mining, today's recommendation, that would probably be about $0.15 to $0.20/share.

Economic Calendar for the week of August 18th
DATE Est. Time Release For Actual Consensus Prior Revised From
Aug 19 8:30am Housing Starts Jul   1.81M 1.79m 1.803  
Aug 19 8:30am Building Permits Jul   1.810M 1.80m 1.817m  
Aug 19 9:45am Mich Sentiment-Preliminary Aug.   92.0 91.5 90.9  
Aug 19 2:00pm Treasury Budget Jul   ($53.0B) ($42.0B) ($29.2B)  
Aug 21 8:30am Initial Claims 8/16   395K N/A 398K  
Aug 21 10:00am Leading Indicators Jul   0.6% 0.4% 0.1%  
Aug 21 12:00pm Philadelphia Fed. Aug   11.0 10.0 8.3  

Prime Update:

Sterling Investment Services is an investment research and money management firm publishing the Prime Stock Newsletter. The Prime Stock Newsletter is a daily comprehensive newsletter that is useful for investors and traders alike. Whether you are looking for short term trading opportunities ranging from day trading to a couple of weeks or if you looking to acquire a long term portfolio at smart entry points. Subscriptions a $30/month. a 3 DAY TRAIL SUBSCRIPTION IS ONLY $4.95 (more).

While last week was a busy week in terms of economic news, it was a slow week from a trading standpoint.

Highlights from Recent editions of the Prime Stock Newsletter
Recommendation Date Entry Point Recent Close or Exit Price Profit Note
Computer Science 'CSC' Aug 12th $42.75 $43.62/share Aug. 12th $0.87 We advised our readers to exit ahead of the earnings report

The Dow Jones Industrial Average:

Today's Opinion: Closed @ 9,321.69 Current Expectations: Called higher with the close on May 27th with the close of 8,781.35 The Dow Jones Industrial Average 'INDU' should move higher and test 9,323.02 on a closing basis. The Dow Jones Industrial has been moving in a narrow trading range between 9,323.02 and 8,985.44 with a slight upward bias since the Dow reached its recent high of 9,323.02 on June 17th. The Dow appears to be poised to close above 9,323.02 and break out of this trading range. If the Dow closes above 9,323.02 then it will have completed a "cup pattern" with a measured move to 9,660.60

The S&P 500:

Today's Opinion: Closed @ 990.67 Current Expections: Called higher with a Buy Signal on the close of trading on August 8th @ 977.59 . The S&P 500 should move high and test 998.68 and then 1,007.84

The NASDAQ 100 (NDX)

Current Opinion: Closed @ 1,253.63 Current Expectations: Called higher on August 9th with a close of 1,223.14. The NDX should move higher and test 1,267.38 and then 1,298.37on a closing basis.

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