# Chapter 2 - History of Stock Trends

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Why Stock Trends? The arrival of this analysis in a national financial newspaper is a personal story, but one that reveals the essential genesis of the Stock Trends methodology. As in any faith – and this methodology demands such – the belief in a doctrine should not come from mystery. Stock Trends delivers a straightforward methodology because it is rooted in integrity and simplicity. It is designed to make the vast summaries of stock market data understandable and empower individuals with effective trading signals. This was the overwhelming mission that Stock Trends compelled me to undertake.

My introduction to the world of technical analysis came courtesy of an article I wrote for Investment Executive in 1990. I reported on a luncheon presentation of the Toronto Society of Financial Analysts where a number of Bay Street’s top analysts shared stories of their personal journeys into the profession. Speakers that day included two well-known technical analysts, Horst Mueller and Leon Tuey, who particularly impressed me with their colourful and creative backgrounds.

In a world where creative expression seemed highly restrained, I found it interesting that stock analysts like Mueller (who played the French horn at Stratford in his younger days) and Tuey (who was an art teacher before he plunged into the investment business) would find the esoteric work of charting stocks a satisfying occupation. Would Mozart or Monet find a chart of IBM exhilarating enough to abandon their vocations – even if the salaries they earned made it palatable? Perhaps.

Nevertheless, I subsequently began reading literature on technical analysis, including John Murphy’s Technical Analysis of the Futures Market, and purchased charting software. My early working life in a financial newsroom left me skeptical about the way the investment business flogged its own analysis, so the independent and creative nature of technical analysis seemed utterly refreshing.

Admittedly, technical analysis looks like a drab applied version of high school geometry. But when one starts to examine the elements of social science and mass psychology that underpin the discipline of the chartist, technical analysis reveals that its esoteric nature derives from the creative - although profit-motivated - energy of the practitioners who developed and continue to expand its vocabulary. The pioneers of technical analysis were basement enthusiasts who diligently compiled, charted, and manipulated market data (largely commodity futures in its speculative heyday).

How to make profits in Commodities, by W.D. Gann, was one of the first books on charting I purchased. Originally published in 1942, Gann’s book outlined his disciplined approach to the market, and although I never mastered the mechanics of his systematic work, I was duly impressed by the authoritative quality of his plan. Indeed, the rigorous methodology of such work gave an air of science to charting. Even then, I thought that the value of technical analysis was more evident – and monetarily acceptable – when a defined methodology was exercised. Charting is by its nature a craft – perhaps an art form. Hardly the kind of tool you want to place over-estimating bets with. But the systematic analysis of the market laboratory does provide a compelling use for technical interpretations of market data. This is the foundation of Stock Trends.

The Stock Trends indicators were born out of this need to develop a systematic technical filtering system that would provide qualified stocks for further charting analysis. Concurrent to this developing personal need, I was challenged in 1993 to develop a value-added feature to the stock tables of the Financial Times of Canada. This financial weekly, which dated some 81 years at that time, needed to find ways to make the costly agate pages a more advantageous editorial feature. Certainly, the quotation aspect of the stock tables was long lost in a marketplace flooded with daily quotes, and the section was even more threatened by the obvious challenge of the Internet. How can the stock tables be made more meaningful and useful?

The immediate answer is to add more information – more ratios, more trading statistics. But space constraints and concerns about throwing data at the reader without any interpretation demanded an algorithmic solution. The idea of using moving averages as data items in the stock tables had been presented, but I felt the reader should be guided along this learning curve. Moving averages on their own are like integers flying in your face - what good are the number 2 and the number 3 if you don’t know their relationship to the number 5? Hence the inspiration of taking things a step further and categorizing stocks by the relationship of their current price with the long-term and intermediate-term average price.

The trend indicators, six different conditions based on this relationship between current price and the primary and secondary trend lines (see Stock Trends: a guide to the indicators), evaluate stock price movements. However, the need to quantify the relative price momentum of individual stocks was an important additional feature of Stock Trends. The Relative Strength Indicator (RSI) used in this analysis measures the relative price change of individual stocks vis-à-vis the performance of the market (over 13-weeks). This indicator answers the question: How has this stock performed relative to the relevant market index (e.g. the S&P 500 Index or the S&P/TSX Composite Index)?

Price performance is just one arm of technical studies. Trading volume is the qualitative element that reveals the character of a price move. It is the fuel that generates a trend. Stock Trends attempts to qualify this element by tagging stocks with relatively high or low volume indicator symbols ( or ), giving Stock Trends the final member of its toolkit. This simple package of indicators, all used in conjunction with each other, is the novel editorial feature introduced many years ago and continues to be generated in the same form every week. You will discover that the consistency of analysis provided by Stock Trends over the last two decades is a powerful trading tool.

#### FIRST PUBLISHED ON JUNE 5, 1993

I remember well the excitement behind the initial publication of Stock Trends – the panicked and hurried production deadline pushed to its limit as we worked out some final technical difficulties on the Thursday night before its inaugural publication in the Financial Times of Canada on June 5, 1993. Indeed the excitement for the product carried through the eventual demise of the Financial Times two years later. Stock Trends is the lone element to survive the weekly paper, which ceased its 83-year publication in the spring of 1995. Stock Trends was promptly picked up by the Financial Times of Canada’s parent publication, The Globe and Mail, and started its weekly run in the Saturday edition of the national paper in May of 1995. It continued to be a unique element of the Globe’s stock tables, supported by a loyal following, for two decades.

The demand for even more information from Stock Trends followers inspired the creation of Stock Trends Weekly Reporter – a weekly newsletter/report service that had its origins as an interactive fax-on-demand product, launched April 25, 1996. Its current format, as a weekly publication of unique filter reports delivered to faithful subscribers, commenced June 12, 1997.

The distinguishing feature of Stock Trends is the improved visual cues the indicators give to the stock tables. Because the indicators put current price within a context of its historical price, readers can quickly put current price movement within a long-term perspective. Traditional quotation services provide current price and change from the previous period (daily or weekly) and a 52-week high/low, but unless you are actively monitoring a stock it is difficult to immediately tell whether the day’s (or week’s) price movement is consistent with the current long-term trend. If Nortel Networks (NT), for instance, rises from \$2.70 to \$3.25 this week, someone familiar with that stock’s brutal descent from \$120 could interpret this trading activity differently than someone who just returned from a two-year spiritual sojourn in Tibet. Stock Trends allows our monk to recognize the indicator, attain enlightenment, and retort: “won’t touch that!” This is the genius of the indicators: they allow readers to scan through the listings quickly and make assessments of the stock’s value in relation to its trend. Whether looking for potential buying opportunities or reviewing the status of stocks already held, investors and traders can use Stock Trends to their advantage. The trend indicators are based on a simple moving average envelope system of categorization. Every stock that has enough trading history (and has a broad enough trading range) is evaluated based on the relationship between the current price and the 13- and 40-week moving average of price. Six different categories of trend are defined in accordance with the prevailing primary and secondary trends. These trends are the elemental foundation of Stock Trends. They are based on a simple premise (that stocks trend) and a simple tool of analysis (the moving average). The success of this system of analysis is derived from this keep-it-simple approach. Trend analysis applied systematically can be used effectively by any brand of trader provided they learn the essential money management skills of the trading business. For the purposes of a swing trader (a trader who trades on an intermediate time horizon, perhaps holding for weeks or months), Stock Trends provides appropriate trend signals that can be utilized in a systematic trading program. The success of Stock Trends - first as a value-added editorial feature in a national financial newspaper, and, more effectively, as a trading system developed within the framework of a dedicated newsletter/report service - has revealed a surprising and inspiring proposition: Profits, like love, can be very simple. If you want, you can make it hard, full of difficult lessons, an arduous education. Or you can simplify things and trust in its magic. Stock Trends allows you to master the market on your own terms. Trading made simple. The Stock Trends Handbook’s most potent declaration came from its description of a trading methodology based on the Stock Trends indicators. The Stock Trends Portfolio was presented as an example of a successful trading program – a back-tested system that provided a glimpse at the potential for profits the indicators deliver. Developing the databases and systems for testing these results, though, required more computer skills than I had. Thankfully, Stock Trends enjoyed the entrance of a new partner at that time: an experienced systems developer with a Canadian brokerage house - and a Chartered Accountant to boot! Add to this the good fortune that the partner, Kevin Kortje, is also my eldest brother, and the brainchild of Stock Trends became more than a tandem of stock market enthusiasts committed to discovering the road to trading profits. It was, and remains, a family affair. We worked together back-testing different trading strategies using Stock Trends, and eventually focused on one that delivered not only good results but also had a trading pattern that would be acceptable to most small traders. Out of Kevin’s professional work in developing the Stock Trends portfolio application grew a new initiative to create a Stock Trends report system. As you learn more about Stock Trends Weekly Reporter, you will recognize that the primary focus of the trading strategies and stock selections delivered to subscribers is on stocks changing from a Bearish trend to a Bullish trend. These include both Bullish Crossover stocks () and certain Weak Bearish () stocks. #### THE PEOPLE BEHIND STOCK TRENDS #### Skot Kortje As a native of Saskatoon, Saskatchewan I cannot deny my endearment to the big sky of the prairie and the resolute spirit of its people. Toronto has been my home since 1986, the University of Toronto my alma mater. I studied economics and English literature at university but was always interested in the ways of business. Upon graduation I found myself working at the Financial Times of Canada, where my interests in the stock market ignited. Since that time I have translated this largely self-taught education in the financial industry into the Stock Trends mission: to share this passion with others, empowering them with the tools for self-directed success in the stock market. Often I wax philosophical in commentary, but I believe that lessons learned from the market have many analogous applications in our lives. I am fortunate to have two other brothers who are experienced brokers. Together with our eldest brother Kevin, we take a family interest in the stock market – a strange vocation for a family whose heritage is rooted in the strong forearms of blacksmiths. We have exchanged the roar of the blazing forge for the quiet hum of our computers. The roar of the market is for others. #### Kevin Kortje Residing in Vancouver, B.C., at the opposite end of the country from my brother and business partner, I take pride in my prairie upbringing and marvel at the wonders of today’s technologies that allow me to keep in close touch with my family in Calgary, Saskatoon and Toronto as if they lived next door. I moved from Saskatoon to Vancouver in 1979, after completing my Bachelor of Commerce degree at the University of Saskatchewan, to article with Thorne Riddell and, after obtaining my C.A. degree in 1983, became an independent computer systems consultant in 1985. I have had the good fortune to be involved in developing computer systems for a wide variety of businesses, including investment brokerage and portfolio management, which led to my ultimate involvement with Skot and Stock Trends in 1995. Being a pragmatist, the ‘KISS’ attributes of the Stock Trends methodology were not lost on me, and I am proud to be associated with the continuing development of this highly successful and valuable product. ### Subscriber Testimonials • You have created and maintained an amazing, highly educational program and I am grateful for your part in getting our retirement funds to the good place they are. • I find your website and research very helpful in my stock trading. I have subscribed to several related services in the past and none present their work with “just the facts” as you. Please keep up the great work so that I can continue to learn! • I use Stock Trends to help direct my stock picks. Also, following the advice of Stock Trends I have religiously used stop-loss orders and have avoided hanging on to losing stocks for emotional reasons. • Thank you for your excellent work and kind approach to your customers. • I am fascinated with your service and methodology - it is very impressive. [...] Over the years I have concluded that there are many ways to approach stock investing, but once one has chosen a path, one is better off sticking to it. • I've followed your recommendations since reading your columns in the Globe & Mail, and finding they published Stock Trends arrows in their financial listings. I do find them a guide to the general market and what I should be avoiding for declining chart trends. Has probably saved me the subscription by not rushing into hot stocks! • I want to thank you for posting such an excellent guide to technical analysis on the web. You have provided a great service to all of us novice investors. • I am just writing to tell you of my appreciation of your service! It makes so much sense to me. You seem to be an oasis of stability and sensibility in a stockmarket jungle. • I very much like the systematic approach to analyzing stock data, it fits my approach. • There is a lot to be gained from comparing trends of how individual stocks are doing within a sector, as well as how the sector is performing relative to the broad market. • Your report is an impressive, excellent tool and I have recommmended it to friends. • I've followed a number of Stock Trends picks, and the methodology is solid. • Stock Trends Weekly Reporter is an easy way to pick up equities that represent an upward trend. • Just thought I'd call to thank you, Skot. Stock Trends Weekly Reporter helped pay for my daughter's education! • I have had the good fortune to be reasonably successful and enjoy the investment process. Your process would be recommended for both experts and those who are new to investing. • Stock Trends information is part of the base information I review before making a trade. • Hence, anyone who had followed the "Stock Trends" line should have sold their Bre-X shares and, with the windfall, paid for a lifetime subscription to The Globe and Mail and more. Talk about return on investment! • Stock Trends analysis quantifies nicely the movement of individual stocks. I’ve found that if the technicals are out of synch with fundamental analysis, it is a wake-up call to make a decision. The Stock Trends Bull/Bear Ratio is useful in identifying major market bottoms and tops. It has always presented a good buying or selling opportunity. • An admitted cynic, it's obviously very high praise when he says he likes StockTrends because of its "simplicity, utility, openness, [and] honesty," and in addition to having "no hidden agenda" is "understandably documented [and] historically verifiable." And, he adds, "It lets me see a lot of things without doing a lot of work." Globe and Mail • I am something of a momentum investor. I find Stock Trends useful as I can look at my portfolio as a “watch list” and quickly see where trends are declining in strength or reversing, so it is particularly useful as a tool in portfolio management regarding sales. ### Subscription Plans ## STWR - Monthly ##$19.95

Monthly subscription plan to Stock Trends Weekly Reporter - pay your monthly subscription fees by having them automatically charged (PayPal only). Free 7-day trial period. Subscribers may cancel before the end of any subscription month.

## $199.00 1 Year Prepaid subscription to Stock Trends Weekly Reporter. Save 16% off monthly rate! ## STWR - 2 Year Prepaid Subscription ##$299.00

2 Year Prepaid subscription to Stock Trends Weekly Reporter. Save 37% off monthly rate!

## $399.00 3 Year Prepaid subscription to Stock Trends Weekly Reporter. Save 44% off monthly rate! ## STWR - Monthly$19.95/1 month

Monthly subscription plan to Stock Trends Weekly Reporter - pay your monthly subscription fees by having them automatically charged (PayPal only). Free 7-day trial period. Subscribers may cancel before the end of any subscription month.

$199/1 year 1 Year Prepaid subscription to Stock Trends Weekly Reporter. Save 16% off monthly rate! ## STWR - 2 Year Prepaid Subscription$299/2 years

2 Year Prepaid subscription to Stock Trends Weekly Reporter. Save 37% off monthly rate!

## STWR - 3 Year Prepaid Subscription

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3 Year Prepaid subscription to Stock Trends Weekly Reporter. Save 44% off monthly rate!