Monday, January 28, 2013

Person, Mastering the Stock Market

Mastering the Stock Market: High Probability Market Timing & Stock Selection Tools (Wiley, 2013) is the latest book by the well-known technical analyst, educator, and author John L. Person. Although Person is probably most famous for his work on pivot points, this book is wide-ranging. It covers seasonal analysis (don’t forget, he’s the co-editor of the Commodity Trader’s Almanac), sentiment analysis, comparative relative strength, breadth studies, volume analysis, patterns and indicators, scanning, pivot point analysis, and management tools. And, despite its title, the book also deals with futures and options.

Traders and investors should probably have some market basics under their belts before they pick up this book. Person packs a lot of information into Mastering the Stock Market and, even though he writes clear, fluid prose, he doesn’t linger over elementary points. His intended audience, I would suspect, is comprised of traders above the level of rank novice who have not already read (and absorbed) dozens of books on technical analysis as well as those who are in search of a good review course.

Need a brush-up on the Commitment of Traders report, VWAP, or the McClellan Oscillator? Want to learn about the seasonal trends of market sectors or spread trading? Interested in illustrations of convergences and divergences? This book offers all of the above—and much, much more.

Here’s one example of a COT option strategy. The COT data, Person maintains, “can act as a great confirming tool, especially when combined with seasonal analysis.” When high-beta stocks or sector ETFs “and/or the broad stock market are in a seasonally strong period, and if the COT data suggest that small speculators are net short more than 12 percent of the open interest in the E-mini S&Ps, then once you have a bullish trigger such as the Person’s Pivot Study (PPS) to generate a weekly buy signal, sell an at-the-money put (credit) spread with an option expiration of less than 35 days but more than 15 days. For added confirmation, look for the 9-day simple moving average (SMA) to cross above the 18-day SMA. If the market moves up, you profit by keeping the premium collected.” If the market moves against your position, to reduce losses “exit the strategy if the PPS indicator generates a weekly sell signal and/or the 9-day SMA crosses back below the 18-day SMA.” (p. 76) The PPS indicator, by the way, is currently available on several trading platforms. It’s not one of those proprietary tools that you can use only if you subscribe to an expensive service.

Mastering the Stock Market is a well-executed book by a seasoned professional.

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