Tuesday, January 22, 2013

Morales and Kacher, In the Trading Cockpit with the O’Neil Disciples

In 2010 Gil Morales and Chris Kacher wrote the popular Trade Like an O’Neil Disciple: How We Made 18,000% in the Stock Market. Kacher made 18,000% between 1996 and 2002, although he was in cash for most of 2000-2002; Morales, almost 11,000% from 1998 through 2005. Once the bull run and the subsequent selloff were over and base breakouts were no longer effective entry points, the authors developed new techniques for dealing with the choppy markets of 2004-2005. I described one of their trade setups, the pocket pivot, in my post about the book.

Their new work, In the Trading Cockpit with the O’Neil Disciples: Strategies That Made Us 18,000% in the Stock Market (Wiley, 2013), expands on the strategies outlined in their earlier book and on their website, VirtueofSelfishInvesting.com. It is in large measure a workbook. Almost half of the book is devoted to pocket pivot and buyable gap-up exercises, with a full-page daily chart recto and the answer on the following verso (its flip side). For the 40 pocket pivot exercises the reader is asked to identify the pocket pivots and add any comments or qualifications. In the buyable gap-up chapter the reader is supposed to decide whether she would buy the gap-up move shown on the chart and why or why not.

The authors also offer a 75-page trading simulation, “step-by-step, day-by-day through the relevant price/volume action in two leading stocks from recent bull market cycles”—FSLR and APKT. “In this manner,” they claim, the reader “can gain a practical understanding of just how decision making occurs in real time according to the rules and techniques embraced by our particular brand of the OWL (O’Neil-Wyckoff-Livermore) investing and trading methodology.” (p. 265)

Despite the hype in the subtitles of both books, and despite the fact that most of the touted gains were made before the authors developed their own strategies, OWL traders will find a lot to like. They will even learn more than entry signals in a bull market. The last chapter on FAQs addresses such issues as when to sell and how to short stocks.

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