Trading Stocks for the Visual Learner by Firehouse Publications

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This is an incomplete preview of the book. To order, please visit and enter code 3YPBN853 for 30% off! https://www.createspace.com/6212081 This book is also available on Kindle and iTunes for just $2.99 but does not include the stock buying worksheets included in this paper edition.

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Trading Stocks for the Visual Learner A Simple Stock Market Guide to Earning Profits By Eric Gibbons 2016 All rights reserved. No part of this book may be reproduced, reprinted, stored in a retrieval system, or transmitted, in any form or by any means, electronic, photocopying, recording, or otherwise, without the prior written permission of the publisher or author, except in the case of brief quotations embodied in critical articles, reviews and for promotional purposes. This book is intended for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice. ISBN-10: 1532780192 ISBN-13: 978-1532780196 Publisher: Firehouse Publishing 8 Walnut Street, Bordentown, NJ 08505 www.FirehousePublications.com Printer: Createspace

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I am an art teacher, a visual learner, and I have made some great returns in the stock market, more than doubling my investments. With banks offering laughable interest rates, sometimes stocks are a good way to make your money work for you, but it should be done with caution and open eyes. If trading with real money is scary, you can create a virtual portfolio for free and play before you invest. This guide is focused squarely on making profits, with a goal of doubling your investment within a year or two. I use a visual method to screen potential stocks, and after a bit of research, buy those stocks, and sell them when they have reached my target price. This is NOT about buying stocks and holding them for many years, passing them onto your beneficiaries. It's about finding opportunities to make a profit. I offer this book and my experiences as an opinion and for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.

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Here is a graph of a stock from Google Finance with labels to decipher the important information.

The market has many ups and downs, and sometimes these trends are emotional instead of "real." For instance, in early 2009 the market had a significant crash because of the mortgage crisis. Banks and companies were making loans and insuring them for people they knew could not afford them. When it all came crashing down, so did the market. The odd thing to me was that stocks like General Electric, Dow Chemical, Ford, Alcoa (an aluminum company), and many more were all down too, but they had NO exposure to the housing market. They were down because people didn't trust the market. It was about this time my friend (Josh) said to me, "I wish I had $10,000 to throw into the market right now." He showed me some stocks, like Ford. In early 2009 it had sunk to $1.43 per share. But when you look at the history of Ford, it typically tended to sell for about $10 per share. Sometimes higher, sometimes lower, but about $10 on average. This was true for all the

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companies I ended up buying: strong, well established companies that were priced way below their normal value. Certainly a company like Ford could go bankrupt, many do, but I felt rather confident that Ford would endure. Fast forward to late 2015 and early 2016 and we have a kind of reverse oil crisis, an odd one. Gas is "cheap" hovering about $1.50 per gallon. Oil is trading about $30 per barrel. There is so much oil available; the companies that produce oil have stocks that are crashing. Chesapeake Energy Corporation (CHK) usually trades for about $20 per share when you look at their 10-year history. They have been around for a very long time, they are huge, and well established, but hammered by low oil prices. I bought shares at $1.88. I nearly tripled my investment as oil prices slowly climbed. I did sell my shares when I felt that debt issues may bog the company down, but tripling an investment is a good thing!

This chart above is from google.com/finance. Click on the Dow Chart, and put in the company's name you want to search. Change the zoom to 10 years, and you'll see something similar. There are several things I see in this chart that I like and make me want to buy it. It also lacks things I do not want to see as well.

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The important things to note are these. 1. The current price is much lower than the stock's 5 or 10 year average. 2. The drop is dramatic in less than the course of a year. 3. The stock did not split as it was going downhill or just before. 4. Before the drop, the price was fairly steady. 5. It is a company that has been around a long time. When all these things are true I add the stock to my list to research. I like to trade 10 stocks at the same time. If I have more I like, I use dividends and company size to weed the list down to 10 (more on that later). I read up on the companies I like, see if they have too much debt, maybe they have filed for bankruptcy, or there is a criminal problem with the company. Morningstar.com is a good place to go for news and to see a company's stock debt, but Google news is good too. (See "Weeding Stocks" for more details on this process) Let's break down these 5 ideas 1. The current price is much lower than the stock's 5 or 10 year average. Why buy something that is not on sale? You can, and if the dividend is good, it's better than keeping your money in a bank. (Dividends are payments made to you that you can reinvest or withdraw just for owning the stock.) But when I play the market, I aim to double what I am investing if at all possible. More is better and by paying attention to the news, this can happen. Slow earnings are not a bad thing. When the market is stable, slow and steady gainers are a good place to rest your money. Let me put it this way. At a dinner party, you might meet someone you like, and make some assumptions based on that first encounter that may or may not be true. The same is true meeting someone having a bad day; you might

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assume they are simply an unpleasant person and not know He or she got a ticket on the way to the party or are in the middle of an ugly divorce. This is the same as a stock. When you look at how it did over the course of a day, a week, or a month, you really don't know if what you are looking at is a fluke, a trend, or the reality of that stock. Just like you need to look over the lifetime of a person to really know them, you need to look at a large portion of the stock's history to get an understanding of how it may or may not perform. For me, a 10 year span is a good indicator, and 5 years is helpful too.

This is an incomplete preview of the book. To order, please visit and enter code 3YPBN853 for 30% off! https://www.createspace.com/6212081

This book is also available on Kindle and iTunes for just $2.99 but does not include the stock buying worksheets included in this paper edition.

2. The drop is dramatic in less than the course of a year, shorter is better. A slow decline over a long period of time may indicate a company is slowly dying. Even big and established companies can show this sad trend. Take Aeropostale Inc (ARO) for instance. They are very cheap, BUT have been declining over a 6-year period. They also had a "split" before they declined, something I talk about on the next point. Though it's on sale, it's a bad buy right now. They may restructure, they could come back from the crisis, but I would not bet my money on it.

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A quick short drop however can show that something unforeseen happened. A fast food stock could plunge if there was a bad outbreak of food poisoning. Chipotle Mexican Grill lost nearly 50% of its value when that happened, but they have been around since 2006. They have 16 billion in stocks, so they are big. To me, they are a good risk. For 3 months they declined, and rebounded about 25% in one month after that! (See the chart below) Knowing WHEN to buy is a bit harder, but by watching its price, and reading the news, you can make some good guesses. This was true of my previous example of Chesapeake Energy Corporation (CHK). The news started to become more positive for oil. Spring is the time gas prices increase a bit. Based on this news, and knowing we need oil to survive, these companies will certainly find a way to increase profits, and so I made the decision to buy.

This is an incomplete preview of the book. To order, please visit and enter code 3YPBN853 for 30% off! https://www.createspace.com/6212081

This book is also available on Kindle and iTunes for just $2.99 but does not include the stock buying worksheets included in this paper edition.

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3. The stock did not split as it was going downhill or just before. Stocks can split to make more shares, or reverse split to make fewer shares. A split is noted with an "S" symbol. So if you own 10 shares of a company and they split 2 to 1, then you would own 20 shares, but they would each be half the price. The reverse can happen too where you own those 10 shares and they reverse split, and you then own only 5 but their combined value is the same. There are many reasons this happens, but in my opinion, the important thing to note is what happens after the split.

To me when a stock splits before a decline, or while the price is low, or when the price is going down, it's a bad sign. Overly simplistic, but it works for me. Splits, when a business loses value or is losing value may be a sign of panic and crisis, and the price after the split is difficult to compare to the price before the split. If you look at AIG stock, you'll know what I mean. The split happened after their crash, and the split did not help its stock. It may have helped the company survive, but it did not put money into investor's pockets to any notable degree. A good split is one that happens while a company is healthy and the stock looks about the same before and after. This is the case with Apple. In fact, it still climbed! That's a healthy split in my opinion. If a split is recent though, it's hard to tell if it was for a good reason or not. I would never buy a stock

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that split within the last year or two unless there was a regular pattern of splits, and the company ALWAYS did well after the split.

4. Before the drop, the price was fairly steady. I suppose steady is a hard word to define when talking about stocks. Below we'll look at Whiting Petroleum Corporation (WLL). When I look at their 10year performance, and note the split in 2011, I see a fairly stable business. Like Apple, it did fine after the split. I look at the graph and would say it is reasonable to assume that its price should hit $40 per share in the future. The price in this snapshot is $7.08. By my estimate this stock should quadruple.

Next is an example of a stock I would not buy for the converse reasons. Its graph looks like "witches teeth." it seems to be very erratic and unpredictable at the 5 year graph. I am not seeing an opportunity to make a

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large profit, though the company is paying a dividend. I would not call it a "bad" stock; it's just not one that interests me. This pattern is sometimes seen with a company that is a bit more volatile, and may mean it has no clear advantage over its competition. The opposite can be true too with a stock that is too stable and moves within a very small range. These are called defensive stocks and are usually the kind of stocks you buy when the market is doing poorly.

5. It's a company that has been around a long time. More time = More stable. Only 50% of small businesses last past 4 years. But just because you are not familiar with the name of a company does not mean you should not invest in it. You should however learn more about them. Some companies on the stock market have been around for many years BEFORE they were on the stock market. Take that into consideration. See how long they have been around. Click the ALL option on the zoom line of the Google stock chart. The longer a company has been around the deeper their roots and ability to make it through tough times. Certainly large companies fail. TWA was a huge airline that was created in 1925, founded by Howard Hughes, but "died" in 2001. There are no guarantees. Google was

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a new company in 2004, big companies have to start somewhere, but my general advice is to not invest in a company that is less than 5 years old unless you have a good reason to think you should. When you look at Google below, note a few things. If you bought Apple early, it doubled from $50, to $100, to $200, to $300 about each year. THEN it stayed at or below $300 for 5 years. That's a long time for your money to sit before growing again. Note too there was no regular dividend. I would have avoided buying it in the beginning and say so without regret.

Frankly, tech stocks scare me. They move in trends, what's hot today is old news tomorrow. Though tech will be with us forever now, it's easy for some This is an incomplete preview of the book. To order, start-up to tumble the well established. Ever hear of MySpace? Facebook please visit andkillenter codeProbably 3YPBN853 killed them. Who's gonna Facebook? somefor kid30% with aoff! laptop. Avoid trendy, "hot" stocks in favor of old reliable companies. (This holds true https://www.createspace.com/6212081 for fashion brands as well for me.)

This book is also available on Kindle and iTunes for just $2.99 but does not include the stock buying worksheets included in this paper edition.

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Weeding Stocks: As I said before, I like to trade only 10 stocks. You might have time to follow more, but 10 works for me. After researching the company, I use two things to weed: dividends and company size. Dividends: The meanspreview the stock pays a dividend - a order, nice bonus to This is "D" an symbol incomplete of the book. To owners. The dividend an amount paid per share. Theyfor vary from company please visitisand enter code 3YPBN853 30% off! to company. I am happy to buy a stock I think will double without a dividend, BUT if I have tohttps://www.createspace.com/6212081 choose between two, I'll go for the one that pays. Like I said before, it's a nice bonus.

This book is also available on Kindle and iTunes for just

Size Matters: Big companies tend to be able to weather storms better than $2.99 but does not include the stock buying worksheets small companies. When you have to choose between a few, go for the larger included thisChesapeake paper edition. company; peek at their "Market in Cap." Energy Corporation has $4 Billion in stock available. That's pretty big. Google, nearly $500 Billion, which is huge. Small companies (less than a billion in stock) may not weather a crisis as well, but some small ones can navigate around their problems better than a big company mired in bureaucracy. I invest in a little of both. Small companies have more room for growth (and higher profits), but balance that against how big the crisis is that they face. Chipotle Mexican Grill likely will overcome their food poisoning crisis, while a small chain might not.

10important more pages of detailed information in Research: It's to research the company for recent newsfollow of rumored or realthe takeover, merger, or buyout situations. Thisfor canfinding get people book, as well as worksheets excited about the stock and give a false impression that a stock is more stocks in the printed edition. To order, please desirable than it should be. If you see a stock jump 20 to 100% in one day, it visit and enter for 30%in off! could be a buyout situation. Avoid it.code This is3YPBN853 true too of a company the middle of a takeover; you may see a dramatic price change and then a stable https://www.createspace.com/6212081