Archive for the ‘Chart School’ Category

Here’s Why Technical Analysis Gets a Bad Rap


Here’s Why Technical Analysis Gets a Bad Rap

Courtesy of , The Irrelevant Investor

There are a lot of people who don’t believe in the merits of technical analysis. It doesn’t make sense to them that you can look at past price movements and determine future price movements. If stock prices are driven by earnings, how can a chart provide any insight? Well, yeah, stocks are driven by earnings in the long-run, but in the short-run they’re driven by sentiment, which can be observed by measuring supply and demand.

Anecdotally, nonsensical forecasts seems to permeate from technical analysis way more than fundamental analysis, which is the main reason it often gets ridiculed. (By the way, I’m not suggesting nonsensical forecasts aren’t ever driven by fundamental analysis, Dow 36,000 is a great example.) These outrageous claims are provided by technicians that abuse the charts. They’ll draw a few dozen lines, waves and retracements, and use a handful of oscillators. In addition to some of the crazy artwork, the patterns they’ll cite have names that sound ridiculous to the laymen; a rising wedge, head and shoulders, three peaks and a domed house, etc. 

Here’s a recent “Red Alert” example from HSBC:


The Head & Shoulders Top with the neckline acting as resistance comes on top of a potentially bearish Elliot Wave irregular flat pattern and the fact that the index is now backing off from the old 2015 highs. A close below 17,992 would be very bearish. Pressure would ease above 18,449.

Lol, what?

Here is another example from an article yesterday in the Wall Street Journal with the headline “Technical Analysts are Getting Nervous About This Market.” It included the following statement:

Those who owned S&P 500 stocks only when both the index and its cumulative advance-decline line were below their 50-day moving averages, as is currently the case, would have lost about 50% since 2012, according to FBN Securities.

What does this actually mean!?!

And finally, stuff like this exists, which shows stocks vs. regional surface temperature of the Pacific Ocean…


Requires no further commentary.

To me, technical analysis is…
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Neutral Day for Indices

Courtesy of Declan.

Markets were unable to build on premarket gains, but did manage to finish the day where they started.

The S&P closed with a narrow range doji, a doji which finished below Friday’s bearish black candlestick. The pattern of the last five days is playing more in bears favour, but with support around 2,115 holding there is still a chance a broad swing low is in play; confirmation comes on a move above 2,160. Trading volume sided with bulls on a confirmed accumulation day.

The Nasdaq was able to push above Friday’s highs, although weak afterhours action from Intel is likely to put a dampner on action tomorrow.  With moving averages converging overhead, the likelihood of a more extended move lower increases. The presence of two black candlesticks in close proximity is bearish.

The Russell 2000 is attempting to build a rally from 1,210. Of the ‘low risk’ long opportunities this is the best for longs, but as action is showing a squeeze with lower highs it would need a push above 1,220 to offer bulls confidence a low is in fact in place. While technicals are bearish, they are oversold enough to mark a bottom.  The most bearish action comes from the relative performance of the index to its peers.

For tomorrow, things remain precarious for bulls, but until there is a confirmed break of last week’s lows there isn’t reason to become a seller or go short either.

You’ve now read my opinion, next read Douglas’ blog.

I trade a small account on eToro, and invest using Ameritrade. If you would like to join me on eToro, register through the banner link and search for “fallond”.

If you are new to spread betting, here is a guide on position size based on eToro’s system.

Apple Inc Trend Management

Courtesy of Read the Ticker.

apple-inc-trend-managementMany many investors exit a long running trend far to early, and they also fail to recognise when a trend starts.

In a previous blog post we showed you RTT Steps with Gold and Silver, this indicator was designed to compliment our Richard Wyckoff logic. Trends do move up by a process of ‘Cause’ and ‘Effect’, like steps, and as you can see RTT Steps showing the stepping stone (continuation) accumulation phases as well as accumulation bases and of course when price shows a change in character (by either breaking the reaction line or the lower band line).

Also as stated before.. RTT Steps tool does so much more than the age old moving averages, they give you the range of expected movement during a trend, a possible pullback reaction line (below the red dotted line is set to 60% pullback [60% between upper and lower range of RTT Steps], and off course a quick view of support and resistance.

Very nice!

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Apple Inc

NOTE: does allow users to load objects and text on charts, however some annotations are by a free third party image tool named

Investing Quote…

…”I did not know then what I learned later, what made me fifteen years later, wait two long weeks and see a stock on which I was very bullish go up thirty points before I felt that it was safe to buy it. I was broke and was trying to get back, and so I waited. That was in 1915.”…

Jesse Livermore

..”Until an hour before the Devil fell, God thought him beautiful in Heaven”..

Arthur Miller, “The Crucible”

 [Contrarian Investing]

..“I buy on the assumption they could close the market the next day and not reopen it for five years” and “Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell.”..

Warren Buffet

..“The main purpose of the stock market is to make fools of as many men as possible”..

Bernard Baruch

..”Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway”..

Warren Buffett

Weekly Market Recap Oct 16, 2016

Courtesy of Blain.

The week that was…

Earnings season began in earnest but the obsession with the Federal Reserve remained this past week.  Tuesday, Thursday, Friday provided some fireworks although Tuesday was the only day with a significant end of day % change.   Thursday and Friday were a bit of polar opposites with a gap up (or down) offset by the opposite move during the remainder of the session.  Federal Reserve minutes were released Wednesday meeting which described the decision around holding rates unchanged as a “close call,” and indicated that Fed officials saw sufficient reasons for a hike but wanted to see further evidence of economic improvement with doves pointing to slack in inflation measures:

In the minutes from its September meeting, the Fed said it held steady but acknowledging that a rate increase was in the cards “relatively soon.”

The minutes tended a bit toward the dovish side, said Karyn Cavanaugh, senior market strategist at Voya Financial. “They were a little wishy-washy, not a lot of substance, leaning toward the doves, and no specificity about [a] December [rate hike],” Cavanaugh said. “We’ve seen this before and the market is looking at it with a jaded eye.”

“There was a little more color in these minutes, but no explicit mention of November or December. We would’ve liked to have seen that—we think another 25 [basis point] increase would be good for the economy—but there’s still time for the Fed to get more explicit,” said Deron McCoy, chief investment officer at Signature Estate & Investment Advisors.

Federal -funds futures show that investors were pricing in a roughly 70% chance to a rate increase in December.

Friday, a Janet Yellen speech went full dove yet again!  We’ll go back to Karyn for comments!

Janet Yellen said it might be wise to run a “high pressure” economy, one with a tight labor market, to reverse the negative effects of the Great Recession.

Yellen is affirming the dovish tilt seen in the recently released minutes of September’s Fed policy meeting, said Karyn Cavanaugh, senior market strategist at Voya Financial.  “These low rates are kind of silly, but the

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Late Selling Leaves Markets at a Crossroads.

Courtesy of Declan.

The follow through from Thursday’s buying burned out after the first hour of Friday’s trading and Friday closed back at Thursday’s close. Where Thursday’s action had set up for upside follow through, Friday’s ‘inverse hammer’ is offering the reverse.  The question is how strong the respective buying and selling which created the spikes from Thursday and Friday are? Monday is likely to start with a test of Thursday’s buying. What happens after the first half hour of trading will set the tone for the rest of the day.

The S&P is trading below 20-day and 50-day MAs. Thursday’s selling was greater than Friday’s buying which is another tick in the bear column. Technicals are all negative. The only positive was the relative out performance of the index to the Russell 2000.

The Nasdaq rebounded off its 50-day MA as buying volume traded below Thursday’s selling volume (like the S&P). Bulls can look to the mid-line test of Stochastics as a possible launching point for a rally. Bears will want an expansion in the new relative underperformance of the index against the S&P.

The Russell 2000 is in the worst position. The index is pressuring Thursday’s low, leaving bulls with little room for maneuver. A weak start for this index will make it difficult for bulls in the S&P an Nasdaq to step in and defend Thursday’s lows, and for buyers from Thursday to hold their positions. Look to the Russell 2000 for leads in all markets

The longer term picture has become slightly more mixed.

Bulls can look to the Dow Theory indicator as Transports continue their performance breakout. The trend remains down, but the acceleration lower which started in 2015 has been negated. If current action can make it past the hashed red-line it will mark a new leadership role for transports which would point to improving economic conditions.

Meanwhile the relationship between Staples and Discretionary stocks…
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US Equity Markets Break Key Technical Support

Courtesy of Dana Lyons

This broad gauge of the equity market (among others) has snapped its post-February uptrend line.

The 2 signature events in the U.S. stock market thus far in 2016 are: 1) the post-February rally, and 2) the January-February plunge (in order of importance). A distant 3rd would be the Brexit affair. This post relates to #1. A few weeks ago, we noted that several major equity indices were testing the Up trendline defining their post-February rallies (i.e., the line connecting the February low and Brexit low). These averages were able to hold their respective trendlines and preserve their uptrends. Until yesterday. Yesterday was perhaps a key day on an intermediate-term basis in that many indices saw their post-February Up trendlines broken. Included among them was the Value Line Geometric Composite (VLG).

The VLG, as we’ve mentioned often, is perhaps our favorite measure of the performance of the broad U.S. equity market. It is an equal-weight index of approximately 1800 stocks, calculated via the median stock in that universe. Thus, it truly is a measure of the broad market rather than a skewed, cap-weighted index. And despite not being tied to any investable vehicle, that we are aware of, the VLG conforms very well to charting analysis. That’s why we view the VLG’s post-February trendline break as significant, in a negative way.


In the post a few weeks ago, we focused on another broad market gauge, the NYSE Composite, which, by the way, also snapped its post-February trendline yesterday. Regarding the NYSE’s trendline test, we stated the following, which is also applicable to the VLG index and others:

“Is it the end of the world if this line gets broken? Not really, but it may be the end of the post-February intermediate-term rally in stocks. Or, at a minimum, it may signal the end of the post-Brexit phase of the rally. Considering the way the NYSE has closely adhered to the trendline, prices certainly seem to “respect” the line. Thus, in the short-term, upon a hypothetical break of the trendline, a quick acceleration to the downside would seem to be a reasonable risk.

Again, a break of this trendline doesn’t necessarily mean the larger trend has turned down. It may just mean a shallower

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Please Assume Crash Positions

Courtesy of Charles Hugh-Smith of Of Two Minds

You know how to get into crash positions, correct? Here's your guide:

Very few punters expect a real downturn here in stocks. The reasons for confidence are many: the Fed has our back, buy the dip has worked great and will continue to work great, the Fed won't raise rates until December (if ever), the Powers That Be will keep the market aloft lest a plunging market upset the election of the status quo candidate, and so on.

This confidence that the market will be on cruise control into the November post-election rally is the ideal set-up for a crash to SPX 1,850. While we can argue technicals all day, the fact is gaps get filled, usually sooner rather than later. There are two big open gaps in the S&P 500 around 2,040 and 1,860 that have been begging to get filled for months.

The question arises: after months of going unfilled, why not fill them now with a pleasantly unexpected little October crash? Technically, there are a couple of features that suggest the market would really, really like to plummet, if only the Plunge Protection Team would stand aside for a few days.

First, there are the open gaps that ache to be filled.

Then there's the peculiar Zombie Market of July and August, when volatility vanished and trading ranges fell as close to zero as is possible. A sign of strength? Hardly.

Third, the SPX has struggled mightily to claw its way above the 50-day moving average, and has failed to surmount this important technical target despite a month of effort. That suggests Mr. Market is feeling the pull of gravity, and the slightest stumble will cause Mr. Market to careen over the cliff.

MACD has also struggled to clamber above the neutral line, and since bad things tend to happen below the neutral line--just back up a bit more, Mr. Market….

The declining trend in stochastics is also fugly, as stochastics are far from oversold.

The cliff and the gaps both beckon. That few believe Mr. Market can possibly stumble only increases the odds of a stumble. Hubris eventually has consequences.

Sellers Hit Out

Courtesy of Declan.


Today had the look of a decisive break down, but the last such breakdown from September's Brexit vote had a similar guise, but it failed to follow through. Volume climbed to register as another distribution day, the second (third for the S&P) such day since the last accumulation day. Tomorrow could be the decider, but it needs to break down right from the open – otherwise the agony will continue.

The S&P is back showing net bearish technicals. However, the index continues to outperform the Russell 2000.

The Russell 2000 finished the day with a 'bull trap', after a positive breakout yesterday. Technicals are mixed, although with relative performance on the wane it would appear bears have the upper hand.

The Semiconductor Index suffered big losses at over 2% for the day. It has been a strong performing index since May's low, but it may find itself experiencing more headwinds now. Technicals are moving into the bear column.


This has had a clear knock on effect on the Nasdaq and Nasdaq 100. The Nasdaq finished on its 50-day MA, much like it did in early September when it was followed by a powerful rally. Bulls may be looking for a gap (down) and rally tomorrow.


Tomorrow needs a bullish reaction, otherwise a move down to June lows becomes the preferred forecast. There is little room for maneuver for bulls after today.

You've now read my opinion, next read Douglas' and Jani's.

Gold and Silver Trend Intact

Courtesy of Read the Ticker.

gold-and-silver-trend-intactOver the last 18 month we have had a new bullish trend start in gold and silver.

The trend is still intact, as nothing moves in a straight line, a trader must expect pullbacks. RTT Steps tool does so much more than the age old moving averages, they give you the range of expected movement during a trend, a possible pullback reaction line (below the red dotted line is set to 60% pullback [60% between upper and lower range of RTT Steps], and off course a quick view of support and resistance.

Yes one can say that Gold and Silver have yet to confirm their new trend by breaking out higher, but trends have to start somewhere, and we shall have to wait and see.

At this point in time, if price halts the current punch lower, the trend should resume higher for both metals, and you can see on the chart below it is a great time to consider an entry point.

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Gold and silver

NOTE: does allow users to load objects and text on charts, however some annotations are by a free third party image tool named

Investing Quote…

..”Thus, I affirm, every class of phenomena, whether in nature or in the stock market, must be subject to the universal law of causation and harmony. Every effect must have an adequate cause.”..

William D Gann

..“One must search through a maze of complex and contradictory details to get to the significant facts … Then he must be able to operate coldly, clearly, and skilfully on the basis of those facts.” The challenge for the successful speculator is “how to disentangle the cold hard facts from the rather warm feelings of the people dealing with the facts.” Moreover, “if you get all the facts, your judgment can be right; if you don’t get all the facts, it can’t be right”…

Bernard Baruch

..“By failing to prepare, you are preparing to fail”..

Benjamin Franklin

…“People somehow think you must buy at the bottom and sell at the top to be successful in the market. That’s nonsense! The idea is to buy when the probability is greatest that

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Weekly Market Recap Oct 9, 2016

Courtesy of Blain.

The week that was…

Key economic reports such as the monthly employment data and ISM manufacturing and non manufacturing didn’t move the needle much this week and the infatuation with Deutsche Bank ended.  However there were all sort of antics happening in oil, precious metals, and currency markets.

On the economic front, Monday was the release of the ISM Manufacturing report which showed a move back to expansion (>50).

The Institute for Supply Management said its manufacturing index rose to 51.5 last month after dipping into negative territory in August. Economists surveyed had forecast the index to total 50.6.  Spending on construction tumbled 0.7% in August.

Thursday saw a gigantic jump in the ISM non manufacturing index to a reading of 57.1, up from 51.4 in August.

The biggest data point of the month is always the employment figures which came in at +156,000 last month, while the unemployment rate ticked up to 5% as more workers entered the labor market. Hourly wages grew 0.2%.  This was a number everyone could live with – not too hot, not too cold so it still puts a Fed rate hike in late 2016 in doubt.

The U.S. has added an average of 178,000 jobs a month this year, down from 228,000 in 2015 and 251,000 in 2014.


Here is a 5 day “intraday” chart of the S&P 500 via Doug Short.


The week ahead…

Hopefully some of the obsession with central banks cease as earnings season launches.   That said earnings have been woeful for quite a long time…

According to the latest FactSet calculation, third-quarter earnings-per-share of S&P 500 companies are expected to drop 2% from the third quarter of 2015, which will mean earnings will have racked up six consecutive quarters of decline.

FOMC minutes will be released Wednesday and with the constant obsession about what the Fed will do (when it usually does nothing but placate the market) it should be on the radar.   Retail sales will be the key economic report to watch for.

Index charts:

Short term: The S&P 500…
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Zero Hedge

Moody's Warns Deutsche Bank Is Dangerously Close To Falling Below Its "Default Point"

Courtesy of ZeroHedge. View original post here.

Authored by Rupert Hargreaves, originally posted at,

Moody’s Capital Markets Research issued a damning verdict on Deutsche Bank earlier this week. In a research report put together by the credit agency’s ‘Analytics’ research division, Moody’s analysts write that Deutsche Bank expected default frequency remains at one of the highest levels in the banking industry, despite the bank’s efforts to shore up its capit...

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Income Inequality Stalls As Wages Rise For Everybody

By insidesources. Originally published at ValueWalk.

The income gap between the rich and everyone else stopped growing in 2015 due to wage growth across the board, according to an analysis out Thursday.

Income inequality has become an important issue in recent years. Progressive advocates have contested that the income gap between the rich and everyone else has grown well beyond what is acceptable. The Economic Policy Institute (EPI) found that last year was unique in that wage growth for the richest didn’t exceed everyone else.

Image source: Democracy Chronicles – FlickrIncome Inequality

“Annual infl...

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Kimble Charting Solutions

Amazon; Potential bearish reversal pattern, says Joe Friday

Courtesy of Chris Kimble.

Without a doubt, Amazon (AMZN) remains in an uptrend (higher highs and higher lows) over the past decade plus. Last nights earnings does NOT change this trend!

Below updates the pattern on Amazon and highlights that this week, it is could be creating a pattern it has seldom created, over the past 10-years.


As mentioned in the chart, a few t...

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Phil's Favorites

Cybersecurity's weakest link: humans


Cybersecurity's weakest link: humans

By Arun Vishwanath, University at Buffalo, The State University of New York

There is a common thread that connects the hack into the sluicegate controllers of the Bowman Avenue dam in Rye, New York; the breach that compromised 20 million federal employee records at the Office of Personnel Management; and the recent spate of “ransomware” attacks that in three months this year ha...

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Market News

News You Can Use From Phil's Stock World


Financial Markets and Economy

Investors are fleeing stock funds at the fastest pace in over 5 years (Business Insider)

Retail investors seem to have cooled on the stock market.

According to a note from Bespoke Investment Group, equity mutual funds have experienced their largest weekly outflows since August 2011.

Deutsche Bank's earnings call was the most brutally honest, angsty thing we've heard in a long time (Busines...

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Digital Currencies

Needham Raises Bitcoin Price Target To $848: Here's Why

Courtesy of ZeroHedge. View original post here.

With bitcoin breaking out of its recent trading range as Chinese buyers once again flock to the currency as the Yuan slides (as we predicted over a year ago they would), even Wall Street analysts are starting to pay attention, and in a recent report by Needham's Spencer Bogart, the analyst has raised his price...

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Members' Corner

Heil The Candidate?

Courtesy of Nattering Naybob.

Remember the 2016 Presidential Election is only thirteen days away. During this election campaign, both 2016 election candidates and the incumbent President, have been amongst other things, vilified as Hitler-esque.

Above Heil Hitlary! courtesy of LULZY T-Shirts

Above Heil Trump! image...

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Chart School

Tech Hold Breakout,.but S&P Wedge Bound

Courtesy of Declan.

It was a mixed day for indices. Large Caps remain bound by wedge support/resistance, but Tech broke upside yesterday from similar wedges and held those breakout today.

There was little change for the S&P over the last couple of days. The one technical change was the MACD trigger 'buy' as other technicals stayed on the bearish side.

Meanwhile, the Nasdaq cleared wedge resistance yesterday, and was able to hang on to the breakout despite today's loss. It too enjoyed a MACD trigger 'buy', but had an On-Bal...

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Swing trading portfolio - week of October 24th,2016

Reminder: OpTrader is available to chat with Members, comments are found below each post.


This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...

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Mapping The Market

The Most Overlooked Trait of Investing Success

Via Jean-Luc

Good article on investing success:

The Most Overlooked Trait of Investing Success

By Morgan Housel

There is a reason no Berkshire Hathaway investor chides Buffett when the company has a bad quarter. It’s because Buffett has so thoroughly convinced his investors that it’s pointless to try to navigate around 90-day intervals. He’s done that by writing incredibly lucid letters to investors for the last 50 years, communicating in easy-to-understand language at annual meetings, and speaking on TV in ways that someone with no investing experience can grasp.

Yes, Buffett runs an amazing investment company. But he also runs an amazing investor company. One of the most underappreciated part of his s...

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Epizyme - A Waiting Game

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

Epizyme was founded in 2007, and trying to create drugs to treat patient's cancer by focusing on genetically-linked differences between normal and cancer cells. Cancer areas of focus include leukemia, Non-Hodgkin's lymphoma and breast cancer.  One of the Epizme cofounders, H. Robert Horvitz, won the Nobel Prize in Medicine in 2002 for "discoveries concerning genetic regulation of organ development and programmed cell death."

Before discussing the drug targets of Epizyme, understanding epigenetics is crucial to comprehend the company's goals.  

Genetic components are the DNA sequences that are 'inherited.'  Some of these genes are stronger than others in their expression (e.g., eye color).  Yet, some genes turn on or off due to external factors (environmental), and it is und...

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All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.

To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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PSW is more than just stock talk!


We know you love coming here for our Stocks & Options education, strategy and trade ideas, and for Phil's daily commentary which you can't live without, but there's more! features the most important and most interesting news items from around the web, all day, every day!

News: If you missed it, you can probably find it in our Market News section. We sift through piles of news so you don't have to.   

If you are looking for non-mainstream, provocatively-narrated news and opinion pieces which promise to make you think -- we feature Zero Hedge, ...

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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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