This diary chronicles a trading campaign in a single stock during the first half of year 2000. In my paper “ A New Paradigm for Stock Market Investing – Maximizing Return and Minimizing Risk By Short Term Trading” I contend that the old principal of portfolio diversification as a technique for risk control can be discarded. I propose that by using statistically reliable forecasting methods and trading near the short term pivots in a market, not only can risk be controlled but return can be enhanced over that of the buy and hold strategy. This trading campaign set about to prove that proposition.

The trades documented herein occurred in an account with Quick & Reilly Discount Brokers with a beginning balance of $38,711.89. This was not a margined account so trades could only be entered on the long side although my forecasting techniques and trading methods are equally as reliable on the short side.

Amgen was chosen as the trading vehicle due to the excellent fundamentals and a long history of successfully trading the stock.

In this diary I will refer to two techniques I use for forecasting the turning points in any market. The first technique I call the Near Impulse Method Ô (NI) is based on my Near Impulse Theory™ as described in the Research Report No 101 “Using Gann Based Expanding Time Cycles to Forecast Turning Points In the DJIA”.

The second method, called the Date Pivot Method™ (DP), has not been publically disclosed but will be described in a Trading manual that is currently under development.

The details of these trades have been independantly verified by an associate whose statement appears at the end of the report.

TRADE #1 Jan. 6, 2000 to Jan 11, 2000 Net + $5635.07

Amgen has been moving up since the middle of December. The NI method forecast a turn in direction for 12/31 or 1/3 so I was looking for a high pivot and a reaction down to a lower price so I could go long. Sure enough, on 1/3 the stock peaked at 70 and the next day closed at 58 1/8, below the previous days low and thus confirming the high pivot.The 1/3 high generated a DP forecast of 1/7 as a potential low. On 1/5 the stock traded in the lower half of the 1/4 range but closed up signalling a possible turn in sentimate. I placed a buy stop at 60 3/4 and was filled on 1/6 at 61.

NI suggested the next turn as 1/11. Also ,using 1/4 as a low pivot , the DP technique gave 1/9 –1/10 as turn points . So I was prepared to exit in this time period.

On 1/10 Amgen gapped up and closed near the top of its range at 72 1/8. I placed a sell stop at 71 and exited the next morning. What a great way to start the year with a 600 share trade netting $5635.07.

TRADE #2 Jan. 13, 2000 to Jan. 14, 2000. Net +$1304.62

Both the NI and DP methods indicated a low coming on 1/13. I bought 650 shares on the open on the 13th. The next day’s (Friday) price action did not confirm the low as the 12th. And since Monday, the 17th was a holiday, I elected to exit at 67 3/8 – a net profit of $1304.62.

TRADE #3 Jan.26.,2000 to Feb. 8, 2000 Net +$2834.31

After my exit on the 14th Amgen moved up the next five trading days putting in a high on 1/24. Although I had a forecast turn for 1/24 from the low pivot on 1/12, I did not trade this move.

Once the high was in on 1/24, my forecasting methods both indicated a low for 1/27. This would be my reentry point. Anticipating the turn, I entered long on 1/26 at 65, near the low of the day.

The following day is scary. Amgen trades lower, closing well below my entry point. I comfort myself with the reminder that the 27th was the forecast low day. I decide to see what happens the next day but to exit if the low is penetrated. The next day, the 28th, is a low range day but I am still in the trade. Monday is a long time away.

Monday is a good day with a gap up open and a steady advance. Tuesday finally confirms the pivot low as the 27th. This suggests the next high could be on 1/30, 2/6 or 2/10. 2//7-8-9 are pivot dates from the NI method so I decide to ride this one awhile. By 2/8 I have had enough – I exit on a sell stop at 69 1/2. Total profit for this trade was $2834.31.

TRADE #4 Feb. 14, 2000 to Feb. 18, 2000 +$9140.24

Looking for the next entry point, I have three dates to consider. From the 2/8 high the DP method gives 2/10 and 2/18 while the NI method gives 2/14. The 10th and 11th are weak down days with nothing to hint at a turning point. However on Monday, 2/14 the stock opens higher, puts in a lower low and begins to climb. After adding an additional $14,000.00 to the account on February 3, I am able to buy 1000 shares on a stop just above the mid point of the previous day. The next day is a narrow range inside day but on the 16th, the stock begins to move up and closes near the high. The confirmed 2/14 low now suggests a high will come in between Thursday, 2/17 and Monday, 2/21. Since 2/21 is a trading holiday, I decide to exit on Friday, 2/18. My 1000 share trade nets $9140.24, the best trade this year.

TRADE #5 Feb. 22, 2000 to Feb. 25, 2000 +$1665.06

The exit on the 18th proved to be timely as Amgen trades lower on the 22nd., confirming 2/18 as a high pivot. Flush with confidence from the last trade and armed with information that 2/25 may be the next turn point, I enter long again on 2/23. The 24th is another up day.. I decide to look at the open on the 25th before exiting. Amgen opens higher, puts in a high and begins to sell off. I exit on a stop at 72 with $1665.06 profit.

TRADE #6 Feb. 29,2000 to Mar. 17, 2000 Net -$6554.55

The market has a way of humbling even the most successful traders and it finally got me. With the high of 2/25 confirmed as a pivot on the following day, my forecast methods lead me to expect a low on 2/29, 3/5 , 3/8 or 3/14. 2/29 develops as a low range inside day and I enter long at 69 1/2. During the next two days the stock moves lower but on Friday, 3/3 it moves higher. I expect a break higher on Monday.

Monday, 3/6, opens with a gap up but that’s the high of the day and the stock moves lower all day. Continued selling pressure takes Amgen even lower on Tuesday. Surly the turn will be tomorrow. Market action does slow on 3/8 but continues down the next day. I decide that if the turn does not occur on the 14th, I will exit the trade.

Tuesday 3/14 is a large down day with a close near the low. My sell stop for the next day is just below the low at 50 7/8 and I am sure I will be stopped out on the 15th.

What a surprise – Amgen gaps up 5 points at the open and continues to rally. The next day is another gap up and at the close I am only 5 points below my entry. The 14th is now confirmed as a low pivot and the forecasts indicate potential highs for 3/18, 3/20 or 3/22. Market action on 3/17 provides no additional buying pressure so I elect to exit at 63 7/8, just below the open. The net loss on this trade is $6554.55 and I am reminded how easy it is to give back profits when you are not disciplined .

TRADE #7 Mar. 22, 2000 to Apr. 6, 2000 Net +$2479.11

It is often difficult to enter the next trade after sustaining a loss but I am determined to get some of my profits back. From the 3/16 high I am expecting a low between 3/20 and 3/24. I begin to place buy stops just above the high of the previous day and on 3/22 I am filled at 61 9/16.

The next two days are gut wrenching as I watch another decline and loss looming ahead. On Monday, the 27th, however the market moves up and confirms the low as 3/24. The 3/24 low suggests a high for 3/29 or 4/2. For some reason, however, I don’t get out on 3/29 and it proves to be the high. Maybe I am hardened now but I watch my loss widen as the stock declines for four days in a row. If it wasn’t for my wife’s confidence that “it will come back”, I would exit this trade and swallow the loss.

One good thing about pivot trading , however, is that you always have a date in mind for a reversal of fortune. The last high was 3/29 so the DP method says 4/3 to 4/5 as a low. The actual low comes in on 4/4 and by 4/6 I am in profits again. I don’t hesitate this time however. I expect a high on 4/7 so on 4/6 I exit, quite happy to record a profit.

TRADE #8 Apr. 11, 2000 to May 8, 2000 Net +$2657.66

The high arrives just as forecast on 4/7 and I now look for an entry at the next low which should be about 4/11. I notice a pattern of higher highs over the past month and surmise that the bear market in Amgen is over. I go long 1200 shares on 4/11 at 58 3/4. Little did I know that the lowest low wasn’t here yet.

I will be out of town most of the next two weeks and will not be able to follow the markets as closely as I should but am comfortable with my position in Amgen and don’t see too much downside potential. Fortunately I don’t know about the low at 50 on 4/17 or the double bottom on 4/24. When I return on May 1, the market has begun to recover. I foresee a high on 5/8 and exit at 61. It has been another wild ride but with a happy ending of a $2657.66 profit.

TRADE #9 May 11, 2000 to May 16, 2000 Net +3395.45

Back from vacation , I am ready to give the markets the attention they demand. It looks like my exit on 5/8 was premature as the next two days trade sideways within the range of 5/8, not confirming the existence of a high pivot. If it won’t go down, then it will go up. In situations like this , I look for the next series of turn points for the pivot. That would be between 5/16 and 5/18. It looks safe to go long on 5/11 at 61 1/16. Three days later, on 5/16, I exit with a $3395.45 profit.

TRADE #10 May 18, 2000 to May 31, 2000 Net +$5779.95 +$920.75

The next potential low indicated from the 5/16 high is Friday 5/19 or Monday 5/22. Amgen gaps down on Friday but doesn’t show sustained selling pressure so I go long at 60 1/2. Monday and Tuesday prove to be down days with the low occurring on Tuesday. On 5/24 I add 300 shares to my position. The next day I exit the 300 shares for a quick $920.75 profit.

Although the low pivot is not confirmed as yet, I buy back the 300 shares on 5/26, convinced a strong rally is coming. The low of 5/23 is finally confirmed on 5/30 and I project the high for the same day. I exit all positions on 5/31 and am rewarded with another $5779.95 profit.

TRADE #11 June 12, 2000 to June 16, 2000 Net +$937.76 +$1959.00

On 6/1, the day after my exit and expected high pivot, Amgen tries to go down but finishes strong near the high of the day. This appears to be a weak down cycle that has failed. The stock then trades higher before peaking on 6/6. From this high I expect a low on the 12th or 13th. On the 12th I enter long at 62. The projected high is now the 19th.

The market begins its advance on 6/13 and continues for three days. On the 15th I sell 500 shares at 65 1/8 and collect $937.76 profit. The next day I exit the rest of my position at 66 and gain $1959.00. This has been a nice four day move and the beginning of a major uptrend for Amgen.

TRADE #12 June 23,2000 to June 27, 2000 Net +$1141.63

This trade cannot be explained by anything but luck The market had topped on 6/21, within the forecast window and the next low was projected for 6/29 or 7/7. On Friday, 6/23 I had no reason to enter a trade but I ventured a 500 share long position at 67 5/8. The following Monday the stock moved up nicely and I bought 500 more at 68 3/8. On the 27th I began to feel uneasy and decided to sell 500 at 69 15/16. The stock began to fall and I exited the balance of the position at 68 1/2. The first trade netted $1115.18 and the second $26.45. I felt lucky to get out with a profit after having no reason to be in.

TRADE #13 June 30, 2000 to July 5, 2000 Net +$1963.88

The period 6/22 to 6/30 turned out to be a flat period with no sustained selling. My forecast was for a turn on 6/29-30. Thursday, 6/29 was another directionless day but on 6/30 Amgen put in a early low and began to advance. I got in on a stop at 68 7/8 just above the previous days midpoint. My next forecast was a high on 7/7.

Monday was a shortened trading day before the holiday but on Wednesday a strong advance occurred I exited the trade at 72 7/8 for a $1963.88 gain. The first half of the year was over.

This has been a spectacular start to the year. I began the year attempting to demonstrate that one could trade just one stock using a reliable forecasting technique, and do quite well compared to a buy and hold strategy. The actual record was 12 profitable trades and one disaster loss. Total net profits for the period were $35,259.94. If I would have bought shares on January at the open (604 shares @64) and sold at the close on July 5 (73 7/8) I would have a gain of $5964.00 . On February 3, $14,000.00 was added to the account. This would have added 218 more shares at the closing price of 64 on 2/3. If sold on July 5, this trade would have netted $2152.75. The total for the buy and hold strategy would have been $8116.75. By actively trading the forecasted pivots, my return was over 400% greater than buy and hold. I believe this proves the value of the underlying approach.

To verify the accuracy and truthfulness of these claims, I have asked a friend to witness the trading records and attest to their accuracy. His statement is included below.

"I have inspected the trading reports and account records which are the basis of this article and verify that they are accurate and factual in reporting the trading results for Amgen during the period specified. Although I am a friend of the author, Jim White, I have no business association with Jim, Pivot Research & Trading Co. or Pivottrader.com and have not been compensated for this statement."

Peter Jackson 8/10/00

pjack10015@aol.com

Copyright © 1999 Pivot Research & Trading Co. All rights reserved.
Revised: August 23, 2000