jea yu notes

8/2/2019 Jea Yu Notes

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Basket Trading Methodology:

The dart throwing BULL market came to an end and thosetraders and investors who were simply lucky... fell through the

cracks. This year was one of major contrast and truly was thebest training environment to any trader who really wants tolearn this game from the trenches. If you survived this market,you can survive and excel in any market. If you didn't survivethis market, chin up. A hiatus is the best medicine to regainclarity.

We learned many things this year as clarity and FOCUS was thetheme. The lack of these two qualities lead most traders tofailure.

As we have preached daily about the importance of tradingbasket stocks, many have listened and exceled in the worstmarket conditions. These BASKET STOCKS are your source ofincome, bread and butter, personal ATM machine. If you havenot picked out BASKET stocks, we ask that you take this pledgefor the new year 2001:

I WILL PICK ONE BASKET STOCK AND FOLLOW IT ALL DAY,

EVERYDAY WITH THE TOOLS. I WOULD RATHER BE BOREDTHAN BROKE.

^--- Post that on a sticky note and tape it to your MONITOR andread that everyday to yourself.

Now that we have that straight, let's get deeper. As is our style,substance is what you need... not just fancy cliches andtextbook metaphors. Please print these steps out and tape them

to your Monitor-- follow these steps daily until you turn blue inthe face from boredom.

1) PICK A BASKET STOCKThese are some good candidates:


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1) MSFT - Moves with the noodles and dow. Good volume, goodvolatility and oscillations, channels can get tight in lightervolume so be careful not to overtrade light volume.

2) KLAC - leader of the semi makers and thus sox.x. moves withthe noodles. the naz can't move much in a direction without thesupport of the semi makers. therefore when noodles are risingbut klac is sell fading likely, the noodles will give andreverse ....

3) QLGC - fast mover, leads the sans sector. good oscillatormoves well with the 1 min stochastics, be careful on the openas they love to crank and lean this one.

4) INTC/CSCO/ORCL - very thick former tier 1's. look more forthe trending moves rather than scalps since they move so slow.2) WATCH YOUR BASKET STOCK WITH YOUR INDICATORSa) Watch how stock MOVES with the 1 and 3 min noodlesb) Watch 3 min ma trend- 5pd resistance, 15 pd supportc) Watch the BEAUTIFUL synergy with 1 min stoch, the 1 minstochastics chart is only useful for the extreme overbought andoversold reversals that means under 20 band oversold reversalback through 20 band for longs and over 80 band reversal back

under for shortsd) note the wider time frames for foreshadowing effects8/13/60 min on noodles and stockse) Put it all together and see the synergies--- NEWS meansnada. Stocks move in ranges because market makers adjustprices to the futures thereby the noodles are your leadindicator! When futures move UP and stock doesnt, then it maybe FADING into the buying aka a SELLSIDE BIAS and vice versaon a buyside bias.

3) PLAY ONLY 1 MINUTE STOCHASTICS REVERSALS ON PAPER!a) Best long setups for scalps? 1 minute stochastics reversalthrough 20 band back up coupled with 1 minute noodlesstochastics-- and 3 minute noodles uptrend emergence. Viceversa 80 band reversals for the short.


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b) On a PANIC or MOMENTUM breakout, the shorts can bemeasured to the 5 period and 15 period for full 3 min noodlesoscillations down.c) On a PANIC or MOMENTUM breakdown, the upside on the

long reversal can be measured to the 5 period and 15 period.Eg: CIEN panics down from 93 to 90-1/4 as noodles take apullback. 1 min stochastics tries to reverse back UP and 1 minnoodles turning back up through the 20 band 3 min noodlesstall. CIEN 3 min ma chart shows 5 period at 92-1/4 and 15period at 92-3/4, so a stochastics bounce entry here at 90-1/4 x90-1/2 tells me my upside is 92 x 92-1/2 range so that is theproverbial MEAT between the bones.

*** important! Be patient and papertrade or use a simulator.

Dont worry about gains, worry about clips. 1/4 to 1/2 is ALL youneed in the beginning, never kickyouself for getting out toosoon *** Stochastics WORKS! You don't believe me? Pull up anystock on a 1 minute stochastics chart with an adjoining tickprice chart and see how 7 out of 10 times the oscillationsproved to be effective in the PRICE of the stock-- the proof isbefore your eyes.

4) GET YOUR SCALPS PROFITABLE 7 OUT OF 10 TIMES ON

PAPERa) This will be boring waiting for formations to emerge, but youshould be hitting 70-80% success rate on your entries forscalps. The amount of the scalp DOESNT matter at first, onlythat you got a good entry with little wiggle and got an exit. Thisis your foothold and foundation you need in the beginning witha Basket stock.

5) TRADE CASH FOR ONLY 100 SHARES OF YOUR BASKET

STOCKa) 100 shares is NOT TO MAKE MONEY. it is to try to DUPLICATEyour paper results to real life. This means you take 1/4 to 1/2scalps with 100 shares to hone skills in real life WITHOUTsweating the Money, this allows you to focus on TECHNIQUE.The money will come later. DO NOT FOR A SECOND DELAYTAKING PROFITS BECAUSE YOU ARE ONLY PLAYING 100


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shares. YOU ARE NOT LOOKING TO MAKE $$. YOU ARELOOKING TO PERFECT TECHNIQUE!!b) Once you can duplicate paper results to cash, hitting 70-80%success rate, then you are ready to increase your share load--

now you are ready to make $.

6) INCREASE SHARELOAD INCREMENTALLYa) from 100, to 200, to 300, to 400, to 500, etc..b) You should go SLOWLY so that you dont shake yourequilibrium as far as your comfort level when in the trade. startwith 100/200 shares and EARN the right to play more shares.only after 4 of 5 days green up shars by 100 shares evry 2weeks. if you slip to 2/3 days green drop down by 100 sharesfor a week.

c) You will KNOW when you are taking too many shares becauseyou will FEEL ANXIETY


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Phew! Thats a mouthful for you to swallow, BUT IT WORKS! Askanyone in the Pit who is making steady consistent GREEN dailyand they will tell you, the basket stock trading method is theONLY way to go! We just touched on the basics here but START

with these steps. You need a FOOTHOLD before you can climb amountain. The above takes FOCUS and discipline to implement.It works. The question is do you have the CONTROL toimplement the above?

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