Hi Trader,

In the last few newsletters I have shared with you a few basic technical techniques and statistics. Before I continue to keep adding to your knowledge base I?d like to review and give you an example as to how some of the basic concepts come together to trade.

For example, you notice the stochastic reading for ABC stock is showing an oversold condition with a reading under 20. You observe that ABC is currently trading over it?s 200-day moving average and you know the edge is to the long side so you begin to look for technical evidence to justify buying the stock or option.

The 10-day and the 30-day moving average are flat showing that there is not a price trend in the short term and that a trading range exists.

You notice that ABC?s price is at around $39-40 currently and that price has been at the level approximately 3 weeks and 2 months ago and both times they rallied off of those prices so there is evidence of support at these levels.

In short, ABC is oversold at a key level of support, inside of a trading range, and with the edge to the long side. Now all you need to do is wait for a trigger(which I will cover in a later newsletter) and buy the stock or a short-term option.

Also, I want to add that these types of trades last 5 days or less. If in that time, price has not hit your profit nor your stop just go ahead and get out. Trust me, you?ll never lack for a trade using this type of setup so go find another.

OK, I hope that puts a few pieces of the puzzle together for you so, till next newsletter, take care.

Good Trading,

Billy W. www.stockoptionsystem.com

3828 West Davis Ste. 308-108 Conroe, TX 77304