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Tutorial Step #3 . . . Establish New Positions . . .

FYI . . . We have ceased publishing . . . The January 28, 2007 tutorial you see in these pages is our final . . . Thanks for your patronage -- It has been fun . . . May all your trades be profitable -- Sincerely, RWG

Tutorial Date: Sunday, Jan 28, 2007 - Final Edition!!!
Valid until Market Close: Friday, Feb 2, 2007

Tutorial Step #3 - Lesson Plan:

Philosophy:

Any and every stock that is of interest to us is included in our "Universe" of desirable stocks. When a stock in our Universe is ready to be considered for investment, it reveals itself to us through the Moving Averages. We then further screen the stock for worthiness. If satisfied, we make the addition to our Portfolio.

Objective:

Reduce the risk of investing in the wrong stocks.

Key Indicators:

Stock Configurations (as introduced in Step #2), and

Risk Corridor (calculated off of the initial Sell-stop or Cover-stop)

Editorial Notes: As you read through this Step, it will help you to know:

"This Past Friday" means Friday, Jan 26, 2007

"Friday Before Last" means Friday, Jan 19, 2007

Process:

a) Identify any Buy and Short candidates:

We have already updated our stock data histories, calculated the Moving Averages, and assembled the Stock Configurations for each stock in our Universe as part of the process back in Tutorial Step #2 - Process parts a), c), and d). The result was This Week’s Stock Configuration for each stock.

Searching the Universe for Buy candidates: When This Week's Stock Configuration for any stock in the Universe matches with any of the listed Buy Configurations applicable for this week's Market Stage, the stock is a Buy candidate eligible for further evaluation.
Searching the Universe for Short candidates: When This Week's Stock Configuration for any stock in the Universe matches with any of the listed Short Configurations applicable for this week's Market Stage, the stock is a Short candidate eligible for further evaluation.

b) Evaluate and act upon the Buy and Short candidates:

We evaluate each Buy or Short candidate for Portfolio worthiness before we execute the trade:

Configuration visual evaluation: We take a good long look at the Configuration chart and ask ourselves, does the configuration chart for the candidate appear to be that of a stock ready to launch into the desired direction? If so, we continue...
Conscientious objections evaluation:  We ask ourselves, is there anything about Market conditions or the company whose stock we are considering that makes us uncomfortable with adding this candidate to our Portfolio? If not, we continue...
Establish an Initial Stop Trigger Point: We attempt to establish an initial Sell-stop (for a potential Long position) or Cover-stop (for a potential Short position). If successful, we continue...
Risk Corridor evaluation: We ask ourselves, is the Risk Corridor where we want it to be for this stock? If so, we do the trade (Buy or Short) and document the Stop Trigger Point.

This Week's Determinations:

Buy and Short candidates & evaluation results:

For the week ended This Past Friday:

		Total Buy & Short Configuration Signals from our Universe		Added to Professor Profit's Portfolio
Buy Candidates		-0-*		none
Short Candidates		-0-*		none

* You can check for Buy and Short signals for your own stocks. See Tools.

Applicability:

This is the only step in the entire process where we select new stocks for the Portfolio.

Additional Help with this Step:

FAQs About Step #3

Books about Step #3

• The Art of Low Risk Investing: Learn more about limiting risk through Buy Configurations
  

• Secrets of Profiting in Bull and Bear Markets: Learn more about Short-selling, and how to establish Sell-stops/Cover-stops as a risk reduction methodology

Tools to assist with Step #3

UniverseManager provides an automated environment for evaluating the Buy and Short candidates from your own universe of desirable stocks

Next Step of the Tutorial:

Step #4 - Tighten-up the Stops