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Suttmeier's 'Buy and Trade' Investment Strategy

When Suttmeier shows a Value Level near a low or a Risky Level near a high, it's time to "Buy and Trade." Investors should always seek to capture the volatility in between these critical price levels and take advantage of trading ranges -- while all the while being cognizant of the trend for the stocks being traded.

By using Suttmeier's proprietary action prices, you can capture a portion of the volatility as stocks move up and down. When using Value Levels, Pivots, and Risky Levels, it does not matter why you wish to own or be short a specific stock or market. Once you select your trades, simply use weakness to a Value Level as an opportunity to increase a long or to become less short and use strength to a Risky Level to become less long or to increase a short.

Another key element of Suttmeier's strategy is a prudent usage of cash reserves as a safety buffer. Cash should be relatively low when bullish and relatively high when bearish. Keeping some cash on the sidelines helps to lock in gains rather than losses, but you won't often get this advice from money managers seeking maximum commissions.

Stock selection is based upon the ValuEngine Forecasting Model, which includes Buy, Sell and Hold ratings including Strong Buy and Strong Sell. Market timing is helped by the ValuEngine Valuation Model, which calculates the number of overvalued and undervalued stocks among more than 4,000 stocks. Timing is also aided by the valuations of 16 sectors.

Defining Terms:

  • A Value Level is a price at which investors should add to long positions, or become less short on share price weakness.
  • A Risky Level is a price at which investors should reduce long positions, or add to short positions on share price strength.
  • A Pivot is a price that should be a magnet during the time frame specified. This is a level at which to consider more aggressive position adjustments.

Where to Buy and Where to Sell

A "Support" or "Value Level" is a price at which buyers should add to positions on market price weakness.

A "Resistance" or "Risky Level" is a price at which sellers should reduce holdings on market price gains.

A "Pivot" is a support or resistance (Value Level or Risky Level) that was violated in its time horizon, acting as a magnet during the remainder of that time horizon.

These levels are calculated in weekly (W), monthly (M), quarterly (Q), semiannual (S) and annual (A) time horizons, based on the past nine closes in each time horizon.
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