Never a Losing Week? Readers See a Shell Game

Skeptics scoff at well-known trader Mark Weinstein's claim.
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Sign of the times No. 1: We skipped our annual slog to the local party store, and instead I ordered the kids' Halloween costumes via

eToys

(ETYS)

.

Sign of the times No. 2: I needed some

H-P

(HWP)

Inkjet cartridges. Forget about leaving the house, though. Instead, I took three minutes on the

Office Depot

(ODP) - Get Report

Web site to find and order them. They were delivered one day later with no delivery charge.

You know, this whole Internet thing just might catch on . . .

And speaking of catching on, this column continues to ramp in both hits, and email received. (Sadly, the quality of the answers continues to hover around the middling level.) So, now's as good a time as any to give you my friendly reminder: I read all email received. However, I cannot possibly answer every question sent in, so do not be offended if you don't see your fine name in print. Unlike other writers, who I will not name but whose name rhymes with Blerb Treenberg, I do

not

have an assistant! Yes, I'm on my own here in majestic Bethesda.

But I struggle on, thanks to the kindness of my readers. Therefore, as always, send cash, non-perishables and anything

Armani

to

technicalforum@thestreet.com. All donations and questions are tax-deductible.

What Exactly is a Losing Week?

As a wrapup to last weekend's

discussion of the

Joe DiMaggio

of trading,

Mark Weinstein

, who claims never to have had a losing week, a few readers had some parting comments:

It kind of depends on your definition of losing week, doesn't it? Here are some relatively simple ways to define it in such a way that you always win. You might actually be losing badly, but there are no losing weeks: 1) Only completed trades count -- both the buy and the sell. So, let's say you own Dogfromhell Industries. You buy it at $60 and it promptly drops to $15. You wait until you have enough winners during a week to get rid of the thing. You hold onto investments until you can cancel them out. Of course, unless you're reasonably good at it, it means you're turning trades into investments all over the place. A more reasonable version of this, is that you only sell winners when selling losers. So you set stop losses, but when you get stopped out, you sell the winner with the weakest chart(s) to compensate until you're back in profit. Now imagine if you had picked and held one of the major winners of the past five years, such as Dell (DELL) - Get Report or America Online (AOL) , you would always have enough profit to wipe out losses. 2) Most investments are in Treasuries intended to be held to completion. Trading is done in a small enough position that no matter what actually happens, the question is whether you made 5% or 7% a year, nothing else. Of course, if that's what he's done since 1989, that's not particularly great. Basically, by Mark saying that he hasn't had a losing week, that means he must have predicted every single major market event in the past 10 years or he's playing around with the idea of what a winning week is. And if he can predict that closely, what on earth is he doing as a mere trader? Why not a top strategist at a firm? -- Andy Pearlman

I had read the Weinstein chapter in

Market Wizards: Interviews With Top Traders

a long time ago, and had been impressed with the interview then. After seeing your column today, I went back and looked at it again, and I'm amazed I didn't have a heart attack laughing at this con. On page 335, he says he has had no losing weeks since 1980, and your discussion with him indicates that he claims that this has continued to the present! Depending upon the exact date of his loss, that is approximately 1,000 perfect weeks. Since this guy loves to play commodities and options, one might naively think that he makes a significant percentage each week. So, I got out my calculator, and assumed he made a measly 10% per week: after 1,000 weeks, his gain is a factor of more than 2E41, i.e., he made $200,000 trillion trillion trillion on every dollar he started with. Well, it must be difficult to keep your gains low when trading commodities, but assuming he only made 1% a week gets us down to a somewhat less mirthful result: a gain of $21,000 on every buck. Since the book makes it sound like he was already a millionaire in 1980, this suggests that he's worth north of $20 billion, i.e., he's pretty close to Warren Buffett. The usefulness of the above rough analysis is, of course, limited if we don't know what kind of gains he is claiming. Since you have been in contact with him, I wonder if you could coax him into estimating a percentage for his average weekly gain (or even a typical range). I suspect the number he quotes will be big enough to be useful in exposing this guy for what he is. -- Rico Cohen

Mark, if you're reading, I invite your response.

That '70s Show

On a different topic, last week I

asked readers who lived through the treacherous early-1970s stock market to share their experiences. Here's one:

I retired at 40 in late 1970 and not wanting to hurry into another job decided to go to school part-time and spend more time in the stock market. I had started investing in the late '50s and was studying finance and had some experience in investing. I went to a brokerage everyday, watched the tape etc. For a year or so things went fairly well, but at some point it became very difficult to make money and buy something that went up. We never felt, as I recall, that we were in a particularly bad market. I do remember that for a year-plus nothing seemed to work right. The stocks I bought did not really go up and almost anything I owned would just keep drifting down. I would go in the morning, get bored and disgusted, then leave to do something else. I finally got a part-time job, opened a small distributorship for craft supplies out of my house, and basically stopped doing anything with the market for several more years. My business grew locally and I spent more time with it. In fact, I just closed my warehouse location this year. I kept my stocks generally, had some dividend reinvestment plans, but essentially did nothing with the market. (I am not sure when I started paying more attention but it might have been around '78.) I added more dividend reinvestment plans and started trading more again. -- Maurice Lewis

Software Sidebar

And finally, a rejoinder to my discussion of trade-tracking software.

As for cheap software, I use Quicken to track my brokerage accounts. The advantage over a spreadsheet is that you don't have to enter anything manually. I can download updated quotes, as well as all the transactions from my Fidelity account, over the Internet. At tax time, all I have to do is run the capital gains report to get a printout of any gains or losses for the year. -- Paul Edelman

And now, onto the questions . . .

You know, many folks say to me, "Gar, you are fabulous. But how do I, a normal reader, get you to answer my lowly question."

Well, I hate to give away trade secrets, but the following email, has just the right pitch, cadence, and honesty.

A Sugary KO Question

YOUR ARTICLES ARE FABULOUS! -- Heather O'Loughlin P.S. How about an update on Coca-Cola (KO) - Get Report and PepsiCo (PEP) - Get Report?

See what I mean? Clear, concise, and admiring, yet, not a hint of insincerity!

SNDK Long-Term Not Rosy

I am still a neophyte when it comes to reading charts and would appreciate your seasoned input. Based on my read of SanDisk (SNDK) , it has solid support around $65 on a three-month chart and is still in a good uptrend on a one-year chart. It looks like a good time to add to my position with a stop loss set at $64. What do you think? -- Steve Reader

MCDE Looks Bullish

I was just interested in getting your take on the technical performance of a few biotechnology companies. What do you think about Microcide Pharmaceuticals (MCDE) and Ligand Pharmaceuticals (LGND) - Get Report? I've noticed that they've experienced some surprising gains during the last quarter. -- Leo Lara

Time-Period Talk

Time period seems to greatly affect the way you read a chart. Do you analyze over one month, three months or one year? The time period of analysis seems to greatly affect results. Any thoughts on offering a short course on chart reading? I would sign up in a minute and even pay for it! -- Steve Ehrens

Thanks, Steve. Your first question is one that comes up frequently, and hopefully, I always answer it the same way: The time frame you look at a chart in should be totally dependent on your trading time frame. That is, if your trades normally span a week to 10 days, then a daily chart, with a six-month look back is appropriate. If you're a daytrader, then a five-minute chart, with a two- or three-day look back is probably fine.

In addition, it's always nice to look at the next level up. For me, that means a weekly chart. For daytraders, a daily chart.

As for a short course on chart reading, I'm not sure there is such a thing! I'd definitely start with some of the books in my Dec. 2, 1998

column, particularly the Jiler and Edwards/Magee books. However, the best course on chart reading? Just look at hundreds of charts a day, form your own conclusions and see how they work out. If you bat anything above 50%, you're doing just fine.

Turnaround on a TRBO Call

You had a very bullish read on TurboChef Technologies (TRBO) a couple of months back. So much so I bought some, only to watch it go from 10 to 6. What happened and what's your current read? -- Kenan Block

Bears Storm Copper Mountain

I traded Copper Mountain Networks (CMTN) the other day and got out at 92. You didn't like it the last time I wrote. What about now? -- Caren Goodman

The View on VISX

Would you consider yourself more of a technical analyst (who uses Gann analysis, Elliott waves, Fibonnaci retracements, oscillators) or more of a tape (and thus chart) reader? I was wondering about your take on VISX (VISX) , a leader in electronic laser components. I have been waiting to go long on it, and now seems a good time. -- Mohan Singh

Mohan,

I'm most definitely a chart reader. In fact, I am often asked whether I use stochastics, oscillators, Gann, and a variety of other techniques. As you can tell, I primarily stick to price and volume. Many other techniques are just derivatives of those two, while the vast majority of indicators I've found to be inconsistent over the long run.

As for VISX, let's take a look.

Gary B. Smith is a freelance writer who trades for his own account from his Maryland home using technical analysis. At time of publication, he held no positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Smith writes five technical analysis columns for TheStreet.com each week, including Technician's Take, Charted Territory and TSC Technical Forum. While he cannot provide investment advice or recommendations, he welcomes your feedback at

gbsmith@attglobal.net.