how to protect your portfolio in a bear market by john schlitz

How To Protect Your Portfolio In A Bear Market

John SchlitzChief Market Strategist

Chaikin Analytics

© 2013 Chaikin Analytics All Rights Reserved. Proprietary and Confidential.

March 30, 2015

What We’ll Cover

• Exploring the Chaikin Method

• Using Chaikin indicators to identify trouble spots

• Qualifying and/or anticipating breakouts/breakdowns

• Using divergences to identify tops/bottoms

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How Chaikin Analytics Helps You Improve Your Results

• Fundamentals

• Technicals

The Key to Surviving a Bear Market Is Playing Good Defense, which means constantly monitoring…..

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How Do You Cut Through The Clutter?

With The Chaikin Power Gauge

Chaikin Power Gauge RatingClear summary of a stock’s potential - with a record of success

© 2014 Chaikin Analytics All Rights Reserved. Proprietary and Confidential.

Technicals• Price Trend • Price Trend Rate of Change• Chaikin Money Flow • Relative Strength vs. Market• Volume Trend

Experts • Earnings Estimate Trend • Short Interest • Insider Activity • Analyst Ratings• Industry Relative Strength

Financials • LT Debt to Equity Ratio• Price to Book Value• Return on Equity• Price to Sales Ratio• Free Cash Flow

Earnings • Earnings Growth• Earnings Surprise• Earnings Trend• Projected P/E Ratio• Earnings Consistency

Why are those 20 factors so important?

• Each one was back-tested for efficacy.

• Combined, they gauge a stock’s 1-6 month potential.

• Bullish PGR stocks significantly outperform.

• Bearish PGR stocks significantly underperform.

The Chaikin Analytics Method

Chaikin Buy/Sell Signals

Technical IndicatorsChaikin Money Flow & Chaikin Relative Strength

Chaikin Power Gauge

Money-Flow and Relative Strength

10

• Power Gauge Rating Bullish

• Relative Performance Strong

• Chaikin Money Flow Strong

What to Buy: Classic Bull

Market agrees with the ModelMarket agrees with the Model

CMF stays positive

CMF stays positive

AAPL - Classic Cup & Handle Breakout with confirming Chaikin Credentials

AAPL: Weekly- 5 Years

Playing Good DefenseWhat to Sell and Avoid

• Power Gauge Rating Bearish

• Relative Performance Weak

• Chaikin Money Flow Weak

What to Sell: Classic Bear

Negative Chaikin Credentials

Bearish Personality ChangeBearish Personality Change

CMF stays negative

Negative Chaikin Credentials + Earnings (1)

Negative Chaikin Credentials + Earnings (2)

H&S top, with negative credentials in the right shoulder

Long-Term Chart Offers A Unique Perspective

RIG – 1 Year

Early warning - trapped in lower portion of the rangefor an extended period.

When Short-Term Meets Long-Term

Strong Chaikin Credentials + Confirmed Breakout = Strength

Early Warning = “Avoid”, Confirmed Breakdown = “Sell”

Strong Credentials + Confirmed Breakout = “Buy”

Sector and Group Analysis

•Ranking sector/sub-sector ETFs via the Power Bar

•Evaluating ETF trend violations/pattern breakdowns

•Identifying strong/weak stocks within an ETF

•Spotting underlying weakness in rising/neutral ETF price action

Ranking Sectors via the Chaikin Power Bars

Ranking Sub-sectors via the Chaikin Power Bars

Viewing ETF component stocks

Spotting underlying weakness in rising/neutral ETFs

Remember to always check the long-term chart

Combining Chaikin Analytics With Basic Technical Analysis

• Use Chaikin Analytics to:

• Assess the current trend• Confirm trend changes• Evaluate breakouts/breakdowns• Identify divergences before price reacts• Spot “stealth” accumulation and distribution

Evaluate Current Trend

Big Base = Big Move

Using Personality Changes To Confirm Price Trend Changes

Using Chaikin Credentials To Evaluate Technical Patterns (1)

Using Chaikin Credentials To Evaluate Technical Patterns (2)

Using Chaikin Credentials To Evaluate Technical Patterns (3)

BA - Two confirmed breakouts with early positive turn in PGR

Using Chaikin Credentials To Evaluate Technical Patterns (4)

Institutions fly under the radar(“stealth” buying and selling)

Stealth Distribution (1)

Stealth Distribution (2)

Stealth Accumulation

Chaikin Signals Assist With Timing

Relative Strength Buy Signal

• Stock is outperforming the market• Turning up from an oversold condition• Crosses above its short-term (21-day) MA

HNT with Relative Strength Buy Signals

Relative Strength Sell Signal

Rules For Weathering A Market Decline

• Monitor your portfolio regularly. (Bear markets don’t announce themselves).

• Avoid stocks with negative Relative Strength and/or Bearish Power Gauge Ratings.

• Respect divergences between price and the Chaikin Credentials.• Check Industry Group Strength (using the Power Bars) as well as the

stock in question.• Don’t chase internally weak rebounds in Bearish PGR stocks,

especially when Relative Strength is negative.• Know where major support, resistance and trendlines reside. • Check for Chaikin Sell signals.

Don’t chase internally weak rebounds (1)

Don’t chase internally weak rebounds (2)

Monitor Long-Term Trends……

…….and intermediate trends (1)

Intermediate Trends (2)

Check the Index and ETF

Avoid Stocks in weak Industry Groups

Do these……..

• Monitor your portfolio regularly. (Bear markets don’t announce themselves).

• Avoid stocks with negative PGR’s and negative relative strength.

• Respect divergences.• Check Industry Group Strength (using the Power Bars).• Know where major support/resistance is. • Check for Chaikin Sell signals.

……and be better prepared for these

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