We have three "Never Fail" rules and several supplemental rules.

First and most important is our North of the Blue Rule from which this program takes it's name. This rule says that a stock should be bought when it's price crosses our Blue Moving Average Line with the price going up (Buy Point) and sold when the stock price crosses our Blue Moving Average Line with the price declining (Sell Point). We refer to the Buy Point as "going Norfth of the Blue". You can see that illustrated in the chart above where the blue arrows point to two Buy Points and the brown arrow points to the Sell Point. There are modifications to this rule that allow our users to sell well before the price declines to our Blue Moving Average.

Equally important, but rarely found are the events underlying our Stochastic-W Rule. Our Stochastic-W or Power-W occurs when a stock's High Price Strength and Upward Price Strength join and form a clearly defined "W" in the Stochastic Panel under our 15% stochastic line. The red arrow points to this occurrence on the Alcoa stock above. The Stochastic-W Buy Point occurs when the "W" is completed and our High Price Strength and Upward Price Strength remain joined as they cross our 15% stochastic line going up. This point operates independently of our North of the Blue Rule. Seldom will the Power-W Buy Point and the North of the Blue Buy Point occur at the same time.

(A) This modification of our North of the Blue Rule allows an investor to retain more of the gains by selling early under specific circumstances. The North of the Blue Rule with Early Sell says that a stock should be bought when its price is climbing up through our Blue Moving Average and sold when its price is descending through our Blue Moving Average OR when its High Price Strength and Upward Price Strength drop below 85% whichever comes first.

(B) Another modification to our North of the Blue Rule adds a buy component to our North of the Blue Rule with Early Sell. Our North of the Blue Rule with Early Sell and Early Buy says that a stock should be bought when its price is climbing up through our Blue Moving Average OR when its High Price Strength and Upward Price Strength leave a severely oversold Red Zone or turn sharply up and climb through our 50% marker and sold when its price is descending through our Blue Moving Average OR when its High Price Strength and Upward Price Strength drop below 85%

Here are additional rules that provide significant buy opportunities but without the strength of our first two rules. Almost always they are used in conjunction with the three rules above.

Our Channel Rule is significant but requires serious thought and experimentation before being used with real dollars at stake. In it's simplest possible terms we say that when the the lower part of our Channel (the light black lines on either side of the stock's price line) crosses above our Blue Moving Average it is time to buy.This is the Channel Buy Point. When this line falls below the Blue Moving Average it is time to sell. Taking the time to use this supporting conformational indicator improves timing and profits.

In stock trading terminology, a channel is the area of price movement that occurs between two lines. Our NOTB chart uses a channel formed at the top by the highest price of the day and at the bottom by the lowest point of the day. This is the range of price movement for the day. A series of days are plotted to show movement relative to our Blue Moving Average line. There ar many other types of channels.

This supplemental rule states that when a stock has established a clear trend line and its price line falls to our Blue Moving Average Line, i.e. touches it (or falls within 5% of it) and begins to climb again. Hence the name Trend Rebound Rule or simply the Rebound Rule.. Trending stocks usually offer numerous instances of this. Our Rebound Rule Buy Point occurs after the stock price line has touched our Blue Moving Average Line and begun to climb. The green arrows on the Alcoa chart show five instances of this happening.

A little more explanation is worthwhile here. The Rebound Rule only occurs during a clearly defined trend such as the Alcoa (AA) chart here indicates. On March 29th the price crossed our Blue Moving Average heading North. Between March 29 and October 22 the price line fell below the our Blue Moving Average between July 1 and July 16. The Stock Price Line touched our Blue Moving Average four times and rebounded each time.

Strictly following our North of the Blue Rule we would have bought the stock on March 25 at $7.31 and sold it July 1 at $10.60. This would have yielded a gain of 45%. We would have bought back in when the stock crossed our Blue Moving Average on July 16 at $9.98. We would still be holding the stock today at $14.15. This time our gain would be 41.78%. Total gain for the period is 86.78% (45% + 41.78%).

If we missed the March 29th purchase date, we could use our Rebound Rule and purchase it on June 23, July 22, September 2 and/or October 5. While the gains would have been less they would definitely be gains.

A similar rule applies when a stock's price approaches a Support Level as indicated by the green horizontal lines in the the Price Analysis Panel. We call this the Support Level Rebound Rule. The Support Level Rebound Buy Point occurs when a stock price falls to or through but remains within 5% of the Support Level. If there is to be a rebound this is where it will happen.

It is worth noting that the Support and Resistance Lines are so accurately drawn that most stocks fall right to the line. We draw these lines based on a complicated algorithm that lets us predict when these significant events occur. The lines are drawn before events occur, that is from left to right. They tell us that a significant event will always occur at that time. In the case of a seriously declining stock we know that if it falls through one Support Level it will continue down to the next level.

Enjoy and feel free to write us to discuss your conclusions.

Dick Brenneke
rjbrenneke@northoftheblue.com

North of the Blue
Office: (503) 233-9452