In This Issue

AIQ’s new Chart PatternRecognition module givesusers a “trading edge” overthe competition ............... 1

It’s easy to find breakoutsand potential breakoutsusing the On BalanceVolume indicator ............. 4

Market Review ................ 6

Data Maintenance ........... 6

S&P 500 Changes. ......... 6

It’s time to reserve your seatfor AIQ’s popular LakeTahoe Seminar Oct. 1-3 .. 7

Check out the TradersSpecial Summer Seminar inLondon this August ......... 8

Opening BellNewsle t t e r

AIQHuge Time Saver

Find Breakouts and Potential BreakoutsEasily -- Using EDS and AIQ’s NewChart Pattern Recognition ModuleBy David Vomund

The Opening Bell Newsletteris a publication of AIQ SystemsP.O. Box 7530Incline Village, Nevada 89452E-mail:openingbell@aiqsystems.com

“The Chart Pattern Recognitionadd-on to TradingExpert Pro isextremely innovative and gives

users a trading edge over thecompetition…having the program

list all the competed patterns/breakouts at the end of the day is a

tremendous time saver.”

July 2007 Vol. 16 Issue 7

DAVID VOMUND

n the May Opening Bell weintroduced an exciting add-onfeature for TradingExpert Procalled Chart Pattern Recogni-tion. In that article we showed

how trendlines are automatically drawnthat highlight nearly 20 well-knownchart patterns on the Russell 3000stocks, most ETFs, and Forex securities.Both completed patterns (default is bluetrendlines) and emerging patterns(default is green trendlines) are shown.

In the May article, we said thatExpert Design Studio (EDS) could beused to identify those stocks withcompleted patterns (i.e., pricebreakouts) at the end of each tradingday. Obviously, this is a huge timesaver as it allows us to find the com-

pleted patternswithout havingto manuallyscroll throughhundreds ofcharts.

TradingExpertPro version 9.0,which includesChart PatternRecognitioncapability,comes with two EDS files that are usedto find breakouts and potential

breakouts. Let’s take alook at these two files,beginning with completedpatterns.

From AIQ’s QuickLaunch Menu, click Studioto enter EDS. Once inEDS, click File, Open, andhighlight the ChartPatterns__Completed file.Click Open. To run thereport, enter the appropri-ate date and from the

menu bar select Report, then Run All.The program will then scroll througheach ticker in your database, searchingfor new breakouts. (Note: to run EDSon a list of stocks, click File, Properties,and select the appropriate list).

In Figure 1 we see an EDS file that

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March 2002

AIQ Opening Bell July 2007

was run after the close on June 12.Near the top of the screen, there areseveral reports, beginning with RuleLibrary (to see the Rule Libraryreport you may have to click the leftarrow to move to the first folder).

In Figure 1 we have highlightedthe “anybreakoutdn” report, whichlists every stock that has fallen belowits chart pattern. These stocks havebearish patterns. The“anybreakoutup” report shows thestocks that have broken out to theupside.

While the two reports mentionedabove are the most important, the“anybreakout” report may be ofinterest as it lists every stock with acompleted pattern, no matter whatthe pattern is. To see what patternwas completed, look for the columnshowing a “-1.00”. For example, inFigure 2, Brinker Int’l (EAT) has a “-1.00” under the Channel Downreport. That means the stock fellbelow a downward sloping channel(Figure 3).

The EDS file has many reportssince there is a report for each chartpattern. Please note that you canchange the order of the reports by

simply dragging them to the newlocation, or you can remove some ofthe reports and add them back at alater date if need be.

Thus far we have discussed theEDS file that shows completedpatterns. The second file that comeswith version 9.0 shows stocks withemerging patterns. An emerging

Figure 1. EDS report screen showing “anybreakoutdn” report for 6/12/07. Report lists stocks thatclosed below support trendlines for all chart patterns.

Figure 2. EDS report screen showing “anybreakout” report for 6/12/07. The -1.00 for highlightedstock (EAT) in “channeldown” column means stock closed below down sloping channel support.

pattern is a pattern that is develop-ing but is not complete because thereis no breakout. Two things canhappen to an emerging pattern:There is an eventual price breakoutso the pattern becomes complete, orthe price action violates the patternso the emerging pattern status isremoved.

To search for emerging pattern,open the Chart Patterns___Emergingfile in EDS. As before, enter theappropriate date and select Reportand Run All.

The first report, called“anyemerge” is the most importantreport as it lists all of the stocks withemerging price patterns. If you charta stock with an emerging pattern,the pattern’s trendlines will appearin green.

When an EDS file lists stockswith emerging or a completedpatterns, it is easy to chart the stocks.One method is to double-click theticker symbol in EDS. A chart of thestock will appear. A better methodis to click the Chart List icon. It willcreate a list of the stocks (calledAIQEDS by default) and then willchart the first stock in the list. To seethe other stocks, click the sideways

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July 2007 AIQ Opening Bell

Figure 3. Daily chart of Brinker Int’l with Channel Down chart pattern drawn by AIQ’s ChartPattern Recognition module. On 6/12/07 EAT closed below the channel, a bearish indication.

Figure 4. AIQ Data Retrieval screen with EDS Post Processing page displayed. The two chartpattern EDS scan files have been added to the main window by means of the Add function.

arrow.

If you use the Chart PatternRecognition feature, the two EDSfiles covered in this article willbecome very important and you willlikely run them every day. Withthese files, you can easily set upTradingExpert to produce a list ofchart pattern breakouts after eachdata download. Here’s how.

From the Quick Launch Menubar, select COMM as if you weregoing to retrieve data. At the AIQData Retrieval screen, select the EDSPost Processing folder. Select Addand highlight the two EDS files andclick Open. Your screen will looklike Figure 4. You should wait atleast three hours after the market’sclose before you retrieve price dataand chart patterns.

The Chart Pattern Recognitionadd-on to TradingExpert Pro isextremely innovative and givesusers a trading edge over the compe-tition. The feature is powerful andbetween the May Opening Bell andthis issue, we’ve only scratched thesurface. Still, anyone who uses the

feature should understand how touse the EDS files discussed in thisarticle. Although they may lookcomplicated, their application is veryeasy and having the program list allthe competed patterns/breakouts at

the end of the day is a tremendoustime saver.

AIQ’s Chart Pattern Recognitionis a $20 per month add-on program.For information, call 800-332-2999 orvisit www.aiqsystems.com/chartpatterns.htm.

Check OutBack Issues of the

Opening BellNewsletter

For a 12-year archive of backissues of the Opening Bellnewsletter, visit:

www.aiqsystems.com/OBMyears.htm

You can also search forparticular topics on this site

David Vomund publishes VISAlert, a weekly investment newslet-ter. For a sample copy, go towww.visalert.com.

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March 2002

AIQ Opening Bell July 2007

T he On Balance Volume(OBV) indicator wasdeveloped by JosephGranville and is used todetect hidden accumu-

lation or distribution. The theorybehind this indicator assumes thatthere is “smart money” that is ableto accumulate stocks at low pricesand ride them higher. As “thegeneral public” starts to accumulatea security, the smart money beginsto sell. The general public does notrealize this is happening because thedistribution of smart money doesnot affect price. Once the smartmoney has sold, the security’s pricetops out and the general public thenfinds itself on the wrong side of priceactivity.

The OBV indicator works bestfor securities with a following that isa mix of large professional playersand smaller uninformed investors.OBV attempts to measure insiderknowledge, which may deal with thefundamental side of the stock. Thesmart money may not be Wall Streetprofessionals, but rather thecompany’s management. The OBVindicator allows technicians to tapinto this “inside knowledge.”

On Balance Volume is simply arunning total of accumulationvolume less distribution volume. Ifa stock closes higher than the previ-ous day’s closing, then the day’svolume is said to be accumulationvolume and the entire day’s volumeis added to the running total. If thestock closes lower on the day, thenthe day’s volume is considered to bedistribution and is subtracted fromthe running total.

With this in mind, it’s best tobuy an issue with evidence ofaccumulation (rising OBV) and sell

on signs of distribution (fallingOBV). The indicator is useful indetermining when a trend reversal islikely and when a trend will con-tinue.

Most traders look for pricedivergences between the indicatorand a stock’sprice. A bullishsetup occurswhen the OBVindicator isrising while astock’s price isfalling. Anexample is ADCTelecommuni-cations (ADCT)on June 5 (seeFigure 1). This is an especiallypositive setup because the indicatoris hitting new near-term highs whilethe stock is moving lower.

How does one find these diver-gences? TradingExpert Pro providestwo sources that screen for positiveand negative divergences. The firstis in the Reports module. WithinReports, click the Price VolumeDivergence report. By default, thisreport looks for divergences in both

the OBV and Money Flow indicatorsover the last 15 days. Since we areinterested strictly in OBV diver-gences, we’ll set the report to onlyuse the OBV indicator.

An Interview That Deserves Attention

Tap Into Insider Knowledge UsingThe ‘Smart Money’ Indicator -- On Balance Volume

Figure 1. Daily chart of ADC Telecom with OBV indicator shown in lower window. Bullish setupoccurred in late May/early June when price fell while OBV rose (trendline).

“OBV attempts to measure insiders’knowledge…The smart money may not

be Wall Street professionals, butrather the company’s management.

The OBV indicator allows techniciansto tap into this ‘inside knowledge’.”

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July 2007 AIQ Opening Bell

AIQ Opening Bell NewsletterDavid Vomund, PublisherG.R. Barbor, EditorP.O. Box 7530Incline Village, NV 89452

AIQ Opening Bell does not intend tomake trading recommendations, nordo we publish, keep or claim any trackrecords. It is designed as a serioustool to aid investors in their tradingdecisions through the use of AIQsoftware and an increased familiaritywith technical indicators and tradingstrategies. AIQ reserves the right touse or edit submissions.While the information in this newslet-ter is believed to be reliable, accuracycannot be guaranteed. Past perfor-mance does not guarantee futureresults.

© 1992-2007, AIQ Systems

To accomplish this, click thePrice Volume Divergence report andselect Reports and then Report Proper-ties from the menu bar. Set theweight for OBV to 100 and set theweight for Money Flow to zero andclick OK (Figure 2). The report willthen look for OBV divergences thathave occurred over the last 15 days.

There is also a pre-built EDS filefor OBV divergences. From theQuick Launch Menu, select File andOpen. Within the Wintes folder,choose EDS Strategies, Basic IndicatorStrategies, and OBV. Here you willfind file choices that look for positiveand negative divergences (i.e., OBVslope moving opposite direction asprice slope). The default uses a 21-day divergence but some will preferto reduce this number within thecode.

The files within EDS also havechoices for finding stocks whereOBV is hitting a new high or a newlow. This is appropriate for growthinvestors since they are not inter-ested in turnaround situations. Theybuy strong stocks and hope to ridethem higher. If a stock’s OBVindicator is strong, it increases the

Figure 3. Daily chart of Eastman Kodak with OBV indicator in lower window. On 6/05/07 OBVreached new high as price also moved higher. Confirmation by OBV is bullish indication for stock.

Figure 2. AIQ Price Volume Divergence report with Report Properties dialog box. To look forOBV divergences, use this box to set OBV weight to 100 and Money Flow to 0.

odds that the stock will continue toremain strong.

An example of an uptrendingstock with an OBV indicator hittinga new 120-day high is found inFigure 3. Eastman Kodak (EK) roseabove a multi-month high on June 5.

OBV confirmed the move as it washitting new highs as well. Thisincreases the odds that the stock willremain strong.

Whether OBV is used to findturnaround situations or attractivegrowth stocks, it is an indicator thatdeserves attention.

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March 2002

AIQ Opening Bell July 2007

Changes to the S&P 500 Indexand Industry Groups:

MEMC Electronic Materials(WFR) replaces Kinder Morgan(KMI). WFR is added to theEquipment Semiconductor(EQUIPSEM) group.

Precision Castparts (PCP)replaces Medimmune Inc.(MEDI). PCP is added to theAerospace Defense (AEROSPC)group.

S&P 500 Changes

The following table shows stock splits and other changes:Stock Splits:None

STOCK DATA MAINTENANCE

Trading Suspended:British Airways (BAB), Claire’s Stores (CLE),Comverse Technology (CMVT), Keane (KEA),Lone Star Technologies (LSS), Nortel Networks (NT),OSI Restaurant (OSI)Name Changes:Boston Life Sciences (BLSI) to Alseres Pharmaceuticals (ALSE)Federated Dept. Stores (FD) to Macy’s (M)Harken Energy (HEC) to HKN (HKN)Pharmacopeia Drug Discovery (PCOP) to Pharmacopeia (PCOP)Prospect Energy (PSEC) to Prospect Capital (PSEC)Teekay Shipping (TK) to Teekay (TK)Wellsford Real Properties (WRP) to Reis (WRP)

FMarket Review

Take a Good Look--the Market Is Not Soaringrom March through Maythe market experiencedan unusually sharp rally.That rally ended in Junewhen the S&P 500 fell

below its steep upward-slopingtrendline. Once the trendline wasbroken it was apparent the rally wasover and that the market wouldeither consolidate or move lower.

A consolidation low was formedon June 7. From that level, the S&P500 rallied off its oversold level (81%of the S&P 500 stocks with uncon-firmed AIQ signals were on the buyside) and reached its late May high.Resistance held and by June 25 theindex was once again testing thebottom of the range. While the S&P500 was testing the bottom of therange, the Nasdaq was outperform-ing and sat in the middle of itsrange. Since the Nasdaq often leads,that is a bullish sign.

The market had a good first halfof the year, with the S&P 500 gaining6.0%. Given all the media hype overthe Dow’s crossing 13,000 and theS&P 500 hitting a new all-time high,this year-to-date return is probablylower than what most people expect.The market is not soaring. The S&P500, although near a record high

level, is virtually where it was morethan seven years ago. Put anotherway, if you had invested in an S&P500 index fund in March 2000, youwould have no gain whatsoever,only plus years of dividends.

For the month of June, the S&P500 lost 1.78%, the Nasdaq Compos-

ite was about unchanged, and theRussell 2000 dropped 1.6%.

The strongest sectors wereAutomobiles gaining 5%, Semicon-ductors gaining 3%, and Energygaining 2%. The worst performingwere Real Estate losing 11%, Utilitieslosing 6%, and Banks losing 4%.

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July 2007 AIQ Opening Bell

PlaceArt-work

Every morning begins with an AIQ-hostedbreakfast. Sessions begin at 8:30 each day andrun through to 5:00 pm (12:00 on last day).Regular breaks during the day include an AIQ-hosted lunch on the first two days. Tuesdayevening all attendees are invited to an AIQcatered buffet dinner. Including meals, cost for all three days is only$895 per person. Reserve your place now asseats sellout fast.

Sign-up before July 31stand pay only $845.

AIQ's 18th Annual Lake Tahoe SeminarOctober 1 - 3, 2007 Harveys Resort & Casino South Lake Tahoe,NV

AIQ SystemsPO Drawer 7530Incline VillageNV 89452www.aiqsystems.com

Nelson Freeburg Founder Formula Research

Visit the AIQ Store http://aiqsystems.com/store/page2.html

Seats are limited CALL 1-800-332-2999 x115

This year's keynote speaker

Also joining us this year will be MarthaSipe, CFA, a veteran of Wall St andpresident of mindingmatter.com, andBob Debnam, founder of the ChartProfitservice. We are also pleased to welcomeback Dale Wheatley, founder of TheOptions Hunter service and StevePalmquist, trader and founder ofdaisydogger.com. Our regular AIQspeakers Steve Hill, CEO and DavidVomund, Chief Analyst round out thespeaker line-up.

There will no Getting Started with AIQ track thisyear; instead we will be offering one-on-onehands-on clinics with senior AIQ staff.Appointment times will be accepted throughoutthe first two days of the seminar

Here's what last year's attendees had to say"Tremendously valuable -the content and clarity ofthe presentations moved

my trading educationforward"

"This was an extremelyuseful session, advancing

my understanding ofseveral important chart

patterns"

"Steve (Palmquist) actuallytold the group what works for

him and what makes him asuccesful trader,

outstanding."

11 sessions

Hosted reception

Nelson Freeburg is editor of FORMULA RESEARCH,a financial letter that develops systematic investmentmodels for stocks and bonds. When he first came to thefinancial markets, Nelson was pursuing a Ph.D. in worldpolitics at Columbia University. Wholly taken by theexcitement and promise of trading, Nelson said good-byeto the academic life. Nelson began researching the marketsfull-time. Eventually he would build a financial databasethat reaches back to the last century--and from this, a libraryof advanced trading strategies. Today Nelson uses thesetiming models to advise institutional clients and managehis own investments.

Many investment professionals rely on Formula Research.Gerald Appel, John Bollinger, Paul Tudor Jones, JohnMurphy, Martin Pring, Linda Raschke, Larry Williams--allof these and other industry leaders employ his proprietaryresearch.

BONUS live webinarsession with LindaBradford Raschke.Linda is President ofLBRGroup, Inc., aregistered CTA andmoney management

firm and president of LBR AssetManagement, a CPO. She began herprofessional trading career in 1981 as amarket maker in equity options.

Nelson Freeburg

A special one day seminar in London with power-packed trading tips andtechniques for the trader and investor alike.

August 10th, 2007 10am - 4pmImperial Hotel, Russell Square, London WC1B 5BB

Traders Special Summer SeminarFocus on Gann, Market Sentiment and

Chart Pattern Recognition

Session One - Gann For Everyone

Gann doesn't have to be a mystery. Bob Debnam introduces some basic but powerful methods pio-neered by W.D.Gann that any trader can use. In 1929, he predicted that the markets would probablycontinue to rally on speculation and hit new highs… until early April. In his publication, The Supplyand Demand Letter, he provided daily financial forecasts focusing on both stocks and commodities.Gann also published several books - most notably "Truth", which was hailed by the Wall Street Journalas his best work. He then began releasing the techniques that he used to make these forecasts: the Gannstudies.

Session Two - Using Chart Pattern Recognition as part of your trading arsenal

Chart patterns are obvious to some and not to others. Quantifying chart patterns in a meaningful man-ner is essential if they are to be part of your trading strategy. In this advanced session, Steve will revealsome of the findings of his ongoing 3 year study of chart patterns. You will discover the elements thatare required for a chart pattern to be valid, including why a given pattern works or does not and how totrade it. Effectiveness rates and where to place exit targets will also be discussed. Patterns discussedinclude Head and Shoulders, Pennants, Flags and double tops and bottoms.

Session Three - Let's Get Sentimental

Bull Markets are born on pessimism, grow on scepticism, mature on optimism and die on euphoria.Sentiment rules the market. How to measure it, how to use it. Changes in market direction are notrandom. Figuring out how to gauge the market is where sentiment comes in. Whether it is commitmentof traders or options sentiment, in this session Bob Debnam will share with some known and somelesser known methods to gauge a market. Bob will include some of his very own techniques that he hashoned over 30 years of trading the markets.

Special discount price for this event only $299that’s £150 at today's exchange rate!

Sign up at http://www.aiqsystems.com/londonseminar07.htmor call US 775-831-2999 x115

Presented byBob Debnam, founder TrendlineSteve Hill, CEO, AIQ Systems

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