Fairlead Strategies, LLC Approach to Technical Analysis

Katie Stockton, CMT Fairlead Strategies, LLC Founder and Managing Partner

Rocky Mountain Economic Summit July 12, 2018

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Our Approach to Technical Analysis At Fairlead Strategies, our top-down approach emphasizes:  Risk management  Alpha generation  Market timing …through the identification of trends and turning points from absolute and relative perspectives. Important concepts include support & resistance and relative strength, with a focus on indicators that provide an informational edge, such as the cloud model and the DeMark Indicators®

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Technical Analysis – In Practice  Having a methodology is key  A “good call” is not luck, it’s discipline  Technicians tend to weather downdrafts with less emotion  The media focuses on T.A. because it has general appeal  Investors focus on T.A. because it works  It’s art more than science  MIT professor Andrew Lo concluded in one of his white papers that

T.A. has persisted, “perhaps because its visual mode of analysis is more conducive to human cognition, and because pattern recognition is one of the few repetitive activities for which computers do not have an absolute advantage (yet)”*

 Communicating is all about visuals (charts!) and not getting too “technical” Lo, Andrew, Harry Mamaysky, and Jiang Wang. "Foundations of Technical Analysis: Computational Algorithms, Statistical Inference, and Empirical Implementation." (2000): 1706. *

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Our Technical Toolbox Support & Resistance  Moving Averages  Peaks/Troughs  Fibonacci Levels  Cloud Model  Trendlines and Price Patterns

Three Classes of Indicators  Trend-Following  Overbought/Oversold  Relative Strength

Market Internals  Breadth

Trend-following  MACD  Moving Averages Overbought/Oversold  Stochastic Oscillator  DeMARK Indicators® Relative Strength  Comparative Ratios  Relative Rotation Graphs (RRG)®

 Sentiment  Leadership  Volume

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First, we start with a long-term framework‌

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Then, we refine our views using intermediate-term gauges‌

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Lastly, our short-term indicators facilitate market timing

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Sector rotation can be key to outperformance

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There are distinct trends on the sector level Consumer Discretionary

Consumer Staples

Financials

Industrials

Technology

Utilities

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The market’s internal measures tell a story

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We like to pay attention to the internals in aggregate Now:

April 2018 low:

Nov. 2017 low:

Feb. 2016 low:

Sources: CQG, Inc., Bloomberg Finance L.P., & Fairlead Strategies, LLC.

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Analysis of other asset classes bolsters our views

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Trend-following can be instrumental in asset allocation

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Biography Katie Stockton, CMT Fairlead Strategies, LLC Founder and Managing Partner Katie Stockton is Founder and Managing Partner of Fairlead Strategies, LLC. Prior to forming Fairlead Strategies, Ms. Stockton served as Chief Technical Strategist for BTIG for four years and was Chief Market Technician at MKM Partners for nine years. Previously, she was a technical analyst for Morgan Stanley and Wit Soundview. Ms. Stockton received her Chartered Market Technician (CMTÂŽ) designation in 2001, and later joined the board of the Chartered Market Technician Association, serving as Vice President from 2012 to 2016. In 2017, she was honored by The Technical Analyst, which awarded BTIG the Best Institutional Brokerage for Equity Research, for her work. Ms. Stockton graduated magna cum laude with a BSBA from the University of Richmond, and she is currently a member of the Executive Advisory Council for the Robins School of Business.

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Disclaimers & Disclosures Information presented herein has been obtained from sources believed to be reliable, but the accuracy and completeness of summaries, conclusions, and opinions based on this information are not guaranteed. It should never be assumed that recommendations will be profitable or will equal the past performance of listed or recommended securities. For access to our full disclaimers and disclosures, including our policy regarding editor securities holdings, go to https://www.fairleadstrategies.com/disclaimers-anddisclosures or email info@fairleadstrategies.com.

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