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Trading with the NSP
We will be publishing a series of articles to provide more background information on the NowVest Stock Pullbacks
Methodology (NSP).
For starters, let's first go into a little more detail regarding the different facets of the NSP Methodology. To
break it down, it basically all begins with the up to 200 stocks that will be presented on a weekly basis. Yes, the
top 200 stocks that meet the very specific NSP standards are all unveiled to our subscribers.
Hopefully you will agree that this is one important factor that sets us dramatically apart from so many out there.
Many simply release only a handful of stocks to all the masses. We also promise to provide a straight-forward
approach. In other words, we will be up-front that there is a risk in trading these stocks and they are even
capable of declining rapidly and significantly at times. That being said, with a level of diversification, the NSP
has very often dramatically outperformed the averages. It will also be our practice to openly track the actual
results on an ongoing basis--both the good and not so good. They will not simply just be swept under the carpet.
How about that for an unexpected breath of fresh air?
We will also not act like one should somehow have a magic crystal ball in his/her possession and know precisely
when to cash in a stock. A prime example of this can be seen in the week just completed in fact. It all goes back
to Alexco Resource Corporation (AXU). Yes, AXU was purchased by the NSP at $4.46 and finished the week at $5.95 for
an impressive +33% gain so far. By the basic NSP methodology AXU will be closed out and sold on Monday's open.
However, some would take credit for its peak price of the week of $6.25 (which would represent a +40% gain). Of
course there are certainly a multitude of potential entry and exit techniques (to be covered in a future article)
but we believe that the NSP results have spoken for themselves even just utilizing these most simplistic
techniques.
Back to a little more on how we track the results. First of all we start with the NSP 100 Index, NSP Top 20 and NSP
Top 10. Those stocks are selected each week Using the NSP proprietary ranking system. The measurement of success is
then incredibly simple in that the qualifying stocks are considered to be bought on Monday's open and sold on the
following Monday's open. That's all there is to it. What it at least does in the most basic sense is provide some
indication of the chosen stocks' short-term effectiveness when compared to the benchmark S&P 500.
Many might say it is rather impressive how remarkably strong and consistent that these NSP returns have been
considering the lack of any fancy entry or exit techniques, and short holding period. Almost without fail, the NSP
100 Index, NSP Top 20 and NSP Top 10 have basically blown away what has been produced by the S&P 500. Despite
some struggles around this very time last year, the NSP 100 Index, NSP Top 20 and NSP Top 10 still turned in
overall gains of +39.4%, 41.7% and +40.9% during the year 2009.
At the time of this writing however, the NSP 100 Index is essentially only right on pace with the S&P 500
year-to-date with a little more than 2 1/2 months to go for the year. However, the NSP Top 20 and NSP Top 10 are
higher by about +17% and +20% respectively so far in 2010 compared to +4.5% for the S&P 500. Meanwhile, the NSP
Value Plus Top 10 is up a very strong +44.5% to date.
With that in mind, let's delve into why I personally feel that the bread-and-butter approach to this methodology
lies in the NSP Value Plus. What separates the NSP Value Plus is that we are primarily striving to get even a
little more greedy in what will be accepted as the buy price. That way one does not get caught "chasing" higher
climbing prices. Once again, I think the results speak for themselves as to just how dynamically positive this
approach has historically been. One need look no further than the year 2008. Admittedly, that year was one of the
very worst in stock market history overall as the S&P 500 tumbled a whopping (-38.5%) lower. Through all of
that the NSP Value Plus battled for bargains, and despite all the widespread negativity, still managed to produce
an overall GAIN of +24.8%. By contrast, even though it still beat the S&P, the basic NSP 100 Index was a bit
more aggressive in its entries into the market, and also ran into some resulting whipsaw action and such. While
past results cannot guarantee the future of course, the NSP Value Plus has appeared to effectively hold its own in
bearish type environments while also strongly outperforming in bullish times. We would like to think that it can
maintain a strong level of consistency in most situations it encounters. Keep in mind though that the NSP Value
Plus can also miss out on some trades that immediately soar to the plus side as the desired buy price never comes
into play. Largely because of that, the NSP Top 10 and NSP Top 20 have even beaten the NSP Value Plus by a little
in a few years. All in all though, the NSP Value Plus has consistently hammered the performance of the S&P 500
ever since its inception in 2001.
The bottom line is we are confident that the NSP can truly provide a multitude of trading opportunities (something
for everyone) on a weekly basis. The key of course is correctly identifying stocks ready to rise in value. The
complete and full details of the NSP qualifying stocks (and specific NSP Value Plus buy prices) will be fully
presented prior to the start of each trading week. Anyone can follow along to see how the NSP results are
calculated. It is all right there to be viewed.
Perhaps even more exciting is that the selected stocks could potentially be handled in additional ways as well by a
skilled trader. What about possibly implementing different entry and/or exit rules, utilizing longer holding
periods (which can have its advantages), filtering with some technical analysis etc.? We will dig deeper into these
very topics and more in upcoming articles as well.
by Bill Nowatske - October 10, 2010
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