Will Keith Fitz-Gerald’s “X-Pattern” Drive this Stock Up?

Checking out the new teased stock with the "X-Pattern" stock chart, teased by Money Map's High Velocity Profits

By xiexgp@gmail.com, March 16, 2015

“I’m going to make a $1.95 million bet.

“You see, over the next few minutes, I’m going to show you a simple pattern I believe will allow you to achieve two incredible feats…

“You could capture a series of 164.68% windfalls, and…

“You will, with 100% certainty, only buy stocks that are going up.

“At its core, all you have to do is just grab regular, ‘boring’ shares of stock when you see this X…

“And sell them when you see it again.”

That’s the lead-in to the pitch for Money Morning’s “X-Pattern” trading idea — Keith Fitz-Gerald says he has found a “simple pattern” that will let you capture a series of windfalls and “with 100% certainty” only buy stocks that are going up. Pretty strong words. And he’s using them to sell a trading service that he calls High Velocity Profits.

And I’m not going to explain the X-pattern in detail for you here — I’m not a chart-trading expert, it looks like he’s using (at least in part) something called the Aroon indicator, which is a trend indicator that you can see described here or here,it basically measures the days since a high (or low) price was hit and gives buy (or sell) indicators when the “days since a high” indicator crosses over (or under) the “days since a low” indicator.

If you see “AROON 25” it means they’re using 25 days as the timeframe — so a stock would be at 100 on that indicator if it just hit a 25-day high (or low) price, or at 0 if it has been below the 25-day high (or above the low) for 25 days. For a lot of stocks, these lines will cross frequently — for some that are consistently rising or falling, they might not cross in a year or more.

Trend-following has certainly led to lots of huge gains over the years, particularly for those who can buy on the way up and sell after it starts to go down and do so consistently over time, and there are hundreds of indicators and strategies that trend-following chartists use, and variations on all of them (what time period you use, what but it’s far from being my strength or area of interest. I don’t know whether the AROON indicator (or oscillator, which visualizes the data differently) will work better than any other charting indicators at measuring the strength or direction of a trend.

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So why do I mention it today? Because today I saw an ad from Keith Fitz-Gerald that said he just had a new indicator triggered last week, a new “X-pattern” on a stock that you should buy. So that I can sniff out for you, and we therefore get an actual stock to talk about and, for those who want to test this “X-pattern”, an example to consider.

Here’s how he put it in the email:

“Below is a stock chart for a company based out of Rochester, NY.

“As you can see, over the past few weeks it has fluctuated wildly.

“However, I believe I know exactly where this stock is going next – and that you can make a whole lot of money from it.

“In fact, I’m so confident that I’m putting $1.95 million on the line.

“You may think I’m crazy for doing this.

“But I’m not. You see, my team has spent the last six months investigating a single pattern that has been appearing alongside two to three stocks a month… every month… going all the way back to the bursting of the dot-com bubble, through the recession, all the way up to today.

“And it was spotted with the company in this chart.

“This same pattern has been detected with some of the market’s most exceptional windfalls, like 7,476% on Monster Beverage, 2,941% on Terra Nitrogen, 2,566% on Kingold Jewelry, and 1,478% on Radcom.”

I didn’t copy the chart, but I did check it to confirm — the stock he’s talking about here is Paychex (PAYX). The stock chart is an exact match, and it is a Rochester company. The AROON indicator for PAYX may have crossed on the bullish side over the last couple days, but if so that would mean you’re using a very short-term version of the indicator (like 15 days or so) — and if that’s what you’re using, then the up/down “X” of the crossing indicator would have happened a dozen times or so in the last six months. If you’re using a longer-term AROON indicator, like 25 days (which most of the chart systems default to) or longer, then PAYX has been in a positive trend on AROON for a month or more after doing a bit of back-and-forth crossover in January and early February.

So what does that mean? I have no idea. PAYX is at a 10-year high — so it doesn’t take a wizard to note that the trend is positive, but it might take an expert technical trader to get you in and out of bumps up and down over the next couple years. PAYX is, like its larger rival ADP, quite expensive and priced at a stiff premium to its growth rate. This is an HR outsourcing company, in case the name is new to you — they handle benefits outsourcing, HR, and payroll processing, particularly for small to midsize businesses who might not have big HR/Personnel departments. What will drive PAYX is the same thing that will drive ADP, broadly speaking: Employment and job creation, labor-law complexity, and short-term interest rates.

To simplify: If employment rises, they’ll collect more fee income for running payroll for their customers… if it becomes more complicated to deal with payroll laws and regulations (as with health insurance handling and tax law), they’ll get more new customers who want to outsource some of that headache… and if short-term interest rates rise, they’ll earn much more money on the brief window of “float” that they get to hold during the paycheck-generating process. (Like ADP, they collect money from the employer a day or two before it’s actually sent to the account of the employee or printed on a check, and earn some return on that money — or at least they did, when there was any money to be earned on very-short-term interest rates… even with low rates, though, that fund is more valuable than it might seem, because, like Warren Buffett’s famed insurance float, it refills itself every day with new employer money even as it disburses itself to the employees so you can, if you wish, consider it more of a steady asset to earn on than a liability to pay out. Like a dammed pond — it lets water out through the sluice every day and new water comes in every day, but the pond’s depth usually is pretty reliably within an expected range).

So with employment trends certainly improving (more people working), and with short-term interest rates widely expected to rise, there’s quite a bit of optimism baked into PAYX. Maybe that’s as it should be, I can’t claim to have have researched the company thoroughly — the twice-as-big ADP is similarly valued at about 30 times earnings (and is at all-time highs), but PAYX is generally more profitable (it’s a less complex company, they don’t offer as many different services even though both are huge in payroll processing)… and both are expected to grow earnings at a 8-10% annual clip, which is phenomenal for a $20-40 billion company but not that exciting for a company valued at 30 times earnings. They’re also both being bought as “dividend growth” stocks — PAYX has the somewhat higher yield (3% versus 2.25%) and the less-perfect record of dividend growth (PAYX has paused their growth a few times and is a younger company, ADP has raised the dividend every year for 40 years now).

And yes, Paychex (PAYX) and ADP (ADP) have been generally stronger bets for far longer than the “upstart” HR outsourcing/payroll companies that have come public more recently, particularly those who use the word “cloud” in every other paragraph like Paycom (PAYC) and Workday (WDAY). I don’t know if that will continue or not, but so far investors have generally been better-rewarded by the established firms that are actually profitable.

We’ll open the week with that — what do you think? Is PAYX a buy either because it’s in a strong and positive trend or because you like the business? Have any interest in or expertise with the AROON indicator or other charting tools Fitz-Gerald might be using to identify his “X-Pattern” stocks? Let us know with a comment below…

(Our readers had some discussion of this “X-Pattern” a few weeks ago when it was first touted by Money Map, so I’ve appended that discussion they had to the end of this article to get you started. Enjoy!)


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John Murnaghan
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John Murnaghan

Well,well, Plenty of opinions….but …..a) the F-score seems to be a reasonably reliable source for finding a ‘decent’ stock pool but b) the Aroon Indicator is ONLY one Indicator and surely should not be used in isolation,. The dilema about the number of days is a serious flaw and really the strategy should not be marketed until a “best” figure for this is established. Aroon is a ‘lagging ‘ indicator….perhaps the P-SAR is a few days ‘faster’ but surely either should only be used when the “market conditions” are most suitable. Lastly, in the promotion for this expensive service, the… Read More »

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Fabian
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Fabian

Very good debunking of this marketing plot. I watched the presentation until the end (Saturday evening and my wife was stuck on Fox). The Arron is set on 100 days and a pre-selection is made on a fundamental score called the F Score that must be at least 8 over a maximum possible of 9. Basically it’s trend following in conjunction with some fundamental analysis. You can do that on your own with your online broker’s tools and no system will tell you in advance that for instance LL is spiffing its clients. And his bet of $ 1.95 millions,… Read More »

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Anonymole
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Anonymole

I’ve backtested the entire S&P 500 using this “X” marks the spot technique with the Aroon settings set to 25, 50 and 100 looking to determine if there was any statistical edge to the up/down crossing event. I determined that there is an edge, very slight, 51.6% predictability. Trading this alone proved impossible as the losses due to delay of signal during consolidation periods easily over shawdowed the profitable runs. End result, the technique only holds promise in the commodities markets where consolidation eras are less frequent.

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ian S
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ian S

Thanks, that saved me trying it on the FTSE 100. It seemed to me a stock could be heading down significantly before the sell cross-over appeared.

F scores particularly of 9/9 do indicate a company where the board should have more money to allocate to dividends if progress at the past rate continues. Few stocks achieve 9/9. However the value of the stock, price relative to book value, is not one of the 9 parameters so this should be checked also, the stock many be fully priced.

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Solyom
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Solyom

What is better than back testing is forward testing. Peter Lynch who once ran Fidelity Magellan taught 6th graders finance and economics. After a month he gave them a million dollars virtual each and had them invest. They put their orders to him during the day and he bought and sold at the close for that day. Most of the teams did well. Some did so well he wished he could hire them as analyst. That is forward testing. As for most touting this or that read Matthew 24 and think and investigate. While you are at it read Matthew… Read More »

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Flyrod
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Flyrod

I fell for Dr. Kent Moor’s spiel on a pending market crash and it cost me money. I fell for Mampily’s spiel on bio stocks and it cost me money. Fortunately, I cancelled in time and at least I received a full refund for the cost of the services. That’s a plus, however, I think the Money Map Press are just internet promoters. The only thing positive I see about this group is that they have great tease writers. The best $49 I have ever spent of stock services is in StockGumshoe.

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Travis Johnson, Stock Gumshoe
Admin
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Thanks Flyrod! Yes, there are some great marketing writers out there.

Island Trader
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Island Trader

My first chance to read all the blogs since I wrote mine several days ago. I do not normally read these kinds of blogs as most comments are just not worth reading. This group within Stockgumshoe have my attention. Many of you speak with knowledge, but even more important, almost all of you have been tricked at one time or another and have truthfully admitted it. Congratulations for being just plain honest folks. I like that! Travis that says a lot for your credibility and for being able to attract honest and real day to day traders and investors. Your… Read More »

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cmessinger
Member
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cmessinger

Thanks for the repy Island!

hendrixnuzzles
Irregular
👍9957

Hey Island Guy,

What’s you’re current attitude towards gold and silver ?
Long all parts of the sector based on macro stuff…what is your take on the technicals ?

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Mark
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Mark

Island Trader, I agree with everything you say about Travis… he and this website are immaculate. You say Stockcharts sets Slow Stochastic and RSI to “maximum efficiency.” How do you know? Have you tested all the others? What did you find? And, by the way, how did you test it? Based on the generalities given here, I’d say it’s impossible to have done any such thing. In other words, your words are as much BS as Fitz-Gerald’s X-pattern. Think about it. By the way, what you say about gold and silver is equally non-actionable. I guarantee that for every month/year… Read More »

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Peter Dawson
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Peter Dawson

I wonder if there’s anyone still tied into the “HIGH VELOCITY PROFIT” deal who knows
whats happened with PAYX, GMCR et al, who didn’t bail out of this absolute train-wreck before they lost everything KFG recommended? I ended at 29 days in, thankfully, and
thank the good folks at customer service to refund my $2K – membership. And I thank
StockGumshoe for their enlightenment on all subjects. My premium will arrive soon.

Peter

marksman
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marksman

I found it most interesting trolling though the submissions from a wide variety of bloggers on the “new discovery”, the amazing “X” indicator. You have to admire Fitzgerald’s sheer inventiveness in creating something out of nothing. When I first saw the “X”, I immediately recognised it as the Aroon High Low indicator (as opposed to the Aroon Oscillator) so went away to check it out using my own database, under various scenarios. As many commentators have already twigged, good results depend on the number of days (periods) used. I tested periods of 25, 30, 40 and 50days and found that… Read More »

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hendrixnuzzles
Irregular
👍9957

Technical analysis can be very useful, but when many people use the same analytic techniques, the performance degrades. I have noticed many charts in the last year with surprising breaks in trend, support or resistance levels that quickly revert to form after an “unexpected” price move. There are literally thousands of people watching charts, and they all see what you do, and so there is amplification and anticipation in volume and false breakout price action that distorts the classical textbook expectations. I select fundamental stories I like, and then use charts to select spots for entry. I look at short,… Read More »

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Mark
Guest
Mark

I think TA is absolutely and completely useless until someone can come up with data to conclusively show that something works. 99% of people who talk TA include none of this information. Fewer than the remaining 1% know anything about statistics. A great read that addresses the lack of controls in Finance is Part 1 of _Practical Speculation_ (2003). I’d think this would be right up Stockgumshoe’s alley, too.

takeprofits
Guest

In Proverbs we read that; “in a multitude of counsellors there is safety” and this thread i believe proves that hypothesis. I would just like to reiterate valid points made in numerous posts. 1) Thirty day guarantees are totally inadequate to test out a newsletter or trading system. 2) Unless you are a millionaire you are unlikely to have enough capital to effectively benefit from trading systems or newsletters costing thousands of dollars. 3) The RISK is far too high for the amount you would have to invest to have any real chance at making a worthwhile profit. I must… Read More »

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alanh
Member
👍4086

Yowzer !! So good to have you back in the saddle Myron. Looks like your metals have finally bottomed. We need you BADLY to guide us into the recovery with good managers to follow. Go Myron!!

Steve Zee
Guest
Steve Zee

The problem with backtesting is that if you test enough schemes you always find some winners. Image how easy it is to dream up an infinite number of things to test. Then test them & advertise the big success of the winners. Lets say you decide to test something that has no rational reason for working like stock symbols that begin with 2 vowels. Do you think finding Apple might make this system look good? Or since you want “velocity of results” you test symbols that start with VR. You find VRX, what a great system. The only sensible way… Read More »

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alastair macdonald
Guest

Thank you everyone for your stories. I have just received a message from Mr Fitz. It says that I have 3 hours to get in cos the demand is huge for high “velocity” stock system. He is trying to rush me into giving him $1700 US, and then assuring me I will make about 160% average on stocks. So I went to stock gumshoe site to see what others had found. Shame that Fitz and others at Money Map Press are kind of like Al Capone or the great train robbers, except it is sophisticated. I have got on really… Read More »

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dee heel
Guest
dee heel

it was good he would do it and not sell it……that theory always works!

Steve
Guest

This is a variation of the Aroon indicator, a screener available through StockCharts

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Stephen Gower
Guest

A better service (and much more reasonably priced) is Sector Surfer from http://www.sumgrowth.com

everythingtogain
Member
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everythingtogain

Who knows whether this analysis system really works or is it just smoke and mirrors with numbers? They want $1,950 for a year’s subscription and its limited to only the FIRST 1,000 people (why the limit????). Such psychological marketing tactics are a dead giveaway that this is a questionable service. And the guarantee they offer: in short, if the service doesn’t perform as advertised you can get a 2nd year of the subscription for free. Sounds like a total gimmick to me. Thank you to Stock Gumshoe for outing the Aroon Analysis behind this pitch, thus allowing Irregulars to investigate… Read More »

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Gary Stoltzenberg
Guest

Limited to the first 1,000. I wonder how many get turned down?

Visco
Guest
Visco

No one gets turned down.
He just opened a 5,000 limit under ” High Velocity Windfalls”
I bet there will be other follow ons

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donchery
Guest
donchery

He was up to 7000 when I joined. His 100% certain shows in his last recommendation. You buy the stock at 166 and in 4 days time that stock is now worth 148. Not much of a profit as I can see it. I looked at the first 25 stocks he recommended and he had one winner in 25 recommendations. That “winner” went from 73.48 on March 25 to 89 today. He may be good if you buy his options or sell short. He will not tell you when the x is crossed either when it is on the upswing… Read More »

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bajapete
Member
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