New England Business Alliance Podcast

Greg Klein-Hertzel 00:00
Welcome to the New England Business Alliance podcast. Connect your business with the right resources.

Merrill Loechner 00:09
Thanks for joining us today. I love learning new things. That's one of the reasons I love being a podcast producer. I can learn new things with every new guest I speak to. Today we're talking with Scott Lask and talking about how to read an investment chart. And as someone who, until I met Scott, didn't know what an investment chart was, I've learned a lot getting ready for this talk, and I hope you're going to learn a lot too. So, Scott, so nice to see you today.

Scott Lask 00:38
Thanks for having me, Merrill. It's always a pleasure to be with you.

Merrill Loechner 00:41
Excellent. Introduce yourself a little bit. Tell our listeners who are you and what your history was.

Scott Lask 00:48
Well, I spent 42 years on Wall Street as a money manager and a financial advisor. Kind of got in the business by accident. My wife's friend's husband, upon meeting me, said that he thought I was in the wrong business and that I should become a stockbroker. That was back in 1983, and we're still the best of friends. But you know, during the course, I saw so many evolutions. And of course, being a middle class kid from the five boroughs, I didn't talk about stocks and bonds in my house, so I had a lot of learning to do. And you had to really learn it on your own, because Wall Street taught you a lot about product, a lot about selling, but not really how to invest as efficiently as you should. And the first really big drop after I was, you know, practicing and I was investing our money--you know, family money--I got smoked like everyone every time the market falls off the mountain. And the problem was twofold and what inspired me to create the Work Optional Method, which is what I, you know, became known for, and when I retired, continued on in a different platform, was that not only did I get beat up financially, but my clients got beat up financially. And when you think about it, they're my income, so I was more concerned at that point of how do I prevent that from ever happening to them again, because I have a big stake in them, you know. And that's what led me to charts. Now I was very lucky; I met and worked at a firm where one of the, at the time, you know, the old deans of technical analysis was working, and he took me and a few of the other brokers under his wing, and he taught us. And to make a longer story short, I'll tell anyone I have a lot of respect for research analysts. They do an important function, but when it comes to managing the money investment of it, I'll take charts any time. And I will bet that I will consistently do better than most of the other analysts, not because I'm going to have the biggest gains in the hot years, but because when markets collapse, my losses will be minimal. And I can say it with confidence, because the charts tell you.

Merrill Loechner 03:35
Okay, I am a brand new investor. Where do we--you're talking charts. Where do I find these charts?

Scott Lask 03:42
Well, there's several platforms. The one that I use, which is it's--people kind of laugh when they get to know me, because it's so simple and basic. Yeah, I put a lot of different, you know, things into it because I've got 42 years doing it. But for beginners, I think it's the best platform, because...

Merrill Loechner 04:02
Which platform?

Scott Lask 04:03
Oh, I'm sorry, stockcharts.com. And for, you know, your listeners, I will say I take the professional subscription. I think it costs me about $50, $60 a month. It's you know minimal, and I get everything I need from it.

Merrill Loechner 04:23
So we've been talking about charts.

Scott Lask 04:25
Yeah.

Merrill Loechner 04:25
What do one of these charts look like?

Scott Lask 04:29
Well, why don't we take a look at one? Let me know when you can see this.

Merrill Loechner 04:34
I can see it.

Scott Lask 04:35
Okay. This particular scan that I have preset in my system is for a specific pattern called a rounded bottom. We can talk about that later, but it's--when you learn charting, it's a very prevalent pattern that you will see quite often. And here's the kitchen table version: a stock, let's say like Zoom, was a high-flyer, the darling of Wall Street. It fell out of favor, and they threw it off the top of the Empire State Building, and they left it for dead. But the company wasn't going to die. They did things to turn everything around, and lo and behold!, someone started sniffing around, and people started buying, and we get to see it on the charts. And rounded bottom is just another way of saying it went full circle in the cycle, and it's ready to go back up. So, I'm going to pick a chart at random, and--yeah, I'm going to use this one because railroads are usually fairly boring. And this is--I just need to adjust the chart a little bit. This is actually one of our recommendations that's in our, you know, growth newsletter, our signal bulletin. So, the first time that I played this--and I'm going to hit an Annotate button so you can follow along--and hang on one sec, you know, it's like Zoom. You've got to flip screens. Can you see what I just drew?

Merrill Loechner 06:15
Yes.

Scott Lask 06:16
Okay. This is a rounded bottom, and to illustrate it a little bit--and if I lose you on anything, if I use a term you don't understand, just stop me.

Merrill Loechner 06:29
Absolutely.

Scott Lask 06:30
So you can see right here around 10 and change, it stopped going up, and it went down. Now, believe me when I tell you, you don't have to be a genius in math to know. If you had 10 and a half dollars in your pocket, and someone pickpocketed you, and you only had $6.40 left, you feel the pain, and that's exactly because put it into simple terms. If this was a $10,500 investment, and then all you were left with was $6,400. You're not feeling too good, are you?

Merrill Loechner 07:06
Mm hm.

Scott Lask 07:07
Right. But then it stopped. So, let me erase some of this stuff, okay. And let me see if I can expand this chart, so you can see it a little more. Well, actually, let me just come back. Eventually, it started going back up. You can see right here. And right around here is where we--at least, you know, when I say we, I mean, you know, what I'm doing for my subscribers--this is where I would have picked up the the initial buy signal, which I tell anyone, "If you get an early buy signal, only put a part of your investment in." If you were going to put--we'll do a simple number. If you're going to put $1,000 into it total, maybe you step in here with $250, and you know that if it goes down, you know, a certain percent, you've got to cut it. Well, then, okay, it did it again. Oops, no, stay down there. Then, it did it again, right here, and it kept--now this space right here.

Merrill Loechner 08:12
Mm hm.

Scott Lask 08:12
There was nothing. It just went from here--zoom!--and this was the final breakout. But this is a classic rounded bottom, and look what happened. It came back. It went through the 10 and a half dollar mark. It went up to about 15. Everyone's happy. Okay, we just had, you know, four slices of pizza each. Time to digest. Okay, now we brought out dessert. The thing went up to 24. You bought a stock anywhere, even if you waited until the final breakout, if you paid 10 and a half, and you're sitting on the stock at 24, you are one happy human being. But remember, I said now it's up to you to manage the profits. Well, you were under 10 and a half. Now, okay, why did it drop like a brick here? Well, that was COVID.

Scott Lask 09:04
And the COVID drop happened so fast nobody was prepared for it. Okay, so now, if you held on and you decided, and you might have even done something aggressive, you would have said, you know what? This thing-the only thing that made this drop from the $24 area down to 15 and change was COVID. This will end. We're seeing proof positives starting to come back. If you bought more down here, and then you took the recovery, look at this. You went to 35 and change. Okay, what happened here? Okay, so this is when the White House changed from Trump back to Biden. Biden did some things to cause inflation. We say it a lot for gasoline. I'm not pointing fingers. I'm just pointing out the different flavors and how they affect markets. Okay, and here's a rule for everyone who ever thinks about investing: politics has no place on Wall Street. Is what you need to be aware of because that's what will dictate where money flows. Makes sense, right? And besides, you save a lot of friendships that way. But you see, now you might have gotten bored around here, but if you didn't, look what happened? We got another sell-off, not a big one, but we got a mini rounded bottom. That just confirms the reason why we still want to be in it. Not a stock, just this week broke above $50 a share. So not bad if you've been holding it for 11 years, plus the dividends. So that's a long-term view of charts. Now, before I stop the share, do you have any questions? You want to ask me anything on Love of Charts Live?

Merrill Loechner 10:58
Well, I see there's a bunch of different charts.

Scott Lask 11:04
Oh, okay. Hang on.

Merrill Loechner 11:05
What's on the top? What's in the next...

Scott Lask 11:07
Let me come back here. Okay. So you're talking about, like, right up here.

Merrill Loechner 11:15
Yeah. What's that?

Scott Lask 11:16
Okay. These are different micro-indicators. For instance, right over here, where it says RSI, that stands for Relative Strength Index. English: how is CSX Railroad performing against the industry, the benchmarks, you know, the comparables, their competitors in the stock market, okay. This one is also a different relative strength indicator, and I always forget what it stands for, but it's a very potent one. And you know, you can see they all kind of follow the same pattern. But this particular one, we--when I buy them, and you can see the number, it's right over here, 93 and change.

Merrill Loechner 12:11
Mm hm.

Scott Lask 12:11
these lines, this is volume. So here's a rule number two: when you see something on a chart and you see a price set up that works for you on a risk-reward basis, you need to confirm if the volume supports it. And what I mean by that is, if the buying volume is larger than the selling volume, that's a very good reason to buy the stock. But if the selling selling volume is bigger, you know, you might as well try to sail into a headwind. You're not going to go anywhere. If anything, you'd get pushed down.

Merrill Loechner 13:02
Well, how does this chart tell you buying versus selling?

Scott Lask 13:07
How does this chart tell me?

Merrill Loechner 13:09
Well, which which chart will tell you volume?

Scott Lask 13:13
Oh no, no, they all do right here on the bottom.

Merrill Loechner 13:15
Okay,

Scott Lask 13:17
They all tell you.

Merrill Loechner 13:18
Okay, but what I'm looking at is it gets really busy at the beginning and quieter at the end. What's buying? What's selling?

Scott Lask 13:25
Oh, I'm sorry. The gray is buying, the red is selling.

Merrill Loechner 13:30
Ah.

Scott Lask 13:31
Sorry. I didn't understand.

Merrill Loechner 13:36
Interesting.

Scott Lask 13:36
This one is just another relative strength indicator. They call it a MACD. It's a moving average line, which--here's rule number three. I'm going to make the chart smaller, so let me come out of this for a second, so that you can get a better look at what I'm going to show you. Okay, if you look from here to here, you see this blue line that squiggles all along? That blue line is called a 50-day moving average. The red line is a 200-day moving average. So now let me, you know, unpack what it means. It means exactly what it says. They take the last 50 trading day prices and they average it. Now, what Gene Siegel, that was my mentor, what he taught all of us: this blue line, this 50-day, this drives direction of price, okay, and if you're here, you can see it's turning down. Once it started turning up, you had an opportunity, okay. You have to follow. Look at the way this just, you know, it went from kind of flat to almost a 45-degree angle. And the stock clearly responded, because it went from the high 30s to just breaking 50 in, you know, pretty much six months.

Merrill Loechner 15:17
Interesting.

Scott Lask 15:19
Here's another rule: the 200-day is exactly what it says. They took the last 200 days. They divided by 200. They got the price. There's a saying on Wall Street: nothing good happens under the 200-day line. And I'm going to show you a chart that proves it. And actually, just kind of, it has showed up on our screen a few times. I don't recommend shorts, but this is one that I may have to bet it's going to keep going down, okay. This--by the way, this is Oracle, a big company in software, a powerhouse company. Look at the 50-day. It turned down, right? What happened? Stock drove all the way, and it reached. It broke below. Now, if you were an advanced chartist, the very first thing you would do was you would draw support lines, which I know most people, once they understand them, they realize how valuable they are.

Merrill Loechner 16:31
Okay, define what a support line is.

Scott Lask 16:33
Okay, stock came down and it held right here. Went up, waffled, came down, it held right here. Now, it really had fun, came down, it did not break. It definitely came down, but it was higher. So you would now have gone and drawn a line here, and if you weren't already short the stock, this would be your red flag to say, "Okay, alert, you know. We don't know if we're under attack, but we may be." And this breach, what I would be looking for right now is that the stock rallies a day or two. You know, you have some short-term trading in it, and then I would definitely short it, because my next line that I would look, if it breaks here, would be here and then here.

Merrill Loechner 17:39
Okay, so you're making the lines from other places when it was lower.

Scott Lask 17:44
Exactly. You--support line is where the selling stops, and buyers come back in and take control. Because everything--I don't care if it's a stock, I don't care if it's the cost of, you know, you doing podcast people, or if it's the cost of bananas in the supermarket--it's all based on supply and demand. If they have too many bananas on the shelf, it goes from 79 cents a pound to 59 cents a pound, the same thing in the stock market. So, support is critical, because you really need to know, okay, "Has the bleeding stopped?" Okay, so for me, if I'm right, and the stock is falling out of favor and is going to continue to, because nothing good happens under the 200-day, well then, what if it goes down to 110? Okay, what if it goes below 100? Well, the truth of the matter is you've got to reverse the numbers, because you sold it at 126. That's what shorting is. You're selling something without owning it. Okay, but you bought it back at 100, so you made $26 on $100. That's a good return. 26%, I'll take that every day. Okay, but let me show you something which I think should shed some light on this. I'm going to go way back. So, for many years this stock did good, but this is not looking healthy. And I'm telling you, if it breaks below the 126 to 100 area, you're going to see this stock go real low.

Merrill Loechner 19:29
Now, how can you tell from these charts or from experience, "Okay, this is going to go low. Now, is it, This is going to crash, and it'll be pennies on the dollar? It's going to go really low and then shoot back up again?"

Scott Lask 19:44
You can't. You have to--once you own something, you have to pay attention to it. Now, you don't have to sit and stare at the TV all day. But the fact of the matter is, and let me just shorten the chart, and then I'll show you. If I was going to execute that transaction right now, my price points--give me one second. Let's go to 10 years and see what that looks like. I can go shorter. Perfect. Let's do five years, and I want to do daily. Okay. So, what I would do if I was going to bet that the stock would keep going down, and I did it here, so let's say I sold it at 125.76. Since I know my risk limits, okay, I would probably--yeah--I would sell if it broke above 140, because that would keep my loss to about 11%, which is, you know, my comfort zone. And then I'd wait, you know. I wouldn't stop watching it, but you know, I could take a small loss. It's not a--because if I'm right, even if I have to put the trade on again, and then I get the 26%, big deal. So, I have a loss to wash some tax gains on, but I'm still ahead 15%.

Merrill Loechner 21:21
That works. Well, if you're talking to, again, new investor, what are some of the big mistakes you see newbies when they're like, "Okay, I'm going to look at this chart," and they read it wrong? How--what are things that they should look at?

Scott Lask 21:38
Well, the first mistake they make is that they want to jump in to the investment right away. One of the things when people subscribe to either of my newsletters, I suggest is if you really are a seasoned investor and you have a really you know reasonable understanding, fine. Don't buy everything. Buy a few that suit you. What I recommend, no matter what their experience level is, first couple of weeks, just pretend, paper trade, write it down, and track it. Get a feel for you know how our setup really plays in the real world. So that's, I think, to any new investor, you don't need to jump in right away. Take a little time to study this, because it has a rhythm. The second thing I I see new chart readers making mistakes is you have a lot of different time variables that you could look at. A lot of the trading that goes on during the day is just that. It's trading. It's noise. So if you're looking at something of, hey, you know, I think that this company is going to grow really great in the next two to three years, so you're looking at holding this thing a year, two years to see if it can come to fruition. Okay, so the day-to-day trading noise; those people should be looking at the one-month charts so they get a feel for how it trades month to month. Keep an eye on the earnings times. Like I will almost never buy anything new right before the earnings announcement because I you just don't know.

Merrill Loechner 23:33
Mm hm.

Scott Lask 23:34
You know I don't know how closely you follow news, but I'll give you an idea just how brutal it can be. There's a a concept in the Wall Street arena of pre-announcement. It's usually bad news. Well, IBM a couple of weeks ago basically said that, "We're not going to hit all our numbers." They shaved 26% off the stock at the opening bell.

Merrill Loechner 24:03
Oof!

Scott Lask 24:05
I mean, can you imagine? You know, let's say you've been working at IBM for 25 years. You've got $3 million worth of IBM stock, and all of a sudden, nope, sorry, you've got 2.2 million. I mean, I'm still not going to cry a river for you, but that's a harsh blow. And unfortunately, those are some of the things you just can never be fully prepared for. They don't happen that often, thankfully. That's one thing you have to give the regulators, that they keep an orderly system of financial reporting and so forth, so. The other mistake, and this is whether you chart or just invest, you do not have a risk-reward ratio set up in your mind.

Merrill Loechner 24:56
It's kind of like gambling. How much are you willing to lose?

Scott Lask 24:58
Right, but if you know how to invest, it is not gambling,

Merrill Loechner 25:03
But no, it's the head set of like, "I'm going to go to the casino. I have a $20 bill. Once it's gone, I'm done. If I get extra money, great." But, so you have that limit.

Scott Lask 25:13
Well, it's--that's why cryptocurrency was such a hot topic for so long. And you know, when--here's a little history for you. You know that Wall Street creates these bubbles, and when they burst, we all get affected. You don't need to have a nickel in the stock market, but if there's a major crash, your business is going to feel it. Back in the 1600s, for some reason in Holland, people.

Merrill Loechner 25:43
The tulip craze! Yes!

Scott Lask 25:44
Yes! And I even wrote in my book that at the height of the tulip craze, one tulip--one tulip!--was worth more money than a house in Amsterdam. Now, it does belie the truth that everything with money is based on trust and faith. Okay, but it seems to be working. Okay, but crypto is a fad. Crypto will become real again when the central banks of the world figure out how to put a box around it like they do with the dollar and the euro, so that the currencies can't implode and screw the planet up, so. But, I say, you know, it really is they're not taking the time to learn how to read charts, and they're trying to read too many charts. I mean, for my trading, I have four, maybe six positions. That's it. I don't care about anything else. I know these in and out, and yes, I'm wrong on them, you know, 20, 30% of the time, but I get out fast, so I'm not getting hurt. They don't--they don't look at the rest of the company once they own it, you know, because now if it's working now, you have to use the trucks to manage profits. Some of that is also knowing that, "Well, on July 27th they're going to report earnings, and I don't know, the stock's been slipping the last couple of days. Maybe I should put," because there's tools. You could put orders on the books today t

Merrill Loechner 29:02
Interesting. So, it sounds like you have a lot of experience with this, and then you started your own company once leaving Wall Street. So, tell us about your business.

Scott Lask 29:13
Well, I'm taking the same methodology, but I'm expanding it to help people realize there is a way you can literally receive income off your stocks every week, and it's not waiting for the dividend. It's not a very complicated strategy. It's just that the public isn't really, you know, overly familiar with it. But essentially, we've--well, our goal is to generate 1.2% cash income on any money invested that week. And so, for instance, we'll do $1,000, and then I'll do the bigger numbers. That would mean you made $1.20 for the week. Well, if you did that for 52 weeks on the $1,000, you made $624 in income. What we've learned is to factor in a discount, because of the strategy. You know, you're still buying a stock, and you're doing something else with it, but the stock can still go down. And if it goes down past, you know, our stop point, we tell you to get out. So we haircut this, so and giving it a very big haircut, which we've never come close to, your $624 would actually net out at about $530. So, let me see if I got this right. And Merrill, I know this sounds insane, okay, but I did this for decades. Okay, it's one of the greatest ways to make sure you always have cash. So, I put up $1,000. Every week, I get paid, and at the end of the year, with all the ups and downs and the losses, and this and that, I still cleared $530 before paying tax on it.

Merrill Loechner 31:20
Nice.

Scott Lask 31:21
Yeah, but it takes--you've got to be willing to understand how it works, and I teach. The thing that I think has helped was when I got the advice from some of my mastermind, when I was planning the business, to build a library for new subscribers, which we're revising right now, and we're going to set up a separate portal. Of course, they don't know this stuff. I mean, to me, this is like, you know, you do it by rote. You know, it's like if you and I were in your mom's kitchen, and we were going to set the table, we both know the plate goes in the center, the salad plate goes on top, the soup bowl goes on top, two forks over here, the knife, the spoon, whatever. Well, okay. Once you know how this works, you don't need me. You may still subscribe to my newsletter, but if you know how to do this and you can be disciplined, you will outperform most portfolios. The other side is the growth one, where we're not necessarily interested in the income. We're interested more in, well, we're on the beginnings of this whole AI evolution. Where are the big winners? How do I find them? How do I stay invested in them? I mean, honestly, and I was still investing public money at the time. When we bought Palantir in the summer, or the spring, of 2024, We had a lot of hope and promise, but we had no idea we were going to see a tenfold increase in our investment. But that's--it was all charts.

Merrill Loechner 32:59
Yep. So primarily, what your business does is you'll work with them within your system, and they'll either stay with you, graduate to doing their own thing, and you've got a newsletter with a lot of information that people.

Scott Lask 33:13
Well, let me modify it just a drop. We offer two basic newsletters right now. One is the one which generates that income every week, okay. The other is pure growth. And we give you the entire setup. We tell you where we think you should buy it, how much you'll get paid, where if it sells below to sell it, okay, and all the particulars that you need. Your job at that point, if we told you sell it at 25, and it goes to 25, sell it, okay. But we tell you how to close the other side of the transaction as well, okay. Same thing with the the pure growth. You know, I actually got a call from a new subscriber, because one of the positions that we added in the July issue didn't get off to a good start. It was down about 8%, and we had put a stop-loss recommendation of a price of 148 a share. Well, they emailed me when it got to 151. Now it's like, you know, they're like, "We're getting nervous. We're getting nervous." Good! That means you're paying attention. What's the stop price? 148. Okay. Has it traded there yet? No. All right. Keep an eye on it. Don't worry. Gets to 148, doesn't rally the next day. Sell it. You know, Merrill. I know this sounds, you know, a little too smiley, but it really isn't rocket science, I'm telling you. What people do in in music, in medicine, in science is so much more complicated. What we do here is we will give you the tools. We will show you where to go if you want to do it yourself. We'll do the heavy lifting with the subscription. You get updates. You get a weekly recap. There are workshops once a month, and more important, we will be accessible to you, because eventually, you know, when we grow to a certain scale, we will be holding monthly, you know, town halls just so subscribers can come in and say, "Scott, I'm having a problem with this. Scott, I'm having a problem with that."

Merrill Loechner 35:27
Nice.

Scott Lask 35:28
Yeah, you know, listen, I'm used to it. There'll always be a few in the crowd that turn you into a punching bag, but it comes with the territory.

Merrill Loechner 35:35
Absolutely. So, how can people reach you if they want to get more information?

Scott Lask 35:40
Well, they can call the office, which is 845-774-2745. They can contact us through the website, which is www.theworkoptionalmethod (all one word) dot-com, or they can email me at info@theworkoptionalmethod.com, and we're on LinkedIn, Facebook, Instagram. And you know, we try to put some videos out to give guidance to, you know, the market during the week. So, but we really want to help people understand that achieving Work Optional is absolutely achievable, and you don't need millions of dollars, okay. My youngest son literally started with $500 two years ago, and his business is very challenging, and he really couldn't put a lot of money in. He put drips and drabs in, like $25 here, $70 there. So, but he's grown it principally, you know, through the selection. He's over $40,000 in two years.

Merrill Loechner 36:57
Nice.

Scott Lask 36:57
Yeah, maybe he put in another two, three thousand, but that's about it. So, it's very doable, and I don't want it to sound arrogant, but there's nothing I do that anyone else can't.

Merrill Loechner 37:10
We'll put all that information in the show notes below, so people can reach out and get in touch with you. Thank you so much. This has been a fascinating discussion, and thank you for your time.

Scott Lask 37:21
I appreciate it, and I hope it helps. And let me know what I can do for you.

Greg Klein-Hertzel 37:28
Thanks for joining us for the New England Business Alliance podcast. Join us next time for more business resources.