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Pristine.

com Presents

Trading The Pristine Method Part I


The Refresher Course
With
Oliver L. Velez

Co-founder of Pristine.com, and co-Author of the best selling


book, Tools and Tactics for the Master Day Trader
Copyright 2003, Pristine Capital Holdings, Inc.

Disclaimer
It should not be assumed that the methods, techniques, or indicators presented in this book will be profitable or that they
will not result in losses. Past results are not necessarily indicative of future results. Examples in this book are for
educational purposes only. This is not a solicitation of any order to buy or sell.
HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS.
UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL
TRADING. ALSO, SINCE THE TRADES IN THIS BOOK HAVE NOT ACTUALLY BEEN EXECUTED, THE
RESULTS WE STATE MAY HAVE UNDER OR OVER COMPENSATED FOR THE IMPACT, IF ANY, OF
CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN
GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF
HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO
ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.
The authors and publisher assume no responsibilities for actions taken by readers. The authors and publisher are not
providing investment advice. The authors and publisher do not make any claims, promises, or guarantees that any
suggestions, systems, trading strategies, or information will result in a profit, loss, or any other desired result. All
readers and seminar attendees assume all risk, including but not limited to the risk of trading losses.
Active Trading can result in large losses and may not be an activity suitable for everyone.
Copyright 1994-2002 by Pristine Capital Holdings, Inc. All rights reserved. Printed in the United States of America.
Except as permitted under the United States Copyright Act of 1976, no part of this publication may be reproduced or
distributed in any form or by any means, or stored in a database or retrieval system, without prior written permission of
the publisher.

Table of Contents

Introduction
Trading w/ the 20MA
Trading the 4 Different Stages
Pristine Trendline Techniques

Pristine Method
Trading the PBS & PSS
Trading the CBS & CSS
Trading the PBZ & PSZ
Trading the PBO& PBD

The Exams
Pristine Quizzes
Pristine Trading Exercises
Pristine Trading Exams

Pristine ESP
Product Review
Pristine ESP: The Climactics
MasterTrader Pro
Pristine ESP & MT Combined

Introduction

Trading With The


Trend & The
Mighty 20 MA

The Pristine Railroad Tracks


1)
2)
3)
4)

Up Trend Formula
Rising 20ma (r20ma) +
Rising 40ma (r40ma) +
r20ma > r40ma +
Relatively even space in between
Nice space

Nearly all dips should rebound sharply

r20ma
r40ma

Find and circle 7 Pristine Buy Set-ups (PBS)

Chart Courtesy of Mastertrader.com

The Pristine Railroad Tracks


1)
2)
3)
4)

Up Trend Formula
Rising 20ma (r20ma) +
Rising 40ma (r40ma) +
r20ma > r40ma +
Relatively even space in between

Nearly all dips should rebound sharply

r20ma
r40ma

Circles show 7 Pristine Buy Set-ups (PBS)

Chart Courtesy of Mastertrader.com

Playing the Uptrend


Marking up charts in this
fashion builds trading skills
Far move from 20ma
and trains the eye to find
Sell
opportunity. Do it often!
-COG w/ TT
far from 20ma
Sell

Breakout
Buy
RLs

PBS

Breakout
Buy

PBS

r20ma

r40ma

RLs

Note the rising lows (RLs) before the breakouts


Note the railroad like moving averages

Chart Courtesy of Mastertrader.com

The Macro Swing Trade

PSS in the PSZ


Breakdown
The Macro Swing Trader rides the trade
as long as the stock stays below the d40ma.
The Macro Swing Trader would consider covering if:
1) The MAs began to narrow;
2) A Climactic Buy Set-up (CBS) formed

Chart Courtesy of Mastertrader.com

d20ma
d40ma

Trading with the 20ma


There are Core Trade & Swing Trade
opportunities in Nortel (NT)
d40ma
Narrowing moving averages
indicate a near end to stage 4

The Pristine Trained


Trader (PTT) trades in the
same direction of the
20MA 92% of the time.

Chart Courtesy of Mastertrader.com

d20ma

Trading with the 20ma


There are Core Trade & Swing Trade
opportunities in Teradyne (TER)
d40ma
d20ma

The Pristine Trained


Trader (PTT) trades in the
same direction of the
20MA 92% of the time.

The trader considers


covering some here

Chart Courtesy of Mastertrader.com

Trading with the 20ma


PTT shorts rallies
with the d20MA

Note the nice spaces between


the moving averages. They
move like railroad tracks on
the way up and down.

r20ma
r40ma
r20ma
r40ma

PTT buys dips in the same


direction of the r20MA
= Pristine Trading Opportunities

Chart Courtesy of Mastertrader.com

Foundation

The Four
Different Stages
Of
The Stock Cycle

Three Major Stages (2-3-4)


Stage 3

Stage 2
PBS

Breakdown

Pristine Bear
Mortgage Play

Stage 4
PBS

Chart Courtesy of Mastertrader.com

The Moving Average Story


Stage 3

Narrow MAs

Stage 4

Stage 2

Breakdown

20ma

40ma

Note how the moving averages can reveal what


stage a stock is in. In stage 2 we have the upward
railroad track MAs. In stage 3, we have narrow
to flat and wavy MAs. In stage 4 the MAs
convert to a downward railroad track pattern.
= Pristine Trade Opportunities

Chart Courtesy of Mastertrader.com

Three Major Stages (2-3-4)


Stage 3

MAs Cross & Flatten

Breakdown

Stage 2
d20ma
d40ma

Did the moving averages warn of a possible Stage 4?

Chart Courtesy of Mastertrader.com

Stage 4

All 4 Major Stages (1-2-3-4)


Stage 3

Flat & Wavy MAs

Stage 2
r20ma

Stage 1

r40ma

Stage 4

What are the moving averages saying right now?

Chart Courtesy of Mastertrader.com

Three Major Stages (2-3-4)


R&F

Stage 3
R&F = Retest & Failure

Stage 2

Whippy MAs

r20ma
r40ma
= Pristine Trading Opportunities

Chart Courtesy of Mastertrader.com

Stage 4

Three Major Stages (2-3-4)


R&F

Stage 3

MAs say sell


rallies & B/Ds
MAs say buy
dips & B/Os
Stage 2

MAs say use support &


resistance techniques

PBS

PBZ

PSS
B/D

Stage 4

Note how the moving averages dictate how to trade

Chart Courtesy of Mastertrader.com

Three Major Stages (2-3-4)


Peek-a-boo Breakout

Stage 3

Stage 2

Breakdown
Pristine Tip:
70% of all breakouts fail, resulting in many
peek-a-boo attempts. When bullish bar
breakouts fail to follow through on the very
next bar, a major reversal is usually at hand.

Chart Courtesy of Mastertrader.com

PSS

Stage 4
50%
CBS

The Three Stages (2-3-4)


Stage 3

Peek-a-boo New High


Wavy MAs

Breakdown

Stage 2

r20ma
r40ma

Stage 4

Note how the moving averages tell the story of the stages

Chart Courtesy of Mastertrader.com

Three Major Stages (2-3-4)


Stage 3

Stage 4

Stage 2

Wavy MAs

20ma
40ma

Note how the MAs reveal how to trade the stock


= Pristine Trading Opportunities

Chart Courtesy of Mastertrader.com

Ending Stage 4
Stage 3

Flat & Wavy MAs

Breakout

Breakdown

Stage 2
PSS
Stage 4
Pristine Tip: The CBS usually ends (finalizes) Stage 4
CBS

Chart Courtesy of Mastertrader.com

The Completed Cycle


Stage 3
= Pristine Trading Opportunities

d20ma
r40ma

Stage 2
r20ma

Stage 1

r40ma

Stage 4

Major Area of Support


Volume Ignites
Move

Volume Ends
Move

Chart Courtesy of Mastertrader.com

Three Major Stages (4-1-2)

What are the Moving Averages telling us?

Stage 4

Stage 2

Stage 1

Flat and Narrow MAs

Chart Courtesy of Mastertrader.com

Trend Line Technique

The Pristine Trend


Line Technique

Uptrend Line Break (UTB)


Stage 3
2 Best Short Opp.

Transitional Phase B

R&F

Stage 2
1
Point 1

Buy, but dont look


for a New High

Point 2

Chart Courtesy of Mastertrader.com

Breakdown

Up Trend Line Break (UTB)


Stage 3

Transitional Phase B

Best Short Opp.


R&F

Stage 2
Buy, but dont look
for a New High

Point 1
Point 2

Breakdown
Stage 4

Chart Courtesy of Mastertrader.com

Pristine Pop Quiz

1)
2)
3)
4)
5)

Instructions & Questions


Draw a Down Trendline
Number the Trendline events
Which Transitional Phase?
What is the next likely move?
Where could the move go?

Chart Courtesy of Mastertrader.com

Pristine Pop Quiz


Point 2

1)
2)
3)
4)
5)

Instructions & Questions


Draw a Down Trendline
Number the Trendline events
Which Transitional Phase?
What is the next likely move?
Where could the move go?
3?
Point 2
1

Transitional Phase D
2

Chart Courtesy of Mastertrader.com

Trading The PBS & PSS

Trading The
Pristine Buy & Sell
Set-ups

60-minute Chart of ROK


CSS

Trading Tip: The Pristine Trained Trader (PTT) uses the 60-minute
chart to find Swing, Guerilla & some Day trading opportunities.

PBS

Circles = Pristine Trading Opportunities


r20ma

PBO

r40ma
-Trap

Chart Courtesy of Mastertrader.com

30-Min Pristine Buy Set-up (PBS)


Pristine Buy Set-up on a 30-min chart
Note: The best intra-day PBSs occur
when the 20ma is above the 200ma
r20ma

200ma

Chart Courtesy of Mastertrader.com

15-minute Chart of GSF


Trading Tip: The Pristine Trained Trader (PTT) uses
the 15-minute chart to find day trading opportunities.

CSS

Circles = Pristine Trading Opportunities


PBS

200ma
PBS
PBS @ MPS

Chart Courtesy of Mastertrader.com

r20ma

5-minute Chart of RCL


Trading Tip: The Pristine Trained Trader (PTT) uses
the 5-minute chart to find micro trading opportunities.
Circle = Pristine Trading Opportunity
r20ma Plays

r20ma
200ma

Chart Courtesy of Mastertrader.com

2-minute Chart of COST

PSS

Trading Tip: The Pristine


Trained Trader (PTT) uses
the 2-minute chart to find
d20ma scalp trading opportunities.
PSS
PSS

Circles = Pristine Trading Opportunities

PBS

Chart Courtesy of Mastertrader.com

PBS

15-min Pristine Buy Set-up (PBS)


Pristine Buy Set-up on a 15-min chart
Note: The best intra-day PBSs occur
when the r20ma is above the 200ma
Stage 2

r20ma

Stage 4
200ma

Stage 1

Chart Courtesy of Mastertrader.com

Anticipating w/ the Bearish COG

d40ma
d20ma

Bear COG
1)
2)
3)
4)

3 or more green bars plus


A relatively solid red bar that closes near the low at
A declining 20ma equals
Anticipation Short Play
* Reverse this technique for the Anticipatory Long

Chart Courtesy of Mastertrader.com

The Power of the 200ma


Using the PBS with MAs & Major Support

r20ma

r200ma

Chart Courtesy of Mastertrader.com

The Complete Pristine Buy Method


Pristine Buy Criteria
1)
2)
3)
4)
5)
6)

Stock in Uptrend
Rising 20ma
Rising 40ma
Rising 20ma < 40ma
OBV rising (not shown)
ADX above 25 (not shown)

Pristine Buy Set-up


7) PBSs (4)
8) CCI(5) Signals

Follow Action Steps:


9) Enter; 10) Stop; 11) Target; 12) Manage

Chart Courtesy of Mastertrader.com

The Complete Pristine Sell Method


d20ma

Pristine Sell Criteria


1)
2)
3)
4)
5)
6)

Stock in Downtrend
Declining 20ma
Declining 40ma
Declining 20ma < 40ma
OBV declining (not shown)
ADX above 25 (not shown)

d40ma

Pristine Sell Set-up


7) PSS w/ -COG
8) CCI(5) Signal

Follow Action Steps: 9) Enter; 10) Stop; 11) Target; 12) Manage

Chart Courtesy of Mastertrader.com

Trading Against the 20ma

The Pristine
Climactic Buy &
Sell Set-ups

Trading Against the 20 MA


5+ Red Bars

Climactic Buy Set-up (CBS)


1) 5 or more Red Bars (or lower highs)
2) Far from 20 MA (8% or more)
3) Bottoming Tail (BT), NRB, and/or +COG
4) Pick-up in Volume
Volume

Chart Courtesy of Mastertrader.com

BT

The Climactic Buy Set-up & the PSS


d40ma
d20ma

PSS
Note: The CBS will often deliver a playable
PSS a week or so later. Therefore, CBSs
represent dual profit making opportunities.
But dont expect a new low on the decline!
The same applies in reverse.

5 Red

CBS

Chart Courtesy of Mastertrader.com

Climactic Buy Set-up (CBS)

It should always be noted that the CBS


will lead to sell opportunity as well;
however, the subsequent PSS must be
played based on the 40/60 Rule.
The same applies in reverse.
Tip: The decline after a CBS will often
be a shallow one.

PSS

5 Red Bars

Big Volume

50%
CBS

Chart Courtesy of Mastertrader.com

Climactic Buy Set-up (CBS)


PSS

r20ma

5+ Red Bars

r40ma

CBS

Chart Courtesy of Mastertrader.com

Marking it Up
Major Resistance

PSS/R&F
Failed PSS

Major Support
PBS

CBS w/ Darling Doji


Climactic Volume

Chart Courtesy of Mastertrader.com

Wide Range Bars (WRB)


Wide Range Bar (WRB)

The WRB (the widest bar of the base)


dictates the next direction.
Another WRB that originates not
far from the d20ma indicates more
downside is on the way.
WRBs far away from d20ma
indicates move is near complete.

Chart Courtesy of Mastertrader.com

PSS w/ Doji
In the PSZ

The PBZ & PSZ

Trading The
Pristine Buy & Sell
Zones

The Pristine Buy Zone


The zone between the rising 20ma & 40ma
acts as a very powerful area of support.

r20ma
r40ma

Chart Courtesy of Mastertrader.com

Pristine Sell Set-up in PSZ


d40ma

After a CBS, KSE has formed a:


1) PSS (Pristine sell set-up);
2) with a COG (bearish COG);
3) And a TT (topping tail)
4) In the PSZ (Pristine Sell Zone)
5) After a 40/60 (% retracement)
6) At the EOM (end of the month)

d20ma

See circle for all 6 items

Chart Courtesy of Mastertrader.com

CBS

The Pristine Buy/Sell Zones


1: Which of the two trades could have
been anticipated? Buy or Sell?
PSS in the PSZ

2: Can you find other signals?


3: Point out the first warning of an up
trend change.

PBS in the PSZ

Area of Macro Support

Chart Courtesy of Mastertrader.com

The Pristine Buy/Sell Zones


R&F
1: The PBS can be anticipated due to the +COG
closing near the high.

1st Warning of a Trend Change

PSS in the PSZ

2: Circles show other Pristine signals.


3: R&F is the 1st sign of a trend change.

PBS in the PSZ

Area of Macro Support

Chart Courtesy of Mastertrader.com

Pristine Sell Set-up in the PSZ


Stage 3

Stage 2

20ma
40ma

Stage 4

PFGC forms a:
PSS; with a -COG; and a deadly Doji; in the PSZ;
after a 40/60%; on the 1st pullback of a breakdown.
See Circle for items listed above

Chart Courtesy of Mastertrader.com

Trading Breakouts

The Pristine
Breakout Method

1-2-3 Breakout Pattern

1)
2)
3)

3 Parts of the Breakout


Buy aggressively if you find it
Look for the PBS and Buy
Buy only if not extended

Chart Courtesy of Mastertrader.com

The Pristine Breakout


Notice the Pristine Trained Trader (PTT)
does not wait for volume. The PTT helps
to create the volume. Volume will usually
lift the committed PTT on breakouts.
Pristine Breakout
Stop
Volume comes after
the PTT buys

Chart Courtesy of Mastertrader.com

The Breakout Play


In Stage 2 the Pristine Trained Trader (PTT) buys:
1) Dips and 2) Breakouts
Buy Breakout
Pause
Stop

Stage 1

Buy Breakout
Stop

Big Volume
Chart Courtesy of Mastertrader.com

Pristine Breakout Buy


Tip: A strong breakout, accompanied
by big volume, typically leads to
multiple buy opportunities

B/O
PBS

Breakout Buy

r20ma
r40ma

Stop
Big Volume

Chart Courtesy of Mastertrader.com

The Pause That Refreshes


Note the narrow nature of the base
Note the drop off in volume
PBS

Why is the PBS considered high risk?


Answer:
Because its too far from the 20ma

Breakout Buy

Stop

Drop in Volume

Chart Courtesy of Mastertrader.com

The Pause That Refreshes


At or near the point of contact with the r20ma,
CBE breaks out and explodes to the upside.

Buy

d20ma
d40ma

Drop off in Volume

Chart Courtesy of Mastertrader.com

The Pause That Refreshes


AAsideways
sidewayspause
pauseinto
intoan
an
r20ma
r20mawill
willtend
tendto
toproduce
produceaa
very
Breakout
verypowerful
powerfulbreakout
breakout

Breakout

r20ma

200ma

Volume drop off

Chart Courtesy of Mastertrader.com

Volume drop off

The Pristine Breakout Play


Note the narrow base
accompanied by rising lows and
narrowing moving averages.
Breakout
r20ma
r40ma

Chart Courtesy of Mastertrader.com

Pristine Combos
Trend is down
Stop

Pristine Tip
The PTT will usually play a PBD
from a narrow base very aggressively.

PSS w/ TT
at mPR

PBD
50%
Ant. CBS

Chart Courtesy of Mastertrader.com

Transitional Phase A
Whats next for IBM? Up move or Down move?
Answer:
The next move should be up

3
1

Chart Courtesy of Mastertrader.com

Trading Tests

Pristine Trading
Exams

Identifying Clean Pristine Trades


Identify the three cleanest trading opportunities
1)_____________
2) _____________
3) _____________

Chart Courtesy of Mastertrader.com

Identifying Clean Pristine Trades


3

Identify the three cleanest trading opportunities


1) Pristine Breakout
2) Pristine Buy Set-up (PBS)
3) Climactic Sell Set-up (CSS)
2
1

Chart Courtesy of Mastertrader.com

Find The Clean Trading Opportunities

1) Circle each clean trading opportunity


2) Name each clan trading opportunity

Chart Courtesy of Mastertrader.com

Find The Clean Trading Opportunities


1
Be cautious of
PBSs after CSS

Breakdown that is not as clean


2

4
5
7

1) CSS; 2) PSS; 3) PBD; 4) PSS; 5) PSS; 6) CBS; 7) PSS

Chart Courtesy of Mastertrader.com

Finding The 4 Best Pristine Plays


Find the 4 best Pristine Trades
1) Circle the trades
2) Name the trades
3) Choose your favorite

Chart Courtesy of Mastertrader.com

Finding The 4 Best Pristine Plays


CSS
2

PBS

1) PBS; 2) PBO; 3) PBS; 4) PBS


My Favorite is 4: PBS w/ a doji at mPS, off the r20ma

Chart Courtesy of Mastertrader.com

Pristine Trading Test


Find and Name the Following:
1) Nine Possible Plays
2) The best Breakout Play
3) The best two PBSs
4) The best short set-up

Can you find a 1-2-3 Breakout Pattern?

Chart Courtesy of Mastertrader.com

Pristine Trading Test


Best Short
9

1) PBO; 2) PBO; 3) PBS; 4) PBS; 5) CSS; 6) PBS; 7) CSS; 8) PBS; 9) PSS


Best Breakout Play: 1, due to the tight and narrow base.
Best two PBSs: 6 and 8 due to the prior peaks being new monthly highs
Best Short Set-up: 9 due it also being an R&F (Retest and Failure).
1-2-3 Breakout Play: The red numbers 1, 2 and 3
5

1
2

2
6
3

Best B/O Play

Chart Courtesy of Mastertrader.com

2 Best PBSs

Pristine Trading Test

1)
2)
3)

Instructions
Circle and name the last 2 Guerrilla trades in this chart
Which Pristine Entry Method you use for trade 2
Point out the area you look to exit each trade

Chart Courtesy of Mastertrader.com

Pristine Trading Test

2 Bear 20/20

Guerrilla Trade 1: Gap n Snap Play


Guerrilla Trade 2: Bear 20/20 Play
Entry Method for Guerrilla Trade 2: 30-minute Sell Rule
Exit for Guerrilla Trade 1: In the area of the 20ma
Exit for Guerrilla Trade 2: In the 40/60 Retracement Area

Exit

Exit

Gap n Snap
1

Chart Courtesy of Mastertrader.com

Pristine Trading Test

1)
2)
3)

Instructions & Questions


How many Buy Opportunities?
Circle and name them
Find the failed Pristine Sell Set-up

Chart Courtesy of Mastertrader.com

Pristine Trading Test


Failed PSS

PBS
2
CBS
1

Chart Courtesy of Mastertrader.com

PBS

Pristine Trading Test

d20ma
d40ma

Questions
1)1) Find
Findthe
the33best
besttrading
tradingsignals
signals
2)2) Which
Whichtrade
tradecan
canbe
beanticipated?
anticipated?
3)3) Why
Whycan
canititbe
beanticipated?
anticipated?

Chart Courtesy of Mastertrader.com

Pristine Trading Test

d20ma
d40ma

2 PSS

Answers
1: CBS; PSS; PBS
2: Trade 2 (CBS) can be anticipated
3: The CBSs +COG closed near the high
1 CBS
Big Volume

Chart Courtesy of Mastertrader.com

3 PBS

Pristine Trading Test


1)
2)
3)
4)

Instructions & Questions


How many Pristine (long) trades can you find?
Name the trade types
Which trades can be anticipated?
Find 4 high risk short points

Chart Courtesy of Mastertrader.com

Pristine Trading Test


4

Answers
1: Four Long Trades
2: 1-CBS; 2-PBS; 3-PBS; 4-PBS
3: Anticipate trade 4, the PBS
4: Red circles and numbers

2
1

4
3

2
1

Chart Courtesy of Mastertrader.com

Mark This Chart Up

Chart Courtesy of Mastertrader.com

Mark This Chart Up


Rounded top
V Top

PBO off r20ma

A
2
1

PBS off 20ma

r20ma
r40ma
PBS at MPS

Chart Courtesy of Mastertrader.com

A = Skeptical PBS

Pristine Products

Pristine Product
Review

Pristine ESP v1.2

Master Merlin, PPT

6 Pristine Trading Modules


200 Pristine Scans
111 Pristine Alerts
Real-time Education
Seamless Link to Realtick

Real-time results for


real-time traders
Unrivaled market
intelligence for the
individual trader

Dont just study the Pristine Method. Live it!

Pristine ESP v1.2


Get the Power!

Chart Courtesy of Mastertrader.com

Alerts

The Power of Pristine ESP

Merlin:
The Pristine Trained Wizard

Intra-day Climactic Scans

Example of how to use


ESP to find my favorite
Intra-day trading pattern:
the CBS and the CSS.

Mastertrader.com

Pristine ESP & Mastertrader Pro


110 Pristine ESP
Trading Alerts,
in real-time

Voice driven trading education via Pristine ESP


Dynamic Level II
Screen with colored
trade buttons

Comprehensive
Level 1 Data

Real-time Charts
w/ Analytics

Real-time Ticker

Real-time News/
Real-time Account
Information

200 Pristine ESP


Scans on over
9,000 securities
Real-time Market
Minders

The Perfect Trading Combo


Platform Courtesy of Mastertrader.com

Execution module with


6 direct-access routes