The Dividend-Alarm indicator is the heart of the Dividend-Alarm strategy. In contrast to the Dividend Alarm that are activated for individual stocks, the Dividend-Alarm indicator monitors the market and provides the actual time window for transactions.
Although there are only 350 dividend stocks on the watchlist, the numerous data sets and their historical development are a good indicator of the valuation of the market.
What is the Dividend-Alarm indicator?
The Dividend-Alarm indicator is a percentage (for example, 50%) and is displayed as a graph. The required data is collected daily and the chart is updated approximately twice a week in the members area.
As a result, the Dividend Alarm indicator displays purchase phases (green), sales phases (red), and a neutral phase (yellow). You will learn when the market has reached which level of evaluation.
Sales phase – red line = 70%
For values above 70%, we are talking about a sales phase. In this phase, the stock market floats and many dividend shares are significantly overvalued. If the value exceeds 70%, you should look at the shares in your portfolio, which generate a sales signal. The opportunity can be used to reduce or close positions and thus realize its accumulated profits.
Alternatively, it is recommended to work with Trailing Stops. If share prices continue to rise, the strike price (sell) is automatically adjusted as well.
Buy phase – green line = 30%
For values below 30%, we are talking about a purchase phase. In this phase, the stock market is in a bear market and many dividend stocks are significantly under-valued. If the value is less than 30%, you should focus on stocks that generate a buy-signal. The opportunity can be used to liquidate its cash position and invest in the market.
Alternatively, it is recommended to work with Trailing Stops. If share prices continue to fall, the stop price (buy) will also be automatically adjusted.
Neutral phase – between 30% and 70%
We speak of a neutral phase at values between 30% and 70%. More specifically, the values are between 40% and 60% (yellow lines). This excludes the area, which is just before the activation of one of the other two phases.
The neutral phase predominates over time. There is not much to do in this phase. In this phase it is a good idea to regularly check the rebalancing options.
BestCase and WorstCase
According to the Dividend-Alarm strategy, it is most effective to become active in the market only when two equilateral traffic signals come together.Purchase phase Purchase signal or Sale phase Sale signal
Only then the time has come to make transactions – be it as a buyer or as a seller. The neutral phase also shows when you do not need to be active, focus on the cash structure, and maximize individual positions using rebalancing options.
Investing is only then in a stock with a buy signal, if the market has entered a buy phase. Analogously, this also works for sales phases. This is interesting for investors who do not strictly follow the buy and hold strategy and would like to turn their profits into silver.
It is not advisable to act with two different traffic signals.Purchase phase Sales signal or Sale phase Purchase signal
You would act like the mass market in the market and sell its stocks at the low point of the market and take up new stocks at the top.
Deviations of strategy
Regardless, not all Dividend-Alarm members would like to wait for a purchase phase (market). Everyone can handle this individually and can only concentrate on the purchase signals. However, you must then also expect to be unable to get the maximum of possible performance from your shares.
Furthermore, an activated signal for a share never automatically means that this share can now be blindly traded. The signal activation should only indicate a rare occurrence. Why this has happened in a share must be clarified by own research.
Is it worth waiting for a purchase phase?
It may well be worthwhile to wait for the indicated indicator phases. The following example of one of the last purchase phases shows this very vividly. The Dividend-Alarm indicator generated the lowest value (20%) of the approximately four-week purchase phase on 11 February 2016. In the picture above, this is very clear. The atmosphere in the cellar and the exchanges were blood-red.
Already in mid-March 2016, the Dividend-Alarm indicator already recovered significantly and was only at 43% and the purchase phase had already ended. After three months, the indicator remained stable at 45% and the market was practically yawning boredom.
We are waiting for these times with our Dividend-Alarm strategy. Even if it always takes a certain time and then costs a little overcoming, so the anticyclic entry is worthwhile exactly. To find such lucrative entry points in the market and in individual stocks, the Dividend-Alarm helps you.
The mere fact of waiting for the purchase of stocks until the Dividend-Alarm indicator has determined a buying phase can save a lot of money or generate much better returns. And as it is said: the profit lies in the purchase.
For a few indiscriminately selected stocks, which at the time generated a buy-signal, we have created a comparison. On the day when the Dividend-Alarm indicator reached its lowest level (11.02.2016 = 20%), the share prices were determined well one month later (14.03.2016) and three months later (12.05.2016). Here, the Dividend-Alarm indicator was again at a comfortable level of 45% (neutral phase).
This small extract would suffice and it could be expanded with further shares. This underlines why we use the Dividend-Alarm strategy to invest our capital on the market only when these situations occur.
After just a few days and weeks, these transactions generate returns of several annual dividends! This margin of safety pays off in the long term.
The examples also show that it is worthwhile to wait for these phases. Waiting in the sense of “not buying a stock” outside of said indicator purchase phase and only to build up cash. Small and lucrative exceptions, as always, confirm the rule.
We ourselves always see cash as an opportunity to beat historically favourable markets. Ultimately, there are only 9 different ways that can happen in connection with our Dividend-Alarm.
What do the Dividend-Alarm members expect?
As mentioned at the beginning of this page, the data of the indicator is determined daily and the chart is updated approximately twice a week in the member area. As soon as a purchase phase or sales phase is activated, all Dividend-Alarm members receive a special newsletter – practically an alarm by e-mail. The diagram of the indicator is updated daily during the two phases.
In addition to the indicator chart, the number base of the last 30 days is also made available in the member area. This allows members to see how the indicator has developed within the last month.
The table shows the following data:
Date, DOW level, Fear & Greed Index, number of stocks the Dividend-Alarm monitors, number of purchase signals, number of sales signals, and the Dividend-Alarm indicator.
The third point is the list of all sales and buy phases. Thus, members can compare older phases with new indicator phase.