Steve:
You're correct. It is very difficult to find a "rolling stock" which rolls for a long period continuosly. I tried very hard to find one like that and finally accepted the fact there no stock which rolls regularly for an extended period. Otherwise, we would be real rich now!! You don't need to do any DD or analysis. Just place stop buy and stop sell orders and make money...and you and I know that it is not going to happen. But, the most important thing is that by using this forum, I hope that we may be able to find some good picks and will be able to exchange our ideas by helping each others.
Any way, I found the following article at Whistle Stop news letter and thought it will be interesting to other people here. Please note that Bill also has his own web page.
Good luck to you.
--Salim
The following message is from Whistle Stop Email News letter. My sincere thanks to Bill DeMorrow.
**********************************************************************************
Date: Sat, 28 Sep 1996 20:26:59 -0500
X-Sender: whistle@gte.net
Mime-Version: 1.0
To: (Recipient list suppressed)
From: Bill DeMorrow <whistle@gte.net>
Subject: Whistle Stop Station #27
reply to Art from Waaco Billy the Kid .... I've used this method
successfully as well Art .... just didn't have a handle for it ... Jim Rupp,
our co editor and tech guru is good at using that tequnique as well. APSO is
a stock that has a rolling characteristic ..... keep yer eye on thes and
throw us one from time to time .... and thanks for your insights ... helps
all of us to become better investors by studying what others have done
successfully .... I have to tell you though I'm not much of a short player
.... I sometimes will buy a put on something I think is way over priced but
fundamentally I'm a long player only ... doesn't mean I'm again shorting ...
just means my mind doesn't get real comfortable selling something I don't
own ... shoot .. the texans use to hang you for doin that ....
Bill, I really enjoy the Whistle Stop Station. I like your concept of Power
Plays. Just to throw my 2 cents in, and for your consideration, is another
trading technique I like to use to generate income/short-term capital gains
although it typically takes longer periods of time and some may think its
"boring." I and others like to call this the "rolling stock technique."
I like to find stocks that also meet your criteria of :
a) Very good management with a mission and a focus on getting the job done.
b) A product or service that has some "sex" appeal.
c) The fundamentals of the company are sound. Very little or no debt, ratios
ok, etc
d) The company has a story to tell which has not been heard by the "street".
e) The current stock price is undervalued.
f) The company is launching a campaign to raise awareness in it's stock.
that trade between $5-10 per share in well defined channels or cycles but
have promising long-term prospects and little downside risk. Because these
stocks trade at $5 or above, they usually have narrow spreads, good
liquidity, and they can be margined and shorted by individual investors.
These are stocks known as "rolling stocks" because they "roll" up and down
2-3 points on a regular basis almost like clockwork and can be bought at a
support level and sold at a resistance level over and over again. One can
trade these types stocks either conservatively or aggressively (and
automatically by using limit orders).
#1 - Conservative Scenario without leverage: buy at the support level, no
margin, and then sell when the resistance level nears or is reached. Wait
on a pull back/profit taking until the price once again reaches the support
level and buy back to repeat the process.
#2 - Conservative Scenario (but riskier) with leverage: same as above but
use margin to double your buying power.
Aggressive Scenario - with margin account: to begin, and depending on which
end of the price cycle the stock approaches, buy or short (buy at support
level, sell short at resistance level). When the other end of the cycle is
reached (either support or resistance), double the size of your transaction
to ride the cycle back in the other direction. For example, buy 1,000 shares
of XYZ that has a good history of "rolling" between $7-9/share at $7 support
level. Then sell 2,000 shares at $9 (1,000 shares short). When the stock
rolls back down near the support level, buy 2,000 shares at or near $7,
covering the 1,000 shares you have short and buying another 1,000 long to go
back in the other direction. When trading this way you MUST PROTECT YOURSELF
WITH STOP LOSS ORDERS because these types of stocks are chosen for their
fundamental soundness and may break through a resistance level and run for
awhile and you don't want to be caught in the short position without
protection when this happens!!
The trick of course is to follow and become familiar with the trading
patterns and characteristics of enough stocks to identify those that meet the
above criteria and trade in fairly well defined cycles. I think it would be
a nice addition to the Whistle Stop to have a "Rolling Stock" Section or
feature to alert other investors of promising rolling stock candidates.
One candidate I have been writing about in the Stockman Forum (I have been a
weekly contributor to LeRoy's forum in the area of technical analysis) lately
is Stac Electronics (STAC - $8.25). STAC is a candidate that has had a
history of periodically rolling 2 points several times a year as it travels
through its up and down trends. I don't have a current buy/signal on STAC
but it looks like it is in a slight uptrend and is slightly above its short,
medium, and long-term trendlines. The top of the next cycle should be near
$9-10 -- will have to watch and see.
When you get time let me know what you think of the "rolling stock" idea. I
probably will also post this in LeRoy's Stockman Forum this weekend. Thanks.
Art Adams at Abasenji@aol.com
*********** all spelling errors intentional **********
_____ Billy the Kid. . . . . o o o o o
__|[_]|__ ___________ _______ _____ o
|[] [] []| [] [] [] [] [_____(__ ][]]_n_n__][.
_|________|_[_________]_[________]_|__|________)<
oo oo ' oo oo ' oo oo 'oo 0000---oo\_
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
The Whistle Stop gate.net |
