I can't answer your question fully in a short post, but I'll try and summarize as best as possible.
1. It all begins with management, if they are platinum the company will stand the best chance of performing (and hence the stock). I only buy companies with excellent management (unless I'm wrong :o)
2. Enabling technology, proprietary technology, captured markets are what I try to find. I prefer proprietary technology such as that of GMST, or for example SMTC, which manufactures specialized analog semiconductor components (top-notch management too).
3. Fundamentals RULE, always have always will! If the company is not making any money, how can I expect them to make me any money? No profit, no revenue, no investment! I think ROE, net margin, and debt/equity are the main factors I look at when glossing over a company's numbers.
4. Technicals ARE important, and to state an opinion that differs from capt_rocky, I truly believe there is much that can be learned, and there is much potential benefit that can be gained by using technicals. MACD, Stochastics, Williams %R are three of my favorites, mainly MACD as it relates to trend analysis.
5. Do I make money doing this, do I have much luck with these methods? It would be fair to say that I am pretty good at finding good buy points, but my emotions have gotten in the way in the past from selling at the opportune time.
Based on this fault (which I am addressing), and learning the painful lesson of being extended on margin, I have not particularly performed well overall. This is something I chalk up to learning, and I have definitely had my fair share of that.
Despite all the hard lessons, I am still in positive territory, and have quite a bit of confidence in my technique at this point.
To answer your other question, yes there is merit in buying on a cup & handle breakout, a cup & saucer breakout, or a base breakout. Read analysis by William O'Neill ("24 Essential Lessons For Investment Success", and "How to Make Money In Stocks"), and you will learn a great deal of what you need to know about "rational investing". He defines breakout, pivot point, sell rules to avoid a large loss, and sell rules to capture a gain (I'm still reading that chapter :o)
To give you a clear example, and to test my method UNDER FIRE, I recommend you watch PLXT, which has corrected substantially and is about to experience a MACD crossover well under the zero line. This is a stock I expect to yield a minimum 25% profit in a month or less. I'm sure many can do better, that is OK with me. I will use one simple rule to sell, I will sell when the MACD Fast line tops out (most likely somewhere near 3.0 or so).
Notice I have used no prices in relation to buying or selling the stock; this is a straight technical buy and sell play. I expect the stock to hit $36 and I would have no problem if it made that price, went higher, ot topped out lower, I simply am going to sell at MACD Fast reversal.
So, thats the short version. Apologies to the thread for the off-topic post. I will be much more inclined to sell GMST, and any other stock I purchase at critical junctures, the market is MUCH too choppy to simply Buy & Hold Long Term, at least from my point of view. Using a disciplined approach, with what I have learned, I will expect to beat the market from this point forward.
I will also from now on maintain an approach I refer to as "harvest investing". When I sell a position, I will keep 10% of the stock for the long-term. My reasoning is that I will only purchase leading companies, and based on that fact, I want to maintain some position in that company for the long-haul. Each time I trade a stock, I will be adding another little "seed" to my long-term portfolio. Hopefully much later I can "harvest" the fruits of all those seeds I've accumulated over the years ... along with the "cabbage" I expect to have earned by trading smartly (and selling when I am supposed to).
Hope the ramble was worth the read, I have a lot to learn, always open to criticism, good or bad.
Best to GMST longs, read back in the thread, and you'll see I recommended GMST at MACD bottom in May. I sold at MACD top in July for nearly an 80% profit. I will now buy GMST at breakout at $80 range and sell at MACD top (I expect right near $99-100 range).
There you go, the neck is out, go ahead and prepare the rope, it's hanging time boys :o)
Last comment, watch moving averages, especially 13 and 50 day exponential moving averages for short term, and 50 and 200 day simple moving averages for long term. They really can tell you a lot about trends as they develop.
Regards, JB |
