Stockscores.com Perspectives
For the week ending Aug 11, 2000
In this week’s issue:
- Commentary: KISS for Profit
- Feature Strategy: Dead Cat Bounces
- Tip of the Week: Gain/Loss Filter
- How to subscribe to the Stockscores.com Perspectives Daily Edition
***Stockscores.com Commentary***
There are millions of investors making decisions for themselves these days.
Advancements in technology have made it possible for the individual investor to
compete with the professionals, and many are choosing to make a living trading
stocks.
There are many books that outline how to make money in the market. Some
encourage a longer-term buy and hold strategy while others focus on day
trading. I have flipped through many of these books, and find that most of them
miss something that is pretty important.
To make money in the markets, you have to KISS.
Keep It Simple (Stupid). Having done this trading thing successfully for a
little while now, I can assure you that the simple methods work the best. In
fact, you will have the most success when you find trading easy.
If you have to try really hard to convince yourself that a stock is a good
opportunity, chances are, it isn’t. The really great opportunities look
obvious, and feel easy. If investing is hard work, you probably aren’t using
the right strategy or looking in the right places. If your strategy for making
money in the market can’t be explained in 20 seconds, there is a good chance it
won’t be effective.
Of course, it takes time to learn and become proficient enough to make trading
seem simple. Don’t get frustrated if you aren’t making millions in the market
even though you are working very hard at it. You have to become good before it
becomes easy.
If you want to be good at a particular sport, you have to work hard and with a
lot of determination. Someone just learning how to golf looks awkward and
doesn’t hit the ball very far or accurately. Yet Tiger Woods makes hitting a
320-yard shot look pretty easy.
If we are learning to golf or play any other sport, we know we aren’t that good
and that it will take time. When investing in the stock market, it is not as
easy to see that we need improvement, as we are not competing against a
particular opponent. But it does take time to become a winner at stock market
investing, and being a winner can have a big payoff.
Your opponent is the market, and it takes time and effort to learn how to beat
it. Beating the market can be done, and the rewards can be great. But remember,
like most any sport, you can’t be good at it until you have played a lot.
Practice hard before you play for real, and then start in the minor leagues
with less money before you step up to the pros.
Enough Said.
***Stockscores.com Feature Strategy ***
There are two emotions that move the stock market; fear and greed. A company
announces some bad news, and the market punishes the stock lower as investors
all clamor for the exit door at once. Because of fear, the stock tends to go
lower than the news justifies, leaving room for a short-term bounce back
higher. This is often referred to as a dead cat bounce. For traders, it
presents a good opportunity to make a profitable trade.
The stock has to have made abnormal losses recently. We want to find stocks
that are trading on fear as the psychological condition of the market makes it
ripe for over extension to the downside. To find stocks that have done this,
you should use the Stockscores.com Market Scan tool to filter out all the
stocks that are down at least 25% in the past 30 days.
- Select <= -25% over the last 30 days for the filter, Gain/Loss.
Stocks that fit this strategy will have very strong momentum. As an extra
filter, we want to find the stocks that are oversold, as this implies that they
have gone too low. Use the Stockscores.com Market Scan tool to filter out all
the stocks that are oversold according to the Relative Strength Indicator.
- Set RSI = Oversold.
For there to be fear, there must also be volatility. We want to find stocks
that have traded in a wide trading range today and have been volatile in the
very recent trading history. To do this, use the Stockscores.com Market Scan
tool to find stocks that have a high Volatility index.
- Set Volatility Index Today = High.
Finally, and most importantly, we want to select stocks that are showing a
Bullish candle. This means that they are closing above where they opened.
- Set Candle = Bullish Candle
I suggest you set a minimum dollar value of stock traded as well, so you can
eliminate illiquid stocks. I used a $500,000 cut off for my scan.
Set $ Value Volume >= 500000.
When we visually inspect the charts, we want to focus on stocks that have sold
off heavily and are showing the first or second day of strength after the sell
off. Based on Friday’s trading action, this scan revealed 11 candidates (out of
the 21,000 stocks that we cover at Stockscores.com). Of the 11, these fit the
visual requirements the best:
Action Performance (ACTN)
Ames Department Stores (AMES)
ICG Communications (ICGX)
Intest Corporation (INTT)
KOS Pharmaceuticals (KOSP)
Eli Lilly (LLY)
Bargain hunters should give this strategy a look on a regular basis as it can
reveal some profitable dead cat bounces.
***Stockscores.com Site Tip of the Week***
In the Market Scan tool, there is a filter that allows you to find stocks that
have gained or lost more than a certain percentage over a period of 10, 30, 60
or 200 days. Many investors may want to find stocks that have gone down more
than a certain percentage, for example, 20%. It is important to understand that
it you want to find stocks that have gone down more than 20% over a set time
period, you have to set the tool to read Gain/Loss <= -20 % over the last X
days. Some of you may try requesting stocks that have gone down >= -20%,
thinking that this will mean you are going to get stocks that have done down
more than 20%. However, -21% is less than 20%, so remember to use the <= sign
for this filter situation.
***Stockscores.com Perspective Daily Edition***
Each day, we scan the market for opportunities and reveal only the best to our
Daily Edition subscribers by email. Plus, we provide comments on past features
with regular updates, helping you understand how to trade these features.
A two-week free trial is available for new subscribers. To enroll, simply send
a request to tyler@stockscores.com. We will have you added within a week of
your
request.
One-year subscriptions are available at the following rates:
$100US
$125CDN
Checks can be sent, made out to Perspectives, to:
Perspectives
1919B - 4th Street S.W.
Suite 167
Calgary, AB T2S 1W4
***References***
To get the Stockscore on any of over 20,000 North American stocks:
stockscores.com
For a background on the theories used by Stockscores:
stockscores.com
For strategies that can help you find new opportunities:
stockscores.com
To scan the market using extensive filter criteria:
stockscores.com
To build a portfolio of stocks and view a slide show of their charts:
stockscores.com
To see which sectors are leading the market, and the stock components:
stockscores.com
***Change of Email Address or Removal from Email List
Please go to the Registration area of the site, and utilize the Edit tool.
Disclaimer
__________
This is not an investment advisory, and should not be used to make investment
decisions. Information in Stockscores Perspectives is often opinionated and
should be considered for information purposes only. No stock exchange anywhere
has approved or disapproved of the information contained herein. There is no
express or implied solicitation to buy or sell securities. The writers and
editors of Perspectives may have positions in the stocks discussed above and
may trade in the stocks mentioned. Don't consider buying or selling any stock
without conducting your own due diligence.
.
+OK 11156 octets
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