Stockscores.com Perspectives
For the week ending Aug 25, 2000
In this week’s issue:
- Commentary: How to be a Stock Market Survivor
- Feature Strategy: Summer Bases
- Tip of the Week: Extraordinary Popular Delusions
- How to subscribe to the Stockscores.com Perspectives Daily Edition
***Stockscores.com Commentary***
A sojourn to the New York Stock Exchange is a journey to a capitalist Mecca.
Standing on its observation deck, observers look down on the main trading floor
of the largest stock exchange in the world, watching the transfer of billion of
dollars in assets with the simple waves of floor traders’ hands. There are
thousands of computer screens contained in the countless trading stations. Each
trading station connects to a web of wire above it, thousands of miles of wire
transferring every transaction of capital. The scene is one of organized chaos,
and the onlookers can only marvel at how complex the stock market really is.
Indeed, it is the complexity that causes many investors to shy away from taking
control of their financial destinies. The parlance of Wall Street seems
designed to keep the neophyte out of the market, destined to leave the task of
investing to the paid professional. Bid, Ask, Short, Long, IPO, Private
Placement, Block Trade, Preferreds, Yield, Quick Ratio, Stochastic; while
familiar, the language is difficult to decipher.
Yet many find the motivation to conquer the web of complexity. They read books,
listen to advisors, watch financial television programs or listen to financial
radio. The aim for the self directing investor is to latch on to the capitalist
engine and let its machinations leverage their own net worth, helping them
realize their aim for prosperity. But the complexity can be difficult to
overcome. Some succeed in the short term, but in the longer term, most fail.
Perhaps the failure to conquer the market was predestined by some founder of
the stock market mechanism, a spider sitting in tune with the every twitch that
takes place within its web. To dissuade those who might try and find their
fortunes, the simple reality of the stock market was shrouded in red herrings.
The complex lingo, the burden of understanding the workings of fundamental and
technical analysis, the endless books and articles identifying winning
strategies may have all been designed to lead us astray, to take the attention
off the most important component of the stock market.
People.
We often forget that without people to make decisions, there would be no stock
market. And so, I submit to you that if you want to win the stock market game,
the most important thing to understand is people.
Last week, Richard Hatch was proclaimed the champion of the Survivor television
game show. I had pegged him as the eventual winner because he, more than any
other contestant, seemed to have the best understanding of people. He
understood what motivated the different contestants, how they would react under
pressure situations, which would turn on their friends and who would remain
loyal allies. I think Richard Hatch would be a very good stock market investor.
Understanding human psychology is essential to becoming a good stock market
trader. The stock market has no life, but people can make it dance and gyrate.
If we understand the powerful emotions that are factors in people’s decisions,
we can take advantage of them to make money in the market. By focusing on
situations where there is a high level of emotion, we can be most effective.
Fear and greed are always at work in stocks. Understanding them is more
important than understanding the complex but systematic aspects of the stock
market.
Enough Said.
***Stockscores.com Feature Strategy ***
The strongest time for the stock market is from October till May. The end of
the summer is the time of the year when stocks that are going to make their run
through the strong season start to form a strong base and smart investors start
to accumulate stock. For a bottom fisher, this is the time to take position
with a six month time horizon for eventual success.
This week, I look at a strategy for finding the stocks that are forming these
bases and beginning to show optimism for the season of success. We want to
focus on stocks that have bottomed out for some time and have formed a
well-defined level of support. This demonstrates confidence in a minimal value
of the underlying company. But, we also want to ensure that there are signs of
optimism on the part of investors about the particular company. The best way to
find this is to focus on stocks that are forming a rising bottom. Here is scan
that will give you a list of candidates that you can then visually inspect to
ensure they are solid opportunities.
Set:
Short Term Moving Average = Bullish
Price of 40 Day High <= 15 %
80 Day Support = Above
Medium Term Consolidation = Yes
Today Relative to 150 Day Volume Average = Above
MACD = Bullish
I chose to look at NASDAQ stocks, so I set Exchange = NASD. Since NASDAQ is
quite liquid, I want to focus on stocks with significant trading volume, so I
set $ Value Volume >= 500000.
The scan revealed 58 candidates. Here are those that pass the visual inspection
of the chart the best:
Agile Software (AGIL)
Alexion Pharmaceuticals (ALXN)
Astoria Financial (ASFC)
Biosite Diagnostics (BSTE)
Cubist Pharmaceuticals (CBST)
Coulter Pharmaceutical (CLTR)
Computer Network Technology (CMNT)
Global Crossing (GBLX)
Guilford Pharmaceuticals (GLFD)
Polycom Inc. (PLCM)
Shire Pharmaceuticals (SHPGY)
There are a lot of Pharmaceutical companies in this scan, which should tell you
something about the strength of that sector.
***Stockscores.com Site Tip of the Week***
If you have time for a little more summer reading, check out:
Extraordinary Popular Delusions & the Madness of Crowds & Confusion de
Confusiones By: Martin S. Fridson
It is very good at discussing human emotions and how they affect markets.
***Stockscores.com Perspective Daily Edition***
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***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
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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. |
