Stockscores.com Perspectives
For the week ending October 20, 2000
In this week's issue:
- Commentary: There Are No Overnight Success Stories
- Feature Strategy: A Stockscores Scan
- Tip of the Week: Plot Multiple Stocks
- How to subscribe to the Stockscores.com Perspectives Daily Edition
***Stockscores.com Commentary***
If I tell someone, that I have just met, that I make my living trading the
stock market, I can usually expect a lot of questions. There are a lot of
people who find the occupation quite intriguing, and have an interest in
getting started.
I expect that the media's stories about the successful stock market investor
helps to create the interest that people have in the subject. Being able to
be your own boss, make a decent living, and do something that is quite fun is
an attractive pursuit. As a result, there are many people who decide to take
the plunge and try to be a trader.
There are also many people who decide to manage their own stock portfolios.
While they don't intend to quit their day job, the aim is to improve the
returns they are getting from a mutual fund or a full service broker.
Unfortunately, many from both groups walk away very disillusioned. After a
short period of substantial losses, they decide that the stock market is too
difficult to understand and they give up on it. These disillusioned investors
are the reason many people think the stock market is nothing more than a
giant casino.
Here is the reality:
The stock market can be beat.
The stock market can be beat consistently.
It is not easy to beat the stock market.
It takes time to learn.
The last two lines are what many investors fail to appreciate. If I want to
be a successful musician, I have to spend a considerable amount of time
learning how to play and getting recognized. Parents of professional hockey
players will quickly attest to the years of hard work that it takes to get to
the NHL. Doctors go to school for at least 7 years, and usually more, before
they can add the Ph.D. to their name.
The difference between these occupations and investing is the amount of
barriers to entry that most successful people have to overcome before they
can pursue their dream. Tomorrow, I cannot release a record, I cannot play
with the New York Rangers and I cannot do open heart surgery. But I can open
a brokerage account and buy a stock, no matter how little experience I have.
And that is why most people who invest for themselves get beat up by the
market and most day traders go broke.
I bought my first stock when I was 20 years old with $3000 that I borrowed
from a credit card. After graduating from University, I chose not to get a
real job but instead try to trade the stock market. I lived in a 750 square
foot basement suite that I shared with a roommate while I tried to figure it
all out, and it took a number of years before I got it right. But, 10 years
after that first stock purchase, I consistently beat the market and have a
very nice living. Some think I got rich quick from day trading.
I am so lucky.
My point is that nothing worth doing is easy. If you want to be a successful
investor, you have to dedicate time and effort to doing so and create your
own luck. Start slow to conserve capital and don't think like a gambler.
I found that the hardest thing was believing that it is possible to make a
living from the stock market. I know it will help to know that the effort can
pay off, and that you can beat the market. Just don't expect it to happen
overnight.
Enough Said.
***Stockscores.com Feature Strategy ***
I receive a lot of requests from users of Stockscores.com to include a chart
showing the historical Stockscore for a particular stock. The request is easy
to understand; it would be a lot of help to see how a stock has scored, and
to look for breakouts in the Stockscores as a signal that the stock may be
turning.
We are developing this chart and hope to have it on Stockscores.com soon. I
have it available to me on my system, and this past week I looked at ten well
known US stocks to see how effective the scoring system is.
The results of my little study were excellent. Stocks that have moved over an
80 rating for the first time tended to do very well. Stocks that were unable
to reach a strong Stockscore were best left alone. For example, over the past
four months Yahoo (YHOO) has never had a score higher than 80, and the
average would be closer to 50 during that time. During that time, YHOO has
fallen from just under $150 to $50. The Stockscore for YHOO went dramatically
lower (moving from 70 to 30 in a couple of days) when the stock started its
move downward at about $135, a strong signal that the stock was headed lower.
The Stockscores were effective at measuring the strength of a winning stock
over the past four months as well. Boeing (BA) went from $40 to a high of $65
before settling at $60. The Stockscore first jumped over 80 when the stock
broke through $40, and stayed at a bullish rating through the resulting up
trend.
Since the chart of the Stockscores is not yet available at Stockscores.com,
you may all be wondering why I am telling you this. Basically, I want to
answer the many questions that I have received about whether the Stockscores
ratings are a good indicator of a stock's future direction. I have found that
they are, and are best used with some very basic chart analysis tools.
This week, I want to share with everyone a new scan that I started doing this
week to find stocks that are worth considering. We want to look at stocks
that have a score of 80 or better and are near an 80-day high (or setting a
new 80 day high). We then want to look at the charts to see whether the stock
is starting an up trend, or is already in one, in which case we let it go as
the opportunity is already partly gone.
Set the scan requirements as follows:
Select a Market. I find it best to do one Exchange at a time. I chose Nasdaq
for this scan.
Set: Stockscores >= 80
Set: Price of 80 Day High <= 10 %
Set: $Volume >= 1000000 (this will allow you to focus on more liquid stocks,
you don't have to do this however).
Set: Today Relative to 20 Day Average Volume = Above
Friday's trading revealed 46 results. We want to look at the charts and find
stocks that are making their first break from a trading range, with strong
volume support. Here are my favorites from the 46 that came up in the scan:
FYII
HGIC
SONC
I use this scan every day for the markets that I am interested in, and it
reveals some excellent candidates. Try using it regularly to find stocks to
spend a little more time researching.
***Stockscores.com Site Tip of the Week***
Want to compare the charts of more than one stock at once? You can plot a
line chart of more than one stock by entering the symbols in the symbol box
with a comma separating them. For example, if you would like to display
Microsoft vs. Intel, you would enter MSFT, INTC. This can be helpful to see
how a stock is correlated to another or to an overall market index like the
Nasdaq Composite (Symbol: COMP).
***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 perspectives@stockscores.com . We will have you added
within a week of your request.
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Checks can be sent, made out to Perspectives, to:
Perspectives
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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
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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. |
