Stockscores.com Perspectives
For the week ending January 12, 2001
In this week's issue:
- Commentary: Promotions
- Feature Strategy: Tech Turnarounds
- Tip of the Week: A Promoted Stock
- How to subscribe to the Stockscores.com Perspectives Daily Edition
***Stockscores.com Commentary***
Each year, starting in late January, the promotional engine of the North
American stock markets starts and many investors catch speculative fever.
Investors focus on low priced stocks with the capability to double overnight,
but few understand the forces behind these stocks, and why it is so important
to know what is driving them.
First, a basic fact. Greed is a powerful factor when many investors make
investment decisions. Rational thought is often replaced by aspirations of easy
money, and an appreciation for risk is thrown out the window.
There are a group of businesspeople who recognize this, and who are eager to
feed the insatiable desire for the next miracle stock. They create money
machines under the guise of public companies, and inject an exciting story that
will capture the market's imagination.
The businesses are long shots, but the potential is immense. Few, and I mean
very few, ever become successful companies. But, there is always that chance,
and it is the chance, which brings investors and their speculative money back.
Since the chance of success is so low, the people who fund these companies have
to do things to minimize their risk. As it happens, they take very little risk
at all. They issue a large number of shares and invest very little money for
these shares, making their cost per share very low.
Now they have to create the interest necessary to sell their cheap shares to
the public. Perception is everything, and nothing creates a positive perception
like an up trend. To get the ball rolling, the promoters often pay others to
buy the stock. They rarely use cash, and instead send shares in the company.
With millions of cheap shares at their disposal, it is worth it to give some
away to people who can create buying interest.
Well-structured news releases, strong market activity, persistent and exciting
rumors, and pay for performance fuel the promotion engine, and make these
stocks go higher. However, the engine eventually runs out of gas. You can only
perpetuate this kind of façade for so long.
I have made a lot of money from speculative stocks, and the promotions that
guide them. I would not tell anyone to avoid these kinds of stocks so long as
they have an understanding of some basic rules:
- Believe nothing you hear.
- If the stock has already made dramatic gains, wait for another bus as
the promoters are selling and soon the party will be over.
- Never get married to the story.
- Put selling as a priority.
- Be disciplined
- DON'T GET EMOTIONAL.
Promoted stocks are fun, but it is the promoters who make all the money. They
do so by selling their stock and not believing in the dream. To win, you have
to do the same.
Enough Said.
***Stockscores.com Feature Strategy ***
Looking for a bargain in tech stocks? There are signs that indicate we are
going to see a resurgence in the beat down technology stocks as we go in to the
spring. While I do not think the rally will be significant or long lasting as
the great bull market that we saw a couple of years ago, I do expect it can be
lucrative over the next few months.
This week, we do a Market Scan that reveals stocks showing signs of a
turnaround. The Market Scan criteria below will filter out Nasdaq stocks that
are breaking a downtrend from a short period of some stability. We must then
visually inspect the charts to find those stocks that are making breaks from a
rising bottom, that is, a period of sideways movement that is higher than the
previous low area.
Exchange = Nasdaq
Score Rating = Bullish
Candle = Bullish
Short Term Moving Average = Bullish
Medium Term Moving Average = Bearish
Short Term Consolidation = Yes
15 Day Resistance = Breakout
Today Relative to 20 Volume Average = Above
$ Value Volume = 1000000
Revealed 50 candidates. I then view a slide show of the stocks from this scan
and look for stocks breaking from the rising bottom pattern discussed above.
The following stocks are examples of the kind of charts you want to focus on,
and these stocks are worth considering if you believe in a tech turnaround
ACOM
ANST
LQID
MCLL
TFSM
TWAV
TWTR
XING
Take a look at these stocks, they may be winners in the weeks to come.
***Stockscores.com Site Tip of the Week***
I know a lot of stock promoters, and ignore most of what they are doing.
However, there is one group that has an ability to move stocks up, even in bad
markets. Their companies are high risk, but they have the power to make them
move higher because they have very tight share structures and a lot of buying
power behind them. Keep an eye on their next deal, which I think has a pretty
good chance of being strong over the next few weeks. It trades on the OTC BB,
with the symbol UMDA (the company is called Uncommon Media).
***Stockscores.com Perspective Daily Edition***
Each day, we scan the market for opportunities and reveal only the best to our
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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. |
