How do you pick stocks?

Discussion in 'Technical Analysis' started by Cruzan, Oct 7, 2006.

  1. Cruzan

    Cruzan

    Sorry, a raw newbie question:

    I'm interested in stocks worth investing in that are currently trading below their moving average but am not sure how to select them. Naively, all I can see doing is going through, say, the Nasdaq 100 and S&P 100 and charting every stock to find those below their MA. This seems a bit too much work and I was wondering what other faster, better ways (as there obviously must be) are out there.
     
  2. ozzie123

    ozzie123

    I usually use Yahoo's stock screener or OPX's (since I'm an option trader).

    I usually pick the stock with high volatility (since beta is what drives the options price up -- generally speaking) and high trading volume.

    Got some good trades but also dozens of bad ones and I can't seem to score a consistent profit on this one.

    Any ideas?
     
  3. Analyze all your trades:

    1. Keep a journal.
    2. Study the charts.
    3. Do you see any commonalities among your successful trades and your unsuccessful trades?
    4. Do your stocks correlate well with the overall market (S&P 500 or NASDAQ Index)?
    5. Was the overall market in a downtrend, uptrend or sideways range?
    6. Were your stocks in a strong uptrend, downtrend or tight range?
    7. Did you enter a trade just before an earnings release and betting on the market reaction to the earnings release?

    Just some ideas for you to look at.

    Charles

     
  4. djxput

    djxput

    Tons of ways to pick stocks ...

    You seem to want to pick them using a certain criteria.

    Using a stock screener (not sure if there are free ones out there or what).
     
  5. ozzie123

    ozzie123

    Yep, doing this ;)

    Yeah, this is actually what I'm doing for market timing. Usually I'm looking at the charts after I'm doing some research on fundamental analysis

    And that's what I can't figured it out! On a successful trading, I have a 'hunch' that it will succeed. Of course on the long run I can't just rely on this 'hunch' alone.

    Probably I have to do more trades and analyse it thoroughly, but just to short time if possible, what is usually went wrong for an unsuccessful trades? Is there any kind of patterns? Fundamental thingy? Anything?

    I usually went against the market. Like the last time when NASDAQ on a strong rally just before DJIA makes a new high, I shorted AMD and comes out on a good profit (on options... I think the return is 50%-ish).

    Yes I know that most of the market move is heavily correlated with the sector and index moves, but it's easier for me to 'spot' anomalities :p

    Same as above

    Well, I'm usually hold it for 1-2 weeks. It can be short or long range. I rarely trade a tight range stock (since it represents a limited volatility, bad for options)

    Yeah I sometimes do that but with a strong fundamentals behind it. I'm not keen on getting into positions before earnings date when I don't know where the fundamentals will go (for example, I got long on AAPL on the last 2 years because of their strong iPod sales). And since I'm mainly trades options, the downside is pretty much limited (I use straddle).

    Thanks Charles ;)
     
  6. ozzie123

    ozzie123

  7. lindq

    lindq

    You are generally on the right track with that approach. But first think about WHAT would cause buyers to come into a stock that was exhibiting weakness. Then consider WHEN they would be attracted to buy.

    Is it any stock that falls below an MA, and at any time? Of course not. Would a stock that exhibits good fundamentals be likely to attract more buyers, and institutional money? Duh? And when might that be? When it has just dropped below the MA? Think that will get attention? Not likely. Think serious distribution. Think volatility. And think about how you would feel if you owned 10K shares of that stock. Would you be throwing up on your keyboard ashamed of your losses and watching your month go to hell? Great. It's time for you to buy.

    Write this on a postit note and stick it on your monitor. I didn't say it. Warren Buffett did: BE GREEDY WHEN OTHERS ARE FEARFUL.

    If you never forget that, you should do well.
     
  8. SteveD

    SteveD

    I would suggest Bill ONeill's books........he has done a great amount of work regarding the movement of stocks....I believe that over 80% never come back....

    There is a reason they are falling below 200 day MA...


    SteveD
     
    #10     Oct 8, 2006