Stockscores.com Perspectives
For the week ending November 22, 2003
In this week's issue:
I want each of my readers who are actively trading the market to ask themselves a simple question. Are you happy?
I don't mean are you happy with your marriage, your health or your job. I mean, are you happy with your performance in the market? You may answer, "Yes, I am up 14% this year, which is a good return, so I suppose I am happy with my market performance." However, to help you answer this question, I should first give you a benchmark.
In the past 12 months, the Nasdaq has gained about 23% and the TSX about 17%. So, while a 14% gain was great last year, this year it is underperforming the overall market. So now, are you happy?
My answer to that question is that I am never happy. I have not calculated the exact number, but I would guess that my gains this year are about 80 - 90%. Recognizing that these gains have beat the overall market, and are also better than my gains last year, I should be happy. However, I can easily be discouraged by the fact that I am no where near the better than 1500% gains that I made in 2000.
I am actually not asking you whether you are are happy or not because I care whether you are happy, I am asking because I want everyone to think about their performance in the market and ask whether they could be doing better. The answer, of course, is that you can be doing better, we can always do better when we are trading stocks. But very few of traders do what it takes to actually achieve better performance.
Suppose you are even for the year. If that is the case, then you are being beat by the market. While stocks in general have made decent gains, you are underperforming. So, what are you doing about it? The answer that most people have is that they are going to continue to do what they have always done. And the idiotic thing about that, is so many of us think that we can achieve different results by doing what we have always done. The reality is that if we always do what we always did, we will always get what we always got.
I watch a lot of traders do the same thing over and over again, grinding away trying to achieve results. Wouldn't it be smart to step back and ask what it is that is being done wrong, and work to correct it? Sounds blindingly simple, but many of us (myself included) are guilty of believing that if we just keep plugging away with what we are doing, we will get different results eventually.
Suppose you have a good undertanding of technical analysis, and are good at reading charts. You have consistently been able to spot good opportunities, but your performance does not demonstrate that ability. Ask yourself, "What am I doing wrong, and what do I need to do to do better?"
I am not trying to encourage people to add more indicators, or change their strategies. But take the time to analyze what you are doing, and figure out what your trading weaknesses are. Then, write down a plan to overcome your weaknesses and become a better trader.
Do you want to make more money in the market? You won't get there by doing what you have always done, you have to make intelligent changes and measure the results of those changes. And never stop analyzing your performance to see if there is something you can do better.
Sounds simple, but I bet you had not thought of it before you read this.Back To Top
The market pulled back this week to the support levels from later October and finished the week with some strength. While it is encouraging (if you are a bull) to see stocks bounce from support, I think the overall market picture still indicates that there is a greater potential to see stocks move lower in the weeks to come than go higher. When I go looking at charts for opportunities, I see better situations on the short side than on the buy side, so I decided this week to focus again on the Short Term Breakdowns strategy, which identifies short selling candidates.
The idea behind this strategy is to identify stocks that are breaking through short term support levels, preferably after strong up trends. I want to find stocks that have had good runs and are showing signs of losing steam. As the psychology turns from optimism to pessimism, we can benefit by short selling these stocks or considering Put options to leverage a down side move.
Using the Stockscores.com Market Scan tool, I ran this strategy and found 84 candidates. After looking at the charts of these stocks, I found three that I think have good potential to go lower in the weeks to come and offer good opportunities as short sells. These stocks are worth considering.Back To Top
1. SUPG
This stock has doubled in the past three months, but notice that is now showing a little falling top pattern and is moving toward short term support at $9.50. The Sentiment Stockscore is falling fast and has moved below the important 60 mark, and the Signal Stockscore spiked lower on Friday, indicating that the market may be beginning to see this stock as over valued and deserving of a correction.
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2. T.IMO
Take a look at the Sentiment Stockscore line (the green one) on this stock, it has been above 60 for about four months while the stock has done well, but is now moving below 60 and the stock made a break downward on Friday that was somewhat abnormal for this stock making me think that something is spooking investors on this stock. This is a relatively conservative stock that is not going to fall 20% in a week, but it does look more likely to go lower than higher.
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3. T.N
On the strength of the Chinese economy, Inco has been doing great recently but the chart is telling me that there may be a short term pullback in the stock. The long term up trend is still intact, but rising bottoms are giving way to falling tops, and that tells me that investor psychology is beginning to turn. If I owned this stock, I would lean toward selling it, and if I like to short stocks, I would consider this as one with good potential to give back some of the recent gains.
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References
Get the Stockscore on any of over 20,000 North American stocks.
Background on the theories used by Stockscores.
Strategies that can help you find new opportunities.
Scan the market using extensive filter criteria.
Build a portfolio of stocks and view a slide show of their charts.
See which sectors are leading the market, and their components.
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.
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