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Stockscores.com Perspectives
For the week ending January 10, 2004
In this week's issue:
What kind of trader are you? There are a variety of personailities at work in the market, many of them self destructive. Ideally, you want to have aspects of each as a sort of personality disorder, but most of us are just one or another.
Even Steven
After suffering a loss, they are eager to right what has been made wrong. On their next stock trade, they sell the moment their profit exactly offsets the previous loss. Now they are even, and don't have to go through the emotional despair of losing in the market. Unfortunately, that stock they sold to make back the previous loss keeps going higher. Emotion is Even Steven's master, happily riding a fence of risk aversion is his destiny.
The Scientist
A perfect score on the LSAT for logical reasoning, and often seen wearing a small steel ring on their writing hand, the Scientist is a victim of their own intelligence. They can provide the mathematical derivation of any techincal indicator of fundamental ratio, and often show charts that appear like a basket weaving class gone terribly wrong. Lost in the details, they may not make a whole lot of money in the market, but they can always offer a well thought argument for why.
The Gambler
Like a bull in a china shop, these maverick traders often end their trading career broke but full of exciting tales of the one that got away. Capable of turning a simple stock tip in to a rollercoaster ride of amazing profits and admiration but ultimately culminating in two mortgages on the family spread.
The Borrower
In a Bull market, they are the all knowing experts on financial markets. In an uptrend, they do quite well because they buy hot stocks and hang on to them believing in the legitimacy of the company's sexed up story. Alas, all profits are but short term loans, because when the market turns their expertise is exposed as a fallacy and they give back all that they gained. Voted most likely to return a BMW to the dealer before the lease expires.
The Professor
Often seen smoking pipes and listening to Vivaldi, the Professor is a student of financial theory and knows that in the long run, the stock market can not be beat. Rather than disprove theory, they instead indoctrinate anyone who will listen, including naive business school students, with their theories of market efficiency. They drive sensible cars, wear sensible shoes and don't make any money in stocks.
The Value Investor
Value investors have refined the art of buying good companies that nobody likes. Unfortunately, stocks don't go up until other investors like it, so most value investors are experts at practicing patience. They typically sleep well because they own quality, but are also forced to grow grey waiting for their investments to pay off.
The Doubter
There are a multitude of garbage stocks out there that go up. The Doubter looks for pigs adorned with lipstick and short sells them. This variety of investor loves to uncover speculative stock scams that, like a house of cards, eventually must fall because they lack a solid foundation. The Doubter's greatest weakness, however, is bad timing. Bad stocks can go up a lot before the bubble bursts, and it can be difficult to carry a short through the price appreciation. Doubter's need deep pockets.Back To Top
The market has made great gains since the third week of November, essentially going straight up day after day. The bulls have been strong, but Friday showed that they may running out of power. The market opened down, attempted a comeback through the middle of the day, but sunk like a stone again at the close. It looks to me like we may be seeing the makings of a short term pull back on stocks in general.
With that in mind, we have two choices. We can favor short selling stocks, particularly those that have gone up too fast and are ripe for a profit taking pullback. Or, we can try and find some stocks that have not yet participated in the rally but are showing signs that they may.
This week, I decided to run the Sentiment Crossover Market Scan which looks for stocks that have their Sentiment Stockscore line crossing above 60. This scan is useful in this situation, because stocks typically see the Sentiment Stockscore go above 60 relatively early in the uptrend. The companies that have lead this recent rally will have had their Sentiment Stockscores above 60 for some time already.
Since the market has been moving higher recently, stocks that are just now beginning up trends are likely small cap stocks that are not very correlated to the overall market. If the market does sell off in the next week or two, we will want to focus our buying efforts on stocks that are not heavily correlated to the market.
Here are three stocks that I found from the Sentiment Crossover Market Scan.Back To Top
1. GTHA
At first glance, this looks like a stock that has already gone up a lot in a short time frame. However, a strategy I call Back By Popular Demand finds that playing stocks breaking from consolidtions after already making strong gains in the recent 40 day period have a very good potential to make further strong gains. GTHA is braking from a pennant after a quick move to the upside a couple of weeks ago, and looks good to continue. This stock is risky, but could have a nice payoff.
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2. DOC
DOC is a very similar play to GTHA, except that it has not broken out from the pennant pattern yet. Therefore, there is a caveat with this pick. Ideally, it is not worth considering until it breaks from the pattern. I think it is a stock that is worth watching over the next few days, and play if it can break out to the upside with strong volume support.
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3. T.ZL
T.ZL has been working on turning around from its Fall weakness, and has done a pretty good job over the past month. Thursday some profit taking came in and the stock pulled back a bit, but Friday afternoon brought some stability, so I think this one could resume the comeback soon. A fairly risky play that could see a move to the $5.50 price level in relatively short order.
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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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