Wise Words Translated
Stockscores.com Perspectives for the week ending July 9, 2006
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In this week's issue:
There are a lot of dead people who have said some pretty smart things. Throughout time, man has recorded these wise words so that some of us can draw inspiration or guidance from what mankind's great thinkers have put forth. In this week's newsletter, I thought it would be fun to look at some famous quotes from those who have stood out in history, and apply the thought to the stock market. My hope is that I can provide some inspired guidance for your investment pursuits.
"The destiny of man is in his own soul" - Herodotus
Nobody cares about your money more than you. If you want to be successful as an investor, recognize that you have to take control and make decisions for yourself. While you may use others for information important in the decision making process, the buy and sell decisions must ultimately be yours, and therefore, you must be an informed investor.
"Nothing splendid has ever been achieved except by those who dared believe that something inside them was superior to circumstance." - Bruce Barton
Most of us are average. To excel in the stock market, to actually beat the market, you have to do something that the crowd is not doing. You have to be one step ahead, and take advantage of the inevitable movement of the masses.
"Whatever you can do or dream you can, begin it. Boldness has genius, power, and magic in it." - Johann Wolfgang von Goethe
Ignore what the financial text books tell us, the stock market can be beat. But doing so requires determination beyond what the average man is willing to provide. Success in the stock market is simple, but not easy. Be bold.
"We are what we repeatedly do." - Aristotle
Are you continually losing in stocks? If so, then you must change the way you make investment decisions. Over the long run, luck or the lack of it does not matter. Figure out what your are doing wrong, and make changes. If you can not determine what it is that causes your failure, seek help to identify the problem.
"The great end in life is not knowledge but action." - Thomas Henry Huxley
What success you achieve on paper trading stocks means nothing. Back testing trading system and proving their success means nothing. To succeed as an investor, you must master your emotions and profit in real market conditions.
"We don't see things as they are, we see them as we are." - Anais Nin
Fundamentals do not matter to the stock market, it is the perception of fundamentals that move stock prices.
"You would make a ship sail against the winds and currents by lighting a bon-fire under her deck ... I have no time for such nonsense." - Napoleon Bonaparte
Do not fight the trend. Buying stocks during times of pessimism is a difficulat way to make money in stocks.
"Democracy does not guarantee equality of conditions - it only guarantees equality of opportunity." - Irving Kristol
The stock market is not fair.
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Last week I ran the breaking downtrends strategy and so far it has worked well for identifying stocks that may have made bottom and are turning around. Because the overall market is not strong right now it is better to look to abnormal market activity as a sign that the sentiment on a stock has turned. Eventually, fear gives way to opportunity.
Find stocks that everyone hates and wait for them to spike up in price and break the downward trend line. That is usually a good sign that sentiment is turning and the stock is likely making a bottom. Then check the chart to see if the downside risk is worth taking for the upside reward. Typically, we put a stop loss order on a close at a new low and look for twice as much upside potential on the trend reversal.
I ran this strategy using the Breaking Downtrends Market Scan provided on Stockscores.com to Advanced and higher members. The scan looks for stocks that have made statistically significant gains after long term downward trends. The scan revealed 10 candidates this week and I found 2 which I think stand out as worth considering:
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1. RSH
A strong break to the upside on Friday on very abnormal volume, something may finally have caught the interest of investors on RSH and warrant an end to the long term downtrend. I would put support at $13.70 and watch for a close below that as a signal to exit.
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2. CHCI
CHCI also showed signs that it has a pulse with a good move to the upside supported by volume on Friday. Support at $5.50 and the next level of resistance at $10 gives the stock a 1:2 risk reward ratio making it worth considering.
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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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