The Catalyst
Stockscores.com Perspectives for the week ending January 27, 2007
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Presentations in Toronto, Edmonton and Calgary
Join Stockscores Founder Tyler Bollhorn at one of his upcoming free presentations in Toronto, Edmonton or Calgary. During this one hour presentation you will learn the basics of the Stockscores Approach and Tyler will teach you how to identify good trading opportunities. For location details and to register, please Click Here
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In this week's issue:
The most powerful filters available on the Stockscores Market Scan are the Abnormal Activity filters, both for price change and volume. These filters look for statistically significant abnormal price change or volume and are really the foundation of the Stockscores Approach. We believe that beating the market requires that you play stocks that are in play and that strong, money making trends start with abnormal activity.
Now, let me prove to you that this is the case. I did a few market scans to find stocks that have been performing really well in the last few months. I did this on two very different markets, the TSX Venture market and the Nasdaq. This way, I could see how this theory worked on speculative penny stocks but also on much more established company stocks like those found on Nasdaq.
Here are the top performing stocks (assuming they traded at least 100 times on Friday) on the TSX Venture over the last few months.
V.CBI
V.CNU
V.WRI
V.UNO
V.NOT
V.GEM
V.VIT
V.SOX
V.NKW
V.PTU
V.SIR
V.SNS
V.RSC
V.WEW
I looked at the charts to see how many of these strong up trends started with a day of abnormal price gain and abnormal volume. There had to be a burst of activity out of a period of relative quiet trading. Guess how many of the 14 stocks above started their uptrends with abnormal price gain and abnormal volume on the same trading day?
All of them.
Now, let me move to the Nasdaq market. Here are the top performers:
FORG
ONSM
MEMY
ARTX
MAMA
HAYZ
TRCR
PNCL
FRPT
Of these nine stocks, eight of the strong up trends started with abnormal price and volume action.
Here is why …
Stocks outperform the market when they are undergoing significant fundamental change in their business. When investors begin to learn about significant fundamental change they buy the stock aggressively, creating the abnormal trading activity. When you see abnormal trading activity out of a period of quiet trading, a sign that the market is surprised by the change, you have a good trading opportunity.
To identify these opportunities you need to have a tool to find the abnormal stocks, that is what the Stockscores Market Scan does. To trade them effectively, you need to have a well thought out trading plan and a set of rules for managing risk effectively as well as knowing when to exit the trades. This is what we teach in the StockSchool Pro course, which is now all available online at Stockscores.com.
What is important is to realize that just because the winners started with abnormal activity, not all stocks that trade abnormally start in to up trends. We have to know how to differentiate between those that are likely to do so and those that are not worth the risk.
Some of the key things to think about when looking at these charts is to find the stocks that are not well in to a trend already. To rule out stocks that are not showing some optimism on the chart. To focus on the stocks that are breaking from low price volatility.
I was asked the other day if the markets have evolved over the years that I have been trading and if I still do what I did 15 years ago. While I have improved my trading skills over the years, I still focus on stocks that are behaving abnormally just as I did 17 years ago when I was broke and hanging around the old Alberta stock exchange, hoping to make money from the stock market.
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This week, I did a very simple Market Scan. I looked for stocks that had an abnormal price gain and abnormal volume. I included a filter of at least 500 trades a day. This scan produced 47 results. Here are the charts that stand out.Back To Top
1. SPPI
SPPI is breaking from an ascending triangle and through resistance at $6. Support resides at $5.65 which means a close below that price point would negate the positive signal of the breakout.
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2. CEM
CEM has been a dog for the past few years but it looks like the mood may be changing as the stock forms rising bottoms which are a show of optimism. Friday saw an abnormal break through resistance and support is now down at $9.75.
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3. CYBS
Eight months of sideways trading ended Friday for CYBS when the stock broke through resistance to a new high, indicating the stock wants to go higher. Support resides at $11.
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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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