Stop the Pop Ups
Stockscores.com Perspectives for the week ending June 14, 2008
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In this week's issue:
One of the most common technical problems that people have with our site is the inability to log in. They enter their username and password and then the site loops back to the log in page and asks for it again. This is a problem caused by the privacy settings on the Internet browser and is relatively easy to fix. Go in to Tools, Internet Options and select the Privacy tab. Lower the setting to Medium and then click on sites and add www.stocskcores.com (or disnat.stockscores.com if you are a DisnatDirect client) to the list of accepted sites. This should make it work.
Something we don't like to use on Stockscores are pop up windows. Some web sites have these annoying windows pop up all over the place, trying to get us to do something that we never really set out to do.
I was thinking about some of the problems that traders encounter and realized that they are very similar to pop up windows.
We approach our trading research with a set of rules and perhaps even a trading plan. Our intentions are good but along the way we encounter some noise that somehow makes us stray from our plan. Like pop up windows, these ideas come in to our head and distract us from what originally intended.
Rather than following the rules that we have tested, we might try, on a whim, entering a stock because of what someone said. Or perhaps because a new indicator that we have been experimenting with just predicted a big move on a stock and so we follow that with a trade on this new signal. We begin to lose our discipline and let the ideas that pop in to our head take hold.
Now, what do most of us do when we go to a website that has pop up windows? Statistics show that the vast majority of people click on the little red X in the top right hand corner and close the pop up window.
Why can't we do that with the rogue ideas that pop in to our heads?
Unless you take a trading idea and test it, you can't know if it will be effective. Many ideas make perfect logical sense and so we tend to follow them without really checking them out first. Recently, someone suggested to me that they buy stocks that insiders have been accumulating, using insider trading reports as a clue. This idea makes very logical sense since we assume that insiders will do a better job of predicting where their stock will go.
However, until you actually test the idea, you really don't know. I have learned, the hard way, that ideas which make logical sense don't always transfer to the stock market. In my experience with insiders, most of them are not very good stock traders and often make bad trades on their own stock. In my experience, I have not found their stock picking prowess is any better than anyone else's.
The people who make browsers have implemented pop up blockers as a way to keep the annoying pop up windows from interrupting our Internet experience. Wouldn't it be great if someone could do the same for those disruptive ideas that come to us when we are making our trading decisions? Until the, you will have to mentally click on the red X when new ideas pop in to your head at the wrong time.
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I could not find anything that I felt was worth considering this week, so I thought it would be helpful to show a few stocks that have good charts but are not good trades to take. By doing so, I can explain what the weaknesses are that make each a marginal trade. As traders, we should be looking for a reason to not take a trade as it is often easy to find some reason to take a trade.Back To Top
1. BQI
To begin, consider this chart of BQI. It is breaking through resistance and on a 6 month chart looks pretty good. However, if you take the chart back a year you will see that there is longer term resistance at S6.50. With about a $1 of downside to support and only $1 of upside to resistance, the stock does not have the requisite 2 to 1 risk reward ratio.
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2. AW
AW is breaking to new highs and has good upward momentum. The Stockscores are good and there is no resistance to slow it down. So what is the problem? It is not starting an up trend but already well in to the uptrend. I like to find stocks that are breaking from two months of sideways trading, stocks that are just starting an upward trend and not already well in to the trend.
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3. FRD
FRD is breaking through resistance and has strong volume support on the breakout. The problem is that it is not breaking from low volatility, it has not been trading sideways in a narrow range for a couple of months. This increases the chance that it will pull back and whipsaw the trader out of the stock.
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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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