The Best Opportunities Are in the Stock Market
Stockscores.com Perspectives for the week ending October 27, 2012
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Live in Calgary and Vancouver
Join Tyler Bollhorn and Michael Campbell in Calgary Monday October 29th and Vancouver Tuesday October 30th and receive a first edition signed copy of Tyler's new book, The Mindless Investor. Use product code SSTB2013 for a 20% discount on your ticket. Click here for more information.
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The Mindless Investor
New book from Stockscores founder Tyler Bollhorn
Coming in November
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In this week's issue:
An Evening with Michael Campbell of MoneyTalks
Featuring Tyler Bollhorn, Founder Stockscores.com and author of The Mindless Investor
Calgary - Monday Oct 29th at 6:00pm
Four Points Sheraton Airport
Vancouver - Tuesday Oct 30th at 6:00pm
Sheraton Wall Center
The following link has some great information on what the night will include:
Evening with Michael Campbell and Tyler Bollhorn, Calgary Oct 29 and Vancouver Oct 30
To get 20% off of the ticket price, use the special offer code SSTB2013 at checkout.
What are the effects of fewer people and more computers trading the market? I provide my thoughts in this week's Market Minutes video.You can watch this week's video on Youtube by clicking here. To receive email alerts any time I upload a new video, subscribe to the Stockscores channel at www.youtube.com/stockscoresdotcom.
Here is an excerpt from my upcoming book, The Mindless Investor, How to Make Money in the Market by Overcoming Your Common Sense. This piece is from the chapter, The Best Opportunities Are in the Stock Market:
It's easiest to beat the market by applying the mindless approach to stocks. Finding the edge-identifying opportunities that have positive expected values-requires that you exploit a breakdown in market efficiency. You now know that the efficiency of the market breaks down in two ways. First, when new information that's not widely known is being traded on and second, when investors act irrationally because of emotion.
So we need to find instruments that are trading with either new information that is not widely known or with emotion. We need to find abnormal activity.
If you focus on stocks, you have over 15,000 stocks in North American to choose from, even more if you move outside North America. If you only focus on liquid stocks, the number is still about 5000. That means that each day, there's a good chance that one of those stocks will trade abnormally.
A focus on commodities gives you a much shorter list, perhaps a dozen actively traded and liquid assets that you can watch for abnormal trading activity. Go to currencies, and the list is even shorter. I am not an expert on currency trading, but I will guess that there are six actively traded currency pairs that traders focus on.
The great benefit of trading stocks is that there is such a long list of tradable vehicles to choose from. Even in a quiet market, I find that there are at least 10 abnormal stocks each day. It's a rare day when I can't find something to trade. Even if I'm looking for long-term trades where my anticipated hold is months, there still tends to be at least one good opportunity a week.
When market conditions are strong and the market is trending, the opportunities are even more plentiful. In a hot stock market, there are more opportunities than you can handle.
The greatest argument against trading stocks is the limited leverage that is allowable. I'm not even sure this is a bad thing, since leverage is a double-edged sword that can quickly destroy the equity in an account if not used responsibly. Assuming you are a great risk manager and capable of controlling the downside of leverage, are there better places to trade than stocks?
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This week, I ran the Stockscores Simple Market Scan, looking for stocks showing good chart patterns. One of the key things I look for is a good relationship between the risk and reward potential of the trade. Many stocks can have a good chart but be far from a price floor that mitigates risk. Sometimes a lower quality chart can represent a better trade if the reward for risk is better. Here are two names that I found this week using the Market Scan:Back To Top
1. IRL
IRL is breaking out of a very long term cup and handle pattern with abnormal volume supporting the breakout. Support at $8.40.
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2. T.FVI
Silver may be ending its pull back and many of the silver stocks are looking like they may start to move up again after a strong move late in the summer. T.FVI is starting to move up from a base with support at $4.75.
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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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