Late to the Party?
Stockscores.com Perspectives for the week ending August 18, 2015
In this week's issue:
In This Week's Issue:
- Stockscores' Market Minutes Video - Coiled Springs
- Stockscores Trader Training - Late to the Party?
- Stock Features of the Week - Long Term Momentum
Stockscores Market Minutes Video - Coiled Springs
Strong price trends tend to come after periods of low price volatility. The patterns are like coiled springs with energy to be released, understanding what they look like is important to predicting future price trends.Click Here to Watch To get instant updates when I upload a new video, subscribe to the Stockscores Youtube Channel.
Trader Training - Late to the Party?
Good traders know that they need to buy the stocks that are going up. All strong stocks must start with strength, so following stocks that are making gains is a good way to find the winners of tomorrow.
There is, however, a fine line between buying the stock at the right time and getting in too late. Whether you are a long term trader or a very short term active trader, chasing a stock higher can lead to frustration as you get stopped out on the inevitable pull back.
Buying strength is best if you are doing it at the earliest stage of strength.
When analyzing a stock that you are considering for purchase, ask yourself a simple but essential question. "Should I already be in this stock?"
If you look at the chart and can see other recent buy signals that have resulted in moves higher, you have to question whether you are getting in to the stock with the most well informed investors or if you are buying with the general public. Are you buying wholesale, or retail?
Whether I am buying a stock to hold for months or taking a day trade to hold for a few hours, I want to be part of that wholesale group that is buying the stock just as it is starting to behave abnormally and make gains. The higher the stock rises, the farther it gets from support and the closer it gets to resistance. That means as the stock climbs, the potential reward for the risk of the trade falls.
I often see traders take entry signals that are valid if they take a very short term view of the chart. However, if they took a step back and looked at the bigger picture, they would see that the trend started some time ago and they are jumping on the bandwagon late.
This is why it is important to look at different time frames on the chart. If you do your analysis on daily charts, make sure you also look at the weekly chart. If you day trade off of the 2 minute chart, be sure to check the 15 or 30 minute chart to see if the strength you are following is the initial pop or if the trend is already well under way.
Doing this only takes seconds but the impact on performance can be massive. Just ask yourself the simple question, "Should I already be in this stock?"
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Stock Features of the Week - Long Term Momentum
Here are a couple of stocks that I found by checking the long term, weekly charts of stocks with good Stockscores and near their multi year highs. Defensive names that are good slow and steady gainers.
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1. DENN
Low oil prices benefits low priced restaurants as people spend the money they have saved on gasoline. DENN has been consolidating for the past few months after a strong run to end 2014. Looks like the upward trend can continue.
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2. CPB
A couple of weeks late on CPB but the stock has not gone up a lot yet so I think it still has 20% upside until it hits long term resistance.
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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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