Follow these steps and you can create a powerful stock watch list in the matter of minutes to an hour each night. I work longer than that but it can be done in less time if need be. This watch list will generate opportunities for trend buying, swing trading and even shorter-term trading. I guess the occasional buy and hold investor could even benefit from this very simple procedure if they purchase at the right time.
I encourage all investors in all time frames to evaluate stocks for investment using both fundamental and technical analysis. A day trader and even a swing trader can get away with avoiding fundamental analysis but I highly recommend both methods of analysis for intermediate and longer term trend traders. Both tools are equally important in making serious decisions with your hard earned CASH!
If you wish to invest in stocks, treat it like a business, NOT A HOBBY. You need rules and you need to follow these rules or money WILL be LOST. Once proven rules have been established, they cannot be broke or you will lose money. Everyone loses money in investing but we must learn to cut losses quick and allow gains to develop. Small losses are acceptable because they teach us lessons that allow us to win big. Think of losses as part of doing business and focus on the long term success of the system and not each individual trade. As long as you have a positive expectancy, the winners and losers will equal out over time to make you consistently profitable.
Now to the watch list method:
- Determine if overall market is in a specific trend (up, down or sideways).
- Use a computerized screener to find stocks with superior fundamentals
- Evaluate sister stocks or stocks within the same industry group (strength travels in groups so the probability of success rises when buying into a strong industry).
- Study the technical aspects of the charts for each possible opportunity
Simple Fundamental Screener Criteria:
The criteria listed in this section can be used together or arranged in a variety of ways to generate multiple lists containing all possible opportunities. Get a feel for specific screens and determine which are the most successful during certain market conditions.
- Increasing Earnings (current, past: quarterly, yearly and future estimates)
- Increasing Sales (current, past: quarterly, yearly and future estimates)
- Stocks making New Highs
- Stocks within 15% of New Highs
- Stocks within 10% of the 200-day moving average
- Increasing Return on Equity (ROE)
- Price/Earnings Growth (PEG) – Less than 1 is preferable
- Accumulation/Distribution ratio
- Up/Down Volume over past several months
- Increasing Institutional Sponsorship
Simple Technical Analysis Scans (with your own eyes):
- Study the one year weekly chart (preferably candlesticks)
- Study the six month daily chart (preferably candlesticks)
- Look for increasing accumulation days (stock up on above average volume)
- Evaluate the Point & Figure chart for support and resistance levels
- Look for basic chart patterns such as flat bases, cup bases, saucer bases, triangle breakouts, obvious trends along a moving average, etc…
That is all one needs to develop a quality list of opportunities night in and night out. Trading opportunities will appear once you see a particular stock make multiple screens on a consistent basis. This is the basic foundation I use to pinpoint my opportunities in the market and the general guidelines I used while running MSW.
I use the custom screen wizard from Daily Graphs (Investor’s Business Daily sister company) for my fundamental analysis because I love young growth stocks but many tools exist on the web. Some are free and some cost a pretty penny to use. My screener costs $45 per month which is nothing to me but maybe too much for others.
Please leave a comment on what screener you use and why. Leave a link to the screener that you use to give the site or business credit. I am very curious to hear what other trader use. As great as the wizard is for me, I am always looking to find something better.
I use Telechart from Worden to do all of my stock charting, but I also use IBD.
What I do is I download the pdf version of IBD, copy and paste the text into a text file, and then I wrote a program that examines that text file and spits out all the top rated IBD stocks (EPS > 85, RS > 85, Overall > 90, Sales = A or B, Group RS = A or B, Acc/Dis = A or B). I can pick and choose what parameters I want to use. I then import this list of stocks into a watchlist in Telechart and go through the stocks one by one. Normally this yields between 60-100 stocks.
I also have other scans that I use in Telechart including a list I might like to short, lists with positive divergences in indicators, etc. The great thing about Telechart is that each stock has 12 tab windows, and in each tab window you can change the time frame. For example, on tab 1 I have a weekly chart with 10 and 30 week moving averages. On another tab I have a daily chart with 50 and 200-day moving averages. They also have different indicators (stochastics, OBV) and some custom indicators (TSV, Moneystream) which I find useful.
One of my favorite activities is to go through a watchlist on one tab, and then go to a different tab and repeat the exercise. Sometimes it yields different perspectives, sometimes not. But it is still a fun exercise.
Great post. I don’t usually trade stocks at all though, but I’ll save this for a rainy day when I might 🙂
I use stockfetcher.com for all my swing setups. At $9/month it is relatively cheap and has a lot of features for scanning. Whatever complicated scans I have come up for my purposes, stockfetcher has been able to handle it without any problems.
Rahul
http://www.tradernirvana.com
Terry Zink would you mind sending me a copy of the program (ie pcf, easyscans) you developed, as described above, to scan Telechart?
TIA
Art
mailto-artlin-at-3282dotsbcglobaldotnet
Terry Zink I would like the program you wrote as well. I am not that savy. Are you willing to do so?
Hi Chris – I’m one of your many fans, and co-founder of a new site (EinStock) that is launching this week on Facebook and as a stand alone site: http://www.einstock.com We’d like to explore synergies and a possible relationship with chrisperunna.com – you must have a crazy schedule but if you have a minute to check out our site please let us know if there is any interest on your part.
Edie Littlefield
Is Jaso good for medium term ? Or other alternatives as i am new to the market.
I appreciate suggestions
Chris, interesting post. Would you be interested in syndicating your content on the home page of my site? It’s an online community of finance professionals ( http://www.wallstreetoasis.com ). I could add an RSS feed that will allow me to promote your blog posts to my home page (when i think it will lead to a good discussion and/or is appropriate), but I wanted to make sure you were comfortable syndicating first. The syndicated post would have a link back to your original post. Thanks, Patrick (you can reach me at wallstreetoasis@wallstreetoasis.com if you have any questions)
i found your article really interesting. thank you
If you dont already know this site you should. Its free and has some of the best scanning tools I have used (and even paid for)
http://www.finviz.com
Does IBD’s eTables do this analysis for us? is that a reasonable shortcut?
Thanks for the stock tips. I can use this information to help me in my first stock investment, which might just be Mentor Capital (MNTR) in the near future.