This is focused towards the wekend investors. Usually over the weekend you'll run a scan for a list of stocks and buy it after certain conditions are met. You can use MSN Stock Screener to find the stocks. Use the Deluxe version, it is free and pretty good. I will post the criterias, the entry trigger, stop-price and profit-taking rules.

Here are the conditions.

Price Change Last Quarter Greater than 20%
Price Change Last month Less than 0%
Average Volume (Monthly) Greater Than 200,000
Last Price Greater Than 3
Last Price Near 52 Week High
3 Month Relative Strength Display only
Market Cap Greater Than 100 Million

This should give you a list of stocks. Put those on the watch list. If there are many stocks that show up, add another condition and limit it by a particular industry.

What are we looking for here?
We are looking for stocks that had a nice run up the previous quarter and is under some profit-taking right now. We are looking to buy it as it is ready to resume it's uptrend.

Entry-Trigger: Buy it the day after when closing price of the day is above the high of last week. So for example: Last week's high was 8.20, then wait till the price closes above 8.20. If on Tuesday of this week, it closes at 8.25, then buy it Wednesday morning.

If there are multiple stocks that meet the criteria and you can't decide which one to buy then use the Relative Stength number. Buy the stocks with the highest RS.

Stop Price: This is the price where you are going to sell if your analysis is incorrect and price starts going down instead of up. Our stop price is going to be the close below last week's low. If last week's low was 7.00, then you'll want to sell it the next day if today's close is below 7.

Profit Taking: If your analysis is correct and the price is moving up, then do not sell it. You want to take your profits when the price goes below the low of last 2 Weeks. In the above scenario:

Let's say we bought at 8.25. Our initial stop is 6.75 (close below 7).

WEEK LOW HIGH STOP
0 7.00 8.25
1 8.00 9.30 6.75
2 8.00 10.00 6.75
3 8.50 9.00 7.75 (last 2 week's Low is 8.00 and 8.00)
4 9.00 10.00 7.75

As the price keeps advancing, you trail your stop with it but at the same time you want to leave enough room so that you do not get out due to the random noise.

How many stocks to buy and how much to risk?

It varies from person to person. It depends a lot on your risk tolerance, size of the capital and so forth. You should not risk more than 2-5% of your capital on any 1 trade.
That way way have to be wrong 20 times in a row before you lose all your money. That could happen but very unlikely. It is the same as winning 20 in a row.

Let's say you want to risk $150. In the above example: your initial risk is $1.50 per share, So you'll buy 100 shares only. If your initail risk is $300, then buy 200 shares and so forth. Don't forget to factor in commissions and other events that are not under your control. If a company comes out with bad news after the close the stock could open way below your stop price. You do not want to lose all your hard earned money because of 1 trade, similarly do not expect to hit a jackpot either. If you hit a jackpot take it but the goal is to make consistent money. Slow and steady.

This strategy works well in bull market but NOT in a bear market. Identify whether we are in a bull market or a bear market(I have posted how I identify in another thread).

Misc.....
I have posted these in good faith and have back-tested over a period of years. I'm not sure when it will stop working. It could be tomorrow or in 20 years. Please test it on your own before you think that you have found the keys to the vault. I recommend you to run the scans, learn the conditions, and build a portfolio in yahoo finance before putting your actual money. If it seems to work for another 3-6 months, then go ahead and try small. If you are not seeing profits, then the strategy is flawed, do not use it.

I wish you all the best.

Ordinary investors or traders won't be able to smell IPOs. They are for institutional investors like pension funds, mutual funds, and handful of other preferred customers of large investment bankers.

eminitrader,
hmm.. nice post (O:

CMGI.. <=== hmm.. where does this stock ring a bell... o gotcha!! now... was not in my radar for a long time. Once a high flier.. looks like a depressed stock (O:

there are couple of things i do not like about this stock. [ main reason being I am a value investor (one that picks up stock for more than 5 years) ]

1. stock owned by institutional = 19% [ very low ]
2. short interest whooping 5%
3. average volume is 3% of float [ preety big number ]
4. trading @ 52 week high [ where does it go? up or down? ] good point. is this stock poised for a run up ?...... how much do not know? (may be 3 max)

50 day moving average 2.2 . 100 days moving average 1.8 200 days moving avg. @ 1.6 . seems like it has firmed up its bases... if it goes below 1.6 time to take loss. but the way y it seems this stock may be ready for a small run up if not 50% run up. one attractive thing might be book value is quite close to trading price of the stock. but its a classic trap (O: .

1, 2 and 3 shows that this is an active stock.
my opinion. this is a day trader's or active trader's stock. not sth. that one would rely for long term values. has big swings .. thus i will stay away from it even it seems to have a big potential in short term

RADS:
insiders and institution sellers are selling it. not a stock to be in. because when institutions are selling (usually in large quantity)it creates a downward price movement unless company itself is actively buying i.e. stock repurchases.



=====================================================
as always
what do i know (O:

Thapap:
Nice to hear different views and different criterias. Most of the mutual funds are not going to own something that is less than $10, some will buy stocks between $5-$10. The institutions that own it are mostly hedge-funds where they do not necessarily have as many rules. I like stocks with high short interest especially if the stock is holding up strong. Once it closes above $2.50, the short sellers will rush to cover which will lead to higher price. For example one of the stocks that I had mentioned on my other thread was XLNX aroung $25-$26. The reason was because it had the largest increase in short interest from the previous month. It is currently around $30.

I have not done any analysis regarding the average volume and the float so I do not know. I'd like to hear between their relationship.

The way I look at 52 week high is that it has to go above 52 week highs to make new 52 week highs. I can see this go to $3.40 in the near future. That is same as a $10 stock going to $14. It is possible.

I trade price only because price reflects every expectation of all the players.

I was wrong on RADS. I like DYN here as I mentioned in my earlier post.

Check out CAT. A falling dollar will help the stock and there are rumors that Buffett might be interested in it.

eminitrader,
i will stay away from CAT.. i will not even look further.. this stock is featured in KRAMER .. he he he (O: kudlow and cramer .... (O: . same jim cramer of CNBC ... another hypist.... (O: but it looks good (O:

DYN seems interesting. very interesting. i am not going to comment on this one. i need to look further. but as i said very interesting.

last year i recommended following :
C, T, VZ, MO, MRK, PFE , GM
if you have invested 1000 on each of them. i think you would have made a whooping 30% on average (O: . Even though PFE did not make any money, you did not lose any either considering dividend. VZ and MO spun off IAR and KFT giving you bonus shares.. so you did make handsomely. i.e. last years investment of 7000 is not 9100 (O:

for the year 2007:
i will go short in GM. sell all my long positions.

for this year i will still go long on following:
C, PFE, MO

and add

PG and JPM

i have 2 more picks on technology. which are risky. thus am bit hesitant to post it in the public.

====================================================
as always
what do i know (O:

Wow,

That was an awesome post Emini.

First a note to Bibas: Buffet's strategy worked in Buffet's days Bibas. Those days, information wasn't as readily available as it is now. Today, what most fund managers know about a company, any individual investor can uncover (theoretically speaking) by simply going to websides like EDGAR, Yahoo finance and msn money and check out all the analysis or simply do them. Therefore I think active management of portfolio is essential- I go with "put all your eggs in one or two baskets and WATCH THAT BASKET. What happened to DNDN today, happened to me a couple months ago in couple stocks- more than 25% wipeout of ALL my money.All those stocks were in a healthy uptrend.

As for your strategy Emini that was just amazing. It took me by surprise because well (and I'm not bragging here, despite school I spend 15-20 hours on weekdays trying to develop strategies) the only difference between mine and yours is that i look for consolidation after a run up, hence a price move in a tight specified range (say between 5 to 10%) and then a rise above the 52 week- and I've been pretty successful with it- although now that you've mentioned it I am for sure gonna try yours. As far as the stops are concerned, I usually monitor my stocks very carefully so I don't follow any such rules but the initial stop idea got me good. That makes perfect sense.

And just because emini has been successful doesnt mean we will too by using his methods as he clearly states. I would reccomend doing a lot of self study.I used a lot of TA before I met Emini- I didnt even know which books to read. I read Darvas and that single handedly changed everything.

Since now I'm more active, I think one can tweak this style for active trading too. Stops should be more tighter and instead of a 0% price move in a month, a consolidation over a week time and then breakout over last week's resistance- and above 52 week high.

What do you say?

I'm gettin better with scanning. It's my psychological side that whups my ass. I still need to know how to handle situations more effectively during days such as today and yesterday. Any advice on that? It's especially unfortunate when you have just made a trade and yesterday's scenario occurs. Theats when your ideas on stops and everything else become kinda of marred.

Thanks! Nice to see you back again. How was Omaha?

And my pick goes with CMGI too, above the 50 cent mark and INTC looks promising. the semiconductors have had a recent breakout (SMH) and the mid caps (IWM) are as always performing really well.

So once I gain in on my losses..LMAO...I'm gonna get a bit aggresive with semis.

Hello to Emini ji, thapa ji and TT ji,

looks like I will have to digest quite a bit in this thread in terms of understanding.

I have finished two books by now. And I have been doing my DD on picks here and there, feel more confident these days. Also, I can understand what you guys are talking. So lil excited I am.

Let me learn some more!

Best~!

-B

Value Investing is hard in this day and age when there is so much information available. The greatest value investore like Buffett have been sitting on a pile of cash. In recent years he has bought companies that are not really considered value like railways. If you are looking for value, then it is necessary to look abroad. The chances of finding a value are greater after a bear market.

There is a book from Mohnish Pabrai, The Dhandoo Investor. He has returned about 26% every year since 1999. There is some talk that he might head Berkshire's Investment arm. He is primarily a value investor. He has tried t emulate Buffett/Grahmn but with some different filters.

I will probably try to get the book this weekend. Value investing can be rewarding if you can find values, and buy and sit on it patiently.

Emini,
will get the book and try and understand it. well, for now getting hands dirty and losing monies in the process has definitely created immense trading "values" for me, that is , personally speaking.

I agree with you in that economy is preety much global. The world is flat. Emerging markets globally is a good niche to get into. But then, having a local knowledge into those market would only come from your expertise in that domain. Say I am into SW development, and I know, that billions are being pumped into Bangalore and Shangai market, and I know the big chip players, then I can get into those domains and be successful, NO?

I need to get more acumen into financial side of operations. Really so!

Best~!

-B

Value investing isn't so much "valu" investing as it is "information manipulation"- hence both active traders (and i'm not talking about day traders or scalpers here) and the classical value investors don't follow the one rule that fundamentalists are so stuck with- that the markets are efficient.

Value investors themselves show that markets ar un-efficient.

I've had arguments with professors on this. It usually turns ugly with a few references from their supporting students to my South Asian background and no expereince in the stock markets.

F them!

Please watch Buffet's video on WSJ today. I can post the link, but, it will not work.

TT,
Value investing in absolute sense has, is, and will be the same forever. Purely, as long as market is there, it has to be efficient. Because that is how mankind is made. You have to understand that Emini is just referring to the fact that there has been "shift" in places for "value." Hai na?

Happy Trading Day to ya all!

Best~!

-B

Emini,
I tried looking for the book you recommended. Allow me to point that it took me a while to look for it. So here is the correct name and the link

The Dhandho Investor: The Low - Risk Value Method to High Returns (Hardcover)
by Mohnish Pabrai (Author)

The content sounds very interesting. Gujju frens have been a treat in my life, some suckers, some frens forever kind. Most of them have either motels, multiples of them, or convenience store that too in multiples, and now the trend is to get into liquor biz, coz the working hours are better *wink*. Smart bunch of peeps who can count to the pennies.

ordered it, I shall let you know when I get done.

Best~!

-B

ps TT how about you getting one and reading it too, so that we have something in common to talk about as we evolve our thoughts in the due course of reading this book

Is this the true selling that we are seeeeeeing today?

Yes, it is a true selling day. This means it is tome to exit some of the positions. If you own 4 stocks get out of the worst performing stock. If we see another one in the next 2 days, get out of another 2 and so on.

Personally, I thnk it is just a pullback because usually the Nasdaq declines more than 2% when the S&P and DOW are down more than 1%.

On other note CMGI looked pretty strong. It was holding up all day but gave up towards the end. If the market rebounds in the coming days we'll probably see CMGI run up fast.

yeah, CMGI was definitely up. I'm holding onto Q for a while though.

I checked the after market at somebody bought the stock after 7:00 p.m. eastern for a mch higher price. How or why does that happen? Any explanation emini?

Bri:

Even before i delved into the stock market at age 16- when I was fresh from Nepal, I alys thought markets could never be efficient- I didn't have an explanation then and still don't have a complete answer today but as far as value investing is concerned, yes it has its merits in the fact that hidden gems can be uncovered- but that again is a violation of the efficient market hypothesis- by the time it reaches the masses, the value should have been absorbed by those privy to the information (by definition), ki kaso? That's the way I look at it.

And tomorrow, I'll probably go check out some mother's day's gifts. :D

Habe phun ebhreywan!

And yeah, Mohnish sounds like one typical Gujju.
I should buy it, but only after I complete my derivatives course. I need to get a job too

:P

CMGI and DYN are both doing good. Anybody still looking at the scans?

One of the things that I mentioned is how it is necessary to get out of losing trades and take the loss. If you guys recall from my other thread, I had recommended JDO and SIGA at one time. After we bought those, they actually went up for a while but started losing steam. We took the loss in JDO around 2.20 and sold SIGA for a small profit around 5.60ish. JDO is below 2 and SIGA is below 4 now.

Hey Emini, yep, CMGI was on my scan a while back but I had been kind of hesitant after I looked at the chart. I'm not sad I missed a boat, I'm just not sue if it will cross the 50 cent mark. If it does, I might jump in on this one with a pretty big chunk.

And taking losses, yeah, mine's improved drastically over last year. I make numerous small tiny losses, and then big wins that cover up for losses and give me a sizeable profits. I'm getting used to it- when I first started I used to almost poop in my pants.

I also size my positions based on the assumed risk. The higher the risk, the lower the exposure, but with higher gains, I add to them in the exact oppositve proportions to maximize my gains but hedge against any unexpected downturn with ones facing lesser risks.

Have a good weekend everyone!