Monday, January 19, 2009

Quick Way to Sort Picks

I'm often asked about days when several picks are fired-off. For instance, last Friday there were 23 picks delivered to my PC, and I was quickly able to narrow that down to a possible 5 by simply looking at the %K(15,3) of slow stochastics.

I hope that most of you use some kind of charting software, even something as simple as Yahoo Finance. There are some free ones out there, but I like my Amibroker and StockShare v2 charts. I'm kinda partial to the 15, 3 settings for %K, but I have also received messages about other settings that work well. It's really what you feel comfortable with that matters.

Anyway, I was able to quickly filter the picks by choosing the ones with a %K value of less than 20. This generally yields extremely oversold stocks that are most likely to bounce up. The results from that left me with DLX, DOW, ADSK, LAMR, and NWL. I sifted through news to get the dirt on each, and I was left with two with impending earnings announcements, one with a failed joint venture, one with a bunch of downgrades, and one hitting a 52 week low, but decent earnings.

Remember, any stock, good or bad, goes through the same up-down cycles. Its just that the good equities have larger up cycles than down. We can make money either way, and even stocks high in %K can still bolt upward. This was just a helpful pointer on a way that I use to sift picks.

Have a good one,
Rog

12 comments:

  1. Hi Roger,
    I have been only looking at and filtering the A rated stocks. Do you give much value to these ratings or just ignore it and look at the technicals for all of the picks? Thanks,
    Jerry

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  2. @Jerry
    Personally, I do strictly technical

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  3. ROGER ; DOESN'T SA2.0 USE ITS TECH ANALYSIS TO SUPPLY ALL OF THE PICKS ,THEREFORE THEY SHOULD ALL HAVE AN EQUAL POTENTIAL ? THANK'S JIM

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  4. Hi Roger,

    I have my SA running just for some days so I do not have any picks yet. When I will I want to gain some experience with paper trading before getting burn...:-)
    Can you give me some advice how to do paper trading e.g. is there a homepage where novices like me can practice in a real-life-like environment?

    Thanks, Richard

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  5. What time period do you look at for %K value? obviously if you look at 1 day or 5 day it is very different than looking at 3 month chart.

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  6. @Jim
    From what I've been told the AI engine of StockAssault does not use conventional technical analysis. From the grading system supplied with the Diamond version, I must conclude that some other means is used to sort the viability of the picks. I tend to rely more on my own technical analysis, but that's just my personal preference.

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  7. @Anonymous
    I look at 4 month charts in general with slow stochastics set 15,3,3 ( periods 15, %K avg. 3, %D avg. 3)

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  8. @Richard
    www.investopedia.com has a trading simulator that lets you practice real trading with fake money. There are many free sites you can google and find for similar simulations. Or you can just do the old fashion pen and paper buy and sell to see how you would do. Definitely read more of my past blogs for some tips. Always time your trades with the action of the market in general, and always follow each buy with a stop-loss order in place to protect your money. You'll learn as you go, and I'm always here to help!

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  9. Roger,

    Appreciated your commentary on how you sort through picks using Slow Stoch. Would you share some thoughts on initial Stop-loss values on a new trade?

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  10. @Phil
    I generally use 5 percent as a standard stop. I've read of some people using 3 percent, and they called that number "extremely tight". On a good stock run, I might change the plain stop to a trailing stop to lock in profits on the way up. I, personally, am afraid to go tighter than 5 percent simply because I find myself getting stopped-out on a good run where the stock swings wildly on its way up. this is especially true of low volume equities. Any stock, however, with a volume of at least 500,000 tends to be a little more stable as far as fluctuations go on a run. i like to stay away for stocks with an average volume of less than 500,000 for that reason.

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  11. Hi Roger,
    I have found that many of the SA picks have a day or more of trading lower before turning around. In looking at past picks, it appears that even with a stop of 5% many picks that went on to become profitable would have stopped out. I'm using 10% for that reason. This is higher than I would normally be comfortable with but the nature of many of the SA picks seem to call for a little higher Stop. Thanks,
    Jerry

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  12. @Jerry
    Looking back, it seems that many picks are triggered by a sudden sell-off which often times is due to some specific event. These sell-offs are usually not finished until the second or third day, hence the later viable entry points. The stop could initially be set at ten, then changed, but I like to wait untill the sell-off is complete and then jump in. That is hard to time, so taking a position right away with a 10 stop , if it keeps you from getting stopped-out of a trade, would work. Nice observation.

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