(reprint from http://www.investortradestocks.com/):
Matt: Welcome and great question. I know from my Google analytics reports I have a number of readers, but few have wanted to step forward and subscribe. Maybe more will feel free to do so. Thanks.
I pick my stocks through a combination of technical and fundamental analysis. Here is my basic methodology.
I read a LOT. All the site listed below right I visit and others. I get Credit Suisse and Merrill Lynch reports, Schwab and many others. I especially read the news for reports and events (Bloomberg and Market Watch, watch some cnbc and fox) to which the market may react.
I look for uptrending stocks that have: history of increasing earnings, increasing revenues, and for raising guidance. I always come back to those: like SNDK, STX, GOOG, BUCY.
I study the fundamentals on my Schwab site and read analysts reports. I will separately go to many company web sites and also listen to earnings conference calls, found thru briefing.com. I look thru balance sheets and earnings history.
I look at a LOT of charts, for many stocks and I use multiple views: 264 weeks, 64 weeks, 100 days, 30 days and 1 to 3 days with a 5 to 15 minute chart. I toggle back and forth. I use the longer term charts to help find stocks that have potential to double and are uptrending. I use shorter term charts to help determine when to buy.
I have 20 watch lists each with 50 to 100 stocks, so I’m tracking about 1000 companies. I add an subtract stock based on what I read or hear. If stocks are being talked up, $$s may go there. I survey my key watch list, the ETF sector watch list that I detailed in this past weekend’s recap. I need to get that separately posted. That tells me intraday and daily where the money managers are going with their money. Sector rotation is very important to note. So, I frequently scan the ETF watch list and my sector watch list of 20 sectors to see what stock are moving.
I then compare that to my view of where I think the $$ should be going (this is explained my 2010 Outlook article you will find on this site). I think some of the rotations are very temporary or head fakes...so I am leery. I don’t like to trade big slow moving companies, or biotech, or some utilities and many staples, but do some.
I also note what the pundits claim they are trading, like on Fast Money, Cramer etc.
In the end, I try to buy stocks that are outperformers, with improving earnings that the big money favors, that have pulled back to support near a 20 day moving average, prior resistance that may now be support 50 ema etc. But mostly the price must be going up...not down. Buyers must be coming in. All a little tricky right now as we have a market that has gapped up and gapped down a lot and if you’re not holding some, you’re not participating in a large portion of moves. That also tends to cause unavoidable losses. CLF and BUCY are good examples of gappers, or RIMM too. So anticipation is used as well. For example, I KNOW $$s will come back to BUCY. The China trade is a long term trend.
I am very impatient with losers…so we Don’t take Losses. If we can avoid losing, we will easily make money in an uptrending market. Just cut the losers. With that said, they all trace with an average true range that varies, so I try to give them some room after I get up a little bit. I bought CAT today after buyers came in and it never looked back. I’m up nicely and have been able to move my stop just above my purchase price and I don’t think it will get hit.
Each nite I review the indexes and ETFs and decide on a plan for the next day for my current holdings. I should note sometimes I trade the ETFs, like XME and hold many in our IRAs. We’re up about 70% on XME since we bought on my long term thesis. We have it in every account.
Hope this helps. More as we go.
Don’t take Losses
Disclosure: Long all listed