Thursday, January 3, 2019

My Updated Stock Screening Criteria

After the new edition of the IBD comes out each night, I start my stock screening. I get my stocks almost exclusively from the Stocks on the Move column every night. I just copy down the ticker symbols from the stocks above the line on both the NYSE and the NASDAQ. This should also tell you that I don’t look at any over the counter stocks – only NYSE and NASDAQ. I then take those stock symbols and put them in the My Stocks List of investors.com.
I do this because I am looking for one particular type of stock — one that institutional investors are buying. This buying shows up in stocks that have large increases in price on heavy volume.
Once I put the stocks in my list, I then screen them further as follows:
  • Volume – I want to see at least 100,000 shares traded daily. You can find the volume number under the price and volume.
  • Earnings Per Share % Change (Latest Quarter) – I want stocks over 25%. You can find this under the fundamentals tab.
  • Earnings Per Share % Change (Prior Quarter) – I want stocks over 25%.
  • Sales % Change (Latest Quarter) – Again stocks over 25%.
  • Earnings Per Share Estimated % Change (Current quarter) – Over 25%
  • Earnings Per Share Estimated % Change (Current year) – Over 25%
  • Composite Rating – Over 70. Under the SmartSelect ratings
  • EPS Rating – Over 70
  • RS Rating – Over 70
  • SMR Rating – A, B, or C
  • Accumulation/Distribution Rating – A, B, or C
  • Group Relative Strength – A, B, or C
I have recently lowered my stock screening criteria in a couple of areas so that I could look at more stocks on a daily basis. The first is in the Composite, EPS and RS ratings. I will now go to as low as 70. With the other SmartSelect ratings, I also now include stocks with a “C” rating. I did this so that I could look at more stocks on a daily basis. My thinking is that I might be able to catch a stock a little sooner than I could before. I also am looking for stocks with stellar earnings and sales as opposed to stellar ratings.
Once I have the list compiled, I like to sort it by price percentage change to see the best stocks in the stock market today. I then move on to looking at particular buy points or set ups in my stock market investing strategy.
Usually, I then post my watch list on my twitter feed which can be found in the sidebar.

Wednesday, January 2, 2019

Secrets Of The Neatest Little Guide To Stock Market Investing

For a long time, I passed by The Neatest Little Guide To Stock Market Investing because I thought the title sounded hokey. So, as I would peruse the book store for new and exciting stock market investing strategies. You can’t find that in a hokey book like stock market investing for dummies type thing. No way. So for a long time, I overlooked Jason Kelly’s book in search of greater books. Finally, because I had pretty much checked every other stock market investing book out that was available at Borders and there was nothing else to do, I skimmed through it.
I was pleasantly surprised. And here is what I learned. The first secret of the of the book is that he does give you some specific and easy to understand investment strategies. While he does go into good detail about the options you have as far as investment philosophy, he also delves into what you can do right now to start investing in the stock market. While I didn’t look at the previous edition, the 2010 version also shared with me the biggest secret I thought that I picked up on from his book and that is how to use a watch list.
This is an area that I don’t find discussed much in many of the books. Sure they all give the topic of lip service, but nobody really walks you through the mechanics of how to set one up and how to use it. I only wish that he would have gone into greater detail about how to prune stocks from the list. He recommends that you keep a list of ten top notch stocks and when you find a better one, you get rid of the worst one on your list.
That’s great in theory but when you have 20 different criteria, how do you decide what is exactly better if all your stocks meet certain thresholds. I wondered that and emailed him. His book said to do that if you needed additional information. But alas he doesn’t respond so I was left to my own methods and that was to let your list grow for all the stocks that meet your minimum standards. If your list gets to big, raise your minimum standards for earnings and sales or for some other category until your list shrinks. As soon as a stock falls below your minimum requirements then let it go.
To me that was the biggest “secret” I learned but I guess I taught part of it to myself. Nonetheless, this stock market investing book might deserve a look for your library.

The Eight Basics Of Stock Market Investing

I’ve put together what I think are the eight basics of stock market investing. From my research if you follow these steps, you’ll increase your chances of being a successful stock market investor. Investing in the stock market does require daily study and if you are to get good at it, you’ll need to work at it. There is no free lunch. I have already talked about a few of these things so some won’t come as a surprise. First, if you are a beginner, I recommend that you get a foundation of investing by reading The Neatest Little Guide to Stock Market Investing. That should give you a good handle on the basic terms you’ll need to know as you go along.
  1. The first thing you need to do is to pick a strategy. You can find a few of the masters in the book above. After that, if you don’t have a strategy, I suggest that you adopt the CANSLIM strategy as your own. You can read more about it in my article called The Only Stock Market Investing Book You Should Ever Read. It’s important that you pick and master one specific strategy. What’s important is that it is one of the stock market investing strategies of the masters, you are good to go. Remember you won’t learn anything if you don’t read specific techniques. So stock market investing for dummies material is not the way to go.
  2. The next thing  you want to do is set up stock screens that bring the stocks you need to review to your attention. You do this by setting up stock screens to uncover stocks that might have strong earnings, strong price moves, surges in volume. It all depends on your strategy. I like to look for stocks that are up on higher volume. So I have a screen set up for that.
  3. Once you’ve done that, you need to move the stocks that appear on your screens over to your watch list. That way you can keep an eye on the performance of the stock. More importantly though, you want to make sure that you buy the stocks at the right time.
  4. That’s where picking entry points come in. Also called a “set up”, you’ll want to enter stocks at times that most likely predict they will go higher. For canslim, that’s when they break out of a base on strong volume. Whatever your strategy, learning to pick the proper buy point is key to a successful stock.
  5. Next you need to have an exit strategy. What will you do if the price goes down. What will you do if the stock goes up. Having price targets is important so you know when to take your gains. Having limits to how far you will ride a stock down in price will help you protect your investment capital. Setting stops is as important as setting profit targets.
  6. After that, you’ll want to use a stock simulator to work on your technique. The best professionals in the world practice in the gym or in simulators (think pilots). You should to.
  7. Review your practice trades and shoot for a specific batting average. Try and get 1 out of 3 right of your stock buys as winning stocks. Learn from your mistakes and keep shooting for a better batting average.
  8. Once you’ve reached your batting average, start using real cash and work on duplicating the results you had when you were practicing. The real stock market works different than a simulator. You’ll find out that emotion comes into play. You’ll need to get a handle on that.
So there you have it.  These are my eight stock market investing basics. Get to work and let me know how you do!

How To Master The Stock Market Investing Basics

Today I wanted to talk about how to master the stock market investing basics. In my last post I talked about the Eight Basics of Stock Market Investing. This is what I suggest to become successful at stock market investing. A lot of people who are investing in the stock market today are looking for a get rich quick scheme. If this is you, you are going to struggle. If you are new to the stock market, you have a unique advantage in that you can know from the beginning that it’s going to take study. It’s going to take daily work. It’s going to take dedication and it’s you are going to encounter your share of mistakes.
What I suggest that you do, is first review that you have indeed chosen a strategy. Many investors fly by the seat of their pants. They have no strategy. Without a road map for your stock market investing strategies to follow, you don’t really know what you are trying to master. If you haven’t chosen one yet or need a review of the basics, check out The Neatest Little Guide To Stock Market Investing. Inside, he review all of the masters from Benjamin Graham to William O’Neil. Get a guru and study his methods. As I’ve mentioned before, my guru is William O’Neil. I talked about his book, How to Make Money in Stocks in my post called The Only Stock Market Investing Book You Should Ever Read. Again avoid the stock market investing for dummies type books. They are too generic.

Go to investors.com After that, what you need to do is start breaking down all of the decisions that you need to make and writing them down. For example, the first thing I do is check each of the market indexes each day. I started a checklist that looks like this:
  • Check the price and volume action for the S&P 500
  • If the index closed higher on higher volume the market is under accumulation (more buyers than sellers)
  • If the index closed lower on higher volume the market is under distribution (more sellers than buyers)
  • If the market closed lower on lower volume, this is neutral
  • If the market closed higher on lower volume, the market could be stalling
  • Watch the IBD TV Market Wrap for analysis of today’s market action
  • Confirm my findings of the market action in the IBD Big Picture column
  • Review the current outlook
Doing this serves a couple of purposes. One, it forces you to think out each step you need to take. Two, it makes it so you don’t forget a step. As you go along, you’ll want to refine your checklist and have one for each component of your strategy. You’ll find that you’ll fine tune it by moving the actions you take to different spots on your list and adding things here or there.
For every set of decisions you need to make. Put them in order of how you do them. Master one set of checklists at a time. Learn from your mistakes and retool your steps. This is how you master the stock market investing basics.