When I trade stocks, I am trying to find where capital is flowing to. The charts generally show traders what stocks are being bought the most by their continuous uptrend. Institutions are buying stocks that have the best earnings growth prospects, because as earnings flow into the company, the stock price is adjusted upwards to account for the new value of the company based on cash flow. This is the key to trading stocks. Go with the flow of the pros.
- I want a stock that is at a price that is within 15% of all-time highs. This alleviates all the overhead pressure from people sitting on losses. Stocks can soar upwards when everyone who has ever bought the stock has a profit, is just letting their profits run, and are unmotivated to sell.
- I want the stock to show reversals in price near the 50 day and 200 day moving averages over the past two years. This demonstrates that institutions still have interest in accumulating shares, even in bear markets.
- I want a stock to have an innovative new service, product, or way of doing business that is better than their competition and is very hard to duplicate.
- During up trends, I want to see the 5 day exponential moving average or the 10 day simple moving average holding as support. These areas are where traders get onboard stocks that are rocketing upwards in price.
- I want high volume in the stock’s options so I can use them as leverage without losing money with wide bid/ask spreads.
- I want the stock to have an A or B on the accumulation score on www.investors.com. This shows me that institutional investors are building positions.
- I want a high price stock. The best stocks cost the most because you get what you pay for. Junk stocks are cheap for a reason, they are junk!
- Stocks being bought back by the company creates automatic buying pressure, removes shares from the market, and drives up prices.
- I do not normally look at earnings before the chart, but all the best charts for stocks have earnings and sales growth at 25%-100% current quarter over the previous year’s quarter.
- I only trade the best companies that are growing the fastest. I do not waste my time waiting for sunken ships to rise to the surface, when I can ride a rocket to the moon.