| +0.00% | CPA | ||
| +6.26% | MTOX | ||
| +0.58% | JOSB | ||
| -0.04% | CPX | ||
| -3.05% | FTK | ||
| +5.12% | SF | ||
| +7.87% | SPTN | ||
| +4.86% | oyog | ||
| +9.11% | RS | ||
| +2.76% | VSEA | ||
| +1.34% | AVT | ||
| +39.29% | RIMM | ||
| +6.73% | ESI |
The screen I use finds stocks that have great fundamentals and have been consistently climbing in the last few months but for whatever reason are 'taking a breather'. In other words they have pulled back for some reason. They have become oversold.
Now, I am no expert (like you need me to remind you!) but there is always a reason why stocks that have been performing well suddenly experience an unusual amount of sell off (within a day). Enough to make my screen identify it as over sold. In my opinion there are a few reasons why a pull back like this can occur.
1. The stock is crap and people are worried. They are closing positions quickly. I don't think that this is the case as these companies have consistently produced excellent financial results for the last three quarters at least. For most of the cases I think we can discount this reason (except SYNL - moved down too quick for me)
2. Good news is about to be announced and the short sellers are worried. Perhaps last quarters earnings were great and it is expected that an upcoming announcement is going to be just as good. Short sellers are getting out before they loose too much money as the stock moves up. A few weeks ago RIMM was a good example of this.
3. Good news HAS been announced - a merger, acquisition etc. Short sellers are getting out because they think the stock price is about to rise.
These are my reasons for believing that my screen finds winners.
Now what?
Well, my first rule that I follow is once the stock is bought - allow it room to 'breathe'. In other words, give it a few days to start its climb. Let the short sellers sell, let people leave who need to get shaken out. It is not unusual for my stock picks to dip for one or even two days before climbing.
A big rule that I try (?) to follow is to leave the stock for fifteen days unless it climbs to 10% at which time I sell. Try not to be greedy. There are times when I sell at 5% if it seems that the stock is struggling in its climb.
Let's take yesterdays picks as examples - MTOX and JOSB climbed immediately. FTK needs to be left for a few days BUT watch it... I am sure it will climb. Unfortunately I haven't got spare room in my account to have bought either of thee stocks that rose nicely today.
Todays pick is CPA. This will climb but it might take a few days (that's what it has done in the past). I am confident of it though. Feel free to track it from my Socialpick account (see right).
As ever, thanks for dropping by - more later.
