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Identifying the Next Stock Market Winners

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									Presented by Daniel Toriola
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Identifying the Next Stock Market Winners By Scott Cole

Since the U.S. stock market hit its closing low on March 9th, it has rallied over 20%. Even prior to the Dow Jones Industrial Average's 497 point advance on March 23rd, the market had shown significant signs that a nice rally was in force. Smart investors, who've been waiting for a decent opportunity to put some capital to work, have set their sights on the stocks that are showing significant strength compared to the rest of the market. Picking the next big movers in the stock market can be a daunting task. But, many of today's analytical programs make this task a little bit easier. I use a program called Telechart by Worden Brothers, and have been using this program for about ten years. However, many of the online brokerages offer good capabilities as well. Here are a few tips to finding stocks that are ready to make nice moves over a couple month period: 1. Look for the stocks that are trading at or near new 52 week highs 2. Look for stocks that are trading further above their 52 week lows than other stocks 3. Look for stocks that have shown significant increases in volume over the last six months Once you have identified a number of stocks that show these characteristics, look for stocks that have been consolidating for a couple weeks, and up to four or five weeks. We don't want to enter a new position when a stock has been up 10 days in a row, so we look for those that have traded sideways for a bit within a nice uptrend. We then look to enter a trade when the stock breaks out above its recent consolidation pattern. These are your high momentum stocks that, when market conditions are good, can give you a pop of 50% to over 100% in just a couple months. However, in the current market environment, it is a good idea to scale back expectations, and not to use any leverage. However, these stocks can provide you with decent short term returns. If it becomes clear that economic conditions are improving significantly, you can then be more aggressive. Remember, there is no full proof trading strategy. This type of strategy will generally result in more
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losing trades than winning trades. However, if you use some common sense and manage your risk, you can enjoy decent returns, as a few good trades will more than make up for the small losing trades.

Scott Cole is a stock market analyst and owner of the website http://www.theultimatestocktradingsystem.com .  He also writes daily market commentary at http://www.kungfutrader.com

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Investing at the End of a Bear Market By Scott Cole

At this point in time, many traders and investors have no desire to be in the stock market after 40-50% losses in the major averages in just a year, and 70-100% losses in many individual stocks. However, as the market has tried to find its bottom, now is the time to scour the market for the next big winners. How can you identify these potential big winners? Well, the first good sign is a stock that has actually been rising while the market has been heading lower. The list of these stocks is actually pretty small. You can find a list of stocks making new 52 week highs or with high Relative Strength ratings in Investors Business Daily or in the Wall Street Journal. Personally, I use the TC2000 software produced by Worden Brothers. Once you have found a list of stocks that have been outperforming the stock market, it is time do dig a little deeper. One method of identifying potential big winners is the CANSLIM method outlined in his book "How to Make Money in Stocks" by William O'Neil, founder of Investors Business Daily. This book is an excellent read and a great source for learning how to invest and trade individual stocks. However, it is not a mechanical method for trading and requires some knowledge about a company's business, management and products. I prefer a method more similar to that discussed in Nicholas Darvas' classic book, "How I Made $2 Million In The Stock Market." This methodology identifies the stocks that have been rising the fastest on good volume, and then, using his Box method, determines a point of entry. Exiting the trade is a little more subjective as far as the initial stop loss is concerned, and using the pyramiding boxes as trailing stops can leave a lot of money on the table when the stock's trend is over. However, there are many different styles of investing and trading, and one would do well to conduct significant research into the Darvas method and the CANSLIM method. I also recommend the work of Gary Smith, author of "How I Trade For A Living" and "Live The Dream By Profitably Daytrading Stock Index Futures." Now is the time to start looking hard at the stock market for the next group of big winners. They may not appear for a few months, but the easiest and fastest money made in the stock market is in the first couple years of a bull market. Furthermore, even if the next big rally turns out to just be an intermediate term rally within the context of a larger bear market, there will be a few stocks worthy of trading to catch that ride up. Do your homework, and your portfolio will benefit handsomely in the years to come!

Scott Cole is a real estate professional and stock and futures market trader and analyst.  In the 1990's he worked for two Commodity Trading Advisors and a hedge fund as an analyst and execution trader.  He continues to develop models and strategies for trading stocks and futures. He is the owner of several trading related websites, including http://www.kungfutrader.com and http://www.theultimatestocktradingsystem.com

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