This is focused towards the wekend investors. Usually over the weekend you'll run a scan for a list of stocks and buy it after certain conditions are met. You can use MSN Stock Screener to find the stocks. Use the Deluxe version, it is free and pretty good. I will post the criterias, the entry trigger, stop-price and profit-taking rules.

Here are the conditions.

Price Change Last Quarter Greater than 20%
Price Change Last month Less than 0%
Average Volume (Monthly) Greater Than 200,000
Last Price Greater Than 3
Last Price Near 52 Week High
3 Month Relative Strength Display only
Market Cap Greater Than 100 Million

This should give you a list of stocks. Put those on the watch list. If there are many stocks that show up, add another condition and limit it by a particular industry.

What are we looking for here?
We are looking for stocks that had a nice run up the previous quarter and is under some profit-taking right now. We are looking to buy it as it is ready to resume it's uptrend.

Entry-Trigger: Buy it the day after when closing price of the day is above the high of last week. So for example: Last week's high was 8.20, then wait till the price closes above 8.20. If on Tuesday of this week, it closes at 8.25, then buy it Wednesday morning.

If there are multiple stocks that meet the criteria and you can't decide which one to buy then use the Relative Stength number. Buy the stocks with the highest RS.

Stop Price: This is the price where you are going to sell if your analysis is incorrect and price starts going down instead of up. Our stop price is going to be the close below last week's low. If last week's low was 7.00, then you'll want to sell it the next day if today's close is below 7.

Profit Taking: If your analysis is correct and the price is moving up, then do not sell it. You want to take your profits when the price goes below the low of last 2 Weeks. In the above scenario:

Let's say we bought at 8.25. Our initial stop is 6.75 (close below 7).

WEEK LOW HIGH STOP
0 7.00 8.25
1 8.00 9.30 6.75
2 8.00 10.00 6.75
3 8.50 9.00 7.75 (last 2 week's Low is 8.00 and 8.00)
4 9.00 10.00 7.75

As the price keeps advancing, you trail your stop with it but at the same time you want to leave enough room so that you do not get out due to the random noise.

How many stocks to buy and how much to risk?

It varies from person to person. It depends a lot on your risk tolerance, size of the capital and so forth. You should not risk more than 2-5% of your capital on any 1 trade.
That way way have to be wrong 20 times in a row before you lose all your money. That could happen but very unlikely. It is the same as winning 20 in a row.

Let's say you want to risk $150. In the above example: your initial risk is $1.50 per share, So you'll buy 100 shares only. If your initail risk is $300, then buy 200 shares and so forth. Don't forget to factor in commissions and other events that are not under your control. If a company comes out with bad news after the close the stock could open way below your stop price. You do not want to lose all your hard earned money because of 1 trade, similarly do not expect to hit a jackpot either. If you hit a jackpot take it but the goal is to make consistent money. Slow and steady.

This strategy works well in bull market but NOT in a bear market. Identify whether we are in a bull market or a bear market(I have posted how I identify in another thread).

Misc.....
I have posted these in good faith and have back-tested over a period of years. I'm not sure when it will stop working. It could be tomorrow or in 20 years. Please test it on your own before you think that you have found the keys to the vault. I recommend you to run the scans, learn the conditions, and build a portfolio in yahoo finance before putting your actual money. If it seems to work for another 3-6 months, then go ahead and try small. If you are not seeing profits, then the strategy is flawed, do not use it.

I wish you all the best.

Please watch Buffet's video on WSJ today. I can post the link, but, it will not work.

TT,
Value investing in absolute sense has, is, and will be the same forever. Purely, as long as market is there, it has to be efficient. Because that is how mankind is made. You have to understand that Emini is just referring to the fact that there has been "shift" in places for "value." Hai na?

Happy Trading Day to ya all!

Best~!

-B

Emini,
I tried looking for the book you recommended. Allow me to point that it took me a while to look for it. So here is the correct name and the link

The Dhandho Investor: The Low - Risk Value Method to High Returns (Hardcover)
by Mohnish Pabrai (Author)

The content sounds very interesting. Gujju frens have been a treat in my life, some suckers, some frens forever kind. Most of them have either motels, multiples of them, or convenience store that too in multiples, and now the trend is to get into liquor biz, coz the working hours are better *wink*. Smart bunch of peeps who can count to the pennies.

ordered it, I shall let you know when I get done.

Best~!

-B

ps TT how about you getting one and reading it too, so that we have something in common to talk about as we evolve our thoughts in the due course of reading this book

Is this the true selling that we are seeeeeeing today?

Yes, it is a true selling day. This means it is tome to exit some of the positions. If you own 4 stocks get out of the worst performing stock. If we see another one in the next 2 days, get out of another 2 and so on.

Personally, I thnk it is just a pullback because usually the Nasdaq declines more than 2% when the S&P and DOW are down more than 1%.

On other note CMGI looked pretty strong. It was holding up all day but gave up towards the end. If the market rebounds in the coming days we'll probably see CMGI run up fast.

yeah, CMGI was definitely up. I'm holding onto Q for a while though.

I checked the after market at somebody bought the stock after 7:00 p.m. eastern for a mch higher price. How or why does that happen? Any explanation emini?

Bri:

Even before i delved into the stock market at age 16- when I was fresh from Nepal, I alys thought markets could never be efficient- I didn't have an explanation then and still don't have a complete answer today but as far as value investing is concerned, yes it has its merits in the fact that hidden gems can be uncovered- but that again is a violation of the efficient market hypothesis- by the time it reaches the masses, the value should have been absorbed by those privy to the information (by definition), ki kaso? That's the way I look at it.

And tomorrow, I'll probably go check out some mother's day's gifts. :D

Habe phun ebhreywan!

And yeah, Mohnish sounds like one typical Gujju.
I should buy it, but only after I complete my derivatives course. I need to get a job too

:P

CMGI and DYN are both doing good. Anybody still looking at the scans?

One of the things that I mentioned is how it is necessary to get out of losing trades and take the loss. If you guys recall from my other thread, I had recommended JDO and SIGA at one time. After we bought those, they actually went up for a while but started losing steam. We took the loss in JDO around 2.20 and sold SIGA for a small profit around 5.60ish. JDO is below 2 and SIGA is below 4 now.

Hey Emini, yep, CMGI was on my scan a while back but I had been kind of hesitant after I looked at the chart. I'm not sad I missed a boat, I'm just not sue if it will cross the 50 cent mark. If it does, I might jump in on this one with a pretty big chunk.

And taking losses, yeah, mine's improved drastically over last year. I make numerous small tiny losses, and then big wins that cover up for losses and give me a sizeable profits. I'm getting used to it- when I first started I used to almost poop in my pants.

I also size my positions based on the assumed risk. The higher the risk, the lower the exposure, but with higher gains, I add to them in the exact oppositve proportions to maximize my gains but hedge against any unexpected downturn with ones facing lesser risks.

Have a good weekend everyone!