Articles tagged education

What makes a stock go up 25% plus in a month

 

As many of you know, everyday I study stocks up 25% plus in month. The idea of the study is to find what factor can lead to stock making a 25% plus kind of move in a short period of time like say a month. If we can understand that then we can scan for stocks like that and try and capture part of the move.

This is an ongoing project and every month I update the criteria list in terms of importance. Here is the latest version.

What matters in order of importance:

  1. Prior neglect. This is the single most important criteria. Unknown stocks make big moves.Stocks with prior neglect/sideways move/consolidation prior to breakout make big move. Neglect comes in various forms.
    1. Financial neglect: A long period of time where stock had no growth. Longer the better.
    2. Price Neglect: A long period of time where stock had no meaningful price rally.
    3. Volume/liquidity neglect: Long period of time where stock had below average daily volume.
    4. News/attention neglect: No analyst coverage. No major news for months /years.
    5. Ownership: low funds ownership
  2. News catalyst. Most 25% plus kind of moves start with some news or new information. News on neglected stock precipitates the move.
  3. Sector. This is the second most important criteria.  Most of the time a sector will catch fire and many stocks in the sector will burst out with great force. Rare earth mineral is one recent example. Cloud computing was another theme few months ago. Solar sector was another recent theme. Currently Communication equipment and Oil and gas sector is in play with some big moves in sector. Sectors often remain hot for few weeks to months and then go in to correction or reverse. Sector moves happen very quickly and by the time most people can recognise it the move might be over or the big movers in that sector would have peaked. After lot of research on this factor I figured out the exact time frame one must use to spot a sector trend. That learning is factored in to the Bluefin Sector50 and Emerging50 list.  
  4. Range expansion. All 25% plus in a month start with a range expansion. Most of the time this range expansion is 4% plus and is accompanied by volume surge. This is the foundation of the Stockbee breakout method and over 10 years of studying this list this has remained my constant finding.
  5. Stocks with float below 100 million dominate the list. 65% or more of the stocks which make big move in a month will have  less than 30 million float. Probability of a stock with 100 million plus float stock making explosive move is low.
  6. Stocks priced below 20 make bigger moves than stock priced above 20. 70 to 75% of the stocks that make 25% plus move in a month tend to be priced below 20.
  7. Bulk of the 25% move in a month happens only in 4 or 5 days. What it means is if a stock makes 25% move in a month out of that almost 20% move will happen in 3 to 5 days. Stock breakout and have 3-4 days of big price surge and then the momentum slows down or there is a pullback. This has clear implications for setting your exit strategy.
  8. At the beginning of 25% move stocks breakout above 105 trend intensity readings and remain above the readings for the entire duration of the move.
  9. Large gaps are not good. Stocks which have large gaps do not move much post their gap. Stocks with gaps below 10% or no gap are better stocks to focus on if you want to find stocks with 25% plus potential.

What does not matter:
  1. Earnings
  2. Sales growth
  3. Margin
  4. IBD ratings
  5. P/E
  6. Distance from 52 week high

The factors that are important for a stock making 25% plus move in a month are different from factors that make stock make 100% plus move in a year.

Similar to the study on stocks up 25% plus in a month I do a study of stocks that double in a year. Stocks that make big moves on the yearly time frame have different dynamics driving their move. In next few weeks I will be studying 500 stocks up 100% plus this year and will let you know of my updated study on the same.

Recently I attended the Mark Minervini Master Trader Program and in that I learned the importance of building a pattern library based on historical precedent analysis. Currently I am in the process of developing such Pattern Library. Skytrader is working with me on building a large pattern library where I intend to document a large number of such stocks and their patterns.

Why I study stocks up 25% plus in a month everyday

 

TZOO- Travelzoo Inc

 

Come rain or shine, everyday the last thing I do in my daily market analysis routine is to run a scan for stocks up 25% plus in a month. I run the scan, boil myself a pot of tea and systematically study each of them. I want to know:

 

  1.  what makes a stock go up 25% plus in a month. 
  2. How does it start the move
  3. What are the volume patterns during the move
  4. What are the price patterns during the move
  5. What was its momentum ranking before the move started
  6. How did its momentum ranking progress during the move
  7. What kind of pullback did it have
  8. In how many days did it make 25% plus move
  9. What is its float
  10. What was its dollar volume at breakout
  11. What was its p/e, p/s, roi, margin, p/b, peg, debt to equity, 
  12. What was their eps growth
  13. What was their sales growth
  14. What was their IBD ranking
  15. How far are they from 52 week high or low
  16. What was its price trend for last 1, 3, 5 years
  17. What was their sector relative strength
  18. What was their short interest
  19. What was the insider buying trend
  20. What was the trend intensity readings at breakout
  21. How did the trend intensity readings progressed
  22. What was the news on the stock for last one month
  23. How far is this stock from last earnings or upcoming earnings
  24. When did the stock IPO
  25. 25 What is its fund holding trend
and so on. 
 
All this information is publicly available freely. The tools I use to do this analysis are:
  1. Finviz
  2. Moneycentral
  3. Google Finance
  4. Dailygraphs
  5. Investor.com
On most days there are not many stocks meeting this condition so it takes 15 minutes to do it. Once in a while you get 200 plus stocks, then it takes a hour to do this.
 
The objective is clear to develop a model of stocks that make big move in short period of time and try and capture couple of moves in a year. The understanding from the exercise goes in to building better scanning criteria and validating or invalidating commonly touted trading wisdom or beliefs.
 
You will find answer to questions like :
  1. does significant earnings surprise move stock
  2. does nearness to 52 week high matter
  3. should you focus on high priced or low priced stocks
  4. should you focus on high daily average volume stocks or low daily average volume stocks
  5. does IBD eps ratings matter
  6. does float matter
  7. what period relative strength/momentum  is best 
  8. why prior period gains are most critical to picking winners
While it is difficult to generalize things because every phase of market has different kind of stocks making 25% plus moves, there are certain common themes you can find and the common themes in terms of factors that drive a stock to make 25% plus move in a month are:
  1. Prior neglect
  2. Catalyst. Big moves start with some catalyst.
  3. Sector momentum is best predictor of short term probability of a stock making a big move
  4. Price momentum is next most important criteria
  5. Float, low price, low dollar volume prior to breakout are good
Rest of the factor really do not matter. In the short run fundamental factors do not matter. Immediate catalyst and sector momentum is most critical factors on a month time frame. 
 
How can you use this information in day to day trading. Focus on stocks with high sector momentum or sector catalyst (Bluefin Sector+price momentum and Emerging Opportunities scans). Focus on stock with immediate catalyst (Episodic Pivots). All things being equal low priced, low dollar volume and low float stocks tend to make biggest move.
 
But above all almost every move of 25% plus in magnitude in a month starts with a 4% breakout signal. Now how valuable is that information to you if you know how to exploit it.....
 

 

 

Stocks up 25% plus in a month:

 

ACAT,Arctic Cat Inc

ACTG,Acacia Research Acacia Tech

ACTL,Actel Corp

AMKR,Amkor Technology Inc

APAGF,Apco Oil & Gas International

APEI,American Public Education` Inc

AREX,Approach Resources Inc.

ARII,American Railroad Industries Inc

ATML,Atmel Corp

AUMN,Golden Minerals Co

AVEO,AVEO Pharmaceuticals Inc

BAK,Braskem Sa

BCPC,Balchem Corp

BID,Sotheby's Holding Cl A

BMTI,BioMimetic Therapeutics Inc

BONT,Bon-Ton Stores Inc

CATY,Cathay General Bancorp

CDXS,Codexis Inc

CGNX,Cognex Corp

CGV,Cgg Veritas

CKEC,Carmike Cinemas

CLU,Cellu Tissue Holdings Inc

CMCO,Columbus Mckinnon Cp(Ny)

CMTL,Comtech Telecommun Corp

COCO,Corinthian Colleges Inc

CPLA,Capella Education Company

CRAY,Cray Incorporated

CRXL,Crucell Nv Ads

DDMX,Dynamex Inc

DGII,Digi International Inc

DGIT,Dg Fastchannel Inc

DHIL,Diamond Hill Investment Group Inc

DHX,Dice Holdings Inc

DIN,Dineequity Inc

DMAN,DemandTec Inc

DSW,DSW Inc

DUF,Duff & Phelps Corp

EBIX,Ebix Inc

EDMC,Education Management

EPIC,Epicor Software Corp

ESI,Itt Educational Services

ETH,Ethan Allen Interiors

FMCN,Focus Media Holding Limited ADS

GBX,Greenbrier Companies Inc

GENT,Gentium SpA

GIFI,Gulf Island Fabrication

GPRE,Green Plains Renewable Energy

GTLS,Chart Industries Inc

GYMB,Gymboree Corp

HAWK,Seahawk Drilling Incorporated

HNR,Harvest Natural Resources Inc

HOS,Hornbeck Offshore Services Inc

HWKN,Hawkins Chemical Inc

ID,L-1 Identity Solutions Inc

IL,Intralinks Holdings` Inc.

INCY,Incyte Corp

INET,Internet Brands` Inc. 

IOSP,Innospec Inc

IVN,Ivanhoe Mines Ltd

JASO,Ja Solar Hldgs Co Ads

JBL,Jabil Circuit Inc

JCP,J.C. Penney Company Inc

JDSU,JDS Uniphase Corp

JOBS,51job Inc Ads

KCP,Kenneth Cole Productions

KEI,Keithley Instruments Inc

KITD,Kit Digital Inc

KMX,Carmax Inc

KNOT,The Knot Inc

KNXA,Kenexa Corp

KVHI,Kvh Industries Inc

LBY,Libbey Inc

LCRY,Lecroy Corp

LDK,LDK Solar Co Ltd

LGL,LGL Group Inc

LINTA,Liberty Media Interactive Class A

LOPE,Grand Canyon Education

LULU,Lululemon Athletica Inc.

LYTS,Lsi Industries Inc

MAPP,MAP Pharmaceuticals

MDVN,Medivation Inc

MEAS,Measurement Specialities

MEDQ,Medquist Inc

MIM,Mi Developments Inc

MIPS,Mips Technologies Inc

MOTR,Motricity Inc

MSB,Mesabi Trust Cbi

MSCC,Microsemi Corp

MSFG,Mainsource Fncl Goup Inc

MSSR,McCormick & Schmicks Seafood

MXWL,Maxwell Technologies Inc

MYE,Myers Industries Inc

NVTL,Novatel Wireless Inc

NZ,Netezza Corporation

OCLR,Oclaro Incorporated

OICO,Oi Corp

OMAB,Grupo Aeroportuario Del Centro

ONE,Higher One Holdings Inc

PBH,Prestige Brands Holdings

PEGA,Pegasystems Inc

PGI,Premiere Global Services Inc

QLTY,Quality Distribution

QNST,QuinStreet Incorporated

RAX,Rackspace Hosting

RDWR,Radware Ltd

RECN,Rscs Connection

RVI,Retail Ventures Inc

SCOR,Comscore Inc

SCS,Steelcase Inc

SCVL,Shoe Carnival Inc

SGEN,Seattle Genetic

SGK,Schawk Inc

SNIC,Sonic Solutions

STEL,Stellarone Corp

STRT,Strattec Security Cp

STU,Student Loan Corp

SURW,Sure West Communications

SVNT,Savient Pharmaceuticals Inc

SWIR,Sierra Wireless Inc

TESS,Tessco Technologies Inc

TGA,Transglobe Energy Corp

THMD,Thermadyne Hldgs Corp

THO,Thor Industries Inc

THRX,Theravance Inc

TPCG,TPC Group Inc

TQNT,Triquint Semiconductor

TRGL,Toreador Resources Corp

TWI,Titan Internat Inc

TZOO,Travelzoo Inc

VHC,Virnetx Hldg Corp

VSEC,Vse Corp

WNC,Wabash National Corp

ZGEN,Zymogenetics Inc

ZNH,China Southern Airlns Co

ZUMZ,Zumiez Inc

 

How to find short opportunities :Part 1

 

The market has had a approximately 10% move from its bottom in last 30 trading days before reversing hard. In the last 30 days some stocks have made big moves and some stocks lagged the market. Both of these kind of stocks offer opportunities for short sell. During market corrections or bearish phase stocks which have ran up a lot correct 20 to 25% and laggards start going down. You have short opportunities at both end of the market. You can look for buyer exhaustion setups in stocks that ran up a lot and you can look at breakdowns move in stocks which were under performing during the rally. 


The following 100 stocks are top ranked stock by % gains in last 30 days. Stock priced below 5 are eliminated and stocks with less than 100000 average volume in last 4 days are excluded to calculate top 100 list.
 
ABG
ADCT
AEIS
AFFY
AGCO
AGO
AGU
APC
APL
ARGN
ARNA
ASYS
ATAC
AXL
AXTI
BC
BCS
BID
BP
BUCY
CAGC
CCO
CGA
CLF
CNH
CRUS
CTXS
DCTH
FDML
FOE
FSYS
FUQI
GENZ
GRA
HEAT
HEW
HGRD
HTHT
IDSA
IGTE
INCY
INFN
ING
IOC
IPG
IPGP
ISLN
IVN
JASO
JKS
KRA
LAD
LDK
LFL
LIZ
LLEN
LNCE
MBI
MDCO
MNTA
MOD
MTL
NEWP
NR
NTGR
NTY
NVMI
OEH
ONXX
OPLK
OWW
PCLN
POL
POT
PPCO
PTRY
PWER
RES
ROC
SCMR
SDRL
SFN
SMP
SOLF
SOLR
TEN
THRX
TKR
TKS
TRS
TRW
TSTC
UCTT
UIS
URI
WHX
WLK
XJT
XTXI
YONG

 



Some leading stocks by price % change in last 30 days are:

ARNA up 109%

 

JKS up 102%
 


And you can see more stocks ranked by % change like this...
 
 
If you see the above stock IDSA, it has corrected 19% in last 6 days from high. Like this many of the strong stocks will have sharp pullbacks if the market continues its down move. A stock like JKS is vulnerable to 10 to 20% correction (JKS has earnings due on16th so be careful). 
 
Some of these 100 stocks will  pullbacks 15 to 255 in next couple of weeks  if market continues to go down. They  offer   opportunities on short side. In a broad based correction all strong stocks are vulnerable to such correction. And in this market we have seen that when things go up everything goes up and when things go down everything goes down. So if you are looking for quick profit short opportunities the 100 stocks above offer you those opportunities. On a list like this you can either run a breakdown scan or a swing exhaustion scan. That way you will get only 5-6 opportunities to work with instead of 100.

To find  these 100 stocks using Telechart, you need to be familiar with the "Custom Date Sort" function. Using the "Custom Date Sort" you can sort the "Common Stocks" for the period between July 1st  (the lowest point in the rally) and August 9th (the highest point in the rally). July 1st was the bottom of this uptrend. Once you get the sort you need to select Top 100 stocks by % change between those 2 dates. You can also look at Top 200 stocks instead of 100 if you are looking for more opportunities

If you want to use the filters I used to eliminate low priced and low liquidity stocks then you need to first apply the filter and create a Easyscan and then sort the Easyscan list by the Date sort.

Here is a step by step way to do this:
  1. Create a liquidity PCF: MINV3.1 >= 1000 This gives you stocks which had minimum 100k volume in each of the last 3  trading days excluding todays trading day.
  2. Create a Easyscan with following conditions:
  • Common Stocks
  • Price per share>5
  • Liquidity PCF =true

Once you have this list setup go to Custom Date Sort and set sort date as:

Start Date: 07/01/10
End Date: 08/09/10
Select % change
and then run the sort.

This will sort your newly created Easyscan by the % change between those two dates. Select top 100 or 200  stocks from that and create a new watchlist "Rally Leaders". On this list you can use two kinds of scans to further reduce number of opportunities:

Stockbee Breakdown Scan

C <= .96 * C1 AND V >= 1000 AND V > V1
 
Or
 
Stockbee Swing Exhaustion Scan
 
C < C1 AND C1 > C2 AND C2 > C3 AND C1 > O1 AND C2 > O2 AND C3 > O3


Keep an eye on these leaders for breakdown opportunities. If market continues its correction many of them will offer 10 to 25% opportunities.

In second part I will talk about how to find laggard 100 to 200 stocks during this 10% rally and look for short opportunities in them.  In Part 3 I will have a video to show you how to do this. I showed a quick way to do this in Daily Market Analysis Video today.

If you are new to this site

 

If you are new to trading or to this site , you will at first feel lost. You will see strange language and terms being used.  You will have to jump couple of orbits to start understanding every thing. Which will take time, patience, and persistence.  

 

 

When I was a beginner and struggling trader I wrote to several well known traders and some Market Wizard asking them for help. I offered to wash dishes for them if they would offer me guidance. No one replied to my request and those who replied asked for tens of thousand dollar. So I learned things on my own.
 

The reason I run this site is I know how lost I was at beginning of my career, now having achieved some degree of success in this career, if I can help some beginner learn and help  him shorten his learning curve I would be giving back to the field. 

 

We were all beginners ...............


Most of the current members have been around for 2 or more years. 95% of the members renew their subscription. Any member who has put in effort and struggled through initial few weeks and months and once got it right has found success on their own. You can ask the members who have been around for year plus  and they will tell you that . All of us were beginner at some stage and had exactly the same problems like you are facing currently. 

When you are a beginner in any field or to a new setup or to a new method,  there is big cognitive load. Whenever we try or attempt doing something new where we do not have sufficient expertise , our short term memory gets loaded and we are unable to do the job fluently and efficiently. Repeated practice reduces such cognitive task. To master a setup you need to organize around it and practice it then the cognitive load decreases. 

In the beginning you will have many questions and if  you frame your question properly several members will answer it. They also had encountered same issues when they started out. 

You can not trade if you do not have software......

One of the first thing you need to have ,if you want to succeed in trading is right software and right broker. I would say first get the right software in place. You cannot learn trading unless you have a scanning software and also historical data. In learning stage you need to go through history and unless you have easy access to historical data you will not be able to learn much.

Your learning's will be very fast once you get a software, you will learn more in a month than you learned in a year. First get software and set it up properly. Once you do that  the discussion here or the ideas discussed here you will be able to see for yourself, they will not be some abstract discussion. You would be able to figure out whether they make sense or not.



Telechart Gold is my recommended software.........

When selecting a trading software look for something which is widely used by most traders. Often I come across new traders using some exotic software not routinely used by most traders. You are just complicating your learning phase by doing this. For a widely used software there are ton of resources to help you learn trading quickly. If you select some exotic niche software , good luck, you are on your own.

The most commonly used software amongst active traders are:
Telechart
Amibroker
esignal
Stockcharts
Trade Ideas
Trade Station
Bloomberg

Telechart is the most commonly used software by most traders. And it is the best starting point for most new traders. Once you outgrow Telechart then you can think of other things. Amibroker is second best choice. You need a bit of programming knowledge to use Amibroker. 

It will take you few weeks to months to become very good at using any software. That is typical learning curve. You can pray for miracles, but unfortunately that is the reality. So set your expectations accordingly. 

Within Telechart there are many options but I use Telechart Gold. 


First learn how to use software and broker........


Once you get Telechart go to Worden site and in the forums there are many videos explaining how to use the software. If you spend a week going through all the video on Worden site you will get very good grasp on how to use the software. Scans for every method I use have been discussed multiple times and every week I make a post with all the past posts related to the method. I will also be putting up videos of how to setup scans from time to time.

Once you set up your software the next important thing to look at is which broker to use. If you are planning to be a swing trader or a trader that is going to do at least 20 to 25 trades in a year, look at your choice of broker. The number one broker used by most active traders in Interactive Brokers. There is a reason for that. It is the cheapest and most reliable broker around if you are trading less than 1000 shares. 

Once you get broker take some time to learn how to place order, how to put a stop, how to close positions. How to access market data. How to use the brokers scanners. Most brokers have pretty good simulators which allow you to learn these things without risking actual dollars.

These two things, software and brokers are the first thing to get in place, if you want to trade profitably. 


It will take you 3 to 6 months or more to master the 2 methods......


Once you do that you will still have a learning curve of 3 to 6 month or more depending on amount of time at your disposal. Once you have the infrastructure in place, you need to understand how to use it properly. Most consistently profitable traders I know of had learning curve of 2-3 years before they became consistent. If you are expecting miracles then get a prayer mat. 

For each of the method traded here all the scans are done using Telechart. In some methods there are multiple steps. First a scan is done in Telechart then information is collected from other sites like Finviz, Moneycentral, IBD, or other sites.



Be aware of market situation......


You must also be aware of the market conditions when you decide to learn to trade. If you just decided to trade , your first to hundred objective should be to protect your capital. For active traders there are always opportunities in the market. Market is not going to run away from you. So if you are beginner you should first concentrate on setting things up. You can do lot of damage to your account if you start trading without ironing out all issues.


Only 3 methods are traded daily......


There are only 3 things traded here on daily basis:
Episodic Pivots
Top 25 breakouts
IPO

If you read last 3 months post you will see these methods have been discussed again and again and in next 3 months also they will be discussed again and again (skytrader would be activating the archives of old site later tonight). To me trading success is about mastering a setup. The more you trade and think about a specific setup like say the Top 25 breakouts, the more fluent you will become in trading them, you will start to understand the nuances of them. At some stage the setups would become part of you. If you master one setup you will find it easier to master other setups. 
 

If you methodically follow the direction and setup things and try and trade the method for 6 months or more you will yourself figure out whether this thing work or not. A site like this can hopefully reduce your learning curve. But the bulk of the work you need to do yourself. 

Ask questions.............


If you do not understand something ask questions on the site. Or you can email me at easyguru@gmail.com. Asking questions on the site is the best option , because most members here have been around for 2-3 years and know more about the methods traded here than I know. They will give you multiple perspective. This is a learning community and members stay on even after they mastered the setup and become consistently profitable, because they find something new to learn here.

Next week I will be conducting a Swing Trading Bootcamp. If you participate in it, you will further enhance your knowledge of swing trading and methods traded here. 

 

lesccohn Trading Plan Template

A comprehensive daily  trading plan template. File is attached for download. 

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