Stockscores.com Perspectives for the week ending April 25, 2010
In this week’s issue:
Strategy of the Week
Stocks That Meet The Featured Strategy
It has been said that up trends build on worry and doubt and end with unbridled enthusiasm. Recalling the tech stock bubble in its infancy, every tech stock that was moving higher was met with pessimistic commentary. Analysts cited valuations that were too high as a reason that the up trend must end. Yet, these stocks continued to march higher, building with the confidence of the investors that bought them.
Early in 2000, the prices of these stocks were legitimized using new valuation models that seemed to be concocted with the same irrational exuberance as that which prevailed in the market. Everyone was making money and thus, everyone was happy to continue buying.
Of course, the bubble eventually burst, leading to a sharp and intensive sell off. Those who still believed in the technology dream stuck with their stocks like a sinking ship’s good captain. And they got punished.
This experience sits in the memory banks of investors and, when the next up trend begins to build, the fear of a repeat performance causes many to sit on the sidelines and watch the market go higher. With each week of price ascension, the doubt about its legitimacy lessens.
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Doubt causes investors to miss out on great opportunities. They look at what is happening in the world and transfer that perception to the stock market, failing to recognize that what is happening the world today has little to do with what is happening in the stock market.
The stock market is not about what is happening today. The job of the stock market is to look ahead, to guess at what will happen in the future. If you make your investment decisions based on what you know today instead of what you think could happen in the future, you are destined to be a very average investor.
Don’t worry about the stock isn’t, trade what it is.
If a stock is going up, it is because people want to pay more for it. Don’t fight what the market is telling you, just go with it!
Why do investors put so much emphasis on what might happen? Perhaps it is their need to hedge against pain. The desire to avoid losses keeps people from realizing great gains. Fear governs their decisions and causes them to not hear the message of the market.
Consider this simple question. How long does it take for you to sell a stock?
Today, with advanced in technology and the availability of the Internet from even your cell phone, the answer is less than a minute. So why do we think that exiting a stock that is in trouble is such a big deal?
You may not believe in the strength that the market is showing, but don’t let that doubt keep you out of a strong trending market. Trends do not reverse overnight. If a stock you buy breaks down and hits you stop loss point, sell it. You don’t have to ride it down to the bottom as a show of loyalty to your decision.
I can’t recall a market that ever made sense to me. This is because the stock market always leads the facts, we only find out afterward why a stock went up. Rather than try to be smart, just do what the market tells you to do. Being a good listener will make you more money than trying to make sense of what is going on.
This week, I ran a Market Scan that looked for an abnormal price breakout on abnormal volume. Lots of candidates, here are two stocks that stood out with a good chart pattern.
T.COB breaks through resistance at $1.25 after stalling under that price ceiling for nearly five months. The breakout was accompanied by strong trading volume. Support at $1.20..
CMS has formed an ascending triangle pattern over the past five months with resistance at $16. On Friday, it broke through resistance with abnormal volume, indicating it has a good chance to go higher. Support at $15.60.
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Tyler Bollhorn started trading the stock market with $3,000 in capital, some borrowed from his credit card, when he was just 19 years old. As he worked through the Business program at the University of Calgary, he constantly followed the market and traded stocks. Upon graduation, he could not shake his addiction to the market, and so he continued to trade and study the market by day, while working as a DJ at night. From his 600 square foot basement suite that he shared with his brother, Mr. Bollhorn pursued his dream of making his living buying and selling stocks.
Slowly, he began to learn how the market works, and more importantly, how to consistently make money from it. He realized that the stock market is not fair, and that a small group of people make most of the money while the general public suffers. Eventually, he found some of the key ingredients to success, and turned $30,000 in to half a million dollars in only 3 months. His career as a stock trader had finally flourished.
Much of Mr Bollhorn’s work was pioneering, so he had to create his own tools to identify opportunities. With a vision of making the research process simpler and more effective, he created the Stockscores Approach to trading, and partnered with Stockgroup in the creation of the Stockscores.com web site. He found that he enjoyed teaching others how the market works almost as much as trading it, and he has since taught hundreds of traders how to apply the Stockscores Approach to the market.
This is not an investment advisory, and should not be used to make investment decisions. Information in Stockscores Perspectives is often opinionated and should be considered for information purposes only. No stock exchange anywhere has approved or disapproved of the information contained herein. There is no express or implied solicitation to buy or sell securities. The writers and editors of Perspectives may have positions in the stocks discussed above and may trade in the stocks mentioned. Don’t consider buying or selling any stock without conducting your own due diligence.