9/02/2014

Everyday hunt for stocks with big ctalyst

Look for stocks with big catalyst everyday. You may not find them everyday, but once in a while they show up and just few of these big trades can make your year or sometime can change your life.

In order to find big winners you need a daily process that you follow to find them. If you follow the process day in and day out , luck will favor you and you will not miss a big opportunity. 

Many big earnings are a result of surprisingly good earnings. The Stockbee Episodic Pivots (EP) method focuses on finding the big winners.

EP is a very specific pattern post earnings that shows up on stocks with years of neglect. It is a very powerful pattern which results stock going up 100 to 500% in few weeks or months, obviously our first choice should be the one that goes up in few weeks. On large cap stocks it takes few quarters for them to go up 50% plus.
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IDSA was  very thinly traded stock with months of neglect prior to big earnings surprise.. It broke out on earnings day and in 17 days made 800% move. I did not have huge position like in other EP in this as it was really thin. But the 25% position  was still good enough position to make substantial  difference to the account.

Best Episodic Pivos are on low priced stocks with months or years of neglect and that have very low volume leading in to EP. The catalyst leads to buying frenzy and then it goes vertical. If you have small acount focus on these kind of lower volume stocks. 

BOOM is another example of this kind of explosive move post earnings. In 10 days it went up 400%. And in next 2 years after that first earnings it went up 20 times.

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Not many ideas will show up daily like this , but you have to be alert everyday to the possibility of finding big idea like this. 14 big trades like these have contributed to 80% of my profit in last 14 years.

3 to 5 big 50% plus movers post Episodic Pivots can make your year if you risk sufficiently on them.

A stock with big catalyst like earnings can make 50 to 500% or more move in next quarter or two depending on how neglected it is.

The primary focus for pre market work should be to find such big game changing earnings or other catalyst stock.

In a year chances of finding such big ideas are 1 to 12 but just one such big trade can make significant difference to your account.

Look at FB last year. It had blowout earnings. Before that it was neglected stock. I bought 50000 shares in pre market between 33 and 33.40 and in few months closed it near 60. In addition I bought calls on it to magnify returns.



Few big trades like these can significantly take your acount up. And that is why pre market you should focus on these opportunities.

When looking for Game changing catalyst always look for situation that is likely to result in explosive move in short period of time. During peak earnings season there is always a temptation to look at every earnings, many of them are just day trade or few days swing trades. They are not real game changers.

A genuinely surprising earnings in most cases leads to big gap up and huge pre market volume. A stock up in pre market on below 50 k volume is not what you want to focus on. Similarly a large cap up on 50k volume is also not important.

The objective of finding game changing catalyst stock is to find a stock that will increase your overall account by 15 to 20% in one trade. Which essentially means the stock should be capable of big move and you should risk sufficiently big on it.

Look for a game changing earnings surprise announced after hours or before market open. For this look at pre market gainers and last night after close gainers.

You want to see stock with neglect, that has significant first or second earnings surprise. If such surprise happens right at the beginning of a new rally then the move can last for weeks or months and the magnitude of move can be 50% to at times 1000% plus.

Big game changing catalyst kind of moves are Episodic Pivots that change the existing Wall Street perception about a company’s business and as a consequence its future price potential.

Earnings related Episodic Pivots are the most common and happen frequently. But they are not the only EP , biotech sector has its own kind of EP. Biotech move based on drug trial data. A loss making biotech can go up a lot on “potential” of drug approval which might or might not happen after many years.

Loss making technology companies also can at times go up based on future potential or sector moves. This tends to happen in later stages of bull moves.

From a practical process point of view focusing bulk of effort on earnings EP is good strategy as they are easier to understand and give you significant rewards for your efforts.

If you want to make serious money trading focus your daily efforts on finding big earings breakout.

8/31/2014

Momentum stock watchlist.


They have the mojo

Stocks with established momentum likely to breakout soon.


FB
TRGP
CSIQ
RDNT
AA
SLXP
NQ
AMRI
PPC
OVTI
Z

8/30/2014

Challenge all assumptions regularly

Market participants have lot of assumptions or pet theories, you should challenge these assumptions and form your opinions based on only what you personally can verify.

As you develop more skills and become ware of lot more steps you must regularly challenge old assumptions.

If someone says only buy stocks at 52 week high or only buy stocks above say 50 MA, you don't get into argument with them , but find out for yourself whether that assumption is true. Many times that condition is part of the setup they use, but that does not mean it is true in all conditions.

As you grow as trader you will find challenging old assumptions leads to new setup ideas and different profit opportunities. Many times as a trader you start trading a setup and gain expertise on it and gain confidence and then you become dogmatic about it. having invested lot of effort in making that setup work, you are too invested in it to challenge certain core assumptions.

That process is important to broaden your choice of setup and have conviction in your setups.

8/29/2014

Timing creates an edge


Good timing reduces risk and gets you in to fast part of a trend or a swing move.

While there are others things like equity selection and risk or leverage that determine your returns , crux of active trading still boils down to timing.

Momentum burst kind of swing trading methods try to time entry as soon as momentum is established. And the expectation is the momentum will continue immediately and accelerate. Or they buy just before the momentum burst anticipating start of a move.

If you time your entry after a move has started chances of trade failure is high. Especially for momentum burst kind of impulse short term moves of 3 to 5 days there is an edge in timing of entry and exit. If you enter a swing trade say on third day instead of first day of breakout, sometime it might work but then you do not have much edge.

Different setups and different kind of instruments require different kind of timing edges. The Lemonade Strategy for 401K I trade is at the heart a timing strategy. It times entry near extreme weakness in breadth. That ensures you are getting in at end of established bearish trend and entering at beginning of a new bull trend. Same way it exits near the end of established bull trend and avoids the down move. That is the only reason the strategy has avoided losses in all 14 years of use. 

Timing entry and exit creates edge for traders, if you want to make money trading find right time to enter and exit. 

If you want to find massive winners


Look for massive volume surge

If you are looking for longer term trends everyday look at stock with massive volume surge.

Massive volume surge on a stock at beginning of a move is common pattern in big winners.

Highest volume in lifetime of stock or highest volume in 3 to 5 years is what to look for.

But again it should be at the beginning of the move which means prior to that surge stock should not be rallying much for months.

Again this you can verify for yourself by looking at one year winner and looking at where they started their move.

If you look at the top 50 stock sorted by DT c/minl252, you will see 45 of them had highest volume in a year or mufti year in the beginning of their move.

What do these stocks have in common at beginning of the move : 

PLUG
BIOF
PEIX
GWPH
PBYI
ITMN
BITA
ICPT
JRJC
HPJ
ISR
VIPS
DGLY
ACHN
PTX
ERB
EDN
RDNT
AMCF
LIVE
ANIP
KNDI
FOLD
HZNP
TKMR
REX
NFEC
CTP
IG
BDSI
DRL
HGSH
XXII
ARWR
EVRY
MACK
SCOK
WLDN
CCIH
RCPT
MPAA
YRCW
GPRE
VTNR
CENX

Not many stocks on day to day basis have big volume surge.

To find stocks today with highest volume in a year you can create a scan in Telechart

v=maxv252

Or you can use Volume Surge Today column Pre Built Columns 
Many of the volume surge candidates setup for big move after their initial burst.

If you are looking for stocks likely to make massive moves start looking at stocks with massive volume surges, investigate them, build a watchlist of them and wait for a good setup on them to enter.

If you are a busy working person and just want to look at handful of stock everyday to research, this kind of approach is for you. 

If you are motivated to make big money , everyday research stock with big volume surge. You just need 2 or 3 good one in a year to make your year.

 

8/28/2014

Buying in anticipation of range expansion


CHE was a stock highlighted couple of days as in range contraction zone (RCZ). I bought it on that day in anticipation of possible range expansion and it had range expansion yesterday.

As I have explained in last couple of days stocks undergo range contraction and range expansion. Buying in range contraction zone in anticipation of range contraction can give you a low risk entry as you can quickly move your stop to break even on first range expansion day.

However not every range contraction zone immediately breaks out and also there is no guarantee it will resolve to upside. From range contraction zone the stock can also have range expansion in opposite direction.