r2i forum

Here is one strategy to invest/trade in stock market


1) Watch earnings closely (Website: http://www.briefing.com/investor/calendars/earnings/)
2) Pick the earnings gappers which are some what large caps (over 50 B Market Cap)
3) Pick a stock that has room to move higher; Meaning not a stock that is hitting 52 WK high. Nothing wrong with a stock which is hitting a 52 Wk its just that it will be hard to find a target to take your profits.


You only need 4 or 5 tickers. Less the better. Diversify is better if possible (not necessary). This way you will be able to manage your fund carefully and closely and take chunks out of your position along your way up.


You want to catch a trend. If SPY is on a trend, good stocks will trend along. So its critical to ensure that SPY is not in a down trend or when it is basing. As I write this article, SPY is in trend mode.


Once SPY is on a trend mode; The best way to catch a tread in a stock is to get in on a pull back to 9 EMA (shorter time frame); 50 SMA for even longer time frame. Any stock basing at 9 EMA which had a big earnings gap will eventually trend. Key for investing is to catch a trend and ride it with a stop loss and taking profits along the way. Its highly critical to watch for this pattern. Examples: PANW; AVGO; MMM; BA; MA; APPL; SWKS


Make a watch list of all the Earnings gapper (Stocks reported earnings gaps up by close of the session) and add them as you go through the earnings period. Wait for a pull back to 9 EMA. Then on the bounce of 9 EMA get in with a 3% stop loss. Note: 3% is a random number; Learn more about ATR here: http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators:average_true_range_atr to identify a proper stop loss. Avoid stocks with higher ATR




Establish initial Stop loss; Target 1; Target 2 and Target 3


Take profits when the stock hits your targets;


At Traget 1; Move stop loss to purchase price
At Traget 2; Move stop loss to Target 1; etc


With this approach you can somewhat ignore market noise and focus on the individual tickers. The strong earnings will not allow stock to fall too much plus the chances of bounce back will be higher in case of a pull back.


Other thoughts:
Usually while the stock is basing; it will be highly volatile but once the dust settles, it will start trending; When the stock is volatile, it will be very frustrating since it will be moving up and down and it will hit a moving average and bounce back which will make you feel like a dumba$$. This phase is called the battle between bears and bulls. You don't want to be in the middle of this battle. Best to be on the sidelines and wait until bulls win the battle.


Do not get scared at buying at higher prices. Think that you need to pay up for good quality product this applies to stocks too.


To create a watchlist I use: Stock charts. They charge $15 for basic where you can manage a smiple list and 25 to manage multiple lists.


Disclaimer: You take care of your wallet don't blame me for your loss.


Comments/Suggestions?

Holding this for any future comments

Or you could simplify your life and invest in an index fund. :))

heimat;595938Or you could simplify your life and invest in an index fund. :))

Yes, if you want to be happy with average returns - But I want more than average returns. Plus with my approach I can preserve my capital.

Desi2return;595931
3) Pick a stock that has room to move higher;

What did yo pick ?

Pls Let us know :)

Chakraan;595942What did yo pick ?

Pls Let us know :)

My intent is not to offer "fish" but to see if I can share an idea on how to fish

Can you employ your trading rule for the past 10 years and find out if you could outperform the market. If you could generate some alpha, it will sound a bit more credible (there is still no guarantee that your rule will make money in the future). How can you say otherwise that you can do better than an index fund?

Desi2return;595945My intent is not to offer "fish" but to see if I can share an idea on how to fish

spbos;595982Can you employ your trading rule for the past 10 years and find out if you could outperform the market. If you could generate some alpha, it will sound a bit more credible (there is still no guarantee that your rule will make money in the future). How can you say otherwise that you can do better than an index fund?

If I could I would.....but thanks for challenging me, I will look to see if I can find any historic info and do some analysis

Desi2return;595939Yes, if you want to be happy with average returns - But I want more than average returns. Plus with my approach I can preserve my capital.

Let me save you some effort and brain cells and give you two names that you should google.
Jack Bogle and Warren Buffett.

See what these people are saying about where to invest your money and report back.

heimat;596008Let me save you some effort and brain cells and give you two names that you should google.
Jack Bogle and Warren Buffett.

See what these people are saying about where to invest your money and report back.

I do have a higher % of my money in index funds and some of them have gone up even over 100% since 2010. Having said this, I know of folks who have made over 100% in one year by stock trading.

Even in the strategy that I outlined above, I am in favor of picking the companies that proved themselves through solid earnings numbers. Jack Bogle is in favor of indexing because he founded Vangaurd. Obviously his message to the masses will be to buy his products. He will go against his own company if he is telling masses to go buy stocks.

With regards to Buffett - Can you tell me how much of his wealth is in index funds? check out this article: http://www.fool.com/investing/general/2014/07/30/warren-buffetts-love-hate-relationship-with-index.aspx

He is an active investor in a basket of companies. If he is recommending others to do indexing they why is he not indexing?