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Hot Stocks

Hot Stocks

The "HotStocks" List

Whether the market is weak or strong, there are always opportunities for profit in the market. This subscription provides a list of stocks that have had a recent strong advance. Just because they have already had an advance does not mean that their advance is over. If any have just declined, they may simply be offering a better entry point. There are those who know how to take advantage of such situatons.

Some traders simply hitch a ride and place tight stop losses in case of a pullback. Pullbacks should be expected. Therefore stop losses should be placed just beyond what is probable without breaking the stock's pattern. Letting a stock fall enough to break its pattern is not acceptable because "the pattern" is probably your primary reason for buying short-term positions in high-momentum stocks.

Some consider a stock in a strong uptrend to be, by definition, "in a "setup" configuration. Therefore, from that perspective, the lists provided consist of stocks already in a type of setup configuration. There is no guarantee that a stock will continue in that pattern, but many traders have learned how to profit from stocks that show that behavior. For them, such stocks present a relatively high probability of a successful investment. Another type of setup is when a stock reaches a new 6-month high, declines for 3 to 5 days in stairstep fashion (each high lower than the previous high), followed by a day in which the high is higher than the previous day's high with an increase in volume. This pattern suggests that, for some reason, there was a great deal of interest in the stock, causing it to surge to new highs. Then, profit-taking set in, causing an orderly decline for 3 to 5 days. Finally, new buyers entered the market to take advantage of the lowered price (causing the increase in volume and higher high). Such stocks may also appear on the "HotStocks" list and on the "Strongest Stocks" list. [They are also among those specifically sought by the "StockAlerts" algorithm.]

Other setups are explained and illustrated on the bottom portion of the "Stock Alerts" page of this site. Many of those setups will be difficult to find on a "HotStocks" list because its focus on such intense buiying, but for momentum investors, that is not a problem.

Our search begins with the Reuters stock database of over 8,000 U.S. listed stocks. After filtering out preferred issues (it is difficult to find charts on those) and stocks that did not trade at least $500,000 worth of shares, our algorithm ranks the remaining stocks based on their recent action. This is not a simplistic ranking of stocks by their RSI. We have created an algorithm that is far more complex than the RSI because we wanted a list of stocks with better pattern profiles than what is typically found by the RSI. On the "Stock Market Review" page, just above the "PAL Report" we list 5 stocks taken from the bottom of the subscriber list. Subscribers get a daily list of the 50 stocks ranked highest by our algorithm. Therefore, the stocks listed on the "Stock Market Review" page may be among the least attractive of the 50 stocks that subscribers get.

So, how does this list differ from the "Strongest Stocks" list? This list places greater emphasis on a stock's most recent behavior. The "Strongest Stocks" list allows more lattitude for recent sideways motion and more lattitude for pullbacks. A stock that is in a long-term rising trend will occasionally consolidate by declining a little or by moving sideways while traders take profits and buyers take new positions because of what they see as a bargain price for the stock. However, we consider the "Strongest Stocks" pattern to have failed if the stock does not resume its climb within a maximum period of two weeks, or if the stock triggers a stop loss. The algorithms are very different. The "HotStocks" algorithm tries to find stocks that are currently rising aggressively. There will still be stocks on the list that have had a pullback, but those will be fewer in number and the pullbacks will have occurred over the last few days. You are unlikely to see stocks on the list that have been going sideways for two weeks. The "Strongest Stocks" list will have a few more of those, but even so, it will not have very many.

However, because they both find stocks that have been unusually strong, there will be some overlap. On the other hand, each will find stocks not found by the other. The daily "Strongest Stocks" lists consist of 90 stocks. The daily "HotStocks" list consists of 50 stocks. Both lists are updated daily. 

One thing that is very important in working with these stocks is to look for overhead resistance.  This is best done by looking at several time frames (1-year, 3-year, and 5-year time-frames, for example).  

When stocks are moving at such steep angles, there may be no support/resistance patterns visible.  We found that we can get much greater clarity on support and resistance levels by looking at interval charts.  For example, try looking at a 20-day chart with 1-hour intervals.  Experiment with different intervals and time-frames to find the combination that works best for your situation.  Patterns that are not readily visible on daily charts often become visible on interval charts.  The interval charts will enable you to do a better job of finding entry points.  They make it easier to see pullbacks to moving averages and trendlines. 

Because the stock is being driven by strong investor enthusiasm, its underlying trend will be on your side.  You will have to experiment a little to get a feel for how to enter these stocks, but the price of the lessons should be well worth it.  Just remember to always protect yourself with stop losses. 

These stocks should not go sideways very long.  When they do go sideways, monitor the volume bars.  Up moves should have greater volume than down moves if the stock is consolidating (setting up for another advance).  If it is under distribution (setting up for a decline), the reverse will be true.

The following five stocks are taken from the bottom of the list that subscribers get.  Obviously, the the more highly ranked stocks are likely to be more interesting, but they are for subscribers only.  We do not pick the best stocks from the bottom of the list, but simply the bottom five.  So, sometimes there may be unattractive stocks listed here.  This short sample is updated daily.

Here is an out-of -date sample of what the lists look like.  The actual lists have 50 stocks arranged by our algorithm in the order their attractiveness/strength.

HotStocks List

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