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 very strong advance. They are what we call "Hot Stocks." Just because they have had an advance does not mean that their advance is over. Even If any have just declined a little, they may simply be offering a better entry point. There are those who know how to take advantage of such situations.
Some traders simply hitch a ride and place tight stop losses in case there is 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 of its focus on such intense buying, but for momentum investors, that is not a problem.
Our search begins with the Reuters stock database of about 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. Subscribers get lists of the 50 stocks ranked highest by our algorithm (updated weekly).
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 a little more latitude for recent sideways motion and more latitude for minor 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. For some people, this is an advantage because it provides a less expensive entry point. The "HotStocks" algorithm, on the other hand, 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.
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 the buyer's 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.
If these stocks move sideways, they should not do so 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.
Remember that whether the market is weak or strong, there are always opportunities for profit in the market. It is almost certain that, even in the worst market conditions, there will be stocks in a strong uptrend. Those who learn how to invest in such stocks will almost always be able to find opportunities for profit. Just because a stock has already had an advance does not mean that the advance is over. Some stocks have sustained a strong uptrend for a year or more. If any have just declined a little, they may simply be offering a better entry point.
The subscriber list consists of the 100 stocks we consider to be the "hottest" listed in order of their "hotness" (with the hottest at the top of the list). Here is a free list of 20 stocks taken from just below the subscriber list (numbers 101 through 120). Only subscribers get lists of the 100 highest ranking stocks. However, this free list is taken from the top 120 of a database of approximately 8,000 stocks, and are will worth investigating.
Some folks who use our services have expressed a desire that stocks costing well under $5/share be included in our lists if they qualify otherwise, because such stocks often move more aggressively than more expensive stocks. To accommodate them, for this particular list, our filter will now admit any stocks on our lists that trade at least $5,000,000 per day, regardless of price. To get this figure, we multiply the 50-day moving average of the volume by the most recent closing price. Thus, a $1 stock might be included if it trades, by this reckoning, $5,000,000 per day and if it also satisfies the requirements of our search algorithms. Similarly, a $5 stock that averages 1,000,000 shares a day might be included. That way, a $50,000 investment can be made in a single stock and still represent about 1% or less of the stock's average daily trading value. Most of the stocks on our list will have an average trading value that is much greater than $5,000,000. Always check the size of your trade against the average value of the stock traded per day to be sure there is sufficient liquidity in the stock. You want to be sure that you can move in and out of a stock quickly and without significantly altering the price of the stock
For more on this service and an opportunity to subscribe, go to HotStocks
Data Updated Tues 5/26/20 After The Close of Market
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