Tuesday, March 24th, 2009
A system to get some order in fast-moving markets
The last few days have been exciting times in the market. The big gains mean that everyone is on alert for a possible new bull market.
I’ve been working more than I have in the past year or so running scans, looking for opportunities, crunching fundamentals, and trying to get a handle on whether we are, in fact, in a new bull move.
I constantly analyse the market, and maintain watchlists, but this ramping up of activity can be confusing.
One of the best methods of keeping tabs on what is what is to classify stocks into various categories based on how close they are to becoming an opportunity.
As you can see in the diagram above (click on thumbnail), when I run my scans I put stocks into six boxes:
Target - A stock in the target box is about to be traded. It has set up a strong chart pattern. I’ve usually put in a contingent order to buy the stock should it rise above a certain price. I’ve also filled in a variety of checklists, including fundamental, technical and general market checklists, to make sure the stock meets my system criteria.
Watchlist - Stocks on the watchlist are showing a lot of promise. They’re usually in the process of setting up attractive chart patterns. I’d say they have the potential to be traded in the next month or so, though there’s no hard and fast rules. I’ve often filled in a checklist on printed sheets of paper which gives me a closer look at their fundamentals.
Uptrend - Stocks in this section are in strong uptrends. Usually trading nicely above their 50-week moving average. But they don’t yet look like setting up bases where I can enter. But I constantly monitor them to see if they start forming nice chart patterns.
Short - This is similar to uptrending stocks, but the stocks are in strong downtrends.
Short watchlist - These are stocks that are starting to form bearish patterns and are being monitored closely for possible trades in the next few weeks.
Short targets - As with long trades, short trades I’m about to make go in this box.
I think Alexandar Elder recommends a similar system to this.
I’ve found it excellent into bringing some order to the market chaos, particularly in fast-moving times.
Word Count: 378. This entry was posted on Tuesday, March 24th, 2009 at 11:39 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
