Friday, September 14, 2012

Update for Friday, September 14 - Method of Stock Selection and Entry

For those of you with Dropbox access, you will note that in the stock file has 166 New Longs and the ETF file has 26 New Longs. 

I've not listed the number of Affirmed Longs but they are even greater in numbers.

With so many equities firing long or reaffirming their long status, how to evaluate which ones should be in consideration?

The Dashboard tab of the stock file can provide some guidance. 

The stocks on this tab are selected based upon what I would consider "quality" data:
  1. The stock must be well above the 200d, 150d, and 50d MAs of price
  2. The stock must have each of these MAs in an up trend (slope is positive)
  3. Year over Year revenues must be > 2% and must be accelerating over a minimum of 2 quarters
  4. Year over Year earnings must be > 2% and must be accelerating over a minimum of 2 quarters

Provided the above is true, I then integrate the list with Pascal's repository file which contains EV data for each. I then sort based on the EV Rating, which combines numerous EV values into a single indicator that ranges from 0 to 100.

Many of the stocks at the top of this list are already extended well above their 10d EMA, which means they have been running faster than the day-over-day gains of the last 10 days. It is noteworthy to add these to a short-term watchlist, and review these for possible pull back and entry on the pull-back.

I'm a big fan of Dr. Elder's Force Index, not necessarily because it makes sense to multiply volume with change in price, but because averages and change in averages of these values can give us some confidence with what is going on in general.

Key criteria that I look for on entering a stock is to determine the status of various Dr. Elder parameters. On the day of entry I specifically want:
  1. The slope of the 13d MA of the equity to be positive
  2. The slope of the 34d MA of the equity to be positive
  3. The 13d Force Index of the equity to be positive
  4. The 2d Force Index of the equity to be negative

The first three in this list ensure that the stock is on a sustained up trend path and the last criteria means that it has pulled back in a local consolidation.

The trigger entry for me depends upon whether I'm aggressive or conservative:
  • Aggressive: the real-time stock price has taken out the previous day's close (price > close)
  • Conservative: the real-time stock price has taken out the previous day's high (price > high)

Looking down the EV list on the Dashboard page, if I select only those stocks with a Rating > 50, and apply the Elder criteria going into the open today (Friday, 9/14), I get the following list:


Everything else is over-extended.

Whether you like these stocks or not is subjective; they are on my radar list for possible entry today if they move above my trigger points.

As with everything, you are responsible for your own decisions, and I am not. Please do your diligence, and please take ownership for your actions.

Make it a good Friday, and enjoy the weekend!