A common question I get asked by Premium members is which stock should be traded when the next trade absolutely has to be a winning trade.
The answer is you want to trade a quality stock, not a riskier growth stock.
About 80% of all stocks in the various portfolios will beat on their next earnings release. This is because one of the ranking factors I use are stocks that have a history of beating on earnings and/or revenue. Of course the economic cycle has a lot to do with that too.
The second thing you want to do is to pick stocks within a strong performing sector. This is called top-down research and you absolutely must use it because institutional traders and money managers use it. The idea is to find quality stocks in top performing sectors.
Now that you know how to find quality stocks in sectors that are performing the best, now you need to determine a trading strategy that is working in the current market environment.
In the weekly Saturday Show I will let you know what trading strategy is working. You can also go to Motif Investing’s catalog page to see what strategies are working the best. Look in both the 30 day and 1 year time frames.
You can also watch CNBC and Bloomberg to determine what trading strategies are working the best as these financial media outlets often have institutional traders on that will say what strategies are working in the current market.
Using the Motif Investing page, let’s say we determine that Buy the Dip is a strategy that is working really well right now.
Go to a top performing sector page and select all the text from the spreadsheet. Now paste that text into a new spreadsheet on your computer. You are doing this so that you can isolate the ticker symbols easily. You can use a free spreadsheet program like Open Office or Libre Office. If you have a paid version of Microsoft Excel that works too. Paste the text you copied into a new spreadsheet. You will notice that the column with the ticker symbols is now isolated so you can copy all the ticker symbols in that column and paste into your favorite stock charting software platform. Some stock charting software let you import in a CSV file of all your stocks. In that case you just delete all the other columns except the one that has your ticker symbols in it, and then Save As a CSV file.
Once you have all the stocks in your charting software, you now look for Buy the Dip setups. You want a stock that has pulled back to uptrend line support and has done a candle over candle reversal off that level. Your stop loss is the previous swing low. You are also looking for stocks that have pulled back a little and are consolidating in a sideways move over the last few days. The only thing you must not do, ever, is to chase a stock higher. Always enter a stock on a pullback, then candle over candle reversal, or a consolidation (sideways) pattern. I repeat, never chase a stock higher if your next trade has to absolutely be a winner.
Trade Green my friends.