Today the markets were up and the Nasdaq in particular. The Investor's Business Daily changed its market direction to a confirmed uptrend clearing the way for a stock purchase. Since thus far, I haven't purchased any stocks and thought we would do that and start learning. Rather than use my own money, I am using the virtual trading option in my online brokerage account at Optionsxpress so this wasn't a direct stock purchase. Since it was after hours, it won't be placed until the morning and at that time it will go through.
I purchased is High-Tech Pharmacal (HTIK). According to it's website, Hi-Tech is a specialty pharmaceuticals manufacturer and marketer of generic prescription and branded OTC products. So, we can use it as an example, I purchased on a whim only because it was up huge in volume.
You can't tell on the chart, but the stock shot up today to 21.42 on really heavy volume. This is a sign of heavy buying. I did check the stock checkup on IBD which was a 98. Other than that, I did not other checking.
View the full HITK chart at Wikinvest
This is not the right way to learn how to purchase stock. But I am doing it for a few reasons. First, so we can analyze the stock market investing decisions here and secondly to show exactly what I shouldn't do in making my stock purchases. Since this is a "paper trade", I thought it would make a good case study to get us started.
I did however, do the first thing right and that was didn't purchase stock online until the market was in a confirmed uptrend. I did not go the additional step of confirming sales and earnings. So, let's start by taking a look at that now.
Our first two rules are to make the best stock purchase is to see if earnings per share are over 25% and sales are over 25% and both accelerating.
I found this blurb on Yahoo! finance today.
"Hi-Tech Pharmacal released first-quarter results, posting record earnings of 73 cents per diluted share, up from 13 cents per share for the same period last year. Net sales jumped 175% to $43.5 million from $15.8 million a year ago. Shares surged 24.1% gaining $4.16 to close at a new 52-week high of $21.42."But that didn't really give me the full picture in an easy to see concise format. So, what I did was sign up for a 14 day free trial to the Daily Graphs Service.
The earning per share and sales figures were as follows:
EPS
- Jul 08 +152%
- Oct 08 +213%
- Jan 09 +229%
- Apr 09 +999%
- Jul 09 +462% (Increase over the +152% from the quarter prior
- Jul 08 +56%
- Oct 08 +58%
- Jan 09 +95%
- Apr 09 +83%
- Jul 09 +175%
Update: Oh, and I almost forgot to add that I need to establish my sale price which is 7% below what I purchase it at. I will update that tomorrow. I've also put a list in the sidebar of the trades we will making.
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