Sunday, July 18, 2010

Great Stock To Buy Today

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It's pretty common that I get questions from my readers like what is a great stock to buy today? As I mentioned in my post called Stocks To Invest In Right Now, it's human nature to want to search for a list of hot stocks that will make our research easier. Unfortuntately, by the time many of these stocks reach these list and then to you, they've ran out of gas. Then when you purchase them, they go down. The reason is because the big money that drove the price up got out as you got in. Without them, the price has no where to go but down.

This is why it's important that you create your own list of potential stocks to buy and keep an eye on it. But how do you go about doing that.

The first thing I do is look for stocks that are breaking out on price and volume. I usually use a 2 percent price increase on 100 percent volume increase.

Once I have found stocks that have broken out like this, I then check their fundamentals. The first fundamentals I check are the Earnings Per Share Rating the Relative Strength Rating. Known as the EPS and RS, these ratings are the second threshold stocks that make my watch list must cross. I typically look in the IBD for these ratings and want them to be over 80. These seem to be the two most important ratings. I then also check the other ratings as well as the other fundamentals like sales and return on equity.

Once the fundamentals are verified, it's time to look at a stock chart. The thing is, just because you find a stock, doesn't mean that you should buy that stock today. You've got to make sure that the stock is near a buy point. William O'Neil calls this the pivot point. Learning how to identify pivot points is the next toughest thing to learn in the CANSLIM strategy. Expect to take some practice figuring out the proper buy point. Once you get a handle on that, you will be a much improved investor. Buying stocks when they break through on pivot points on higher volume is the central part of buying winning stocks.

So, find stocks breaking out and start watching them. Create your own hot stock market investing watch list and don't rely on the media to do it for you.

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