Now that the current outlook is "market in confirmed uptrend", it's time to take another look at the Stockbee IBD 200 trading techniques. I don't know Stockbee personally, but I really enjoy his blog because he seems to be sincere in helping people understand the market. While he does have a membership site (which impressively now boasts 1000 members) you can subscribe to, he does a thorough job of giving his readers a number of strategies that you can use for free. On the long side, he personally uses three types of strategies: Episodic Pivots, Top 25 breakouts and IPO (Initial Public Offerings).
One of his most talked about approaches I saw discussed was his post on using the IBD 200 to pick winning stocks. This list is published each Thursday and is the IBD's Top 200 Composite Stocks. These are the stocks with a SmartSelect Composite rating of 96or higher. If you want an electronic listing of these stocks, you can also subscribe to the eTables service which will give you the top 300 stocks. You can then take the top 200 (sometimes it's three or four more) and download them to a spreadsheet. You'll find this list under the main tables section. The eTables service is a real bargain really at $13.95 a month I think it is.
Once before, I tried this list and was going to buy one stock a day but it got out of hand pretty quickly. It turns out that it's just too many stocks to watch. I thought I would take another shot at experimenting with this approach to see how it goes only this time simulating one stock roundtrip from purchase to sale. To be fair to stockbee, I wanted to make sure that the market is in a confirmed uptrend. Even on his blog today, he says that his market monitor is showing that it's probably confirmed under his methods.
It's the weekend right now so it's not actually Thursday. Not that that matters but I wanted to disclose the day that I started. Anway, let's get started with this stock market investing project:
STEP 1: Obtain Investor Business Daily for Thursday for $1.25
Just a note that now the Thursday edition is $2.00. Inflation sucks. As I stated above, I am going to use the eTables service.
STEP 2: Go to page B5. Look at the list of IBD's Top 200 Composite Stocks
In today's paper it has been moved to page B1. This will probably change from time to time but will probably always be in the "Making Money" section. Use the main tables tab in eTables. Remember this brings the top 300 and you'll need to cut it down to 200.
STEP 3: Put this list in watchlist
I downloaded my list to an excel spreadsheet. I then took out all stocks rated 95 and lower. Next I put the stocks in the My Stocks List on investors.com. You can have five lists of up to 50. This is a great way to check price and volume as well as fundamentals.
STEP 4: Everyday identify companies from this list which had price increase of 2%, minimum volume for the day of 100000 and volume for the day is above yesterdays volume
OK. So I ran this list and here are the resulting stock tickers.
OPEN, LSCC, BFR, EC
While the stock market today closed higher it was on lower volume. That really shows here as only four stocks showed up.
STEP 5: Buy next day with 1% risk
OK. But which one. In checking the comments. Here is how he said to narrow it down. His first criteria was to use the one with the lowest float.
OPEN - 15.5 million
LSCC - 114.8 million
BFR - 56.7 million
EC - 2003.4 Mil
So in my simulator I put a buy order in for 22 shares of OPEN. I know it's not a cash purchase and the market is different than a simulator but will serve as a good test ground.
I'll review the selling rules after the buy goes through and will review everything after the market closes.
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