Friday, October 2, 2009

Penny Stock Prophet Review

In my never ending quest for stock market investing information about how to make money with stocks, I came across a new program called the Penny Stock Prophet by James Connelly. The program is open to the first 500 that apply and it looks like they are filling up. From the looks of it, his students have had success with it. The gist of it is that Connelly was a broke MIT student who found success with buying penny stocks. I have to say that his results and those of his students are impressive. He has provided several testimonials about his program including documentation about many of his trades.

I think if you have been a reader of mine, I've been implementing the CANSLIM strategy, you should know that I am rather skeptical and not easily impressed even with these types of programs that are even thoroughly documented. It is proven that if you apply yourself to the study of stock market investing, you can absolutely make money in stocks today. That said, I have never been a big fan of these supposed "top secret strategies" that promise untold wealth. That's why you should take what is said with these type of online programs with a certain degree of skepticism. I suggest you take the time to watch the videos of some of his students by checking out the videos here at --> Penny Stock Prophet Reviews and make your own determination.

While you are going to have most of your success investing in the stock market finding stocks priced over $15 to $30 with strong institutional support it doesn't mean that you can't make money with other strategies and many deserve investigating. A lot of people are interested in the best penny stocks to buy and you are definitely going to need some sort of approach. The program on his website sells for $97 and if I think about how much money I spend learning about CANSLIM it has added up. About 6 books, several years of subscriptions to as well as some of it to the daily graphs service. What I've spent would total a lot more than that. After all, finding hot penny stocks will require some sort of system to uncover them.

Here's my take. If you are interested in penny stock investing and are looking for a way to broaden your stock market education and you want to play around with it, then I'd definitely sign up for his service. If you are not sure what direction you want to take as far as investing, then I'd probably hold off on getting in. Since it's a speculative type of investment, I would include it with other strategies like options, foreign stocks and contain the total amount of your portfolio that you devote to these types of investments to less than 10 percent of your total investments.

If I were going to buy penny stock, this is probably the program I'd choose. You can find out more about the program here: Penny Stock Prophet.

Thursday, October 1, 2009

Developing My Stock Market Investing System Part One

I wanted to spend a little time here today talking about my stock market investing system. As some of you may know, I've been working to structure my investment philosophy around the CANSLIM investment strategy created by William O'Neil of Investor's Business Daily. I've read his book How To Make Money In Stocks many, many times and have actually bought two editions. He's also written a couple of other books that are also helpful. One is called The Successful Investor and the other 24 Essential Lessons For Investing Success. These books combined have a wealth of information. Still, though, actually implementing his strategy and setting up a system that I follow each day is the challenge that I and every investor faces when they first get started.

A long time ago, a friend and I used to discuss our goals and objectives and our main goal was to sit around all day investing in the stock market. I think a lot of people have that dream, but very few people set out to actually accomplish it. To become a successful investor takes time, study, practice, patience and many failures to learn from. The learning curve can be shortened by picking the right system to begin with. I chose O'Neil's strategy because it made the most sense to me. The first most logical thing was his researching the most successful stocks of all time and identifying the characteristics of what made those stocks run up in price unique. Once he identified the similarities, he put them down into a set of rules that he set out to test and refine and then eventually build an investing empire of stock market information that is there for you and I to utilize. We live in a lucky time in that we have access to so much more stock market information than at any point in history. We can even get mobile access to our brokerage accounts and with the internet research just about anything that we might want to know about buying stocks.

Access to so much information and choice for that matter makes stock market investment choices that much more difficult because it is so easy to get information overload. Add that access, to an ever abundant selection of cable news shows devoted to investing with their stock market tickers and their constant gloom and doom about the stock market's twist and turns and it is easy to get overwhelmed. That's why the first order of business is to put together a step-by-step action plan of what to do each day to follow his system and make it my own. What you want to do is eliminate as much of the emotion from your investment strategy as you can. Avoid listening to the television pundits and the newscasters and start developing your own set of decisions that come from what the market tells you -- not what someone else's opinion of what the market is.

That being said, where do you start? Each day, I start with the IBD and reviewing how the stock market investments -- or the general market performed. By the general market, I am referring to the major market indexes which are the "M" in the CANSLIM acronym which are the Standard & Poor's (S&P) 500, the Dow Jones Industrial Average, the New York Stock Exchange (NYSE) Composite Index and the NASDAQ Composite Index. These general market indexes can't be viewed in a vacuum, you've also got to take a look at the volume on the NYSE and the NASDAQ and compare it to the day before. I try and get into the habit of analyzing the days market action to determine what happened on my own. Once I've done that, then I confirm what I thought the market did by watching IBDTV's Market Wrap. The Market Wrap is available a few hours after the market closes. They go through the general market performance for the day including the charts for each index summarizing the price and volume action. I've noticed that they do this video before the paper comes out and refer me to the Big Picture column.

After reviewing the price and volume action, the best stock market investing advice I can give you is to review the Big Picture column each day on the front page of the IBD. It's here that you'll find the definitive authority on what the current outlook for the market was by looking at the Market Pulse. Here they'll let you know whether the market is in an uptrend or a downtrend. This is a key factor in becoming a winning investor because you want to be in the market when the trend is up not down. I don't think that when I first subscribed to the paper years ago that they gave such a concise snapshot of as they do now which is really super and saves a lot of time. I recommend though, that you get in the habit of learning to identify the market trend on your own. On the surface, it may seem a quite simple process, but if you had to do it without the help of this column, I've made a handful of mistakes already in determining what it all actually meant. Once I have done that, the next thing I do is look at the actual charts for each index on my own and put the data in a spreadsheet. Actually, I do that first, before I have the paper tell me what happened to test my skill in figuring it out. Once I've done that, I then move on to the General Market page to review the charts in the paper as well. The best thing about using this system as they have structured it is that you are dealing with just what the market is telling you what happened and not some on CNBC or CNN. There's no hype, it's purely market data you are dealing with. Then, if you do happen to hear what the market did, you can know the real story.

Here's a snapshot of a spreadsheet when I first started it.

I've started recording what I think the overall market direction is and included the rules that have been developed to do that. One of the most confusing things that I learned when I was really putting this all together was that their is a lot that goes into figuring out the overall market trend. I took some time to review the ASKIBD feature and review the frequently asked questions section for everything I could find on it. I even went as far as calling IBD's help desk to get a better feel for what a 'distribution day' is, what a 'follow through day' is and more. For most of us, though, just using the current outlook in the Market Pulse is sufficient. If you are like me and want to track it yourself and learn how it all works, don't be afraid to call them and ask for help if you are a subscriber, they'll be glad to help from my experience. Don't expect them to know everything though, and don't expect them to pick stocks for you. They are in the information business. Actually deciding what to do with the information is up to you, the investor.

To further help you locate these indexes, I've put together three videos to help you. The first one talks about how to use to view the indexes and the companion charts. Here is video one:

In the second video, I talk about the finding the Big Picture column in the eIBD and in particular the Market Pulse box which includes the current outlook.

 In this third video, I talk about how I've started keeping track of the general market direction in a spreadsheet I've been putting together.

 I think that as far as the "M" in the CANSLIM acronym, I've developed my strategy of determining overall market trend through a combination of the charts, videos and paper at Now it's time to move onto the next phase and that is stock market selection.

Buy And Sell Stocks

As we've been discussing here, before we buy and sell stocks, we need to work with the stock market today and not against it. Your stock buys are more likely to go up in value if the market is in an uptrend. So, far, as I've been watching the stock market investing data and analyzing it according to CANSLIM principals, I am learning to understand the overall market trend and the concept of distribution days. Those are days when the market closes lower by at least .2% on volume higher than the previous day. While the S&P 500, the Dow and the NYSE all traded lower, they avoided a distribution day. The Nasdaq did not however.

Once I looked at the data, I then watched IBDTV (free to nonsubcribers) which confirmed what I had decided and also said that today's IBD would change the current outlook to "Market Uptrend Under Pressure". When you are first learning how to buy and sell stocks like we are here, this is a redflag to us that we might want to sit out until it changes back to "Market In Confirmed Uptrend".

Yesterday, I called the Investor's Business Daily to ask them what the current outlook in the Market Pulse section could say over time. I was told that there was one additional status message and that is "Market In Confirmed Downtrend". I wasn't sure that the person knew what they were talking about so over time we are going to note the possible current outlook messages. Right now we have two and I'll add those in the sidebar.

The key for us as far as how it affects us as we make our buy and sell stock decisions, this would be our signal to start exiting our stocks. I've yet to read tonight's Big Picture column and I'd expect it to say something along those lines. It will be interesting to see what the market does over the next several sessions to see if more selling by institutions takes place.

If you remember from my other lessons about buying stocks, then you will know that these big money players drive the market. This is because they buy in such huge dollar amounts that it drives up the prices of stocks. Once they start exiting stocks, it has the opposite affect. That's why we have to pay close attention to the current stock market outlook today and everyday for that matter.

Now that I am starting to get a handle on the current market outlook in today's stock market, I'm going to focus on how to buy and sell stocks online using the canslim methods.