Saturday, July 31, 2010

Review Of Stockbee

I have several readers asking me to do a review of Stockbee. I talked about him in another article when I talked about the Stockbee market monitor. I don't remember how I ran across his site, but I am glad that I did because it's a wealth of information. While he details his strategies for free on his blog, he also has a membership site that now boasts over 1000 members. You won't find trial memberships and I think that's mainly because he focuses on one thing and that's the stock market -- not coddling people who can't commit. That's what you want him focusing on and he does it well.

It's rare that you find sites that really want to help their readers make money and he's explained on his site that all of his stock market investing strategies he uses. The membership just complements what he teaches to his everyday readers. Lately, he has used more video to walk through things and given his site a face lift.

As evidenced by what I know so far, he's been greatly influenced by William O'Neil's CANSLIM strategy and the IBD and that's probably why I like Stockbee so much. Because I like the IBD so much, I think it makes sense that I would also enjoy his stuff.

He spends a lot of time also being a cheerleader of sorts and urging you to really master your strategy and work on studying the market. In particular, he promotes finding setups that you can recognize when you enter stocks and perfecting your entry points. He speaks at length about what he calls episodic pivots which is one of his favorite strategies from what I can tell and lately he has been producing a list of top 25 breakouts, Stockbee really adds value to his readers. I know him best for his IBD 200 trading strategy which I am testing on this site and have been detailing in my Stockbee IBD 200 Trading Techniques articles.

Currently, it looks like he's running Swing Trading Bootcamp that starts on August 3. I don't know Stockbee and I doubt he knows me, but I'm confident that from what I've see, you might want to check out Stockbee's site to learn more.

Friday, July 30, 2010

Suckers Buy Penny Stocks

It's bad enough that the media almost always steers us wrong, the internet is just as bad with their constant push to get people to buy penny stocks. My view is that they are looking for suckers. Here's how I think it works. Some "investors" or Wall Street types get together in a room and decide they want to work the penny stock market. They know that the small investor likes these stocks because he can afford to buy them in round lots of 100. They also know that it's easy to believe that a stock can go from 50 cents to a dollar than to believe that one can go from $50 to $100. This is a myth that just isn't true.

Next, they get people to sign up for email alerts or buy lists of people looking for penny stocks to buy. While that's going on, they start looking at all of under performing lowest priced stocks that they believe can be manipulated. I don't know how they know which ones they can, and this is all theory anyway.

After they do that, they send out press releases about the company that appear to be "news" from independent journalist when in fact, they were probably written by the same people in on the deal and then submit these press releases through services anybody with a few hundred dollars can do.

Once that's in place, they then notify their students into buying penny stocks that they've got a hot one and it's time to invest. They pump the stock up in price with their own money and let the advertising (the press releases) sell you on the fact that this is true. You get in when you see the stock is going to go up. By then, they are on the way out and are the ones selling the best penny stocks to buy (at inflated prices).

Wait too long and you will see the demand crash and the stock is a low as ever, and you have lost money. This is a reminder that you shouldn't buy penny stock again. Only buy stock in quality companies that have demonstrated earnings and sales, not pipe dreams.

Don't be a sucker with your stock market investing program.

Three Steps To Investing For Dummies

I consistently get emails from my readers asking what is an easy approach to investing for dummies. Most of us are not traders and we can't sit at the computer all day studying the market. "WE" are the night traders. We look at the market each night. We look at our positions after the market has closed. And, we can't study hundreds of stocks a night. We want a simple system of stock investing for dummies like us. But we are not stupid, we're just pressed for time.

Here are three steps I would take if you are looking for an investing online for dummies approach.

Step One: Get a subscription to the electronic edition of the Investor's Business Daily. This will provide you with nearly all of the tools you need to succeed. With the electronic edition, you'll have it most nights by 9 pm ET. In the meantime, you'll have IBD TV Market Wrap and access to the stock checkups and charts on

Step Two: Pick one screen in the IBD to focus on and use it for all of your investment ideas and focus on stocks breaking out. You might use the IBD 200. Maybe the Weekly Review. Maybe the Stocks on the Move or even the Stocks in the News. Nearly all of the best stocks in the market pass through these screens. Focus on stocks breaking out on 2% price increase and a volume percentage change over 100 percent.

Step Three: Pick a stock with the strong ratings. Look for Smart Select Composite Rating, EPS and RS ratings greater than 80 and an the SMR, Acc/Dis and Group RS at least an A or B. Finally, make sure the earnings and sales for the most recent quarter are over 25% and the estimates are over the current growth rate.

Buy the stock the next day and cut all losses at 8 % of your purchase price. Using this "investments for dummies" approach will narrow down the list of stocks you need to look at on a daily basis and will also have you focus on some of the best quality stocks in the market to put on your stock watchlist.

Good luck with your stock market investing!

Wednesday, July 28, 2010

Another Stockbee’s IBD 200 Strategy Update

Another quick update on my Stockbee IBD 200 Strategy. The first stock that I purchased in testing his strategy through my simulator is Open Table, Inc. (NASDAQ:OPEN). The stock was purchased on July 12 and so far so good. Today, the stock closed lower on lower volume. The real story for this stock though is that it was highlighted in the IBD Stocks in the News column. I think this is a good sign that the stock was highlighted in IBD and am wondering how this will affect the action in the stock.

I've been watching volume really closely and am not quite sure what to make of it. Time will tell.

Earnings are scheduled to be released on Tuesday. You can learn more about the strategy from Stockbee's website. Check back with Stock Market Investing Today for more updates later.

Investopedia Stock Simulator

Over the past year, I've encouraged anyone new to use a stock market simulator. For the most part, I use the Investopedia Stock Simulator. It's fairly easy to use and I like the interface better than some others that I have used. One of the great features of the is the there are a large number of contests you can join and also you can message the participants. You can also set up your own games and invite your friends to play along.

We live in a time when you can practice stock market investing so much easier than in the past. Used to, to practice, you had to "paper trade" and do everything manually. It kind of reminds me of the old fantasy football days when everyone did their picks manually and someone calculated the statistics by hand each week. Thankfully, those days are gone and it's the same with investopedia.

If it were me though, I'd probably put the simulator together a different way. But for practicing, it does the job. Keep in mind that a simulator is just that, it's not the real thing. But professionals in all walks of life use simulators including airline pilots. They use them to hone their skills and prepare them for scenarios they may never face. Investing today requires the same approach.

While your life isn't at stake when you are practicing your stock market investing skills, you can derive as much benefit from as those pilots. How? By developing a system to your trading before you invest hard earned money. As I've tried to detail on this site, you want to follow this plan:

  1. Learn how to determine the market trend.

  2. Learn to screen for stocks.

  3. Analyze the charts for those stocks.

  4. Start picking buy points to watch for.

  5. Practice buying those stocks in the simulator so you can track the mechanics of what you have to do on a daily basis.

  6. Make checklist of those steps.

  7. Refine the checklist from what you learn practicing.

  8. Start investing real money and learn for real.

Investing with real money is the real true way to learn the skill of investing. Simulators like investopedia don't provide the same emotion or the same market conditions that investing with real money does. Get to the real money phase as soon as possible. Take the time you need, but that's when the real learning will take place.

Good luck investing!

Criteria For IBD 200

A reader asked today what the criteria for IBD 200 was and how stocks showed up on that list. The IBD 200 is a list of stocks that are ranked by the SmartSelect Composite rating. This is the IBD's own rating that they have created. It combines several factors all of which are not exactly known or else anybody could create it. What it is though is a summation of the rest of the stocks ratings like the EPS and RS ratings among others.

Every Thursday, they run a list of stocks called IBD's Top 200 Composite Stocks. These are the top rated stocks by SmartSelect rating. They typically contain stocks ranked 96 or higher. The great thing about this list is that it does provide many trading opportunities as I discussed in my posts called Stockbee's IBD 200 Strategy and Stock Market Investing For Beginners Using The IBD 200 which will outline some IBD 200 rules if you want to start trading this screen.

Even though it is only published on Thursday's, you can access the list daily by subscribing to the eTables service. The top 300 composite stocks comprise their main table in that service. You can then in turn download these stocks to excel which is pretty handy to have the IBD 200 in excel.

I find this much easier than either writing them down or copy and pasting them. I like to put them in the My Stocks List feature on because I like the information they provide.

The stocks in the IBD 200 change as the market changes. Just like any other screen, the stocks will come and go. Sometimes, the newest entrants might be the best to look at according to Stockbee. Like any other screen though, just because it appears here doesn't mean it will be a winner.

Always research every stock further.

Good luck with your stock market investing!

Stocks To Buy Now

As part of my daily stock market investing routine, I look at my stock market screens to see what stocks to buy now. These screens can fluctuate and some days they flash lots of stocks and on days like today, they only bring a few to the surface. Whether the market is good or bad, you should be on the constant lookout for quality stocks to buy every day. When the market is in confirmed uptrend, if the chart shows a proper buy point on a breakout, you could buy that stock right away or if the market is in a downturn, you could put the stock on a watch list to keep an eye on for later.

Finding the best stocks to buy right now is an art not a science. And, like any skill, only by working on it on a consistent basis can you improve your ability to pick winning stocks. Making mistakes will only improve your skill. So you can't be afraid to make them. They will just improve your skill. At the heart of this is the developing a system of bringing quality stocks to the surface and looking at them daily. And, while you can just listen to shows like Cramer's Mad Money and make your picks from there, you are better off developing your own list of potential winners.

If you are just starting out, here is what I recommend that you do. Based on your investment strategy pick a stock screen that will bring stocks to the surface that meet that strategies criteria. For example, I believe in the CANSLIM strategy. A good stock screen to watch on a daily basis might be the 52 Week New High List. These stocks would deserve further review.

However, this doesn't mean that just because a stock shows up on the 52 week new high list that I should expect it to be one of the best stocks to buy now but it deserves further review.

Today for example, I had two stocks show up on a screen I'm working with. They were:


But upon digging deeper into their fundamentals did I determine that I didn't like them. Had they been better fundamentally, I would have then looked at their charts.

Determining what stocks to buy now is a process you can learn to master. A commitment to daily and weekly learning is required. Keep working at it and you will get better. For more information on where to start, you might check out my Ultimate Buying Stocks Guide as well.

What Is A Distribution Day?

A reader asked me today what is a distribution day? O'Neil says that a distribution day is when a market index closes lower on higher volume. Technically, in order for it to count as a distribution day, the index must close at least .2% lower. Anything less than that and it doesn't count. Each day the IBD keeps track of the major indexes - the S&P 500, Dow Jones Industrial, NYSE Composite and the NADSAQ -- and determines what the current outlook is for the market.

When the market is in a confirmed uptrend, or the uptrend is under pressure, this is when you need to be on the look out for the institutionally selling. This shows up when the market closes lower on heavy volume that was a higher than the previous day and is called an IBD distribution day.

It is possible for one index to show distribution and another not. That's why the IBD keeps track for each index. While you can keep track of these days on your own, it's just as easy to subscribe to the IBD and let them keep track of it. It does make sense though to look at each index daily to determine what happened. A distribution day in of itself is not necessarily a bad thing, but when four to seven distribution days add up, it can turn the market. Knowing the market trend is important because you only want to invest in a market that is a confirmed uptrend.

To get a handle on how to determine the overall stock market investing direction, it's also a good idea to watch the IBD TV Market Wrap and read the Big Picture Column. Also refer to the How's The Market page in the Investor's Business Daily.

Good luck on your investing and let me know if you have any questions. We can tackle them together.


Tuesday, July 27, 2010

Stock Market Investing Today Recap

Here's my near daily stock market investing today recap. In case you missed an earlier article I wrote called IBD market direction checklist, one of the first things I do is check the market indexes to see how it affected the overall market trend. Today's action provided a couple of learning points about distribution days.

The first lesson is that just because the market closes lower on higher volume doesn't necessarily mean it's a distribution day. On the S&P 500, the index closed .10 percent lower. Distribution days are only counted if the decrease is .2% or more. So the S&P escaped a distribution day. I learned this a while back when a similar day occurred on an index.

The other lesson to be learned today is that distribution days don't stay in the daily count forever. They can be erased on either time or distance. The NASDAQ and the NYSE erased a distribution day because the gains had risen high enough to make wipe them out.

I'll have to research the requirements to see what the qualifications are to erase distribution days. This is a good example why it pays to take the time to decide what you think the indexes did and then compare it to what the IBD says. In this particular case, I wouldn't have caught that. Whenever that happens, you need to update your daily routine to account for your mistakes. Since I just go by what the IBD says and don't keep track it's kind of immaterial but it also is a good reason to subscribe to the paper.

Otherwise the indexes were mixed today but overall the condition of the market improved because of the ability of two of the market indexes to shed a distribution day.

The NASDAQ seems to be the strongest of the indexes despite the lower close on that index.

Overall the market in confirmed uptrend continues and so you still want to look over your stock market investing screens for a great stock to buy.

Good luck!


Great Stock To Buy

It seems everybody that visits my Stock Market Investing Today wants a list of great stock to buy. I discussed this earlier in an article called Great Stock To Buy Today. What surprises me most about the market is that stocks with great fundamentals don't always go up and stocks with lousy fundamentals soar. A better idea would be to create an article called great stocks to research today.

Anyway, here's a list of stocks that could be potential stocks to buy because they showed good price and volume action. Analyze each stock for it's fundamentals and then look at it's chart to determine buy points.


Of these stocks the one that I liked best and that might a stock to buy is Cummins (CMI). Here's the chart.

When looking at to determine if this is a stock to buy today, the first thing I noticed was that volume was up over 81% today on a higher price. I would definitely call this a breakout day.

After checking the price and volume action, I checked the earnings and sales of Cummins. The EPS change last quarter was up 317% which is great. The sales were up over 31% as well. The one thing that bothered me was that the data on IBD for sales didn't match the data on the stock checkup. When I get a chance I am going to call IBD and ask them what the deal is on the discrepancy.

When calculating a buy point, I was unsure whether to classify this chart pattern as a cup with handle or a double bottom. I elected to classify it as a double bottom. The high point on the middle of the double bottom pattern is $77.10 which would give me a pivot point of $77.20. The CANSLIM strategy recommends to not buy any stock that is extended 5% over the pivot point. If I take the closing price today of $79.43 and multiply it by 1.05 that equals $81.06. That would mean that I'm still within the 5%.

Let's say however that instead of a double bottom, it was instead a cup with handle. This would then create a pivot point of $75.48. Multiplied by 1.05 would be $79.28. This would make it slightly extended over the 5%.

In any case, as part of my learning process, I'm going to place a buy order in my stock simulator for $1000 of CMI and make it my stock to buy today. For more information be sure and check out my post called The Ultimate Buying Stocks Guide.

Good luck investing.

IBD Market Direction Checklist

Over the last few days, I got a request for an IBD market direction checklist. I think that was because I had written a few articles about the IBD market pulse. As you might know from reading my site, I have spent some time discussing what I consider the first step in your stock market investing journey and that is market direction. In fact, that's how I start each day. I look at the market and confirm the overall trend.

I also think that it's important that you take every step of your investment process and break it down in to checklist that you can follow each and every day. You should be working your way to a daily routine of sorts that you can follow day in and day out. One of the ways to make sure that you follow the same routine is to make a checklist. While a checklist in this case might serve as a memory jogger more than anything else, the longer the list of decisions you need to make becomes, the easier it will be to start to cut corners and leave steps out or forget things.

Checklists are the way out of that problem.

So as far as our first checklist goes, I want to walk you through my checklist for determining market direction using the IBD and link to a Google docs checklist that I might update from time to time below.

Keep in mind that what you are going to have to do is develop your own specific checklist that suits your own style. You might like what I've put together, and then again, you might not. The important thing to do is to think in terms of setting up an investing system that you can follow. This will also have the added benefit of removing some of the emotion out of your investment routine if you have already "pre-thought" your decisions.

Here is my link to my IBD Market Direction Checklist.

Monday, July 26, 2010

121 Stock Market Questions I Get

I've been writing about the stock market for about a year and four months. For fun, I thought I would make an article of 121 Stock Market Questions I get that I hope to answer on this site at some point. Because my site is so new, I don't think that I really have any readers yet. You'd think after a year I'd have a few. Thus is the lonely life a stock market writer. Here's my list for the evening:

Questions in no particular order.

  1. Can I make money in the stock market?

  2. What is the best time to play the market?

  3. What is the best penny stock to buy?

  4. How do I screen for stocks?

  5. What is the best investment I can make today?

  6. What investments are best for beginners?

  7. What happened in the stock market today?

  8. Can I learn investing from reading books?

  9. What is the best stock exchange to buy stocks in?

  10. What is the best online stock trading strategy?

  11. Can I earn a living stock trading?

  12. Can I buy a share of the market through indexes?

  13. How do I invest 10,000?

  14. Is stock market investing rigged?

  15. What makes stock prices go up?

  16. What is the best way to start online investing?

  17. Can I get stock charts for free?

  18. What effect does stock market news have?

  19. Where can I find stock picks that will make me money?

  20. Will the stock market crash today?

  21. What are some hot stocks to buy right now?

  22. Where do I find stock market quotes?

  23. Are the stock markets over priced?

  24. What is the stock ticker for Apple?

  25. Where is the best place to get stock market tips?

  26. Should I buy stocks in a foreign country?

  27. How is the Indian Stock Market doing?

  28. Can I learn stock investing on my own?

  29. What are the rules for value investing?

  30. What stock brokers are the best to work with?

  31. How do I read a stock chart?

  32. What determines a stock price?

  33. Is the stocks market the only way to make money investing?

  34. Would you buy penny stock now?

  35. Where should I be investing money now?

  36. What is market value and how is it determined?

  37. What is the correct way to do a stock analysis?

  38. Are stock investment vehicles safe?

  39. Is there any stock news sites I can trust?

  40. What is common stock and how is it different from preferred stock?

  41. Is the financial market about to collapse?

  42. Can I learn how to buy stocks?

  43. What is an online stock brokerage?

  44. Do you do a daily stock market analysis?

  45. Is stock market trading easy?

  46. How do you do your stock research?

  47. What stock trading software do you recommend?

  48. Do you publish a stocks to buy list?

  49. What are the best stocks to buy in today's economy?

  50. Are cheap stocks safe?

  51. Where can I get real time stock quotes?

  52. Does the stock market report the latest mutual fund buys?

  53. What are some of the best stock market tips you can give me?

  54. Should I buy small cap stocks or large cap?

  55. Can you predict stock market prices?

  56. What stock market software should I use?

  57. Can you make a living being a stock trader?

  58. Is the stock market inflated?

  59. What is the world stock market?

  60. What determines the market price of a stock?

  61. Where can I find stock information?

  62. What kind of return can I expect from stock investments?

  63. Can I get a stock market chart service for free?

  64. Who provides the best stock market charts?

  65. Have you read stock market for dummies?

  66. What is a stock symbol and where do I find it?

  67. Do you provide free stock tips?

  68. Is the India Stock Market just like the NYSE?

  69. What are the best books to study for stock market for beginners?

  70. What is the history of the stock market?

  71. What is a stock market index?

  72. Is an EFT (Exchange Traded Fund) at stock market investment?

  73. What is better, stock market technical analysis or fundamental?

  74. When does the stock market update?

  75. Does stock technical analysis work?

  76. What is the best time to make stock trades?

  77. What is the best stock trading system?

  78. Should I listen to stock trading tips I hear on tv?

  79. Are stocks trading on Wall Street?

  80. Where can I find value stocks?

  81. What is the best stock to buy today?

  82. Is it a good idea to be investing stocks dividends back into the stock?

  83. What is better mutual fund investing or should I invest in actual stocks?

  84. What is the NASDAQ stock market?

  85. Should I be using a stock charting service?

  86. What is a stock dividend?

  87. Are stock dividends taxable?

  88. How can I read a stock market quote?

  89. Are financial stocks a good choice to invest in today?

  90. Would you invest stock market profits back in the stock market?

  91. Are you in the market to buy stock today?

  92. Would you buy a share of the market today?

  93. Are stock market investments safe?

  94. What trader has the best stock market results?

  95. Are stock shares available for companies not trading publicly?

  96. Are there any stock trading systems for beginners?

  97. What financial investing strategy would you recommend?

  98. Is the market trading at an all time high?

  99. What is better NASDAQ stock or NYSE stock?

  100. Where did you get your stock market education?

  101. What are the major stock market indices?

  102. Are stock market shares only available through brokers?

  103. What is the best growth stock market strategy?

  104. How can I get a better understanding of the market?

  105. Should I invest in the stock market?

  106. Where can I find stock info?

  107. What is the stock market performance over the last year?

  108. Who makes the best stock market predictions?

  109. Should I buy a stock when it's at its all time high stock market price?

  110. How do I determine a stock value?

  111. What are the top stock market trading software available to individuals?

  112. Would you buy stocks today?

  113. What is/are the best stock blog (s) on the web?

  114. Can I get someone to make stock market picks for me?

  115. What stock market strategies should I use to invest $1,000.

  116. Are stock investors more successful than options traders?

  117. What are stock earnings and when are they announced?

  118. Who are the most successful stock market investors of all time?

  119. Should I be investing in the stock market?

  120. What is the best way to learn how to invest in the stock market?

  121. Should I buy an IPO in the stock market?

OK. So, there are a few questions I have gotten. I've discovered I have a lot to talk about.

Good luck investing!

Stockbee’s IBD 200 Market Update: NASDAQ: OPEN


If you have been reading my site, you are no doubt aware that I've been putting Stockbee's IBD 200 strategy to the test here and the first stock that popped to the top of the screen was Open Table Inc (NASDAQ: OPEN). I used a stock simulator to purchase 22 shares of OPEN at $44.95. It's now trading at $46.69. Right now that represents a 3.87% gain. The position was established on July 12.

I almost sold the stock on July 16 and am guessing that Stockbee would have per his sell rules. It found support around it's 50 day moving average line. Volume has been light but volume really has been light for the overall market as well. While the stock closed higher today, volume was only slightly higher. I'd like to see a greater demand for the stock.

My target price is a 20% gain when the price reaches $53.94.

My overall guess is that this stock doesn't have the power to make a huge move. I remember that the day I selected this stock from the screen, there weren't a lot of potential stocks to choose from and that the market was down for the day.

If you are a beginner, I hope that you see the value in simulating trades until you get an idea of the mechanics behind your trading activity. What I've been doing is developing my philosophy and detailing the steps I take to move forward. Here is the road map I've been following.

  1. My first step was to get a handle on how to interpret the general market direction. Each day I look at the market action and decide what effect it has on the overall trend. Rule number one - only invest in a market uptrend.

  2. My second step was to start developing a set of stock screens such as the IBD 200 or the Stocks on the Move or a combination of several of the IBD screens.

  3. My third step is to simulate several trades to get a handle on the decision making involved so that I can hammer out a daily routine.

  4. Once I've ironed out the daily routine, I will invest real cash in the market.

I'll keep you posted here on Stock Market Investing Today as to the progress of this current experiment based on Stockbee's strategy.

Sunday, July 25, 2010

Can I Buy Stock With My Roth IRA

Today I wanted to talk specifically about a question my friend asked me today which was can I buy stock with my Roth IRA. The answer is yes. A Roth IRA is just a special type of account arrangement with special tax treatment. While you can buy stocks in it, you can also use other types of investments to fund it. Using stocks makes sense though because you can shelter the gains from taxes as the interest grows tax free. It's a common question that doesn't surprise me. I know that when I worked at a bank a lot of people did buy cd's to put in their IRA's so I didn't really know that way back then either.

The key to how to buy stocks in your Roth IRA starts when you open your account with the broker. Before you can invest in the market, or any other type of investment, you have to choose your account type. And, that's really how simple it is. Once your account is opened, it works and functions just like any other brokerage account. It's just treated different for tax purposes.

That's why it's important to remember that you want to keep track of stock market investing contributions to your Roth separately from your other accounts. That's because it's different kind of money from your regular brokerage account. Because the tax consequences on Roth's are different, you want to treat it different as well.

Since the tax laws change all of the time and this post would quickly become out of date, I am not going to talk about the tax issues here, but rest assured you can buy stock in your Roth IRA. For more information about buying stocks though, you might check out my Ultimate Buying Stocks Guide.

Good luck investing!

Saturday, July 24, 2010

IBD Distribution Day

The current market outlook is market in confirmed uptrend. That means that at the close of the market each day I am looking for an IBD distribution day. Distribution days are when the market closes lower on higher volume. This means that the big money is flowing out of stocks for that particular day. Put a string of them together over a few week period of time and IBD will change the market direction. At this point, we have two distribution days on each index - the S&P 500, the Dow, the NYSE and the NASDAQ.

I recommend that you watch these indexes every day based on the advice of William O'Neil's CANSLIM strategy. If you want to get in the habit of keeping track of distribution days, it might not be a bad idea. If, however, you are a subscriber to the IBD, they keep track of it for you. I personally like to figure out what I thought the market did for the day and then verify it with the Big Picture column and the IBD Market Outlook.

During a market uptrend, the focus each day on the market is to pick up signs of selling from the institutions whose demand drives the stock market. When they exit the market, it brings stock prices down. This is why distribution days are so critical to determining market direction.

Your goal is follow the trend and to do what the big money does and not what it says. The current outlook column in the market pulse will help you do that. Your assignment right now is watch the market each day and see what it does. If it falls in heavy volume, then you know that's a red flag.

Whether you pay attention to the IBD method of determining market direction or use another method, the main thing is that you have a method. Either way, you can spot selling by watching for days of distribution or selling.

Good luck with your stock market investing program.

Scottrade Penny Stock Rules

A while back I had a reader question the Scottrade penny stock rules. There was a rumor that you couldn't buy penny stocks through them any more. I called Scottrade and asked them. It turns out that you can buy penny stocks through them but it is possible that there might be some restrictions. These are not so much restrictions that Scottrade puts on you but more of a behind the scenes third party clearinghouse issue that facilitates trading.

I wrote more about this in an article I wrote called Scottrade Blocks Buying Of Penny Stocks. These are restrictions that most likely any broker has to deal with. The market makers can't make markets in all stocks so these smaller issues may have some liquidity problems. This is another reason to steer clear of penny stocks. That and they are a target of manipulation.

If you have any questions about your brokers rules regarding trading, the best thing you can do is call them and ask. It's easy for people to say this or that about a companies procedures. Since they don't represent the company in question, you can't really know for sure if it's true.

I dealt with this first hand this week when a competitor of mine made false claims about the product I sell for a living. The people he tried to talk out of it called me up to see if it was true. They were surprised to learn that he was incorrect in their assumptions. But, the people who called me to check were right on target to call me to verify his claims.

With the advent of the internet, it's easy to believe stock market investing claims that might be outrageous. Verify them with your broker before you believe them outright. You also want to watch programs that tout penny stock strategy like I mentioned in my post about Killer Penny Stocks.

Good luck!


So for this week's edition of my carnival of investing, I thought that I would pick five sites that discuss CANSLIM and provide other tips that might help if you are investing using the CANSLIM strategy. If you find other resources that discuss it that would be great. Just leave them in the comments. Just a reminder, if you want to host the Carnival of Investing, please contact me. The Carnival of Investing is supposed to be a rotating feature with other sites. I don't have time to get people fired up to host it each week, so I am going to host until others step up. If you are on the list, I encourage you to link to the Carnival and also to consider hosting.

Here are this week's sites.

The first site that I came across was I think they have some free tools but for the most part I think this is a membership site devoted to following the CANSLIM strategy. You might want to check it out.

The Wishing Wealth Blog talks about how to use the New America feature of the IBD to find winning stocks.

I might have mentioned the Joshua Hayes Big Wave on How To Use the IBD. I really liked his blog and he has the unique advantage of living in Hawaii. This means he can sleep in and check the market around lunchtime. How great is that. His is a great post on how to use the IBD.

The Disciplined Investor has a podcast with Kate Stalter who does the IBD TV Market Wrap. I couldn't tell if it was free but you definitely have to use Itunes or the a Zune account.

Part Time Swing Trader talks about how he uses the CANSLIM Strategy. It looks like he documents the trades he makes so their might be some good learning material on his site.

You might also be interested in reading CANSLIM, $500 & IBD.

Good luck with your stock market investing!

IBD 200 List

One of the best stock screens around is the IBD 200 list. This list is published every Thursday in the Investor's Business Daily. It includes the IBD's Top 200 Composite stocks. The composite rating is the Smart Select rating the IBD developed. It's an average of their other ratings along with some other factors. It usually contains those stocks with a composite rating of 96 or better. The list this week did have some stocks with a 95 rating.

The beauty of this list is that it all winning stocks will probably go through this list so if you watch is each week, you will be alerted to it at some point. You could if you want watch this list exclusively and try and trade it as has been recommended by Stockbee's Pradeep Bonde. Methods, results for this strategy will vary on market conditions at the time. You'll want to make sure that you watch the overall market trend too. I highlighted his strategy in my posts called Stock Market Investing For Beginners Using The IBD and Stock Trading Using The IBD 200 Composite List and How To Use The IBD 200.

The truth is though that you could take most of the stock screens in the IBD and trade them. You would get to know the traits of winning stocks that appear there. Some people think you need a bunch of stock screens when you probably should just keep it simple and choose one and study it.

This is the case with the IBD 200, the Stocks on the Move, the Stocks in the News, the Timesaver table and Weekly Review to name a few. All of these screens bring quality stocks onto your radar. The trick is to pay attention and do the research. That's the hard part. The actual work comes not from screening but from analyzing them after they hit a screen for fundamentals and buy points.

Start your stock market investing training by using screens but move onto further analysis to see if you  should buy them. Because a stock appearing on a list doesn't mean it's a good buy. It depends.

Good luck.

Track Record For “Market Pulse” In IBD

A lot of the questions I seem to get regarding the general direction of the stock market tend to revolve around what kind of track record for the "Market Pulse" in the IBD. I'm not sure where it's addressed at, but O'Neil does talk about this in one of his books. I believe what he said was the the method he uses to determine the overall trend is right about 80 percent of the time. He goes on to say that no system is 100 percent right 100 percent of the time. He concludes that for our purposes, you can make money with a system that is right that often.

I've noticed that there are many critics of the IBD and their methods for identifying market tops and bottoms. Where I think this is shortsighted is the most people don't even have a method. And that even if it seems obvious that the market has topped, then why did so many people lose nearly half of their investment funds in the last bear market. The fact is that they either didn't have a system or they chose to ignore it. The real reason is probably that for most people, they've been brainwashed into thinking that you must buy and hold forever. You do this at your peril with individual stocks. The price of a stock is directly determined by the demand for it. Demand is primarily determined by where the big money flows. It eventually leaves and in many cases, it never returns. This is when the small investor gets screwed. Now I don't believe that the same rules apply for mutual funds. They definitely should be held for 15 to 20 years minimum.

What's important to know is that the vast majority of times, the track record for the market pulse in the IBD has identified market tops enough times to know it's a good tool to use. And while it does flash a "market in uptrend" signal that doesn't always succeed, every bull market has begun with an attempted rally and a follow through day. The current outlook in the IBD is a good place to start if you have no system because it is based on what the market says what is happening instead of the opinion of the talking heads on tv.

So, before you invest, make sure your stock market investing strategy includes a way to find the overall market trend whether it's the Market Pulse of some other system you trust.

Good luck!

Thursday, July 22, 2010

How To Find Stocks To Buy Using The IBD Stocks On The Move Screen

I'm a little late posting today because I've been trying to put together a post I can be proud of that might also be of interest to my readers and I came up with this: How to find stocks to buy using the IBD Stocks on the Move screen. This screen appears every day in the Investor's Business Daily and also is prominently displayed on the front of I've discussed the Stockbees IBD 200 Strategy that I found a while back and was struck by it's simplicity -- as were his readers and got to thinking that you could probably take any screen in the IBD and trade it. I'll be the first to admit, I am not a trader but I am trying to make my mark as far as creating my own type of implementation of the CANSLIM strategy and to improve upon my post called the Ultimate Buying Stocks Guide.

While the great thing about learning how to buy stocks is the choice we have in investment vehicles, this is also the very thing that makes investing quite a challenge. It's very hard to focus on one thing and perfect it. If more of us spent time mastering one specific idea we'd all be better for it. For most of us though, it's easier to float from idea to idea. I've always said that rather than a bunch of new ideas, we need ideas that we apply and put into action.

So, the goal of my specific strategy here is to number one, keep things simple by using one stock screen and number two trade it successfully. So, let's begin investing today with this technique.

If you are not familiar with the IBD Stocks on the Move screen, you'll find it on page B1 of the paper each day and a slightly different version on the front of The fact that this screen appears on the front of the making money section and on the front of their website should tell you one very important lesson -- that IBD thinks this screen is important. I figure if it deserves such a prominent location it should be one of the best screens we can use.

The idea behind the Stocks on the Move is to pick up institutional buying. Usually the best stocks to buy right now are the ones that they are buying because the increase in demand for the stock due to their buying causes the stock's price to rise. You want to hop on board for the ride. Institutional support is key for this to happen. Any time they start pumping money in a stock, it will show on a stock chart in the form of a price increase on higher volume. Stocks with surges of volume and a price increase will show up here. It will be virtually impossible for a winning stock not to show up here. This is an important point.

Now that we know what the screen does, the next step is to try and find the best stocks to buy in it and which shares to buy today. The first criteria I set for myself is to take the stocks that are in bold. These stocks are stocks that are in the 80 EPS and 80 RS category. Most likely, the SmartSelect rating will also be over 80 as well.

Part of using this screen is that it brings to the surface stocks you want to look at. You can set your minimum thresholds however you want. What I decided to do was this.

  • Only review the stocks in bold with 80 EPS and 80 RS

  • Only choose stocks with average daily volume of over 300,000 shares

  • Only choose stocks over $15 for NASDAQ and $20 for NYSE

  • I then am left with a good list to work with which I plug into the My Stocks List on

  • I then sort based on the SmartSelect data and only keep stocks that are

  • Composite over 80

  • SMR Rating over A or B

  • Acc/Dist A or B

  • Group Relative Strength A or B

  • Then I check the fundamentals to make sure that

  • EPS % Change in the latest quarter is over 25%

  • That EPS % change from the prior quarter is increasing

  • That sales % change in the last quarter is over 25%

This leaves me with a list of good stocks to buy. But it doesn't mean I should buy them. Today I found the following stocks which were whittled down from 24 initially.

The ticker symbols were:


Once I have these, they may potentially make my watch list if the remaining qualifications I will set are met which I'll discuss later. All of these things you should start incorporating in your daily stock market investing routine.

Wednesday, July 21, 2010

How To Buy Stocks

I guess that a little tutorial is in order here on how to buy stocks. The first thing you should have is a online investing account at at broker like Etrade, OptionsXpress, TradeKing, TDAmeritrade. You might Google special offers for each of those companies because they are usually trying to get customers and have a promotion going on so you might check that out. Once you open an account, you'll need to fund it with cash. You can usually do this by sending a check in or by EFT. If you want you could probably wire it in as well. Once you have funded your account, when the funds have cleared you are ready to get started.

A special note if you live outside the United States, it might take longer to get your account set up. Check with the brokers and see. I know that my friend was in Mongolia and had a tough time getting it opened up. Just an FYI.

It's easy these days to learn how to buy stock in your account. Many of the online brokers have stock market investing simulators that mirror their real systems. This will give you a chance to get familiar with the controls so to speak. I know that OptionsXpress has a pretty good simulator.

Many of the brokers also provide videos and help lessons for those who might need lessons for how to buy stocks for beginners. These are really useful. I know that I also get many emails from some of the brokers offering free webinars so if you are new, there are plenty of resources available. You might also check my Ultimate Buying Stocks Guide for a few more tips on getting started. Before you invest, you should also notice the market direction IBD posts in their paper every day. Make sure we are in an uptrend before you grab a position in a stock.

Once you've been investing for a bit, you'll start to get on mailing lists like this: How To Buy Penny Stocks. Keep in mind that it's easy to lose focus. Try not to let offers like this deter you.

I also want to let you know that when you are learning how to buy and sell stocks, sometimes it's easy to get confused by the types of orders you can place. When you are first starting, just put in market orders. That's what I do.

OK. Enough today. Have a great day and good luck!

Buy Stock To Beat Inflation

One of the best reasons to buy stock is to beat inflation. I went to the bank the other day and I just can't believe that interest rates are so low. Something that doesn't bode well for the stock market in my opinion. Once interest rates rise, the market will probably go down as it historically has. I could be wrong. But even though the statistics show us that inflation is really low, everything seems to cost me more so the inflation rate in my opinion is a lie. That being said, in order to grow your savings, you've got to look for a higher return. That return has usually been derived from stock market investing. You've got to buy stocks if you want to outpace inflation.

That being said, the hard part is posting stock market gains. Just because you can do better in the stock market doesn't mean you will. The way I see it, you have three choices.

  1. Invest in mutual funds

  2. Invest in stocks

  3. Invest in a combination of the two

Buying a stock mutual fund and holding it forever is one way to see gains in your portfolio over the long term. These can be index funds or any variety of mixtures of investments. Because these funds are fully invested almost all the time, they tend to go up and down with it. Expect fluctuations.

Learning how to buy stocks is a challenge and not for everyone. I'm convinced that most people can do as well or better than their broker. I have said this before, anybody can leave the money in the market and watch it decline almost 50%. The key thing with your broker is this. If you have individual stocks, you have to sell them at some point. Gone are the days that you can hold it forever. If you do, you are almost guaranteeing yourself a disappointment down the road. I have seen it happen with many retirees. The stocks value tanks right when they need it. The industry preaches buy and hold but doesn't practice it. There's a reason for that so you should take notice.

Learn to look for stocks to buy with institutional support and sell when it does. You can tap into this by learning how to read stock charts and by following the advice of William O'Neil.

Start studying the market! I feel like a You might also check out my Ultimate Buying Stocks Guide to get you started.

Good luck!

Green Light To Buy Stocks Today

Well, since the market is still in a confirmed uptrend, I thought I'd remind everyone that means you have got the green light to buy stocks for your portfolio. While the market has undergone a couple of distribution days, the current outlook hasn't changed. Remember that you've got to keep tabs on the current trend for the market. As the distribution builds up though it's a good idea to be more cautious.

With the time to buy stock upon us, it's probably running through your mind which stocks should I buy? If you are a beginner just starting to learn how to buy stocks, you might want to start with my Ultimate Buying Stocks Guide for some ideas on how to get started.

Stock marketing investing requires constant study to keep on the trends and the leadership in the market. One way to keep up with the leadership in the market is too look in two places. First, check out page one. The IBD Market Pulse usually lists the leaders up and down in volume. You also want to look at the How's The Market page. On that page, you'll find that the top industry groups are listed. This will tell you which groups to do research in. Typically, you want to focus on the top 6 industry groups.

You can find some of the best stocks to buy in the industry groups that are leading the market. Be wary though that the industry group isn't in later stage bases though as these are prone to failure.

Another great place to look is in the Stocks on the Move section. This list contains stocks that are currently trading in high volume -- a sign of institutional buying. Some of the best stocks to buy are the ones with just this kind of sponsorship.

I know that I am just getting started out and at the current time am perfecting my stock watch list selection process. I'm setting up my screens and sorting out those stocks that don't meet the cut. The great thing is that you can always make money in the stock market but the downside is that while it's easy to buy stocks online, it's hard to pick the winners.

Take your lumps and learn from it. Keep your losses under control by selling stocks that drop 8% below your purchase price.

Good luck!

Today’s Stock Market Investing Recap

Time to look at Today's Stock Market Investing Recap. It appears that all the indexes, the S&P, the Dow, the NYSE and the NASDAQ all suffered distribution days. While this doesn't change the current outlook from "market in confirmed uptrend" it does bear watching. Like I've been saying, checking market conditions should be one of the first things you do each day in your stock market investing routine. I wish that I could do my whole routine earlier in the day but here is how I typically do it.

The market closes at 4:00 pm ET and the NASDAQ market data on is delayed 20 minutes so I usually check the market activity sometime after that. Around 6:30 ET, the IBD TV market wrap is put online and then I check that out. Finally, around 8:30 ET, the eIBD paper is online and I read the Big Picture column and read the How's The Market page.

It's kind of spread out, but I try and do each of those things each day to get my take on how things are going in the market. This is an interesting uptrend so I'm anxious to see how it plays out.

As far as the news of the day, the Wall Street reform bill was passed prompting me to write my 33 Reasons Why Wall Street Reform Won’t Help The Stock Market (Or You) article. It's a rant that's been building for a while.

I did also want to announce that Stock Market Investing Today has been on Twitter for a bit now and we've started updating it. If you want to follow me you can find us at: Stock Market Investing Twitter Feed. I've noticed that some of you have started following me ther as well which is great.

Be sure and check out the stock market today and every day to keep on top of the current market outlook.

Stockbee Spreadsheets

One of the best things I have seen lately are these new Stockbee spreadsheets. I'm not sure but think he is doing these in conjunction with The Patient Fisherman as these are where they are posted. I've read through many of his posts as well and you can tell that he and Stockbee must come from the same mold. He had a cool picture of some women from GQ of "Girls Gone Wild". Stockbee does that kind of thing too. I thought that was a plus too. I like his blog too and while I think his site is newer (I think), he appears to be providing some really useful stuff to his readers.

This seems to add a lot of value to their sites and to their readers. It appears that these are updated on a regular basis. I checked today and there were three available. They were:

  • Top 50 Stocks with Price and Sector Momentum

  • Top 50 Stocks with Price Momentum and Value

  • Top 50 Stocks with Price Momentum and Short Interest

They are Google Spreadsheets and I accessed one of them but another I didn't have permission to it appeared. I'm not sure if that's by design or not.

Anyway, it's just another tool you can use to help with your stock market investing. There's a screenshot below and you might also want to check out another post I did called Stockbees IBD 200 Strategy.

IBD Investing

One of my friends was asking about IBD investing the other day. I think a better term for it would be CANSLIM investing. The IBD is the Investor's Business Daily. It's just an abbreviation. In any case, the IBD is a great investment tool. I highly recommend it and talked more about it in my Invest Using The IBD article a few days ago. You might want to check that out.

IBD is tailor made for the CANSLIM investor. All of the things that William O'Neil talked about in How To Make Money In Stocks are built in to the paper. All of the screens, the education is all supportive and consistent. I am big believer in the strategy so I'm also a subscriber. If you are a big time investor, you might want to also sign up for the Daily Graphs service. While you can invest using the IBD it's made easier with the daily graphs service. It is pricey though, around a grand a year. I've checked and they don't package the services together, they are ala carte.

One nice feature of the Daily Graphs service is the Custom Screen Wizard which gives you access to screen all of the stocks in the IBD database. Those tools are really all you need to have to be successful with the IBD investing strategy.

I guess you've also got to be able to apply what you learn. If you are looking for help, read the Investor's Corner everyday and also watch the Daily Stock Analysis video on the IBD TV. Those features alone will help you tremendously. I know they have helped me alot.

Break your stock market investing learning down into steps by starting with market direction, then move on to stock screening, then practice buying with a stock simulator, pick a broker and then invest real money. Learn from your mistakes. It's a fun thing to learn and you will get better if you practice.

Good day!

33 Reasons Why Wall Street Reform Won't Help The Stock Market (Or You)

I thought I would take a little respite in this article from talking about stock market investing to talk about the major news of the day which is the sweeping Wall Street reform bill that Obama signed into law today. I also thought I would offer up some suggestions for reform that I have noticed that I'm sure that won't be addressed in this bill.

One of the first things I noticed about the stories about the bill was that this bill would put a stop to bailouts. Like we needed a law to prevent Congress from bailing people out. I would say that the vast majority of the American people were against the bailouts anyway yet they were passed anyway. One thing I could not believe about this whole mess is that the FDIC was created to protect depositors. Yet, the government went out of there way to basically guarantee the whole balance sheet. A completely unnecessary step. In my opinion, had we not bailed out the players, the dollar would be stronger today.

And don't get me started on the Federal Reserve Bank. Which absolutely turned a blind eye to just about everything under Alan Greenspan. As a former banker and graduate of the Graduate School of Banking, I'm appalled that I now look at my banker as a thief and no longer someone that I can trust. In fact, the other day I went to the bank and was waited on by a gal named "Robin". How appropriate.

I don't know for sure what all of these derivatives are or how they work so I can't really address all of that but here some things that I can say that affect the average everyday business and person like myself that I don't like. Here we go:

  1. You can get a free copy of your credit report but not your score. No one cares about what's in your report anyway. They make you pay for the one piece of information that really matters.

  2. The credit score you get from all of these services is not the score your lender uses when you get a loan.

  3. No one will tell you what score you need to get the best rate plus they won't tell you what it was when they reviewed it AND then charge you more.

  4. YOU have to pay for identity theft insurance meanwhile the people that control the credit reports don't have to do anything to protect you.

  5. They should ban adjustable rate mortgages. It just churns you into refinancing your loan.

  6. When you refinance your home mortgage, you should not have to repay for title insurance, closing costs or re-qualify if your payment has gone down.

  7. Banks should pay checks from the smallest to the largest instead of milking it by letting the largest go through to create more overdraft fees.

  8. All banks and credit cards should have the same cutoff time to make payments, transfers, deposits, etc. It should be midnight in the timezone you live in. Not 2:30 in the afternoon.

  9. When you are late on a payment, you should be charged a late fee, not have to pay 12-15% more in interest for another year plus give up your first born son, etc.

  10. If you do have to pay a higher interest rate, it should come down automatically after there current payments. These rates should be published up front and you should not have to request the decrease.

  11. When you request something from customer service at a bank and you ask to talk to a supervisor, and that supervisor is never available, not getting a call back from a supervisor should be a $500 fine.

  12. Banks should only be able to make loans to make a profit, not invest their cash in hedge funds. Any idiot should be able to make money borrowing money from depositors at ZERO percent and loaning it out at a higher rate.

  13. When you borrow money, all fees that the bank wants to collect should be in the interest rate, not all segmented out.

  14. Just because the bank discloses everything in writing doesn't make it a legitimate business practice.

  15. Fees banks collect processing credit card transaction should be capped and be the same for all merchants.

  16. Stock brokerages should not also be analysts upgrading and downgrading stocks they have interest in.

  17. There should be one credit reporting agency so we don't have to work with three when there is a problem.

  18. ATM fees should be capped at $1 for each bank involved in the transaction and not be $5 plus. I've paid as much as $8 bucks on one side and $2 on the other.

  19. You should be able to pay your bill for free either online, by mail over the phone or on the internet even if you are late and whether or not you talk to a live person or not.

  20. Credit reporting agencies should not charge you for your report or your score ever.

  21. Insurance companies shouldn't be able to charge you higher rates because of your credit score.

  22. Transfers between banks should happen on the same day and not take three days.

  23. Credit card interest rates should be capped at 18%.

  24. When a law is passed changing the way debit card transaction are posted to your account, the bank shouldn't be able to give you a way to opt out of the law to "keep things the same".

  25. All transactions should post to your account at a uniform time of day, not 5pm for bill payments, check clearing at midnight to get overdraw you.

  26. Banks should not be able to offer saving accounts that bear interest rates like .00001%. I mean what's the point.

  27. Banks should not be able to offer me $275 and a free ipod touch for opening an account at their new $5 million dollar branch paid for with your bailout dollars.

  28. Companies to which you owe less than $2500 dollars shoudn't be able to ding your credit report for that $53.00 utility bill you never got and have it stay on there for 7 years.

  29. The time limit for everything on your credit report should be two years.

  30. This has nothing to do with Wall Street or the banks, there should also be one car charger and one wall charger that powers all phones and I shouldn't have to buy a new one every time I get a new phone.

  31. You shouldn't be able to short stocks. Just think if all the money that was put into the short side was forced over to the long side. Instead of trying to find weak companies, let's have the money flow into strong companies. It's not a casino.

  32. Make it impossible for companies that break the law like Goldman Sachs be able to enter a plea agreement where they don't have to admit any guilt.

  33. Tie executive pay to a percent of net earnings not stock price.

Well that's the end of my rant. I know that some of these things don't have anything to do with stocks but I don't like them anyway. Have a great day.

Stockbee Market Monitor

Today I wanted to talk about the Stockbee Market Monitor. As you know, I've discussed at length the steps to determining the overall market direction. Part of the CANSLIM strategy is to only invest when the market direction is in an uptrend. This is in place to help you preserve your capital. No one is immune from the trend of the market. Most stocks go down in a downtrend. The importance of following the trend can be the biggest difference from being a successful investor and a losing investor.

Stockbee has spent a great deal of time and effort on his blog reviewing market direction. He's explained in great detail how he would spend months working to gain 30-40% and then to give it right back because the market direction turned. Like any good investor or problem solver, he set out to make the IBD system better. Hence, the market monitor.

When monitoring the market, both Stockbee and William O'Neil will tell you that no system is 100% full proof. No system is correct 100% of the time. But for both, it works well enough for them. The key to Stockbee's techniques for determining market direction is measuring market breadth to a greater extent than the IBD method. Other successful investors will probably tweak a method until it works for their systems. I know that uses the New Highs-New Lows method which has proven to work well for him.

The idea behind any measure of the direction of the market is to get an early warning signal that a storm is coming and the market will turn soon. As an investor in individual stocks, you must heed these warnings by getting out of your positions until the storm passes.

Because it's stressed so much by Investor's Business Daily (it's on the front page), and investors like Stockbee who have a wide following, the one thing that you must learn first is that you must have a system for measuring market direction in your stock market investing arsenal. Take a successful system and put your own twist on it if you must just like Stockbee did.

I wrote about one of his unique strategies in another post called Stockbees IBD 200 Strategy if you want to read more about it as well.

The Ultimate Buying Stocks Guide

I know by writing a post called the Ultimate Buying Stocks Guide that I'm already setting high expectations for the page. I hope that it lives up to them. I figure that if I am ever going to attract a readership then I'm going to have to put together some content that really, really adds value. I expect that this will be a long post and therefore, if you decide to read it, will no doubt cause you to think of things you can add to it. If that's the case and you can think of something that will improve my guide, feel free to add it in the comments below.

If you want to buy stock today, I strongly recommend that you handle everything. Gone are the days when we can expect our stockbroker, our banker or other financial adviser to look out for us and make sure that we succeed. There's too much pressure on everyone in the market to give anyone, especially the smaller investor, full time attention. Once the commission made, they have to generate another one and another. It's the nature of the game. Now, I'm not saying that there are not exceptions to the rule. My friend works with people's money and he does an awesome job, but for the most part, you are on your own. You should therefore look to be your own stock market investing adviser because that is in truth what will be happening. Most likely nothing will happen in your account until you call your broker and tell him or her you are not happy. You will then make a change.

If you don't want to be your own adviser then you should not be in individual stocks. You should be in mutual funds. Mutual funds have full time manager who are actively trying to outperform the market. At least they are managing the money and someone is looking after the money. Just buy the best one you can find. But, if you want to buy stock, you will have to learn that the buy and hold strategy that applies to mutual funds doesn't apply to individual stocks. You must turn them over. You must sell them and hopefully before they tank which all stocks eventually do.

Keep in mind that the reason that a stock's price goes up is because demand has increased. Demand increases when the big money on Wall Street decides to take a position in a stock. The whole time they are establishing that position, the overall trend of that stock will be up. However, once they need to exit and take a profit, the exact opposite happens. This is why you must sell stocks at some point. Because the demand evaporates and then the stock's price falls. This usually happens just right after you got in because you heard it was a great stock. If you think it's a coincidence, I beg to differ. You see when the big money needs to exit a stock position, they start advertising the stock, the Wall Street firms start recommending it and then the analysts start upgrading it. This advertising campaign brings in buyers to help the big money get out of the stock with a profit -- and you holding the bag.

You can help yourself avoid this by learning how to buy stocks the right way and I hope that you've learned the first rule I have brought to light above and that is that you don't buy stocks the media tells you to buy - ever. In fact, for the most part, I'd do the exact opposite of what the media tells you the vast majority of the time. You've got to learn to make your own decisions.

Once you've mastered that rule, the next step is that you have to decide what type of investor you are going to be. There are many different types of strategies you can follow developed by the masters of investing in the stock market. These are people like Benjamin Graham who followed a value investing approach, Philip Fisher who developed a growth stock strategy, Warren Buffett who is maybe the most famous investor of our time, Peter Lynch who used to manage the Magellan Fund, William O'Neil of CANSLIM fame, and Bill Miller. Review and study these masters and then do the next step - pick an investment strategy that suits your personality and then stick with it! Because the market offers so many choices, there are so many ways to make money. If you are interested in the market, you will be tempted by them all and of course part with your money. If you have the money, by all means feel free to use it. But realize that there are no shortcuts and that choosing a strategy and then putting all of your effort into mastering that strategy is the best course of action. If your an absolute beginner, then research the basics of the market first and then start researching strategies.

Your next course of action is implementing your investing strategy to make it market worthy. You'll do this by going through practice sessions with a stock market simulator like the one at or Develop your system of finding stocks to buy by setting up your tools. You will need some way to track the market's daily action like the Investor's Business Daily, a way to screen for stocks to put on your watch list like the Custom Stock Screener at or a software program like Worden's Telechart. You'll need to set up a way to manage your watch list and decide which stocks make it and which don't. You'll need a charting service either through the IBD or You'll also need a selling strategy to make sure that you exit a position before it collapses to lock in gains.

By practicing or using a stock simulator, you can fine tune the decisions you need to make on a daily basis. Write these steps down so that you follow them exactly the same down. Put them in the form of a checklist. Fine tune the check lists. Constantly improve them. Practice until you feel comfortable.

During the practice phase, start researching brokers. These days you buy stocks online, without the help of anyone. There are a number of online brokers like ETrade, TDAmeritrade, OptionsXpress, TradeKing are a few. These are going to change over time so I won't even try to list them all. Pick the broker that provides you with what you need as far as the tools you used during practice. If they have a stock simulator, use it before you fund the account. What you want to do is find the broker with the least fees and the best service. I look for two things. One, no maintenance fee and two, what I call the lowest round trip trade. For example, if trades cost $9.95, then you are going to pay two fees. Once when you buy in and once when you sell. That's $19.90 round trip. Get the round trip as low as you can. Don't fund your account with the full amount. Put a small amount of money in and make a few trades to see if the online broker meets your needs. Everybody is different, find one. Test a few if you have too. Check out all of the features they have to offer by checking out all of the options on the menus. Can you trade long, short, with options or on margin? Do you require it? Whatever you investing strategy requires make sure they have it. If they have a stock simulator that lets you practice using the tools, I strongly suggest you use it to get a feel for the real account.

You want to move from the practice phase to trading with real money as soon as possible. Using real money is the best teacher. Only by trading for real can you learn the art of trading stocks. Your quest for the best stocks to buy won't be easy and you will make mistakes. The important thing is to make them. Learn from them and adjust accordingly. Many times, the strategy is sound. It's pur implementation that is poor. Analyze where you went wrong and work to improve. It might cost you some losses, but it's well worth it down the road. Look at it like the cost of doing business. It's no different than letting your broker let half your money disappear by never telling you to sell like happened to some of my family members. You'll probably lose less if you work at it and study the markets. Don't let anybody fool you, you can and will lose money, there are no guarantees. It's part of the learning curve.

Once you've settled into who you are going to trade with, fund your account as large as possible. The market is full of investors who are looking for good stocks to buy. The ones with sufficient capital typically do better. You can and should start even if you have a small amount to invest. You can invest with as little as $500. Plan on adding to your account as you get extra money. The ideal method would be to have over $100,000 to start with but for a lot of people this is not possible. What I suggest is that if you are starting small in the market, start with money you can afford to lose and consider it gambling. At first, it probably will feel like it. You put your money on a stock and wait for the dice to roll (the market open).

Learning how to buy stock takes two things. A commitment to study and a brokerage account. Start investing now. Make a few trades and then do a post review of all of your buys and sells. Study what you did write and what you did wrong. Make adjustments. Don't make the same mistakes and constantly improve your daily stock investing routine.

Good luck and keep me posted on your progress.


Tuesday, July 20, 2010

Todays Stock Market Investing Recap

Today's stock market investing recap brings good news to us today as all the market indexes closed higher on higher volume. Volume is still below the average but I think this is still good news. Apple's earnings beat estimates and provided some good news for the market. Remember as part of your stock market investing daily routine, your first step should be to determine the direction of the general market indexes to see if they are in an uptrend or a downtrend.

The first steps in deciding what happened in the stock market today is know which indexes to check. You want to primarily look at four. They are the S&P 500, the Dow Jones Industrial Average, the NYSE Composite and the NASDAQ. You can feel free to check other indexes and indicators but when you are getting started focus on these.

Just know the closing numbers for the index really isn't enough, you need to compare them to the previous days close. The numbers you want to focus on are the closing price of the index and the volume. Here are the things that could happen each day.

  1. The market closes higher than the previous day on higher volume - This is what you want to see. This means the market is under accumulation, or buying. When this happens when the market is currently in a downtrend, it could represent an attempted rally or a follow through day as well.

  2. The market closes higher than the previous day on lower volume - This could represent stalling action as buying did not push up the price of the index but it went up anyway. It's good the index went up but not with big money behind it.

  3. The market closes lower than the previous day on higher volume - This is a sign that the big money is selling and is called distribution. While one distribution day doesn't turn the market down, several within a short period of time will end an uptrend.

Start your study of the indexes with these rules in mind and you'll soon find that you'll be analyzing the days market action like a pro.

Best Share To Buy Now

My friend called me today and as usual we talked stocks. One of the things we talked about was if you could only buy one stock, what would be the best share to buy now. I decided that if I only had one choice of shares, the best one to buy today would be Google (GOOG). He decided on Apple (AAPL). For now, both shares seem to be good options as far as choices go.

At any one time though, stocks fall in and out of favor. What's a good share to buy at this time, won't be next year and the cycle repeats. That's why you've got to keep a constant watch for stocks that might be the new leaders in the future. A way to do this is by watching breakouts. I prefer to add stocks to my watch lists only after they have broken out. I typically look for breakouts of a 2% price increase on volume over 100% increase from the prior day.

The way I look at it, only stocks with institutional support deserve a look at. This support shows itself in strong increases in volume and price. The law of supply and demand dictates that when more shares of a stock are in demand, the price has to go up. When the demand for shares goes down, the price must fall.

When institutional support leaves a stock, the price falls because there is no demand for it any more. This is why you must exit a stock when it does. The big money may never return and because of that, you may never have the same fuel to drive up the stock's price again.

Since today's top stock might be the share of the day to buy, you've got to constantly keep on top of it for signs of distribution, or selling. When you see it, it's time to get out. That's my stock market investing tip of the day and I hope it helps you figure out which shares to buy today.

IBD Market Outlook

One of the things that I do on a daily basis is check the IBD market outlook. You want to check this daily because it tells you what the professional editors at the Investor's Business Daily view the general market direction. The "M" in CANSLIM says only to invest when the market is in an uptrend. This is because studies have shown that three out of four stocks follow the overall market trend. Because of this, it's important to steer clear of new buys when the market turns down and liquidate your current positions. Otherwise, your stocks will most likely go down. Preservation of capital is key and the market outlook is an important factor in determining your decisions each day.

You can find this every day in the Big Picture column. There's a little box there called the IBD Market Pulse. The current outlook can be found here each day. It also includes information regarding the days current action, leading stocks up and down in volume and whether there are any distribution days building up on the indexes.

I always make note of the current outlook and then also do a couple of other things. The first thing I do is watch the IBD TV Market wrap to get a walk through of the days action on each index. Then I check out the How's The Market page for stock charts of each of the indexes. On this page, you also find many other market information like leading industry groups, other major indexes, put and call ratio and more.

As your familiarity with the market grows, you'll no doubt grow more comfortable determining market direction on your own. But the great thing about the Market Pulse is the fact that when the market is in a confirmed uptrend, it keeps track of distribution days. This is kind of hassle to do on your own. It's almost like why bother, it's already done for you and one of the major reasons to subscribe to the paper each day.

As always, I highly recommend making reviewing the IBD Market Outlook to your stock market investing routine.

Should People Invest In Stocks In This Economy?

It's pretty common for the average every day investor to get wrapped up in whether people should even invest in stocks in this economy with the recent recession and all. It's easy to get wrapped up in all the doom and gloom the media likes to spread. But the answer to the question really needs to be answered by the market itself. What you want to do is learn how to interpret the market indexes and let the market tell you -- not the media -- if you should be in the market.

If the market indexes have rallied and confirmed a follow through, then the yes, people should be in stocks. However, you must be willing to cut your losses. If the stocks you choose fall to 8% below your purchase price, you must sell them to preserve your capital. If the market is still in a confirmed uptrend, then try again.

Keep tabs daily on the market indexes and if they show too much distribution (selling) then the market is telling you that you shouldn't be in stocks at that moment. Until you can read the market, and even if you can, follow the Big Picture column and the IBD TV Market wrap. They will tell you if the market is:

  • In a confirmed up trend and it's time to be in the market

  • If the uptrend is under pressure when you shouldn't buy anything and watch your current stocks closely

  • In a downtrend and you should be moving to cash

They compare it to a stoplight. When you have the green light, ignore the media. Ignore the bad news and focus solely on whether the market says go and try not to let your emotion drive your stock market investing decisions. I've talked about this before if you want to read more in my post called Should I Invest In The Stock Market In This Economy.

Good luck!

What Stocks To Invest In Now

Once you have a handle on the whether it's the right time to invest, the next step it to look at what stocks to invest in now. Lately, the market hasn't been provided a lot of opportunities and it's my opinion that the big money is still sitting on the sidelines. The latest confirmed rally wasn't followed by a huge amount of volume. This makes it difficult to find good buying options. Finding stocks to invest in that will potentially gain 20-25% requires institutional sponsorship to drive up the price. The best stocks to invest in in each new bull market are the ones that break out on the follow through day that confirms it.

What I would do if you are looking for ideas is keep an eye on page one of the IBD. In particular, watch the stocks that appear in the story and in the Big Picture column. These are stocks that they have concluded are the market leaders. Until you learn to spot leadership, look here to know which stocks are the leaders. Once you have a better eye for stocks, you'll discover that you can pinpoint leadership.

Another place to find stocks that would be good to invest in now are in the top six sectors leading the market. These are listed at the top of each sector in the stock tables. The stock tables are arranged in order of leadership.

Once you have identified stocks that the paper considers leaders, use the stock checkup feature to see what other stocks are in the same industry group. Remember stock market investing works in trends and those stocks that go up are usually grouped together. Try your best to be in the best stock in the group.

Whatever stock you choose to invest in at this time, make sure that you don't buy when it is overextended or more than 5% above the pivot point.

Good luck!

Monday, July 19, 2010

Investing Today

Investing today is different than any other time in history. Today's investing is rife with market manipulators. While they are under the radar, I think that most investors know they are there. I think they have always been there, it's just that now it's done on a more grand scale and won't be identified by the regulators either because they turn a blind eye, are part of it, or because they are just downright stupid. I kind of compare the stock market investing environment that we invest in today to Michael Jackson.

You see, when Michael Jackson became the King of Pop, there was a story in the paper every day. Everybody thought he was a crazy because any story is a good story, whether it's freaky or not. Then, the next thing we know Brittany Spears is getting the same story a day coverage. Before you know it, Mel Gibson is a daily story and then it's your every day Hollywood star. It's gotten out of hand because the PR people that handled these people told other people or trained them to do the same thing.

It's no different than the stock market. The ideas that people used to make money investing in the market today that were kind of more manipulative have just been amplified. In fact, I believe that the whole banking crisis was a by product of this very behavior. We're being duped that financial reform will fix all of that but I don't believe it for a minute. Why? Because the people who are drafting the rules are the same people skirting them -- building in ways around them.

The key for us, as small investors is just to be alert and to know that they are there. To be skeptical of every piece of information we receive and to make our own decisions. Study the market and be your own source of information. You'll be better off for it.

Invest Using The IBD

I've been a big fan of the stock market and learning to invest using the IBD every since I saw my first copy of the Investor's Business Daily some 15 plus years ago. In my opinion it's the best stock market investing periodical out there and I truly believe that anyone that uses it as a tool to help them invest will become a better investor. The key is consistent study. You have to study the markets on a daily and weekly basis. By reading the IBD consistently and then investing your own money you begin to learn more about how the real stock market works.

As you analyze your trades, you become a better investor. One of the best two features of the paper are the Daily Stock Analysis and the Investor's Corner. These two features will help you learn what you need to know to become a better investor. Use the IBD, and investor' to research the areas you have questions on. Practice strategies like Stock Market Investing For Beginners Using The IBD 200 to hone your skills. Use the forums and ask other investors practicing CANSLIM for advice. In addition, track down other sites that discuss how to apply it on a daily basis.

I guess if I had to boil down a strategy to get the most out of investing using the IBD paper, I'd recommend the following:

  • Read How to Make Money in Stocks

  • Read the paper each day

  • Follow the general market direction

  • Use the stock screens the paper offers

  • Create a watch list of the best stocks

  • Identify a stocks chart type as well as pivot point

  • Put your money in a stock

  • Analyze what you did right and what you did wrong.

If you follow this advice and practice and study on a consistent basis, you will get better. Give it a go!


Stock Investing Today

Every now and then I call my friend up and we discuss the current state of stock investing today. Mostly it's in disgust at the out right manipulation we see in the market every day. Whether it's analysts downgrading stocks they have a short interest in or the governments outright disregard for setting any kind of trading rules that would make the market fair for all. Meanwhile, the SEC who sets most of the rules puts the Martha Stewarts in jail while the Bernie Madoffs bilk everyone out of their money. We also don't see financial reform doing much to correct the sorry state of the markets today.

I think the real problem with the market is the fact that basic premise behind free markets is supply and demand. Yet, we have these market makers that provide liquidity to investors so that there always buyers and sellers. This seems to me to create artificial demand and if that's the case, it must prop up prices to some degree. I also think that because these market makers are sitting on this liquidity, it's my theory that they sit in a room and figure out how to make money with this idle money. And that's where the little investor gets screwed. Now I'll admit that I don't know much about "market making" and it may very well be required, but it seems a little too casino 'ish if they are just acting like the house taking all bets.

In the end, stock market investing today is what it is and it still provides investors with one of the best opportunities to make money than just about any other out there. The rules as those who invested before us are not the same and so it's important that you have an investing strategy that will help steer you clear of those out to just capture your capital.

One such strategy that I think works well today is CANSLIM. In particular, the most important part is what it teaches about using charts to be able to tell when big money is getting into and out of the market and likewise into and out of individual stocks. From my experience in the market so far, I will tell you that the media will just pass on what the big money wants us to believe so they can profit. The media will do no real research to see if what they say is correct. Cramer on CNBC confirmed this tonight on his show when he said that no one checks into economist forecast to see if they are accurate. They just accept it.

That's where the technical analysis of charts comes in handy because you can look at a stock chart just like an x-ray. You can determine if the demand is increasing or decreasing for the stock you are looking for. From day to day, these price and volume clues that the charts can't lie about do more to provide you the insight you need the media does.

Because of this you need to devote your study of the market to those that help you create your own opinion rather than relying on that of other.

Continue your study and good luck!

What Stocks Should I Buy Right Now

While I was working today and thinking about how people ask me all the time what stocks should I buy right now. I talked a little about this in my recent posts Stocks In Uptrends. As a result of spending some time thinking, I wrote a post on How To Screen For Stocks Using The IBD today. I thought that would help people get a handle on exactly what they need to know to find potential winning stocks to buy.

Screening for stocks is half the equation though. Once you identify stocks that are fundamentally sound, the next step is to make sure that they are technically sound by analyzing their stocks chart. For now, though, I am going to focus not so much on what stocks you should buy, but what stocks you could buy if the timing is right. Let's get into some stocks that might make good candidates based on the what hit our stock market investing radar today.
  1. Stocks reaching new 52 week highs - TLP, EPD, NRGP, EEQ, JKS, EPE, EC, VRX, ADTN, WINA, CVU
  2. Stocks with heavy volume - WHR, MMP, WPI, KWR, ADTN, PSMT, ALTR
  3. Stocks trading within 15% of their 52 week highs - ALTR, CRVL, DTV, BOOT, LCAPA, LSTZA, MNRO, SWKS, VLTR, XLNX, EPE, NRGP, TLP, BBD, ABV, MMP, NEM, PPO, VQ, WPZ
  5. Stocks with earnings increase over 25% and accelerating - None

Now that I've scanned the market for stocks that might meet my criteria, these will deserve further analysis. The next step for me is to check these stocks for:
  • EPS Rating > 80
  • RS > 80
  • SMR Rating of A or B
  • Accumulation/Distribution A or B
  • Group Relative Strength A or B

The ratings above are the IBD's ratings and if will eliminate more of the stocks above.

That's about all I have time to do today, but this will  continue to build on what we've started and I'll work on streamlining it further as I go along. Within these stocks you might find some good stocks to buy but a final reminder that they need further analysis to be sure.

How To Screen For Stocks Using The IBD

We've been working on studying general market direction for several weeks now and I hope that you are comfortable with that now. Today though, I wanted to spend some time on how to screen for stocks using the IBD. Later when I get a chance, I'll update my post called How To Use The IBD: The Complete Guide to reflect this post. It's important to note that there are probably thousands of ways to screen for stocks. And, I'm sure that even once I lay out how I am going to start screening on a daily basis, that I'll change and refine it later as I get more experienced. While the screening methods might change, one thing won't. That's the need to find stocks that meet your criteria to potentially invest in on a daily basis.

William O'Neil breaks down his screening process into two parts:
  1. Fundamental screens - Fundamental screens check for EPS and RS ratings, Return on equity, etc.
  2. Technical screens - Technical screens use stock charts to look for the best buy points.

Please note that there are TWO steps here and just because a stock meets a fundamental screen doesn't mean that it's the best stock to buy now. That's why you need to verify that a stock you like fundamentally also looks good technically. We're going to start with the first step and review the fundamental screens. Once I get more experience, then I'll move on to improving my chart analysis.

But again, please note that just because a stock makes a screen doesn't mean that if you bought it that it would go up. You have to buy it at the right time. That's what your technical analysis will show you.

When you are using your screening tools, visualize yourself like the gold prospector along the river. See yourself sifting through the dirt looking for pieces of gold. Screening for stocks is just a way to sift through the thousands of stocks available to reduce the number to a managable number that you can review on a daily basis.

Rather than recreate the wheel, let's start with what O'Neil has already set up for us. As a subscriber to the eIBD, I've already got access to several screens customized specifically to the CANSLIM investor. As my starting setup, I'm going to focus on five daily screens and see what stocks start popping up on my radar.

Here they are:
  1. Stocks reaching new 52 week highs - Everyday, you can find a list of these in the paper each day. Stock market winners pass through this screen on their way to higher highs. Stocks that reach new highs often go higher - much higher. I'll limit my screen to the top six industry groups and those over 80 EPS.
  2. Stocks with heavy volume - This daily screen come from the Stocks On The Move feature that is on the front page of the Making Money section. Heavier volume is indicative of institutional sponsorship - a must if I'm going to see big gains in price. For this screen, I'm only going to look at stocks that are 80 and higher in both EPS and RS ratings. These are conveniently in bold.
  3. Stocks trading within 15% of their 52 week highs - Each and every day, the Stocks in the News section highlights 20 stocks - 10 from the NYSE and 10 from the NASDAQ.
  4. Stocks with strong price action - The Timesaver Table summarizes stocks up at least 1 point or making new price highs.
  5. Stocks with earnings increase over 25% and accelerating - Each day I will check for stocks that have over 25% increase in earnings per share and that are also accelerating.

These daily screens will bring up the cream of the crop and the first thing that I want to do is just get the mechanics of going through them each and every day.

Once I identify stocks that pass the above screens, I will then reduce them further by eliminating the ones that do not meet these minimum thresholds:
  • EPS and RS ratings over 80
  • SMR, Accumulation/Distribution, Group Relative strength of at least an A or B
  • At least 100,000 in average daily volume
  • Earnings per share over 25% in the last quarter
  • Sales increase of over 25% in the last quarter

In addition to the daily screens, there are also several screens that I will go through that the IBD runs once a week. These are:
  • IBD 100 - Published on Monday
  • IBD Big Cap 20 - Published on Tuesday
  • IBD Top 200 Composite Stocks - Published on Thursday
  • IBD Weekly Review - Published on Friday

Because it's possible that the stocks that comprise these screens may remain the same from week to week, what I'm going to do is look for stocks that have a price increase of 2% or more and a volume increase of 100% or more. If they do, then I'll use the above additional screening criteria above to reduce them futher.

Once, I do this, this should give me a handful of stocks that I can focus on each day.

So, that's how I am going to screen for stocks to buy each day. As I update and refine my screens, I will update that here. Let me know if you have any tips or suggestions. Once I get my screening process ironed out, the next step for me is to iron out how to manage my stock market investing watch list. That's for another day.

Good luck!