Monday, September 20, 2010

Buy Stocks Online: Start Looking At Charts

When you first start to buy stocks online, I've suggested that you spend a lot of time practicing first and I've defined that time period as 100 simulated trades. If you have been following along here as we buy stock online, you'll note that we've bought 3 stocks. They are JKS, MSB and OPEN. All three of those stocks were up today. The market really hasn't suffered much distribution and today it even cleared out one distribution day on the NASDAQ because of the distance the rally has increased the price of that index.

Today, the market returned a bunch of stocks on the Stocks on the Move screen. Here are the stocks I had to look at today.











































After seeing relatively few stocks on the screen for so long, it appears that the market is strengthening based on this list. Applying my screens to these stocks returned the following candidates for buying stocks online through our simulator.

They were:


If you buy stocks online ZBRA might deserve a look.

Of these stocks, I purchased $1,000 in ZBRA. We'll see how it does.

In learning how to buy stocks online, I've started to turn my attention to analyzing charts in greater detail. The first thing I am going to tackle is the cup with handle pattern.

The first thing I noticed from O'Neil's book is that he uses weekly charts to identify his chart patterns. So starting with the six stocks today, I began taking a closer look at the price and volume action and specifically looking for the cup with handle.

The goal here is to identify the correct buy point, also known as a pivot point. He spends a lot of time talking about buying stocks at the right time. Mastering this particular component is probably going to be the toughest.

For now, what I recommend is get in the habit of looking at the charts. See if you can spot bases. As we go along, I'll try and lay out my strategy for figuring that part out.

Until then, good luck with your stock market investing program. If you want to follow along with my progress here, I suggest that your read, "Buying Stocks - A Case Study". Here are a few other posts that go through what I'm doing.

Buy Stocks: Where I Started
Buy Stock: Follow The Leaders
How To Buy Stocks
Stocks To Buy Today
Finding CANSLIM Stocks To Buy

Sunday, September 19, 2010

Finding CANSLIM Stocks To Buy

This site is all about finding CANSLIM stocks to buy. As I mentioned in an earlier video, there is no reason to reinvent the wheel. When you are new, do what the masters teach you. Master what they teach first and then fine tune it based on your experience. The Investor's Business Daily is one big CANSLIM stock screener that bring stocks you might want to buy to your attention. Use them. They usually have some of the best stocks to buy right now in them.

Let's see what is available each day.

Stocks On The Move

The stocks on the move screen highlights stocks that make price moves on higher volume. This is a sign of institutional sponsorship - a key component of a stock's ability to go up significantly and the "I" in CANSLIM.

Stocks In The News

The stocks in the news screen highlights stocks that are close to potential buy points. When you are learning how to buy stocks, the hardest part is identifying the pivot point - or the ideal entry point. These stocks are close to buy points and there is a chart for each stock that also sometimes gives you the pivot point so you can learn how to find it. The mini charts are a great resource especially if you don't have a subscription to the Daily Graphs feature of IBD.

New Highs

Stocks making new 52 week highs can also contain some of the best stocks to buy. Stocks that skyrocket in price have to make new highs many times. Keep an eye on this list for potential winning stocks.

Timesaver Table

This screen highlights stocks that make big price increases and is worth a look. Personally, I prefer the stocks on the move screen as it's a little easier to cherry pick the bold stocks. O'Neil devised it for it's ability to save you time. If you only have a limited time, refer to this screen.

On you can also find some good stocks to buy that meet CANSLIM criteria. There's the screen of the day for one. Also don't forget that stocks mentioned in the Big Picture column or on the front page are also great CANSLIM stocks. Because of that, you might want to add them to your watch list as well. Other popular screens are the IBD 100, the Weekly Review, the IBD 200 and the Big Cap 20.

In the end though, the best part of the Investor's Business Daily is the number of ideas it generates. This can cause information overload. That's why I suggest that when you are putting together your stock market investing routine, that you focus on one screen only. It makes your job that much easier and if you are a beginner that's a big deal.

Right now, I am tracking my progress. It's called Buying Stocks - A Case Study. If you want to follow along here are some previous posts you might have missed.

Buy Stocks: Where I Started
Buy Stock: Follow The Leaders
How To Buy Stocks
Stocks To Buy Today

Saturday, September 18, 2010

Best Stock To Buy Today

According to my stock research, the best stock to buy today is Mesabi Trust (NYSE: MSB). It broke  out on Friday. It was up 2.36% in price and on volume 70.83% higher than average. It's this kind of breakout that shows it's potentially being bought by the "big money". It's also sporting an IBD Composite rating of 99, EPS rating of 85, RS rating of 99, SMR rating and Group RS rating of A and Accumulation and Distribution Rating of B+. Fundamentally, company earnings per share were up 4100% in the last quarter. This kind of growth in earnings is what you want to see in a growth stock.

The best stock to buy today might be Mesabi Trust in the Mining Industry"

Just because it's one of the best stocks to buy today doesn't necessarily mean that it will go up in value. Always make sure that you first do your own due diligence and cut any losses at 8% of your purchase price.

There weren't many stocks to like today, but of the ones I focused on, this was the one I liked the best.

Especially, since I get emails that keep touting the best penny stocks to buy today, I know that this stock probably will garner more institutional support.

There are some negatives though. It might be slightly extended in price. When that's the case, it's easy to get stopped out of your positions.

As you get more proficient in chart reading, you'll discover that you will learn to fine tune your entry and exit points.

Make sure that you at least put this stock on your watch list for further review. Whether it's one of the stocks to buy today from your point of view, you'll have to see how it stacks up to your stock market investing criteria. For more information on how I choose stocks, check out my series called "Buying Stocks - A Case Study"

Stocks To Buy Today

Your search for stocks to buy today should start by looking for stocks that close higher on higher volume or what is referred to as a breakout. I personally look for stocks that breakout on a 2% percent price increase on volume 100% higher than the average volume. Why do you want to focus on stocks breaking out? That's because the best stocks to buy today are the ones that have institutional sponsorship. It's this sponsorship that drives prices higher. You are looking to ride that wave along with them.

The hard part is finding stocks that institutions are buying because they don't disclose it to the mainstream media. In fact, the exact opposite probably happens. When the media tells you to buy a stock, that is probably when they are getting out. Once this "advertising" starts to take place, it's purpose is to find buyers for the shares they are selling.

So, if they don't broadcast to the world what they are doing, then how do you know what stocks to buy today that they are buying. The answer lies in the breakout. Stocks that experience unusual volume and the price rises at the same time are under accumulation by the big money. Follow the money and you'll have a chance to make money on their coat tails.

You can find the best stocks to buy today that potentially have institutional sponsorship by watching the "Stocks on the Move" screen published daily in the IBD. Just about every stock that goes higher will show up on this screen. Watch it daily and add some of these stocks to your watch list and monitor it for breakouts.

This is where I start my search for good stocks to buy today and you should too.

Open Table, Inc. turned out to be one of the best stocks to buy today when it's breakout occurred.

Let's have a look at what can happen. Earlier this year, Open Table, Inc. broke out on huge volume and a large price increase. You can see what's happened since.

This stock has risen considerably since then. The reason behind the move is big money is behind it. Once the big money decides to get it, it has this kind of effect.

Will this always happen? No. That's why you've got to do additional research. Many breakouts will fail. Your goal is to find the ones that succeed.

You do that by watching stocks making big moves on huge volume increases, adding them to your watch list.

Eventually, you buy some of them. With experience you can find some hot stocks to buy today.

Good luck with your stock market investing. For more information check out my "Buying Stocks - A Case Study" series.

Links to the posts directly after that one:

Buy Stocks: Where I Started
Buy Stock: Follow The Leaders
How To Buy Stocks

Friday, September 17, 2010

How To Buy Stocks

Since it's Friday, I thought I would spend a little extra time talking about how to buy stocks. Weekends are a good time to reflect on the market, your trades and cleaning up or adding to your watch list. Learning how to buy stock is something anyone can do. But, the fact is that most never take the time to study the market long enough to gain the experience they need to succeed. If you think the media is going to tell you the best stocks to buy, you are going down a quick road to failure. The key to buying stocks is watching the market and identifying the leading stocks on a daily basis. Actual trading experience is also the best teacher.

Over the history of the market, many people have put in countless hours of study and developed investment strategies that are proven successful. Because of that, you don't need to reinvent the wheel. Pick a strategy that suits your personality and run with it. Learn it inside and out. Don't go from idea to idea looking for the next get rich quick investing idea. People get sucked in to options, forex and penny stocks all of the time. Can you make money using those vehicles. Absolutely. Is it likely? No. Stick to strategies that are proven from the masters of investing like Peter Lynch, Benjamin Graham, Warren Buffett and William O'Neil. Start studying their works and putting in place your own set of steps to take on a daily basis. That's what I am doing here. I've become a follower of O'Neil and his CANLSIM strategy. I've decided it's the only strategy I am going to follow. I've also decide that I'm going to set out to master it as best I can.

I've started to illustrate this process with a series of articles in my Buying Stocks - A Case Study. To get up to date on what I am doing, you might check out the most recent posts in this case study by checking out these articles.

Buy Stocks: Where I Started
Buy Stock: Follow The Leaders

How To Buy Stocks For Beginners

First, I recommend that you become a CANSLIM investor. Start by reading How to Make Money in Stocks by William O'Neil. He also has another book called The Successful Investor that I think actually breaks down the steps in a more clear fashion. Read and re-read these books. Next subscribe to the Investor's Business Daily. Also known as the IBD, this paper is the source for all of the data you need to be successful. As a subscriber, you'll also get access to which has several useful tools to help you succeed. This includes a very thorough help section. I've also called IBD many times asking questions and they have always been extremely helpful.

Next start studying, the market indexes on a daily basis. Commit to only investing when the market is in a confirmed uptrend. The Big Picture column tells you every day what the current outlook is. You don't even need to know how they figure that out. Today it's in a confirmed uptrend. That's really all you need to know. Can you develop your own system to determine market direction? Should you add all of these secondary indicators that detail market breadth or new highs to new lows? Well maybe, but as a beginner, don't worry about such complexities. Keep it simple.

When you look at the stock market each day, what you are really looking at are the market indexes. Indexes are a composite (or price average basically) of how the stocks in that group performed for the day. You want to focus on four indexes. They are:

  1. S&P 500

  2. Dow Jones Industrial Average


  4. New York Stock Exchange Composite

Finding this data is easy. You just go to and look at the home page. They are right at the top. They are also at the top of the front page of each days paper.

I like to look at it online because I can quickly look at the indexes chart by clicking the link. While the same data is available in the paper on the How's The Market page, I like to see it on my computer screen.

Each day, look at index and determine if the market index went up or down in price. Once you've done that, look at the volume for the day. The volume is the bar at the bottom of the chart. Was the volume higher or lower than the previous day?

Once you've identified these two pieces of information, you can tell what kind of day it was on the market. These are the four things that can happen on an index each day.

  1. The market could close higher on higher volume. This indicates that the market is under accumulation and money is flowing into the market. If the market is in a confirmed uptrend, this is what you want to see and is a positive for the market. If the market is in a correction, this could be considered an attempted rally or also might be a follow-through day. If the market is under pressure, this is also a good thing. In any case, this action on an index is always a great thing for investors.

  2. The market could close lower on higher volume. This indicates that the market is under distribution and money is flowing out of the market. If the market is in a confirmed uptrend, depending on the price decline (more than .2 percent) it will count as a distribution day. If the market index is in a correction, this just means more of a bad thing.

  3. The market could close lower on lower volume. This is the kind of action you want to see on an index if it has to have a decline. It's neutral action in any outlook at the time.

  4. The market could close higher on lower volume. This is more a stalling action that might indicate the big money has stopped putting money in the market and is more of a sign of weakness or stalling action. While not necessarily a bad thing as every market uptrend needs to rest somewhat, it might be a red flag if it continues.

So to summarize, first look at the current outlook. You are going to find one of three conditions:

  1. Market in confirmed uptrend (time to invest)

  2. Market uptrend under pressure (don't invest, consider selling)

  3. Market in correction (sell your positions)

Figure out what kind of market you are in.

Next, identify what happened on each index for that specific day. Is the market under accumulation or distribution. Read the Big Picture column, watch the IBD TV market wrap but only after you have decided for yourself what happened. Then confirm it by using those tools.

Remember this rule, only invest when the market is in a confirmed uptrend. Keep it simple and in the beginning just go with what they say. Get fancy later.

It will be around this time that you'll get an email or see an ad that will say "How To Buy Penny Stocks" promising riches and quickly. There's nothing to see there. Move on and keep your focus on your strategy.

The first step in learning how to buy stocks is only investing when the market is in an uptrend.

The next thing you want to do is start identifying stocks that meet your criteria. As a CANSLIM investor, there are several screens you can choose from that will bring some of the best stocks to buy to your attention. If you focus on buying the leaders, you'll dramatically improve your results. The problem with the IBD is that their are so many ways to locate good stocks to buy that you'll probably feel overwhelmed.

You'll find:

  • The IBD 100

  • Your Weekly Review

  • Stocks on the Move

  • Stocks in the News

  • IBD 200

  • Timesaver Table

  • New Highs

  • New America

  • Big Cap 20

Because there are so many screens, it's almost too much information. So, here is my suggestion. Pick one screen to build your watch list from. Maybe you will like the IBD 200. Maybe it will be the Weekly Review. It really doesn't matter. Pick one screen and keep it as your source of new ideas. I guess in an ideal world, you'd have the time to make note of all the stocks in each of the screens. But in the world I live in, I only have so much time.

I repeat, when you are just starting out, pick one screen and only focus on it. Keep it simple.

For me, I chose the Stocks on the Move screen. Almost every stock that goes on to make huge gains will show up on this list, probably more than once. I watch it daily and then add the best stocks to my watch list. These are stocks I might want to buy at some point. But I don't know yet. I have to check further.

Here's how I do it.

  1. I review the Stocks on the Move list.

  2. I write down the tickers for the stocks in bold. These are stocks that have an EPS rating and an RS rating of 80 or higher. EPS stands for Earnings Per Share and RS stands for relative strength. The higher the number the better quality the stock. Keep in mind though that stocks that have high ratings might not go up. Why? They might have already peaked. That's why you'll need to review them further.

  3. Once I've done that I put the ticker symbols into a MyStocksList on I look at the price and volume information. I eliminate all stocks that didn't have at least 100,000 in daily volume.

  4. Next I look at the Smart Select Ratings. I eliminate all stocks that have a Composite Rating (IBD's special rating) of less than 80.

  5. I eliminate all stocks that don't have A or B ratings for SMR, Acc/Dis and Group RS ratings. I don't include anything of B- or less.

  6. After that, I look at the fundamentals. I eliminate all stocks that don't show increases of at least 25% in EPS and Sales changes across all of those options in my stocks list. I keep N/A stocks.

  7. Finally, I check the remaining stocks and eliminate stocks with more than 100 million in float.

I then add these stocks to my watch list and will review them further.

Now before you move on to learn how to buy stocks online, I suggest that first, if you are new, that you go through an three to nine month practice session. I'm going to suggest that you simulate 100 trades before you invest your own money.

That's what I am doing right now to show you how it should be done. The correct way to practice is to go through the motions just like you would if you were using real money. This will help you get a handle on your daily stock market routine. Start to make checklist of each and every action that you take. Start streamlining your routine so that you do the same thing every day. Get it out of your head and put your checklist out where you can see them. Take the time to go through them each time. Eventually you learn them by heart. But at first, you'll discover some little step you forgot here or there. You'll decide you need to add this or subtract that step. In essence, you'll be refining your steps. When you get everything out of your head, eventually you won't think about the steps any more and you'll be able to focus on the big picture, help control your emotions when you finally invest real money and be more able to act on your experience than figure out if you are doing everything you need to do.

Many people at this step of how to buy and sell stocks will scoff at using a simulator to practice. They will tell you that it's not like the real thing. They will say that the simulator won't act like the real market and you won't act the same once you invest real money. And, they will be right. But professionals every day use simulators to make sure they are well suited to the task at hand. Pilots, use simulators and checklists to be sure that they can handle any situation they might encounter. You should too.

I suggest that when you start identifying stocks that show up on your screen, you do a simulated buy the next day of a $1,000 worth of the stock with the least amount of float. Float is the number of shares that actually trade. The lower the float, the more of a pronounced impact on the price when the big institutional money flows into it. This kind of action is what you are looking for.

You want to ride this kind of uptrend as high as it goes. But when you do these simulated buys, what you should be doing is also setting your stop losses and your profit target. Whatever the price of the stock is, multiply it buy .92 to get your stop price. This is an 8 percent decline and also multiply it by 1.20 and this will give you your price target.

Once you've simulated the buy, only trade at the beginning and end of the day. Don't make intraday decisions. You'll find that some of your stocks will decrease quickly or increase quickly because of the low float. They will be more volatile. For now though, only check your stuff at the end of the trading day. If it dropped 8% or more, sell it at the beginning of the next day. If it increases to 20% sell it the next day.

Your goal here is to do this daily until you know not only what steps you need to take but also how to buy stocks and sell stocks as well. You won't be holding them forever. Some stocks will go down immediately and you'll cash out and leave. Some you'll be in for a while. If the market turns into a correction, you'll exit all of your stocks. If the market uptrend comes under pressure, you'll not buy any new stocks. Do just like you would if it were real money. Start studying charts and looking for cup with handle patterns, flat bases and other patterns. Try and identify ideal buy points. Start watching the price and volume action and ask yourself if money is flowing into this stock or not. See the market index information above. It's the same for individual stocks. Keep an eye on three moving averages, the 10 day, the 50 day and the 200 day moving averages.

Do this for 100 simulated trades as quickly as you can but no more than one a day. Along the way keep a trade journal of each stock. Note the results. What was the percentage gain or loss. Your objective is to be right on 1 out of 3 of your "at bats" basically. Also, make note of why you sold the stock. Was it because the market turned. Maybe the stock didn't seem to act right. Was it because it closed lower on extremely high volume.

Be tight with your simulated money. Treat it like the real thing and make sure that you contain your losses.

If you were right one out of three times, you have graduated to the next version of simulation. You'll want to open a trading account with $1,000 bucks and treat it just like a simulator. Only this simulator is a real live trading account with real time data. Start repeating the process. Choose a broker that's as reliable as you can get with the lowest commission possible. You want your in and out fees, or roundtrip, to be as low as possible. For example, if you go with Scottrade at this time, their fees are $7 per trade. Your roundtrip will be $14.

Now though, you'll only want to own one stock at a time. You'll learn quickly that the real market does work differently. And so do your emotions. But keep in mind that to learn how to buy stocks without a broker is a learning process. One you can do if you put your mind to it and focus your study. As with your simulated trading, buying stocks for real, you'll have the same goals. At least one out of three. Once you've done that, start committing more money to your stock market investing. Well, I've talked a long time today.

Today, I didn't add any stocks to my watch list. I put a buy order in my simulator for NYSE:MSB Mesabi Trust.

Thursday, September 16, 2010

Buy Stock: Follow The Leaders

Today, I wanted to talk about why you should buy stock in the market leaders. This is my third article in my series that follows how I am setting up my investment strategy. But to bring you up to speed, each day, I'm walking you through my stock market investing strategy. Here are links to the first couple of posts:

Buying Stocks: A Case Study
Buy Stocks: Where I Started

If you want to buy stocks, you have to sit down and develop your day to day routine. I am a strong advocate in following the same specific steps each day. The only way you can do that is by taking note of your actions and writing them down. My steps might be different from yours. What matters is that you get results with your system.

Now when I talk about my system, I don't mean I developed the CANSLIM theory. But what I am talking about is making the strategy my own. You need to do this to master the strategy. Break every step down in complete detail so that you don't think about the process, you think about the big picture.

As usual, the first step I take each day before I look for stocks to buy now, is by looking at the general market direction. I like to look at each market index and then watch the IBD TV Market Wrap video to verify my analysis. Finally I read check out the Big Picture column and the current market outlook. The market remains in a confirmed uptrend and there was no distribution in the market indexes.

The next thing I do is check my current holdings. Yesterday, I picked up 36 shares of JKS for $27.87. Today it was up 4.67% on heavier volume to close at $28.91.

Jinko Solar was also listed as one of the leaders today on the front page of the IBD. I expect this stock to be somewhat volatile because of it's low float of 21.7 million shares.

Now that I've opened a position, I wanted to set up some price targets. The first is my stop loss of 8 percent.

Stop loss $22.80

I'm using mental stops instead of hard stops and also only doing my trading at the beginning and ending of each day.

My next price target is a 20% profit.

Profit target $33.44

So, we'll keep an eye on Jinko Solar (NYSE: JKS)

But learning how to buy stocks starts with screening. Each day, I watch the Stocks On The Move screen and today the following stocks popped on my radar.


I then apply my specific criteria and knocked all but three off my list. They were:


MSB was new and so I added that stock to my watch list.

I decided to open up my investopedia simulator and pick up a $1,000 of NASDAQ:OPEN which should be about 15 shares. In looking for stocks to buy, I chose Open Table, Inc because of it's low float and it's seven weeks of higher closing prices. It was also mentioned on the front page of the IBD as a market leader.

The goal is of this case study is to get a track record of trading results. My stock market investing objective is to be right 1 out of 3 times. I've got to cut losses at 8% and get gains of 20%. I'll keep you posted as I go along.

Good luck when you start to buy stocks online and let me know how it goes.

Investor’s Business Daily Market Pulse

Every day, you want to follow the Investor's Business Daily Market Pulse. You'll find it in every issue of the IBD in the Big Picture column. The market pulse will include a summary of the days action, the current market outlook, how many distribution days are weighing on the market. You'll also find the market leaders that might be up or down that particular day.

By far the most valuable feature is the current market outlook. As a CANSLIM investor, you only want to invest when the market is in a confirmed uptrend. The editor's of the paper make it easy to determine what that is. What I like to do is look at the market indexes myself before I read the paper to see what I think happened in the market today. I then also watch the IBD TV Market Wrap video to see if I was right.

I think the next most valuable feature of the market pulse is that it identifies the market leaders for you. If you aren't certain who the leaders are, look here each day. A front page mention of a stock shouldn't be taken lightly. Keep an eye on those stocks for later. Consider adding them to your watchlist.

If you start reading the market every day, you'll be able to tell what the Big Picture column is going to say before you read it. Even then, you'll discover little nuances to determining market direction, like when distribution days fall off, what follow through days look like and more.

Reviewing the IBD Market Pulse should be the first thing on your daily stock market investing checklist.

How To Tell When Institutions Are Selling

I had a reader want to know how to tell when institutions are selling stock. I know that in previous articles, I've talked about How Do You Tell When Institutions Are Buying Stock? My reader is on the right track here in tracking the institutional, or "big money", and watching where it is flowing. When the big money flows into a stock, it has the effect of driving that stock's price up. When it starts selling, it has the opposite effect. Because demand for the stock is falling, it makes the price fall. Once you see signs of a stock weakening you want to start exiting as well. But how do you know?

Your first sign is the general market indexes. Once distribution days (days the market closes lower on higher volume) start stacking up, this means that the institutions are starting to sell. The stock you own might not shows signs of a weakness right away. But even the best stock will fall in a market correction.

That's why you also need to pay attention to the stock itself. When you start to see the stock's price close slightly higher on lower volume (stalling action) or closing lower on higher volume (distribution) you'll know that money is leaving your stock.

Combine what you see from the general market direction with your stock. Pay close attention to the charts of each. Keep an eye on the Big Picture column. Only invest when the market is in a confirmed uptrend. You'll find that experience will also teach you how to spot a weakening stock. Study your past trades to see how they've acted. Learn from your mistakes.

Don't be afraid of selling to early. Feel free to lock in some of your gains by selling at least a portion of your position. There's always opportunity in the market during an uptrend.

Good luck in your stock market investing journey.

Wednesday, September 15, 2010

Buy Stocks: Where I Started

To buy stocks, you've got to start from somewhere. If you are just starting from scratch, then I thought what I would do is let you have an inside look into the steps I took to to set up my investing program. When I first started, I knew that I wanted buy stock and also felt that the stock market offered one of the greatest opportunities available to anyone to make their fortune. The key is figuring out exactly what you need to be doing on a daily basis to give you the best opportunity to succeed. Step one is to commit yourself to daily learning. You've got to study the market everyday. Only then can you expect to be successful.

My first goal in developing my system was to try and figure out how to streamline it so that it was as simple and as quick as possible. Like you, I only have so much time in the day. I want to use my time as efficiently and effectively as possible. I laid out my six step approach in a recent post called "Buying Stocks - A Case Study". From this point forward, I decided that I would break down each step on a daily basis as best I can.

The first step for me in figuring out how to buy stocks is determining the direction of the general market directions. My objective is to only invest when the market is in a confirmed uptrend. I have spoke in the past, that the best place to find this information is by reading the Big Picture column and watching the IBD TV Market Wrap on

As I write this, current market outlook is "Market In Confirmed Uptrend". Once you know the outlook, start paying attention to the market indexes on a daily basis.

What you are looking for is the price and volume action of each of the four major indexes. Those are the Standard & Poors 500 (S&P 500), the Dow Jones Industrial Average (DJIA), the NASDAQ and the New York Stock Exchange (NYSE).

You can see the chart at the left shows that the S&P 500 closed higher today on lower volume. What you want to see is the index to close higher on higher volume. This is a sign of strength. Today's action on the index was not a sign of strength but more a sign that the index stalled a little bit today.

A quick note on charts. I personally go to and review the charts there because it's free to do so. I am a subscriber but I like the way the charts are laid out. The other reason I like the chart there is because the volume at the bottom of the index is for the NYSE volume not just the S&P stocks. William O'Neil compares it to the whole market.

With the market in a confirmed uptrend, what I'm watching for is what is called a distribution day. A distribution day is when the market closes lower on higher volume. None of the indexes showed any distribution, which is a good thing for us CANSLIM investors. There is one distribution day on the count to this point.

Once I've identified the state of the market, I then start to look for stocks to buy. The way I like to do it, is by looking for stocks that are breaking out in price on higher volume. The best place to do that is by watching the stocks on the move screen in the IBD. Every day they list stocks that are breaking out. I then look at these stocks to see if I want to include them on my watch list.

I usually sit at the computer and pull up my eIBD and write down the tickers of the bold face stocks. These are stocks that have an EPS and RS rating of 80 or higher.

The stocks that met that screen today were:


Once I have these list of stocks, I check to make sure that they trade at least 100,000 shares in volume. I then make a run through of each stock and eliminate those that don't meet the following criteria.

  • Composite Rating > 80

  • EPS > 80

  • RS > 80

  • Volume > 100,000

  • SMR Rating > A or B

  • Acc/Dist Rating > A or B

  • Group RS Rating > A or B

  • EPS % Change Latest Quarter > 25%

  • Sales % Change Lastest Quarter > 25%

  • EPS Est % Change Current Quarter > 25%

  • EPS Est % Change Current Year > 25%

  • Float < 100 million

Today, this left me with three good stocks to buy based on my criteria as:

JKS 10 million shares

OPEN 15.5 million shares

RVBD 56.6 million shares

I then add these three stocks to my watch list to watch from this point forward. As you can see, I listed them in order of smallest float to largest. A tip I've picked up from stockbee. He has said some of the best stocks to buy are the ones with less than 100 million shares in float.

To begin the learning process, I then am going to buy stocks online in a simulator to build up some experience. I will put in a market order for approximately $1,000 shares of stock (roughly 36 shares) to see how this plays out. Good luck with your stock market investing and I'll keep you posted on mine.

Tuesday, September 14, 2010

How Do You Know If The Market Is In A Confirmed Uptrend

Step one in CANSLIM is only investing when the market is trending higher, but how do you know if the market is in a confirmed uptrend? The easiest way is to subscribe to the Investor's Business Daily. On the front page of the IBD each and every day is the Big Picture column. This column contains a box called the Market Pulse and inside you'll find the current outlook. The outlook will have one of three conditions. They are:

  1. Market in confirmed uptrend

  2. Uptrend under pressure

  3. Market in correction

If you are a CANSLIM investor, you only want to invest when the market is in a confirmed uptrend. This is because most stocks follow the overall market trend. By investing with the trend, you are more likely to have your stocks price go up. If the market is in a correction, this puts additional pressure on your stock's price. You want to avoid this.

By following the Big Picture column, you'll keep on top of what the IBD editor's expert opinion of the direction is. This saves you the time of keeping track of it.

Here's a tip that most people might not know. Whether you are an IBD subscriber or not, you can follow the IBD TV Market Wrap video on a daily basis for free. This video will help you keep tabs on the overall market direction. Watch it daily. In addition, you can review the charts of the general market indexes for free as well.

You'll find that your stock market investing results will improve if you only invest with the market in confirmed uptrend.  This is why O'Neil recommends you pay close attention to the market's action everyday. If you are new to investing, I'd start by learning the "M" in CANSLIM which is how to determine the overall market direction. Read more in How To Make Money In Stocks.

Sunday, September 12, 2010

Daily Stock Market Routine Checklist

I am a big believer in creating a daily stock market routine checklist. The reason is because if you can break down all the investing decisions you need to make and put them into a checklist, you are more likely to follow a system than if you just fly by the seat of your pants. I've already started putting my daily stock market investing routine into a checklist. You can see the first one I did that's described in my post called IBD Market Direction Checklist.

For most things we do, we'll remember the steps for the most part, but it's not always easy to remember exactly what to do in the heat of the moment. When money is on the line, why not take the extra safe guard to follow standard procedures that you've already pre-thought ahead of time.

That last comment about having a checklist is really important in my mind. Mastery of your investment strategy requires complete dedication to doing the same thing over and over EACH time. If you make one decision once and another decision in the same circumstance. How do you really know what works? The answer is that you really don't.

Systemically breaking down every decision so that you always know what to do each day is not something every one does. But you shouldn't be like everyone else.

Whether you realize it or not, you develop a daily stock market routine of being inconsistent if you don't devise and develop your own set of trading rules that you follow exactly each time you buy and sell stocks.

The best way to develop your checklist is to get a yellow legal pad and have it handy while you take each step from market direction, stock screening, buying and selling, etc. Write down each step as you take it. Write down everything. You'll find that you make changes to your checklist and move things around.

Getting into this habit will also help you define when your job is done, because you'll know what done looks like. Finally, keep those checklist out where you can see them. Otherwise they won't do you any good.

Good luck!

Saturday, September 11, 2010

How Do You Tell When Institutions Are Buying Stock

I had another reader question today which was how do you tell when institutions are buying stock? This is a great question and really touches on the heart of the CANSLIM strategy which is institutional sponsorship. Without it, it's hard to get the stock price to go up. With it, you can find some real winners.

The first way to spot institutions buying stocks in specific companies is by watching the price and volume action on a chart for that particular stock. If the price is increasing on higher volume, that might be a good indicator. Especially if it's on a substantial increases in price and volume otherwise known as a "break out". The best place to find this information is by reviewing the Stocks on the Move screen each day and on a weekly basis.

You can also look for the monthly screen in the IBD called Top Mutual Fund Buys which appears sometime in the first week of each month. This information has a lag time though from when it actually happens to when we get it which I think should be more transparent. I don't see why they get to hide their buys. I guess it's more likely they are more concerned about hiding their selling so you don't know until they are completely out. But it is still useful because institutions sometimes take a few months to complete their buys.

You can also check the top performing mutual funds feature each day. You'll discover what stock they are buying now by looking at the details provided their. You'll also find it in a few other screens from time to time.

Those are the major ways to spot it though. In particular the price and volume gives them away. Knowing they are getting in is a good sign and institutional sponsorship is key to a stock's rise in price.

Good luck with your stock market investing.

How To Download IBD 200 To An Excel Spreadsheet

If you are looking for how to download the IBD 200 to an excel spreadsheet, what you are going to want to do is sign up for the eTables service on Inside that subscription, you can download the main tables into an excel spreadsheet. It includes the top 300 stocks ranked by the Smart Select composite rating. I usually delete the bottom hundred to get the IBD 200. Once in the spreadsheet, I usually copy the tickers 50 at a time over to the My Stocks list on or into a watch list on Google finance. Portfolios on Google finance can keep up to 200 stocks at this writing.

You can add the stocks right from the eIBD into your stock market investing watch lists on but this is kind of time consuming. The other alternative is to write the tickers down or copy them from the electronic version but this also is a step that is nice to eliminate so you can spend more time reviewing stocks. Writing the tickers down helps you remember them better and that's a plus but for most of us, we'd like to skip that step.

In the last reader survery, I mentioned this would be a nice feature. As it stands now, you have to pay approximately $15 a month for the additional subscription. It's worth it though because you also get the IBD 100, the Weekly Review and the New America stocks as well.

Also, the main tables that provided the IBD 200 are updated daily, so you could update your spreadsheet every day with current stocks instead of waiting until Thursday of each week to get the list. I wrote more about using this list in Stockbee IBD 200 Trading Techniques.

Stockbee Scam

I get a lot of visitors searching for information on a Stockbee scam. He has a membership site that now counts over a thousand members at the time of this writing. Because he is promoting a membership service, it's easy to be concerned that it's a scam. In particular, I know a lot of people would prefer that he offer a trial membership to get a feel for what they are going to get before they sign up. I'm pretty sure that you can learn everything you need to know about his strategies by reading his site. It's not like he is keeping them a secret. He explains all of them and in most cases in complete detail.

A while back I did a review of stockbee which you can check out for more information. He gets most of his members from word of mouth and from sites like this one that really believe in what he is doing. He provides some of the best information regarding stock market investing strategies including how to use the IBD 200 which I tested here and wrote about in my post called How I Made 21% Buying Stocks Using Stockbee's IBD 200 Strategy.

Like all stock market strategies, they don't work 100 percent of the time and if you do sign up for a membership on Stockbee's site, you'll also know that you'll need to be prepared to study and learn to apply yourself. Making money in the market does require practice and experience, both of which Stockbee is a strong advocate of.

I encourage you to read through his blog and try some of his stuff out.

CANSLIM Stock Screener

One of my readers asked me today about the best CANSLIM stock screener. While there are plenty of paid services out there, the best way to screen for CANSLIM stocks is just by subscribing to the Investor's Business Daily. The IBD was created by the man who invented the strategy and he developed the screens in the paper and on to find the best stocks to fit his strategy.

In the paper, you'll find the following screens that will help you:

  • Stocks in the News

  • Stocks on the Move

  • Timesaver table

  • New highs

  • Stocks just out of bases

  • Screens of the day

  • Weekly stocks on the move (published on Monday)

  • IBD 100  (published on Monday)

  • IBD 200 (published on Thursday)

  • IBD Big Cap 20 (published on Tuesday)

  • Weekly review (published on Friday)

  • Top mutual fund buys (published the first week of the month)

These are the screens that I'll be relying on for my Buying Stocks: A Case Study. If you are just starting your stock market investing program, you'll want to use these screens to find great CANSLIM stocks.

Screening for stocks is the first step. Once you find stocks that appear on these screens, you'll want to review the stocks fundamentals and stock charts to see if it's been forming a proper base.

Finding stocks this way, is really fun when you find them. There is a learning curve to master the CANSLIM strategy. I encourage you to read How to Make Money in Stocks and all of the complete help center on

In addition, you might find it helpful to subscribe to the Daily Graphs package because you can setup customized screens. For help doing that, you might want to check out stock tips from He's done a good job of laying out exactly how he uses that service. Personally, I subscribe to the eTables service so I can export the stock's ticker symbols into a spreadsheet and copy and paste them into my watch lists.

While you'll find other screeners out there that will help you find CANSLIM stocks, the IBD is the place to start. Good luck!

How A Strong Stock Is Identified

A reader asked me today how a strong stock was identified. They read my post called What You Should Look At When Investing In A Stock. This is a key question. Every day, I get my IBD, I ask myself which stocks should I focus my time reviewing what I consider strong stocks. The first step for me is to look for stocks that show strong price and volume action. If they pop their head up on a price increase of at least 2 percent and a volume increase of more than 100 percent above average, then to me they warrant further review.

I start here because a key component of a stock's ability to go up in price is institutional support. When the big money flows into a stock, the price of a stock goes up because of increased demand. Taking a position in a stock that starts finding institutional support is ideal because you can ride the price up with them.

You can find stocks like this by watching the Stocks on the Move screen in the IBD. It focuses on stocks doing increasing in price and volume. The reason this screen was developed by IBD was that it uncovers stocks that are under accumulation.

There are a couple of other places to look for strong stocks. The first place is to look at stocks making new 52 week highs. Stocks that skyrocket in price also make new highs. You can also scan for stocks in the Timesaver table as well as look at the earnings up column. There you can find stocks that have higher earnings reports. Put those on your watch list and start watching for breakouts in price and volume.

The great thing about stocks with strong institutional support is that it draws more and more buyers in. This compounds the increase in a stock's price.

Be careful though. Stocks that go up in price also decrease at some point once this demand disappears. If you buy into a stock and the big money leaves, you should leave then. How do you know when to leave? When the price closes lower on higher volume than average, this tells you that the strong stock you once found might be weakening.

Good luck in your stock market investing endeavors.

IBD’s Top 200 Composite Stocks

Every Thursday you can find the IBD's Top 200 Composite stocks listed in the making money section of the Investor's Business Daily. These 200 stocks are the top rated stocks ranked by the Smart Select Composite rating. Usually it returns the stocks ranked 96 or higher. Next to it, you'll also find the bottom 200. I don't ever review that as I usually go long in my stock investments. I suppose if you were going to short stocks that might be a place to look.

Recently, I wrote a post called Stock Trading Using The IBD 200 Composite list where I talked about how this list can be used to find good stock market investing ideas. I was fortunate enough to find Open Table, Inc (NASDAQ:Open) and watched it go up 21 percent in less than two months.

The strength of this list is the composite rating. It's a composite of earnings per share, relative price strength, accumulation/distribution, sales and profit margin and return on equity. These stocks tend to outperform the market.

Just because a stock appears on this list doesn't mean that it will go up however. While fundamentally, they are strong stocks, technically they might not be at proper buy points.

The key to implementing the CANSLIM strategy effectively is timing your buys when a stock breaks out above previous resistance. The buy point, or pivot point, is .10 above that point. I've found it's easy to identify stocks that fundamentally should go up. It's harder to learn how to buy the stock at the right time.

Here's what I do. I watch the list for price increases of more than 2 percent while the volume is more than 100 percent above it's average. Next, I look at the stocks trading volume and make sure that it's over 100,000 shares. After I look at all of the IBD ratings and make sure that they are over 80 and over A and B. The last step in the fundamental screening process is to look at the stocks earnings percentage change as well as the sales percentage change. I make sure they are over 25%. This gives me a smaller list to review.

It's at this point, that I start looking at the stock's chart and start looking at the past price and volume action. Later I will talk more about how I identify specific chart patterns. For now though, consider the IBD 200 a good place to start your search for potential winning stocks.