The Best Ways To Use TM’s News And Analysis Page

  • December 19, 2002
  • Vincent Mao

In my
previous lesson, I outlined a way to help you quickly identify
the strongest and weakest sectors of the market. You will recall that stocks
usually move in groups. So, by trading stocks in the strongest and weakest
sectors of the market, you increase the probability of a successful trade. In
this lesson, I will go a step further and show you how you can utilize the tools
right here at TM to help find and analyze stocks for the next trading day.

Step 1. Go To The StockScanner

After you’ve identified the sectors
you want to trade in, head over to the StockScanner.

  1. In the upper right-hand corner in
    the “Sub Sector” field, scroll down and locate the sub-sector(s)
    that best corresponds with your sector of interest, e.g., the software
    sector
    (
    $GSO.X |
    Quote |
    Chart |
    News |
    PowerRating)     (if you identified it as one of the weakest sectors).
    By eyeballing the chart, we see that the software sector is in a strong
    downtrend as represented by the -DMI being greater than the +DMI — and that
    it’s staging a countertrend rally. In this case, we select the
    “Applications Software” sub-sector. Bear in mind that this is only
    one sub-sector within the software sector and that you need to repeat this
    process for all the other software sub-sectors.

  2. In the “Closing Price”
    field, enter “20” in the first box. The higher the price, the
    better. It’s a lot easier for a higher-priced stock to move several points
    than a lower priced issue.

  3. In the “50-day average
    volume” field, enter “2500.” This will give you stocks that
    traded at least 250K shares for the last 50 days. This will ensure adequate
    liquidity.

  4. In the “DMI” field,
    select “Down.” Since we are looking for short candidates, we want
    stocks that are in a downtrend. If you are looking for long candidates,
    simply change the DMI to “Up.”

  5. In the “RS3” field, enter
    “1” in the first box and “25” in the second. This will
    give you the bottom 25% stocks. If you were looking for long candidates,
    enter a “75” in the first box and leave the second one
    blank. This will give the top 25% best-performing stocks.

Step 2. Go To The
“News & Charts” Page

  1. Staying within the Stocks section,
    click on “News
    & Charts”     in the upper right-hand corner of your screen.

  2. Click on “My Watch List.”
    Your default Watchlist will contain three symbols: Dow Jones Industrial
    Average
    (
    $INDU |
    Quote |
    Chart |
    News |
    PowerRating)    , S&P 500
    (
    $SPX |
    Quote |
    Chart |
    News |
    PowerRating)    , and Nasdaq Composite
    (
    $COMPX |
    Quote |
    Chart |
    News |
    PowerRating)    .
    Here, you can begin to build your new Watchlists from the results of your
    scans. Click on “New Watchlist.” A pop-up box will appear,
    prompting you to enter a name. Simply give it a name and click
    “OK.” For example, you can call this one “Software
    Weak.”

  3. Input the symbols from the results
    of your scan into your new Watchlist. Separate each symbol with a space.
    Repeat if necessary, to create other Watchlists.

  4. Now it’s time to set up your
    charts. Select “Snap Charts” or “Java Charts” on the
    left side of your screen to begin analyzing each chart. Snap Charts are html
    charts that need to be refreshed each time you make a change to the chart,
    whereas Java Charts come up almost like a separate application. I prefer
    Java Charts because they are faster, more user-friendly, easy to customize,
    and you can draw trendlines. In addition, you can even e-mail someone a
    particular chart of interest. Both charting features will automatically
    store all of the stocks that are in your Watchlists.

  5. Once in Java Charts, double click
    on “My Charts” in the upper left hand corner. Inside you will find
    all of the stocks that are in your Watchlists. Simply double-click on a
    symbol to bring up a chart.

  6. In the lower left hand corner,
    click “detach” to put the chart in a separate window, whereby you
    can adjust the size of the chart.

  7. Then it’s time to build your
    technical analysis template. Under the “Tools” pulldown menu,
    select “Customize Studies.” I’m a big Dave Landry fan, so Bow
    Ties     are a must. In order to create your customized
    template, add the technical studies that you want and adjust the parameters
    to your desires. Repeat if necessary to create other study templates.

Step
3. Analysis

Everyone like to focus on
trades that have a high probability of success. With that in mind, I like to
look for two particular kinds of setups:

  1. Pullbacks —
    Pullbacks from highs and countertrend rallies from lows are the
    bread-and-butter swing trade setups. There is nothing fancy about them, they
    are logical, and they work. I mean, how else is a stock going to go higher
    except by taking out its prior high? Vice versa for
    shorts.

b. Triangles
— Triangles are another high-probability pattern. When prices go into
consolidation, eventually one side will win. They can be subjective at times,
but the results speak for themselves.

Step
4. Keeping Up With The Stats

During the market day, many key events are taking place. You can use the
“Market Hotspots” section to keep tabs on what’s happening. Here are
some things you should keep your eyes on:

  1. Volume
    — Markets need fuel to move, and volume is that fuel. Visit the “Market
    Stats”     page throughout the market day, especially the first half
    of trading, to identify big moving days.

  2. 52-week highs and
    lows — Go to the “Top
    Stocks”     section and under the Category pulldown menu, look at who
    is making new yearly highs and lows throughout the market day. In times of
    weak markets, look at who is making new 52-week highs. These are that stocks
    that are saying, “I don’t care about the market, I’m going
    higher.” And in times of strong markets, look at who is making 52-week
    new lows, as these are the dogs of the market and could be potential short
    setups.

  3. Dollar Gainers and
    Losers — These are the stocks that are the best and worst performers during
    the day. The Dollar
    Gainers and Losers lists     give you a better representation of what’s
    moving the markets. Many times, there is significant news behind the moves,
    and you can read up on what’s happening by visiting the “News
    & Charts”     section.

Summary

This lesson just provides
an outline of how you can get more out of our site with tools such as the Stock
Scanner, News & Charts and Market Hotspots to help you find and analyze
stocks for the next trading day. Feel free to tailor it to your specific needs.