If You Don’t Already Keep This List, You May Want To Start

  • June 15, 2005
  • Rob Hanna

The
market moved up fairly well after selling off a bit this morning.  It
was especially encouraging to see the QQQQ’s test their 200-day moving average
and bounce nicely off it.  A strong sneeze could propel the S&P 500 above it’s
recent highs, and the midcaps and smallcaps are already there.  I’d give the
advantage to the bulls and continue to focus on the long side.  Don’t get overly
aggressive just yet, though.  Sentiment is beginning to worry me. 

 

In the sectors, oil, energy and
natural resources continue to defy gravity.  Wait for a pullback here.  Techs,
including Semis and Internets have pulled back the strongest in the last week
and a half and look primed to resume their uptrend.  Retail has broken higher in
the last few days a should be watched.

 

Now…let’s assume for a minute
that the market is in the early stages of a nice leg up.  The drifting in recent
weeks is a consolidation, and we will soon move through this area.  New highs
for the year will then be within sight, and from there the rally will continue
higher for some nice gains.  While a bit optimistic, it’s not completely far
fetched.  If this ideal scenario plays out, what stocks do you want to own to
best take advantage of this move?

 

One group of stocks that is
often forgotten by traders is low-priced stocks.  When a bull-move is in its
early stages, low-priced stocks can offer incredible opportunities.  Many of
these are companies who have not yet caught the public eye, are not widely held
by institutions, and you probably haven’t heard of them.  They’re not
yesterday’s news.  They’re tomorrow’s news.  If you’re able to get in early on
any of these, well, enjoy the ride.  It can be spectacular.  Early in the 2003
rally, many of these kind of stocks became hot.  For a few examples, check out
the weekly charts of CNQR, TRAD, RATE, CHINA and ORCC.  Notice the incredible
percentage gains they underwent after breaking out of low-priced bases.

 

If you don’t normally keep a
list of low-priced stocks with good momentum and solid (or at least improving)
fundamentals, you may want to start.  You can easily spot some candidates simply
by looking at the largest percent gainers each day on the exchanges.  Low-priced
stocks typically dominate this list since a small move in price can be a big %
increase.  Another place to find some candidates is the “Strongest Stocks Under
$10” page in the Indicators section on TradingMarkets.

 

In the next few weeks I’ll talk
more about managing your risk when trading potentially volatile stocks such as
these.  For now I’d simply suggest getting them on your radar.  If the market is
going to rally more, you don’t want to miss out on the opportunities that this
group will likely present.

 

Best of luck with your trading,

 

Rob Hanna


robhanna@comcast.net

 

P.S.

Click here for the Hanna ETF Money Flow System.

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