These Are The Lists I Use
The
S&P 500 managed to hold above its 50-day moving average the last two
days, although the buying hasn’t exactly been gangbusters. The major support
level I described on Monday — around 960 –Â remains intact, and the minor
50-day moving average support has now risen to around 977. The Nasdaq has been
stronger, putting in two consecutive accumulation days. First level Nasdaq
support is now between 1635 and 1655. This area contains the 50 day-moving
average, the March to July trendline, and the minor 23.6% fib retracement level
of the March-July move. Second level support is just below 1600. Below that and
it’s trouble for the long side.
Last week’s column, in which I
spoke of some of the spreadsheets I use, generated quite a few questions. Due to
this, I thought I would spend some time describing some of the lists I keep in
more detail and why I keep them. Each night I review every stock in all of these
lists. Here are the lists:
1)Â Â Â Portfolio
holdings — This one is obvious. I want to know what all of my holdings did
each day. I look for emerging patterns in my stocks, whether they be new bases,
topping formations, short term pullbacks, breakouts, or anything else. I write
down notes on any stocks I feel may require action.
2)Â Â Â Watch
list — This is the list of stocks I am ready to pounce on should they hit my
target prices. I’m looking for any notable technical action here as well. Is a
stock setting up in a way that would allow me an opportunity for early entry?Â
Is a basing pattern that I was looking at falling apart?Â
3)Â Â Â Bought
& Sold list — These are stocks that I was stopped out of, but would consider
repurchasing if they showed a favorable risk/reward trade opportunity to me.Â
For example, if I purchase a stock as it breaks out, and it runs up 15%, I will
normally move my stop to breakeven. I simply don’t want to see a good trade
turn bad. My stop level my not be at a point where the stock has exhibited a
complete technical breakdown, though. Therefore, I will continue to monitor the
stock to see if it allows any other trading opportunities.
4)Â Â Â Passed
Over list — These are stocks that made my watch list, but when they broke
out, I elected not to take them for some reason. Maybe I decided the pattern
was too wide and loose, or the handle was poorly formed. Â Perhaps the action on
the day of the breakout was poor (low volume, finished near bottom of range,
etc.). Just because I didn’t take them that day, doesn’t mean I won’t want to
trade them if I see a high risk/reward opportunity later on. My initial
decision to pass on a stock may have been the wrong decision. If the stock is a
real winner, it will normally provide several more opportunities for entry. You
may refer to my June 16th article for an example of why I feel this
list is important.
5)Â Â Â Up
& Coming Candidates — These are the stocks that are still building basing
patterns and aren’t yet ready for the watch list. An example would be a stock
that is building the right side of its cup, but hasn’t begun to form a handle
yet. Another example might be a stock that is forming a flag pattern, but is
only 12 days into it.
One other way in which I
categorize my stocks is by ranking. I use a simple ranking system for them,
depending on how strong of a candidate I feel they are. This would be similar to
Mark Boucher’s close call list, or Chris Tyler’s swing trade list in the
Intermediate Term Trader’s Report. I use bold/italics so that the ranking is
obvious to me as soon as I look at the stock. The ranking helps me determine how
much I am willing to risk on the position, what the maximum position size could
be, and how soon I might want to start taking profits, or moving my stops up.
There are many ways to track
stocks. These lists have evolved for me over the course of many years. It
doesn’t really matter how you organize your lists, as long as you have a system
that’s working for you. Feel free to write me with any questions you may have.
Best of luck with your trading,
Rob
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