What Over A Decade Of Trading Stocks Has Taught Me
The market was unable to ward off the terrible
Yahoo earnings release. The good news lies in the fact
that the real selling was isolated to Yahoo. The major indices all traded
lower, but volume came in lighter than yesterday, indicating no real rush for
the exits by the major institutions.
 
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I believe there is a better
way to play the stock market than formulate opinions and worry about making
and losing money on days like today. My solution has been to strictly follow
price and volume of the market to determine a good time to buy stocks and a
good time for the sidelines. Right now, the market has clearly stated that it
is a great time to own stocks.Â
This leads to the next step of finding the best names to buy out of the
thousands of publicly traded companies. The best method I have found was to
utilize the characteristics found in past great winners. William J. O’Neil
outlined this methodology in his book “How to Make Money in Stocks.”Â
Since I first read the book in 1994, I have learned, interpreted, added on and
tried to practice the philosophy as best as possible. Since buying every
growth stock I could get my hands on since mid-March, I have continuously been
taken to the next step in investing: Sell Rules.Â
After over a decade of investing and trading stocks, I have realized the
importance of a well-defined set of Sell Rules. These solid rules alleviate
the need to cast projections and worry about days like today. I have found
that these criteria will either keep me invested or force me out at the
appropriate time.
I saw Ebay
(
EBAY |
Quote |
Chart |
News |
PowerRating) take a hit, but
volume came in lower than yesterday. This is typically an indication that
there is no real trouble on the horizon and large buyers are still lurking.
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I glanced over
Ryland
(
RYL |
Quote |
Chart |
News |
PowerRating), one of the leading
homebuilders that have helped propel this market higher. The stock has seen
volume decline over the past few days as it attempts to establish another
price base or consolidation.Â
While
Inamed
(
IMDC |
Quote |
Chart |
News |
PowerRating) may very well continue higher, it has shown the
opposite action lately. On a weekly chart, the stock has seen volume dry up as
prices rise (indicating less and less support) while the two recent down weeks
have produced larger volume (indicating selling pressure).
My heart goes out to the
families of the US soldiers who have been killed in recent weeks. I am sure
that some very smart analysts will go on to claim that these events coupled
with the economy and Yahoo’s earnings hurt the market today. In the end, it
does not matter if you are looking at the right information in regards to
price and volume. Simply put in regards to evaluating them: THEY DO NOT LIE.
Moving forward, we’ll keep a close eye on the major indices for accumulation
or distribution. As new stocks set up, they will be worth paying attention to.
My Trading Service has identified many of these names and acted on them
accordingly. Lately, I have to admit that I love hearing so much TV Chatter
from so-called experts that things are overvalued right now. I love hearing
any reason why stocks can’t go higher.Â
For the time being, take a look at stocks from the Internet, Homebuilding and
Medical Sectors as they have been fantastic leaders. We may still be
consolidating recent gains, but the market looks good from where I am sitting.