The “Hot List”
Whether the market is weak or strong, there are always opportunities for profit in the market. This subscription provides a list of stocks that have had a recent strong advance. Just because they have already had an advance does not mean that their advance is over. If any have just declined, they may simply be offering a better entry point. There are those who know how to take advantage of such situations. We make no recommendations regarding these stocks.
Some traders simply hitch a ride and place tight stop losses in case of a pullback. Pullbacks should be expected. Therefore stop losses should be placed just beyond what is probable without breaking the stock’s pattern. Letting a stock fall enough to break its pattern is not acceptable because the pattern is probably your primary reason for buying short-term positions in high-momentum stocks.
In general, the lists provided in this subscription are already in a type of setup configuration. That is, one type of setup is a stock that is climbing rapidly (but not for just a day or two). There is no guarantee that a stock will continue in that pattern, but many traders have learned how to profit from stocks that show that behavior. Another type of setup is when a stock reaches a new 6-month high, declines for 3 to 5 days in stair-step fashion (each high lower than the previous high), followed by a day in which the high is higher than the previous day’s high with an increase in volume. This pattern suggests that, for some reason, there is a great deal of interest in the stock, causing it to surge to new highs. Then, profit- taking set in, causing an orderly decline for 3 to 5 days. Finally, new buyers entered the market to take advantage of the lowered price (causing the increase in volume and higher high).
Other setups are explained and illustrated on the bottom portion of the “Stock Alerts” page of this site. Many of those setups will be difficult to find on a list of stocks that are the focus of such intense buying, but for momentum investors, that is not a problem.
Our search begins with the Reuters stock database of over 8,000 U.S. listed stocks. After filtering out preferred issues (it is difficult to find charts on those) and stocks that did not trade at least $500,000 worth of shares, our algorithm ranks the remaining stocks based on their recent action. This is not a simplistic ranking of stocks by their RSI. We have created an algorithm that is far more complex than the RSI because we wanted a list of stocks with better short-term pattern profiles than the RSI can find.