CANSLIM & Momentum Investing 02 (Aug 09 - Dec 24)

[winston]

Make it Personal By Rodney Johnson

My kids will never be farmers. They won’t be ranchers either. And I doubt they’ll ever own an industrial-sized chicken coop (what a mess!). Like most everyone else, I presume my children will be urban professionals their entire working lives, hustling for promotions and bigger paychecks.

This is a problem for me. And, chances are, it’s a problem for you as well.

For centuries people by and large grew their own food, were self-sufficient, and took in aging relatives. It was a hard living, but it was still a living. For older folks, it meant knowing where they would end up when they could no longer work.

Those days are gone. Now everyone keeps their own household until they move to assisted living, enter a nursing home, or die.

I don’t know when I’m going to pass. I imagine my wife and I will live most of our days on our own. Eventually we’ll end up in a facility of some sort. It’s something I’m not excited about, and I’m especially not looking forward to paying for it.

But unless I want to end up broke in my old age, I have to plan for this path, which means slogging through financial data ad nauseam, developing and implementing investment approaches that I believe will help me reach my goal.

I know I’m not alone in this. We all work on growing our wealth to finance retirement. And we all worry about it, because if we come up short, it means suffering with a lower standard of living when we’re too old to rejoin the workforce.

To reach our goals, we’ve got to make saving and investing personal. We can’t rely on averages. None of us are average because we each have our own set of circumstances. Long-term portfolio calculations based on average returns won’t pay the bills.

We need concrete action plans that make sense and limit risk. That’s why we have such a strong emphasis on momentum here at Dent Research, along with an eye toward hedging. The objectives: speed, and safety.

Our overriding theme is still demographics, and our main body of work will continue to follow economic and financial trends around the world.

The trick is putting research into action.

From Adam O’Dell’s Cycle 9 and Max Profit alerts, to my recently launched Triple Play Strategy, our goal is to provide readers with the tools necessary to ride current market trends, but then stand aside when the markets start to break apart. We follow the momentum, then hedge and get out of the way.

This is not what the mainstream financial press would recommend, which I’ve always found a bit odd.

To suggest that investors simply buy and hold is to suggest that markets are efficient. It implies that stock prices reflect everything that we could possibly know about the markets, and that people who are bearish balance out those who are bullish.

Even though this “efficient market hypothesis” has been the ruling thought in the mainstream investing world for decades, I don’t buy it. Even one of the architects of this hypothesis, Eugene Fama, noted that momentum investing poses a serious challenge to the theory.

Momentum investors use very recent trend data to identify the best sectors for investment. Over the long term, investment returns of individual stocks are somewhat random. But in the short term, stocks with a lot of momentum tend to outperform other equities.

The idea is to ride the short-term trends as much as possible, banking gains and moving on to other winners when current holdings slow down or change direction.

This active investment approach also allows investors to move to cash when too many equities turn lower. Instead of holding their investments through a downturn, they can sit on the sidelines, protect their gains, and wait for a better opportunity.

This might sound like a lot of work, but it doesn’t have to be. Many momentum approaches require just a few minutes of work a day or week. My own strategy brings that down to ten minutes a month.

The main point is that we are all responsible for our own financial well-being, so we need to do better than just following the averages, hoping things turn out in our best interest. We need to build our portfolios to capture as much of the upside as possible, while actively taking steps to limit risk.

While this method of investing takes more effort than it does to simply buy and hold, there’s no doubt that the long-term goal of a comfortable retirement is worth it.

Source: Economy & Markets

[winston]

Common Investing Mistakes: Refusing To Consult A Stock Chart

Even with the CAN SLIM style of investing, investors can’t just buy stocks of companies with top-notch growth rates, then sit back and let the good times roll.

Investors also have to mind the stock’s price-and-volume action. It’s a serious mistake to buy and sell without knowing what’s happening on a stock chart.

Companies with breakthrough products and services as well as stellar earnings and sales growth rates are the prime targets of growth investors. But that’s only a piece of the puzzle.

The CAN SLIM investing method employs both fundamental and technical analysis. The former tells you what to buy, which stocks are leaders in top-performing industry groups.

Technical analysis tells you when to buy. Timing is a key part of successful investing. You can pick the stock with the best growth rates, but your chance for a profitable trade is low if it’s the wrong time to buy.

Only a sound analysis of the price-and-volume history of the stock can help you accurately gauge the timing of buys and sells.

Source: Investor's Business Daily

http://www.investors.com/how-to-invest/ ... yptr=yahoo

[winston]

Common Investing Mistakes: Tailoring Time-Tested Rules For Buying Or Selling

Source: IBD

http://www.investors.com/how-to-invest/ ... yptr=yahoo

[winston]

Wish To Spot Stock Market Tops?

Easy: Count The Distribution Days

A distribution day is defined as the loss of more than 0.2% by a major index -- these days, typically the Nasdaq or the S&P 500 -- as volume ticks higher than the prior session's total. Tracking the accumulated damage is crucial to gauging a market's health.

How many is too many? For now, the market could probably withstand six or seven distribution days before rolling over.

There are three ways a distribution day can fall off the count. The first is by the calendar. After 25 sessions, a distribution day expires. The count falls by one.

A second way a distribution day can fall off the count is for the index to rise 6%, on an intraday basis, from its close on the day the higher-volume loss appears.

The third way is far more painful. A broad market correction makes the distribution day count a moot point. Often, a high distribution day count will presage that correction. Once the market falls into a correction, the big question is when will it regain its uptrend.

When a follow-through day arrives, signifying a new uptrend, the distribution day count starts clean at zero for all three key indexes.

Source: IBD

http://www.investors.com/how-to-invest/ ... yptr=yahoo

[winston]

Know This Sell Rule: When Distribution Days Pile Up In The Stock Market

A distribution day occurs when one of the major stock indexes, namely the Nasdaq composite and the S&P 500, falls at least 0.2% or more in higher volume than the prior day. For the S&P 500, IBD uses total turnover on the New York Stock Exchange.

As IBD Chairman William O'Neil wrote in "How To Make Money In Stocks," "After four or five days of definite distribution over any span of four or five weeks, the general market will almost always turn down."

Source: IBD

http://www.investors.com/how-to-invest/ ... ck-market/

[winston]

Cramer shares the unusual signs that mean a stock is ready to explode

by Abigail Stevenson

Investors can determine if a stock is overbought or oversold by charting the ratio of higher closes, also known as the relative strength index, or RSI.

Cramer also matches the RSI of an individual stock to something else, maybe the relative strength of its sector or a larger index, and then measure the price action historically.

Volume is another key tool that chartists use to find pivots. It is often said that volume can be a lie detector to tell investors if a move is real or not. When there is a small move on light volume, technicians ignore it.

Source: CNBC

http://finance.yahoo.com/news/cramer-sh ... 46090.html

[winston]

Momentum Trading as Easy as 1, 2, 3

1) Earnings Momentum: When companies are experiencing positive earnings momentum, it means that most everything is going right; i.e. They have a great management team, first rate products and services, happy employees and delighted customers.

These aspects have a self-reinforcing quality that will keep the company headed in the right direction for an extended period of time. The result being a string of positive earnings reports well above expectations and a booming stock price. The best way to uncover earnings momentum is to find stocks enjoying large upward estimate revisions.


2) Technical Momentum: Isaac Newton had it right. "A body in motion tends to stay in motion' . So you should seek stocks whose share price has been on the rise. Not just in the last few weeks, but over a longer stretch as well, so you know it's not a fluke. This greatly increases your chances that other investors are aware of the positive aspects of the stock...and likely to stay that way.


3) Value: I know on the surface it sounds antithetical that these stocks could be on the rise and trading at a discount at the same time. But it happens quite often.

Sometimes it's because their industry group is out of favor. Or that the stock has just had a round of profit taking that pushes down the price 10-20% and now is ready to make new highs.

In this method, we are not seeking deep value stocks with low odds of success. It's about finding momentum stocks trading at discounted prices.

Source: Zack's Research

[winston]

My Best Advice: Buy High and Sell Higher

by Dr. David Eifrig

Buying stocks that are approaching 52-week highs often delivers better winners than other strategies.

Source: DailyWealth.com

http://dailytradealert.com/2017/07/23/m ... ll-higher/

[winston]

Momentum

Sometimes stocks take off and never look back, as each uptick attracts more buyers.

Momentum stocks are typically high-Beta (significantly more volatility than the overall market), have larger-than-average short positions (but not major short bets) and are valued for their outsized top-line growth rather than earnings.

A key characteristic of momentum names is that they are often breaking out to new 52-week or all-time highs, and they also tend to have very high tradition valuation multiples.

Source: Charles Payne, Investor Place

[winston]

Best ETFs to Buy for the Santa Rally: iShares MSCI USA Momentum Factor ETF (MTUM)

If you’re trying to make the most out of a potential Santa Claus rally during the last quarter of the year, you need to focus on growth. The iShares MSCI USA Momentum Factor ETF (BATS:MTUM) is the way to get that exposure.

MTUM tracks the MSCI USA Momentum Index — which looks at the ratio of each stock’s price returns over the trailing 13 and seven months against volatility over the past three years. In a nutshell, you’re getting stocks that are moving and moving upward quite fast.

By targeting mid- and large-cap stocks with strong recent price performance, MTUM has provided better returns than the S&P 500 in its short lifespan. That should continue to play out if we get a big rally at the end of the year.

However, investors need to be careful with this one. When the wheels fall off the momentum train, MTUM will fall hard.

But for those investors looking to make the most of the next few months, the ETF is one of the best around.

Source: Investor Place