ChartWatchers Newsletter Blog Archives

December 2017

Here's The Only ChartList You'll Ever Need And The Five Keys To Trading Success

'Tis the season and I'd first like to wish everyone a happy holiday season.  To health, happiness and prosperity!

Feel free to sing along....

"We've made our (Chart)List 
we've checked it twice
but we won't buy stocks 
at any ole price
market makers will bring the price down"

That's the tune we hum every day at EarningsBeats.com and it's how we post our impressive results day in and day out.  Here are the five principles that we live by:

1.  Do Your Homework

Ok, well we'll do the homework for you.  It starts with the understanding that trading stocks that have exceeded Wall Street's expectations is the first step towards improving your trading results.  Seriously, would you want to buy a company that's been failing to meet their own projections and making excuses about how "we'll turn things around next quarter or next year" or perhaps is out looking to replace their CEO?  Or would you feel better buying one that's just proven to Wall Street that their business plan is being executed to perfection and revenues and earnings are rising even faster than projections?  Don't think too long on this one.  Our first step is to identify those companies that have exceeded expectations in their latest quarter by reviewing thousands of earnings reports.  But we don't stop there because some companies report stellar results and Wall Street doesn't care as their stock price spirals downward.  We want the "1-2 punch" - great results and a technically sound chart.  It limits our stock trading universe to a manageable number of stocks.  That leads us to our next principle.

2.  Establish a ChartList

The tools at StockCharts.com are excellent and include the ability to organize all of the stocks you like in a ChartList.  We have one ChartList and we call it our Candidate Tracker.  Every single trade that we make will be found in that one ChartList.  No exceptions.  We don't go outside our boundaries.  We are not swayed by buyout rumors.  We don't care about the political environment.  We are on a mission and focused solely on those companies that are simply performing better than everyone else.  You'll need to be a StockCharts member in order to establish a ChartList.

3.  Stalk, Stalk, Stalk

They say patience is a virtue and we couldn't agree more.  Consider this analogy.  Imagine that you're an avid golfer and you're standing on the first tee, ready to rip that drive.  Then your playing partner says, "Ummmmm, put away your driver, we want to save you for the 13th hole."  It may not be a great analogy, but the feeling is probably similar.  Many traders that have cash available in their accounts simply cannot wait to make that next trade.  They have an itchy trigger finger and buy without giving it much of a thought.  Change that process.  Stalk your ChartList and wait, wait, wait.  Then wait a little longer.  Look at the charts and decide where a GREAT entry is.  If it doesn't hit, DON'T BUY.  Buy as close to support as possible and "support" can vary.  It might be the rising 20 day moving average.  It might be the trendline support.  It could be a major price support.  Perhaps it's the 50 day moving average.  The point, though, is to buy as close to key support as possible to limit risk (principle #4)

4.  Manage Your Risk

Let me be honest and straight forward.  We will not provide you 40 winners in a row like many services might tout.  That's not our expectation and it shouldn't be yours.  In fact, our past 17 closed trades have resulted in a very modest 9 winners, while we've endured 8 losers.  But here's the secret sauce.  Our 9 winners have produced an average return of 8.13% over an average of 13 calendar days.  Think about that for just a few seconds.  At a time when banks pay you almost nothing to keep your money, we've returned an average of 8.13% on our winning trades and we've done it in less than two weeks.  That can grow your capital quickly.  But we won't ignore the 8 losers, we'll embrace them.  Why?  Because we make no excuses and losers solidify our discipline.  It's as simple as that.  When we identify a trade for our members, we expect that trade to work to our benefit immediately.  That's our mantra.  "Better timing.  Better trades."  If a stock goes against us and violates our tight stop policy, it's gone.  Banished!  And we move on.  So let's talk about those 8 losers.  We lost an average of 1.90% on those trades and our average holding period was 3 days.  They either work or we put them out to pasture.  Again, no excuses.  Big losses kill trading results.  You should have absolutely no patience when it comes to trades that aren't working.  Use your capital elsewhere, right?  Sure, some of those "losers" will turn around right after you get stopped out.  But there'll be some that would turn into large losses and that's what we want to avoid so take the small losses and don't look back.  The winners will more than offset them.

5.  Do NOT Hold Stocks Into Earnings

Repeat Principle #4.  How can you possibly manage risk by playing the earnings roulette wheel?  Will your stock explode higher with a great quarter?  That sure does feel good!  But what if they miss or lower future guidance?  Do you like waking up to a 20% financial haircut?  

If you follow these five principles, I'm convinced you'll see much improved trading results.  

Our ChartList, or Candidate Tracker, constantly evolves as companies are deleted as they approach their next earnings date....and then replaced by companies that recently reported stellar results.  This past week we were able to take profits in a few companies that hit our targets and we were fortunate to have moved into energy stocks by week's end.  Recently, we had ZERO energy stocks on our Candidate Tracker because few were reporting great quarterly results and even fewer had nice looking charts from a technical perspective.  But stock market rotation has changed that.  Energy stocks have begun to beat estimates and the recent profit taking allowed us to move into three energy stocks on our ChartList:

I am in a festive mood and I'd like to make a special offer to ChartWatchers readers.  I want you to see how we operate and manage risk in real-time.  If you'd like a special three week trial at EarningsBeats.com to include a copy of our ChartList, CLICK HERE. There is no further obligation beyond the three weeks and you can keep the ChartList as our holiday gift to you even if you decide that our service does not fit your trading style.  In other words, we've done steps 1 and 2 ("Do Your Homework" and "Establish A ChartList") for you.

Wishing you a great holiday season and as always, at your service,

John Hopkins, President
EarningsBeats.com

Energy Shares Are Bouncing on Optimism Over OPEC Agreement

Energy shares are finally showing some bounce. The daily bars in the chart below shows the Energy Sector SPDR (XLE) climbing above its 50-day average today. The XLE is bouncing off chart support along its late October low and its 200-day moving average. Those are logical chart points for the XLE to start moving higher. [The 50-day average remains higher than its 200-day line which is also a positive sign]. The gray area (which plots a ratio of the XLE divided by the S&P 500) has been slipping over the last two months. But it's rising today with energy being one of the day's strongest sectors. That's probably based on reports that OPEC has agreed to extend production cuts to the end of 2018. Energy shares have lagged behind rising oil prices which recently hit the highest level in two years. It's time for them to start catching up.

 

Here Are Two Stocks To Consider In December...And One To Avoid

I love to combine bullish seasonality with strong or strengthening technical conditions.  As we move into December, it's important to realize that there has been no better month for the S&P 500 since 1950 than December, which has produced annualized returns of +19.51%.  Also, December has resulted in rising S&P 500 prices 50 of the last 67 years, easily the best such month of the year.  So we know that history is on our side to look for long trades.

Continue reading "Here Are Two Stocks To Consider In December...And One To Avoid" »

Metals - The Calm Before The Storm

One of key principals of a global bull market is the major moves in the sectors as the market expands. As we head into 2018, there are a significant number of charts that suggest we could be on the platform for a significant move in commodities. The Commodities Countdown blog tries to show some of the major themes, including oil off the July lows. One of the major setups now is the metals. The chart of the steel ETF has been consolidating for months. Copper has had a great run this year, and with the love of electric vehicles (EV), looks set for many great years ahead. Along with copper, metals like zinc, cobalt, lithium, nickel, and iron all have uses in the global transition to EV. 

Five global mining companies shown below all look to be pausing on the weekly charts. Teck, Vale and Freeport McMoran have turned up the full stochastics. BHP and Rio Tinto still have declining full stochastics. These companies have all consolidated big moves from 2016 and look set to go on another run. Adding them to your watchlist will help you catch the move.

Teck Resources has moved above 75 on the SCTR which is a fresh entry into the top performing stocks. The full stochastics have turned up. The $26 level is very important, as it marks the 2016 high and a year of consolidation. With the head/shoulders base setting up through 2017, a breakout from here would be very bullish.

Continue reading "Metals - The Calm Before The Storm" »

Financials and Industrials Lead New High Expansion

Chartists can plot High-Low Percent for the nine sectors to identify areas of strength within the stock market. The chart below shows the High-Low Percent ranked by this week's highest value. The finance, industrials and consumer discretionary sectors stand out this week because their High-Low Percent indicators hit the highest levels of the year. High-Low Percent for the finance and industrials exceeded +50%. Assuming virtually no new lows this week, this suggests that more than 50% of the stocks in these sectors hit new highs. XLY High-Low% ($XLYHLP) exceeded 20% the last three days and these are the highest readings since March 2015. 

Continue reading "Financials and Industrials Lead New High Expansion" »

« November 2017