I have large watchlists, some customized on sectors, and some pretty broad, to help me get a feel for who's doing what with who and so on, but I only trade a few issues. Figuring out which to add and witch to ditch is most of the work I do while watching for a good setup for a trade on something on my list.
Here is what I look for (along with all the conventional stuff that every good book on the topic covers).
- Decently high beta -- this means a stock tends to move more than the market. Motion is money so motion is good -- if you can stay on the correct end of the trade. Not super high, that's just too flakey to make money at. Otherwise a decent beta is kind of like using leverage, without some of the risks of that.
- Either best in sector, or close, which is kind of a judgment call. Since I'm a long-mostly trader, it's nice to work with companies that have good long term prospects, as when I break the rule about never letting a trade become an investment (and everyone breaks even their own rules) it tends to pan out more often.
- A business plan I understand and like. Though I'll make exceptions -- if I have a chance to take money from guys who club baby seals so I can do fusion better, I'm there for that.
- Liquid, but not too much so, and not too well known -- the more players in a trade the harder it is to figure out their "tells". So I don't trade the industry darlings so much, and when I do, I don't always do as well as with the lesser known stocks.
- High enough market cap, but not too high. I want companies who still have growth ahead of them. Too small market cap makes manipulation too easy, and the only other players too unpredictable too. Avoid penny stocks where even I could push the price around easily. If no one else than the company principals are mainly in it, it can be hard to sell high -- no buyers.
Also, these are the most usual targets of the pump and dump scams, and that's just not a good game to play in. - I like the CEO and/or other management. Purely subjective I suppose, but having been one myself, I can generally tell a good one who is a real benefit to the company. An example, I'm not a big Ford fan (see picture) but I love Alan Mulally. And Ford as a company has gone from under $2 a share back in March last year, to what, $14 now. Who knew? Not me, I sold out at 5-6 (about where they were in the boom), so no complaints.
That, and playing with companies where I *don't know too much* so I concentrate on the other traders, has led me into mostly commodity based companies. Miners, oil drillers, water providers, guys who dig stuff up and sell it. They happen to be in the limelight right now which isn't all good -- too much speculation driving prices up nicely is good while it's happening, but when sector rotation comes around again, it will also mean some sharp drops too, the other side of high beta.
But I like these guys. I think Malthus was right, just in the wrong century. We're getting real close to what the planet can carry, and really, there's no new tech that's going to make metals and fuel obsolete in view. This also means some of the agriculture issues are good (POT in some times, but not now, for example). The need for their products is fully assured, and limited only by buying power of the world. It's at the point where many of them have some pricing power, always nice for an outfit, but most of them aren't bordering on monopolies, which tend to lose interest in their shareholders, not to mention start treating their customers badly because they can and get away with it, for awhile. (See microsoft). You want to see some room for growth in a company if you might find yourself happily stuck in a trade that becomes a good investment (rare, but it happens and it's good when it does).
To that list I will add a few generally very solid large cap dividend paying players. I use them to park money when I'm not trading it, for example in my retirement account which is my larger but slower trading one.
OK, here's the ticker list I'm currently or recently playing with.
FCX -- best in breed copper, gold, moly miner, good management, one of my favorites. Not really an investment, see chart, they swing and I make money on that, then get out.
ANR -- metalurgical coal company very well run, good to their people, swings wild -- a little dangrous, but good when you time it right.
BTE -- Canadian energy trust, fat dividend, and it goes up too! Canada oil is about 50% of what America actually buys...and our neigbors to the north are pretty cool people. Add in currency "risk" which is and has been going in my favor for awhile and likely to continue.
I used to really like PBR as an oil play, but things are a little confused there lately with their government and China all getting control over it, and Brazil trying to prevent the rise in their currency due to foreign money flooding in. For now, I'm doing Brazil via EWZ, not fantastic, but it's doing fairly well. Ditto the big miners down under with EWA, kind of a nice place to park a bit of money not being needed to play zoomers.
BHP -- worlds largest miner of all things, Aussie based. Not as sweet as FCX, but a good one, and again, international and USA is winning the race to the bottom on currency, making the internationals a winner in general.
GLD -- duh, a nice place to park some money, and if traded right, a nice trade when going up faster than the buck is tanking down. In fact all the precious metals are good if you buy them right, which might not be right now, or it might be. So add to that SLV, PALL, PPLT which don't always all move together.
MCP is one I'm just now starting on, and it breaks most rules. Huge negative balance sheet, but the only "new" US startup miner of rare earths. Not actually new because they have been in this business until China kind of priced them out of the market, but now starting up again with a decent plan. Looka that chart! I've now managed to get two over 10% moves in my favor in and out of that one. This month. Not a bad return rate, eh? Have no idea if it's going places in the long term. I think this is a case of over-enthusiasm that will actually take awhile to get stable and be anything like a good investment. For now, it sure is fun when you're on the right side of the wild swings.
Understand that with all miners -- swings are the norm, and you have to have a very strong stomach to just buy and hold them, and might lose nearly all your money if you do, and do the usual panic sell right what you can't stand it anymore (which inevitably is right before it starts going up again -- this is an eternal truth in the markets). My situation prevents that -- I live today on the money I make today, so again, the ticker is the truth, cut your losses brutally before they cut you brutally. Better to fight and run away, and live to fight another day.
FAS, FAZ -- financial leveraged ETFs. Never to hold more than a couple days and not for the faint at heart at all. I will sometimes play C or BAC, short in general. That's one sector we KNOW is going to fail or at least see serious turmoil in (they may get a bailout again), the only question is "when" the big moves happen. Watching these is good for the general feeling of the markets, anyway, so they are on my watchlists all the time. All the big financials are HFT'd as well, which kinda messes up their trade-ability most times.
My bank, STEL. Not a big one, I like to keep an eye on how they are doing, mainly, but since I'm only trading against about 50 tellers and bank branch managers, and perhaps a fund or two, easy to make money on most of the time. In this case, more often than not I actually know the person on the other side of the trade, how they think, and what motivates them! Ideal! For me. For you, well, there are probably similar situations out there. Not super liquid, but...enough. In fact, this is about my lower limit on liquidity, they only trade every few minutes at most.
So, Jack can't be too nimble on that one and you can't count on getting the current price going either way & right now.
JNK -- as the ticker suggests, this is junk bonds, which actually are doing well. As some people I listen to warn, it's a crowded trade and when bond rates rise (as they certainly will) that means the prices of the bonds falls, and so will this. As is warned by others, the exit ramp for this trade is going to be very crowded when that all goes down, so it's not a low risk trade, but for now it's a nice dividend payer.
PG -- if you buy it right (and I did), pays divvies and goes up too. Really just a place to park some money while waiting for a juicy better trade to show up on the radar, but till then, a better deal than treasury bonds and so on, and a little diversity in the mix. I prefer divvie payers that pay monthly, as you might have to ditch one going down and then you'd miss the dividend too. PG doesn't do that, but since I bought around 50-something, I'm ahead no matter what at this point. It's kind of a nice way to watch the consumer business along the way, but discount retailers that are still growing might be better plays if you're bent that way.
NOTE!
I am DEFINITELY NOT ADVISING PEOPLE TO GO BUY THESE -- I AM SELLING THEM NOW MYSELF! At least in part, I'm well up on most of them (or already out). The times will come to get back in or add to my holding in these, soon enough -- you rarely have to wait all that long for a nice swing that makes buying back in attractive. Meanwhile, taking your winning bets off the table is not a way to get broke, ever! How many advisors will tell you that? The norm is for them to suggest you
buy what they are
selling. Now, since we're having a zooming day (11/4), I'm not selling most of this outright, but putting a tight trailing stop on them all that covers most but not all of my holdings of them -- the next tiny dip gets me out after letting any profits run, in other words, could be sometime today, we'll see. From my charts, I'm seeing others do this (watching on balance volume and bids/asks, and depth charts). People are taking profits on these now, or figuring out this is time to cut their losses. When they are done with that, time to get back in! Wash, rinse, repeat. The medium tight stops means I stay in as long as things are going up, or holding, but get out quick if they aren't. This is somewhat risky in a single (USA here) market, as things can gap up or down a lot overnight (because they trade in other markets too, pretty much 24/7) when these orders can't be filled by my broker, so I will take a hard look at the end of today and decide if manual intervention is required at that point. After a zoomie like this it's nearly a sure thing we'll see a pretty big gap down within a couple days, if not the next day -- then I can buy back in at a better price, which is the name of this game after all. You want to get a lot of a move, but not be one of the pigs who get slaughtered and sit around whining about what it could have been. I'd bet that if the market here doesn't gap up tomorrow, it will instead go down pretty hard again, to about half or so the peak it reaches today -- it's human nature we're playing with here, and seeing a loss on this sweet gain will trigger selling to keep at least some profits, self-fullfilingly driving the prices down further. That's when a smart trader buys...
Depending on what I see in about the last hour of trading today, I may actively take bets off the table, and perhaps even buy some inverse 3x leveraged bear ETF (like SPXU) to bet on the idea that the market might revert tomorrow, with the idea of closing that trade win or lose tomorrow. I don't often do that, but my experience is that after nearly 200 point moves up in the dow, the next day is at best going to be tepid up, might be serious down, and I'd just be playing the odds there. Pretty rare to see two consecutive 3 digit runups, it happens, but usually you get a smaller one, then the larger one. When you get one like this "out of the blue" or in this case, government manipulation driven, the chances are good for a partial reversion right away.
Some relevant sayings:
Make hay when the sun shines.
He who is lost, hesitates.
The market can stay irrational longer than you can remain solvent. Use rationality to make decisions about irrationality.
For long types -- buy high, sell higher. Don't catch a falling knife, the middle of a move will be enough.
Be greedy when others are fearful, be fearful when others are greedy. (Warren Buffet) He's not an investor or trader, he's a runner of companies, a fixer upper guy. He's still right often enough, but don't buy his stock, I've made more on the short side of it when he's wrong -- which is inevitable when someone is as not-nimble as he must be with those amounts of money.
From the US Marines:
Anything worth shooting is worth shooting twice. But be sure of your target and the backstop first.
Improvise, adapt, and overcome.
If you ever find yourself in a fair fight, shoot your planner first. The object is to win.
Some of the above companies have alternates that are nearly as good, and since they don't quite track lockstep, a move in one can slightly predict a move in another, or one can be in a better place to buy than another. For example, FCX has SCCO that is also good in copper. BTE has PWE as an alternate. Other large conglomerates pay some nice dividends while their stock goes basically nowhere other than PG. Bonus on any of those if you can catch them at bottoms, but when you look long term -- they just aren't going up or down, but pretty flat, like WMT for example. No motion, no money other than the dividend, but in that case, you still have a risk it will go down -- not so good, eh?
In a rare more or less full disclosure (I redacted my account numbers) here is what I'm seeing, doing and holding just now. Not a bad day to say the least. A lot of people would be getting excited and "doubling up" at this point, but ot me this setup screams "SELL!" and "it's too good to be true, unless I force it true now". So I'll be triming some of this today, probably near the close as things are still going up, though the market as a whole stopped more or less about an hour after it opened today. The big boys do most trading early and late, which is why all the volume curves tend to look like smiley faces.
The three little plots that got their names covered (so you could see my watchlists, or at least the ones I have up) are, top to bottom FCX, MCP, BTE. Speaking of "too good to be true".
Hate to sell much BTE, as there's that monthly dividend (180 bucks on the 1000 I own now), but I may.
Posting as just me, not as the forum owner. Everything I say is "in my opinion" and YMMV -- which should go for everyone without saying.