Blue Plate Specials – Special Categories

Continuing our perusal of the daily *Blue Plate Specials* Menu, today we’ll be looking at a few of the more popular Special Menu categories. You can think of these as daily treats–sometimes they’ll be there, and sometimes they won’t.  It all depends on what ingredients the chef has to work with. 

Special Menu Categories

Low-Priced Leaders
Hot Lists:
These are culled from all of the bullish Hot Lists.

Selection Criteria:
*Stocks trading under $30 with most of the them under $15.

*Significant daily volume (usually >250k). They can trade on lower volume if their 5-minute charts move in an orderly fashion.

*Stock price has been moving up steadily for at least several months.

How to Use: Low-priced stocks moving up steadily on decent volume can signify that the investment community is waking up to new companies with major growth potential. This is where you’ll need to put extra effort into your due diligence as these could be companies you might want to hold for the long-term. Think Microsoft and Google in the early years.

On the other hand, I do pick stocks that have risen substantially which means that their runs could be coming to an end, at least in the near-term, and especially if the market is reversing to the downside. In bull markets you might want to add a few of these to your portfolio during market dips, starting with partial positions and building each as it moves up. Just remember to set a stop-loss as a fierce market move to the downside can spell disaster for smaller issues.

Example:

VMED Chart 11-19-09

Speculative Leaders
Hot Lists: These are culled from all Hot Lists, especially Unfilled Gaps, Unusual Volume, and Percent Gainers.

Selection Criteria:
*Stocks trading under $10. Sometimes if a higher-priced stock has been in a significant uptrend and it trades at a low volume, I’ll include it.

*Lower daily volume (usually <250k). They can trade on higher volume if their 5-minute charts move in a choppy fashion, usually according to the whims of the market-makers.

*They’ve been moving up for at least a few weeks to a few months with very few pull-backs below previous support.

How to Use: These are highly speculative issues. They can turn out to be extremely profitable but the probability of that happening is low. In this respect, it’s of the essence that you do as much research as you can on the company and only play with discretionary funds.

Stocks of this ilk tend to be very volatile so you might want to consider either dumping them when they break their first support level; or, you can sign-up for the longer term and hold them until they either tank completely (and hopefully you haven’t risked much money) or launch into orbit in which case you can retire in luxury.

Just don’t blame Dr. Kris if your investment in any of these speculative stocks leaves you with indigestion!

Example:

PWER Chart 11-19-09

Darlings of the Day
Hot Lists: All bullishly-biased Hot Lists.

Selection Criteria: These tend to be higher priced stocks (>$30) that have been in an up-trend for at least several months. Technically speaking, their charts are about perfect.

How to Use: Generally, these are well-established companies whose stocks have been beaten down and are on the rebound. Long-term investors might find them especially appealing and look to investigate them further. But remember that nothing ever goes up in a straight line forever and at some point, even these stocks will take a break.

Example:

CHKP Chart 11-19-09

Caveats to keep in mind:
*Despite the fact that I look at hundreds and hundreds of charts per day, many valid candidates don’t make the hot lists because they are symbol-limited. This means that if you see a stock breaking out to a new high and it’s not on my list, that doesn’t mean that it’s invalid. Most likely it didn’t make my hot lists at the time I was looking at it. Remember, too, that the price of a volatile stock can change markedly from minute to minute.

*Sometimes I see stocks that have broken out the day before that somehow escaped filtering. If the stock hasn’t broken out too much and I think it has an excellent chance of going higher (assuming the market is trending upward), I’ll put it on the appropriate Break Out list. I don’t want you to miss out on some good prospects!

*This may seem obvious, but please remember that stocks tend to move in the overall direction of the market. That means if the market is in a strong bullish trend, shorting stocks is not the percentage play, and vice versa. Even the strongest stocks will succumb to the pressure of a bear market.

Summary
Now that we’ve cleansed our palate with the bullish candidates, we can next focus on those that can cause gastric pain in many–the bearish entrees.

Bon appetit!

Leave a Reply

You must be logged in to post a comment.