First you have to find stocks to analyze.
Method of Finding stocks:
1) Go to http://yahoo.com and open an account if you don’t have one.
2) Click the Finance Quicklink on the left
3) Roll over ‘Investing’ tab on the top, click Stocks
4) Under Research tools, click Stock Screener
5) Under Launch Screener, click Launch HTML Screener
6) Leave all selections at ‘Any’ except for the following:
a) Share price: $5 Min, $25 Max
b) Profit margin: 0% Min, Any Max (profitable company)
c) Price/Earnings Ratio: 10 Min, Any Max (earning company-goes to share price)
d) Avg Analyst Rec: Buy/Hold rating (2) or better
7) Click Find Stocks. Yield: 334 stocks
8) This population is the highest quality stocks as indicated by the Analyst rating of 1.0 – 2.0. Editing criteria allows you to manipulate Share price, Profit margin and Price/Earnings Ratio for more or fewer stocks returned.
9) A spreadsheet program is the easiest way to move the stock symbols into a list. I use Excel, but OpenOffice.org has a fine one as well.
10) This is the tedious part. The list has to be copied and pasted 20 lines at a time (copy the headings only the first time). All portions of the group have to be spread-copied into the spreadsheet. This has to be done 5 times for each 100 selections. You can also type in the symbols.
11) After copying, delete all columns except the Stock symbols. We now have our selections. I use Yahoo Portfolios to store them. I can then tell their share price at any time.
12) I manually delete any stock with Average Volume less than 300,000 shares. I do this for liquidity, but down to 200,000 is generally OK.
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Alternate Method of Finding stocks:
Recently I have been using AOL Money and Finance at:
http://finance.aol.com/usw/quotes/stockscreener
1) Launch the Screener and make similar selections:
a) Share Price (custom range) $5 – $25
b) Avg volume (custom range) 300000 – 50M
c) Price Earnings (custom range) 0 – 50
d) Profit margin (custom range) 0 – 50
e) Analyst consensus: Run twice and save each list for Strong and Buy
f) Results per page 300
Yield: Buy, 275 stocks; Strong Buy 16 stocks
2) This population is the highest quality stocks as indicated by the Analyst rating of Strong Buy (1.0 – 1.9) or Buy (2.0). Edit Criteria section allows you to manipulate Share price, Price Earnings and Profit margin for more or fewer stocks returned.
3) A spreadsheet program is the easiest way to move the stock symbols into a list. With this method and 300 results per page, all stocks may be spread-copied at once for Strong Buy, then for Buy stocks.
4) After copying both sets, delete all columns except the Stock symbols. We now have our selections. I use Yahoo Portfolios to store them. There is no manual volume deletion.
Portfolios:
1) Back at Yahoo Finance, roll over ‘My Portfolios’ tab at the top of the screen.
2) Click ‘New Portfolio’ and add up to 200 Stock Symbols from the spreadsheet list. Add a new Portfolio if more than 200 stocks. I name mine, “Screener 1″ and “Screener 2.”
3) Be careful with your mouse in the Spreadsheet. Touching a Stock symbol name can select it.
4) Clicking ‘Finish’ for the Portfolio will display ALL the stocks in the Portfolio in your choice of predefined formats or you may design your own format to watch all the stocks in a portfolio at once during the trading day.
Analyzing the market:
1) I designed a Yahoo home page that has Market defining stocks (Dow, NASDAQ, S&P100, S&P500, SPY, QQQQ, the CBOE (Chicago Board of Options Exchange) volatility indexes for the Dow (VIX) and NASDAQ (VXN), and the shares traded on the Dow and NASDAQ.
2) The way these help me understand market conditions is that markets naturally fall of their own weight.
a) If the market settles lower, it may simply be that fewer people are buying. Selling goes on all the time (people have expenses).
b) The volatility indexes run counter to the markets. If the Dow is healthy and rising, the volatility indexes go down. We want them at around 30 or lower.
c) If the market as a whole goes down, individual stocks generally follow. Visualize boats on a tide.
Analyzing stocks:
1) Start with the stocks in your ’screened’ portfolios and analyze them one at a time with Yahoo.
2) Click a stock symbol, or ‘Dow’ or ‘NASDAQ’ on your Yahoo home page.
3) This brings up a page for the stock with a lot of information on it, including “real time” prices. Just below “real time” is “Last Trade” which is delayed by 20 minutes. Watching these two price values show if a stock is going up or down. There is also a small daily graph.
4) Make another duplicate tab. On this one, under ‘Charts’ click ‘Basic Tech Analysis.’ Check these options to construct a chart.
a) Range: 3m (months)
b) Moving Avg: EMA: 5, then 20 (gives you two tracking lines)
c) Indicators: MACD, Slow Stoch, W%R
d) Size: L (my preference)
Technical Analysis:
1) Top graph is Price (up to yesterday’s close) with two tracking lines of 5 days and 20 days. The price line should be rising and be ABOVE the two tracking lines.
2) Next graph is MACD. The red Signal line will generally follow the stock trend.
a) If the red Signal line is ABOVE the zero line, the higher end of the vertical lines should END ABOVE the Signal line for a rising stock.
b) If the red Signal line is BELOW the zero line, the lower end of the vertical lines should START ABOVE the Signal line for a rising stock.
3) Next graph is ‘Stoch‘ or Stochastics.
a) The blue line measures recent price performance and the red line is a following average of the blue line.
b) The blue line (%K) should be ABOVE the red line (%D) for a rising stock.
4) Next graph is W%R. It is a measure of price in relation to past prices and basically follows the track of the blue %K Stochastic line.
a) The single track that should be heading up or hanging out in the upper region. It should NOT be heading down.
When is the best time to buy?
1) Price above both tracking lines
2) MACD red Signal line following the stock trend UP from BELOW the zero line to ABOVE the zero line. The most current vertical lines
a) START ABOVE the Signal line section BELOW the zero line, or
b) END ABOVE the Signal line section ABOVE the zero line.
3) Stochastic blue line (%K) ABOVE Stochastic red line (%D) and rising.
4) W%R in upper region or rising to that area.
When is the best time to sell?
1) Price falling below both tracking lines
2) MACD red Signal line following the stock trend DOWN from ABOVE the zero line to BELOW the zero line. The most current vertical lines
a) END BELOW the Signal line section ABOVE the zero line, or
b) START BELOW the Signal line section BELOW the zero line.
5) Stochastic blue line (%K) BELOW Stochastic red line (%D) and falling.
6) W%R falling from the upper region.
There you have it. Be patient. You are a hunter. Wait for the best time to pull the trigger. Don’t pull it too early or too late. Always put in a “Stop” order, so if the stock crashes you won’t lose everything. I set my trailing stops (that move with the rising stock price) for 3%.
Good luck and good hunting.
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