Rightfully yours

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:
• Share price: $5 Min, $25 Max
• Profit margin: 0% Min, Any Max (profitable company)
• Price/Earnings Ratio: 10 Min, Any Max (earning company-goes to share price)
•  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 (maximum 200 stocks).  I can then tell their share price at any time.  With more than 200 stocks, create another Yahoo Portfolio.
12. I manually delete any stock with Average Volume less than 200,000 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:
• Share Price (custom range) $5 – $25
• Avg volume (custom range) 300000 – 50M
• Price Earnings (custom range) 0 – 50
• Profit margin (custom range) 0 – 50
2. Analyst consensus: Strong (1.0-1.9) and Buy (2.0)
3. Yield: 300 stocks approximately.
4. This population is the highest quality stocks as indicated by the Analyst rating of Strong Buy or Buy.  Edit Criteria section allows you to manipulate Share price, Price Earnings and Profit margin for more or fewer stocks returned.
5. A spreadsheet program is the easiest way to move the stock symbols into a list.
6. After copying, delete all columns except the Stock symbol.  We now have our selections.
7. Use Yahoo Portfolios to store them (200) stocks per portfolio).  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.  Inadvertantly clicking a Stock symbol name will 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 and stocks rise only under buying pressure and naturally fall under their their own weight.  The reason is that many investors have automatic sales in place to provide their income.  It works by date, not by value.

1. If the market settles lower, it may simply be that fewer people are buying.  Selling goes on all the time (people have expenses).
2. 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.
3. 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. In the left margin there are clickable choices.  We are currently in ’Summary’ under QUOTES.  Under CHARTS click ‘Basic Tech. Analysis.’  Check these options to construct a chart.
• Range:  3m (months)
• Moving Avg: EMA:  5, then 20 (gives you two tracking lines)
• Indicators:  MACD, Slow Stoch, W%R
• 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 ‘Stoch‘ or Stochastics.
• The blue line measures recent price performance and the red line is a following average of the blue line.
• The blue line (%K) should be ABOVE the red line (%D) for a rising stock.
3. Next graph is MACD.  The red Signal line will generally follow the stock trend.
• 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.
• 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.
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.
• 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
3. START ABOVE the Signal line section BELOW the zero line, or
   END ABOVE the Signal line section ABOVE the zero line.
4. Stochastic blue line (%K) ABOVE Stochastic red line (%D) and rising.
5. 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
3. END BELOW the Signal line section ABOVE the zero line, or
   START BELOW the Signal line section BELOW the zero line.
4. Stochastic blue line (%K) BELOW Stochastic red line (%D) and falling.
5. W%R falling from the upper region.

Alternative to ’Basic Tech Analysis.’

1. Under ‘Charts’ click ‘Interactive’
2. This charting tool gives you the option to set your own values for your technical indicators.  Since I trade on a daily basis, I set my indicators tightly.
3. Click the indicator descriptions to change the values.
• Fast Stochastics: %K=2 (Value); %D=9 (Trigger line)
• MACD: Slow period: 3; Fast period: 6; Signal period: 9.
• Williams %R: Period: 3.

The Value of Open:

The interaction of Open and Close values with each other have largely been ignored by traders.  I have found the following information to be helpful.

1. Everyone knows that when a stock closes higher than the previous close, the stock price is rising.  When the stock closes lower than the previous close, the stock price is falling.
2. Everyone also knows that buying a stock when it is low and selling it when it is high will result in a profit.
3. But how do we know when a stock is changing direction?
4. The Open price is mainly assumed to be a random guess by the market maker and therefore is largely ignored.  But based on the stocks latest performance, news and rumors, investors place orders before the market opens.  These orders are balanced by computer into an equilibrium price where the number of shares for sale equal the shares wanted.
5. When the Open price is less than the previous Close, it indicates a peak, and the Close will likely be lower than the previous Close.  Is the price heading down?  Probably.  At least for a few days.
6. When the Open price is greater than the previous Close, it indicates a base, and the Close will likely be higher than the previous Close.  Is the price heading up?  Likely, at least for a few days.
7. There is more to it. I’ve found a stock is rising when the latest Close is greater than the average of the last 5 Closes, and going down when less than the average of the last 5 Closes.
8. I’ve also found that that a stock many times is at a Base when the latest Close is lower than the last 5 Closes, and at a Peak when it is higher than the last 5 Closes.  I will set a buy or sell order at the next Open and become part of the market maker’s equilibrium price.
9. Many times there are more than one Base or Peak days occuring sequentially, each higher or lower than the one before, allowing for greater profit.  I’ve found the gap in price between Open and Close gets narrower as the Base or Peak days acumulate, and I generally lose my nerve at day 3 and place an order for the next day.

As a note, I have found the use of a spreadsheet is very valuable in tracking the trends.  You only need prices for 5 or 6 days.

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.