To start off, here's a quick look at the overall market this year. Was it an easy market? At times, you could say yes, given the relatively smooth uptrends we saw from February to May and also from September to December. Volume was not always there in those uptrends, but overall, if you stayed patient you could make some nice gains.
Now May to September - that was another story. Total chop. Let's hope we don't have more periods like that in 2011. As I reviewed my basic timing system over the past year, most of the false signals I saw took place during these months. You'll have that however - trading lightly when signals get whipsawed is probably the best thing you can do.
In terms of individual stocks, I am sharing ten with you that I think are important from the past winners. There are many that could have been chosen, but these are the ones that stood out to me for one reason or the other. Some are IBD-type stocks that had year-long moves (although quite choppy moves) while others were recent IPOs that had quick one or two months bursts in which they doubled or more. They all are worth studying.
All Charts from Telechart, Courtesy of Worden Brothers, Inc.
As I studied these, I found some common factors that I have discussed in previous years and are again important to remember heading into 2011....
- All of these stocks started with a heavier volume, one-day move of over 4-5% (and in some cases the move was much higher).
- In several cases, the first move was a result of positive earnings being released.
- Buying stocks that have had a big, one-day move is very difficult (at least for me) as your mind tends to think they have moved too far, too fast and will pullback as soon as you buy (at least that's how my mind thinks). That does happen, but most of these big winners see immediate follow-through the next day.
- Simple method for riding your winners as long as possible - use the nine day moving average as a trail on a CLOSING basis. When the 9 day starts to flatten out or it is broken, typically the stocks will have a consolidation period or get choppy, so it is usually best to take your profits and move to the next opportunity.
- As your gains increase, in some cases you may want to use the 20 day or even 50 day moving average as a stop loss level. That is up to you and your trading style.