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How to Find Stocks Ready to Breakout, and What This Indicator Says Now

Value investors are familiar with a problem most experienced investors have faced. Identifying value stocks to buy is relatively easy to do but the problem is that stocks can remain undervalued for extended periods of time, years in some cases. That means they buy an undervalued stock and then wait for it to move higher. Sometimes, they wait for months or even years before other investors discover their undervalued gem.There are a number of ways to deal with this problem but one of the simplest could be to combine value investing with relative strength analysis. This is the approach taken ...
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A Trading System to Help Avoid Dead Money

One of the dangers of trading that many traders fail to consider is the problem of dead money. They may spend a great deal of trying to find buy candidates and working to limit the risk of loss. But they may completely forget about the risk of a market that doesn’t move. This can lead to disappointing results and if too many trades are in stocks that don’t move, a trader may never reach their ultimate financial goals.For traders, money is among their most important resources. Money, or trading capital, is the inventory for their business. Retailers who lack inventory ...
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How Volatility Can Help Your Trading

Hundreds of indicators are available to help traders analyze price action. Moving averages, stochastics, MACD, RSI and other less well-known indicators help identify the trend or warn of a possible trend reversal. While the details of how to calculate each indicator varies, they are all using closing prices as their primary input. A moving average sums the closing prices while the stochastics formula places the closing price within context of the recent price action by including the recent high and low prices in its calculation. All of these indicators have been developed to find a tradable edge that can produce ...
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Another Look at the Cheapest Stocks in the Dow

In a recent article, we looked at the traditional approach to a trading strategy known as the Dogs of the Dow. Several readers have questioned how a simple strategy like the Dogs can work. In this article, we will explain why the Dogs of the Dow can work and look at a variation of the strategy that can be implemented at a relatively low cost.A common question among investors is how a strategy can work when a large number of investors already know about it. Researchers have shown that if a strategy is based on sound investing principles, it ...
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Cheap Stocks That Could Beat the Market Next Year

It’s finally January and now could be the time for traders to take positions intended to benefit from the January Effect.Investment managers and the academic community have long recognized that stocks do well in the first month of the new year. They called this tendency “the January Effect” and defined it as “a seasonal increase in stock prices during the month of January. Analysts generally attribute this rally to an increase in buying, which follows the drop in price that typically happens in December when investors, engaging in tax-loss harvesting to offset realized capital gains, prompt a sell-off.”Understanding the cause ...
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Investing Lessons From Last Year’s Winners

At the end of the year, many investors look backwards, wishing they had invested in the previous year’s biggest winners. This behavior isn’t unique to investors. Many individuals take time as the new year approaches to consider their mistakes of the past year. This can be an important exercise, if you learn lessons from a review of the past. For investors, it seems few learn lessons because they repeat the process year after year, almost always looking in the rear view mirror at the stock or ETF they didn’t buy.We want to take some time to do things differently. We ...
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Will a Strong Dollar Doom the Stock Market?

Several unexpected events have happened since the election of Donald Trump as President. Among the most surprising for investors has been the fact that the dollar has become significantly stronger. Below is a chart of the US Dollar Index, a trade-weighted index that consists mostly of the euro and yen given the importance of trade completed in these two currencies. The Chinese renminbi is not represented in the index, which dates back to 1973 when China was not a significant player in the global economy. Some investors might consider this to be a weakness of the index, but no index ...
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Dogs of the Dow Picks for 2017

Sometimes, it seems as if there aren’t really any new ideas in the stock market. The Dogs of the Dow is an example of this. The Dogs is an investment strategy that is remarkably simple to implement. It requires trading once a year and has a long-term track record many active investment managers and hedge fund pros would envy. The roots of this idea can be traced back at least 60 years, a relatively old idea which means it has withstood the test of time.The Dogs strategy has a simple buy rule. At the end of the year, sort the ...
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