The Best Trades for February

Last month, we applied a simple seasonal strategy to find potential buys for January. Now, we can review the results of this strategy. Of the 8 stocks, six moved up, a win rate of 75%. Half of the stocks beat the market, delivering a gain larger than the gain of the S&P 500 index. Results are summarized in the table below. This strategy outperformed because of the large gain in Illumina, Inc. (Nasdaq: ILMN). This demonstrates the value of trading a strategy. We never know whether a trade will be a winner or loser and we never know which stocks will deliver the biggest gains. That wi...
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Is it Too Late for a Trump Trade?

As we all know, the election is long over and Donald Trump has now been sworn in as the President. These events have had a significant impact on investors. The S&P 500 index is up more than 9% since the election and economists have been revising their forecasts of GDP growth higher in anticipation of policy changes Trump is expected to make. Companies are also considering the impact President Trump and his policies will have on their operations. Early indications are they believe the impact will be significant and largely positive. This is based on an analysis of comments company CEOs a...
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RVI and How You Can Become a Better Trader

In a recent blog post, one of our readers commented that they found the RVI to be a useful indicator. That comment illustrates what we try to accomplish with our blogs. We strive to introduce our readers to new ideas that they can use to improve their results. By explaining RVI we saw an opportunity to advance our goal. This is an indicator most traders haven’t heard of. The Relative Vigor Index, or RVI, was developed by John Ehlers and was first published in the January 2002 of Technical Analysis of Stocks and Commodities magazine. Ehlers has been a frequent contributor to that publication...
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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 are at risk of going o...
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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 ed...
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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 can work no matter how well known it is. This idea...
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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, promp...
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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 will look at the biggest...
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