Trading Tips Blog

1 2 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 ...
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1 2 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 ...
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1 2 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 ...
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1 2 In a recent article, we highlighted the latest Dow Theory buy signal. Rather than repeat the details of Dow Theory and explain the signal here, we recommend reading the original article. In this post, we want to address specific stocks that can benefit from the signal. Dow Theory relies on the principle that both production and transportation are important. This is a logical relationship. If factories are producing goods and no one is buying the output, inventory will stack up ...
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1 2 In a recent post, we introduced Cloud Charts, formally known as Ichimoku Clouds. We received several questions about how to interpret the charts. While we generally like to provide answers to questions in the comments section of the blog, some answers require more space than that. When more space is needed, we sometimes devote a post to the question as we are doing now. Rather than cover Clouds in detail here, we will provide a quick review. The chart is visually ...
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1 2 Ben Graham is considered to be the founder of the value investing philosophy. He began investing in the 1920s, just in time to suffer large losses in the 1929 stock market crash. Graham decided to learn from the crash and began studying how to buy safe stocks. Within a few years, he coauthored the first book on the subject of value investing with a former student, David Dodd. That 1934 book, Security Analysis, is still found on the bookshelf of ...
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1 2 Under normal circumstances, elections are often followed by selloffs in the stock market. Two examples many investors may remember are the selloffs that occurred in 2000 and 2008. Stocks were already in bear markets as those elections were held, but the selloffs that occurred after the votes were counted still seemed to catch many investors by surprise.   The circumstances associated with the 2000 election may have been unique. That year, a close election required several weeks of recounts and a ...
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1 2 We’ve all seen the analyst on CNBC explain with a sense of authority that the S&P 500 index has just crossed above or below an important moving average (MA). We are led to believe this foretells a trend reversal but we never really see data supporting that idea after the statement is made. This leads to the logical question, “are analysts talking about MAs simply to have something to say or are MAs useful?” The answer, as so many answers are ...
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