This trader walks us through one of her trades, detailing the indicators she used and the decisions she made.
The age-old philosophies of “Buy,
low, sell high” and “Buy cheap,
sell rich” are the investing approaches
every investor strives
toward. Unfortunately, the task
of uncovering qualified stocks
is not as easy as the four-word
philosophies imply. By qualified,
I refer to an undervalued
stock that is technically and fundamentally sound enough to
appreciate in price. The challenge is not just limited to finding
undervalued stocks; it is to identify those stocks that have
exhausted their downward tendencies and are setting up for
an upward move.
Here is my approach to identify stocks ready to advance.
When screening for technically undervalued stocks, I utilize
daily data and employ four primary traditional indicators —
the stochastics oscillatorƯ, relative strength indicator (RSI)Ư,
moving average crossover, and moving average conver-gence/
divergenceƯ (MACD). I also use the multiple time
frame approach. Using this strategy, I use daily data to screen for acceptable stock candidates and then scrutinize the monthly
chart for trend confirmation. Finally, I utilize the 60-minute
chart as my entry timer.
When seeking sound, undervalued stocks, especially those
with which you are not intimately familiar, it is important to have sufficient technical and fundamental supporting data.
Even the staunchest technician will admit that fundamental
confirmation is key to proper stock selection.