Turn Off CNBC

If you want to stay focused on the task hand, and make money in the stock market, one of the best decisions you can make is to turn off CNBC and other financial news channels. Why? It is easy to get caught up in all the noise, and you can lose focus on your trading. The best way to become profitable in the market is to do your own thing and develop your own methods. All these financial news channels will do is clutter your mind with nonsense. Every day, a couple times each day, CNBC will strut out a bull and a bear to make an argument on the direction of the market. These are often people who have decades of experience, yet they really have no clue where the market is heading because NO ONE DOES! While it IS important to stay on the right side of the market, just let the action of the market itself tip you off as to which way it wants to go. Keep it simple though. If the market is breaking out to new highs, it will likely go higher. If it is selling off to new lows, it will likely go lower. Don't try to pick market tops and bottoms. Let the action of your individual stocks tell you when to get out of them. If you have a sound strategy for trading stocks, that strategy should tell you what to buy, when to buy, and when to sell. That's all you need! www.whentobuyandsellstocks.com

When To Buy and Sell Stocks - Part 1

When to buy and sell stocks is a question that has been asked by traders and investors since stock markets were invented. There are literally thousands of ways to trade stocks and make a profit. The problem is that most investors do not have the technical skills or knowledge to obtain historical stock market data and then back test all of these strategies to find out which one will work best. Another problem is that in certain conditions, some strategies will perform better than others. With this in mind, keeping your trading strategy as simple as possible, and then following it with strict discipline, is the way to go. One of the best general models for trading stocks that will produce significant long term profits (if applied to the correct stocks) is a trend following strategy. Trend following strategies essentially buy a stock when it breaks out to a new high price of some level, and then exits the position at a low price. This actually sounds like “buy high and sell low” but the goal is actually to buy high and sell higher. This is counter to what most investors want to do, since they typically want to go bargain hunting and buy a stock when it is cheap. The problem with buying a stock when it is perceived to be cheap is that usually this means it’s price is trading in a down trend. Investors may perceive the stock to be cheap based upon its valuation. Unfortunately, it is virtually impossible to forecast what a company’s earnings will be. In reality, it is just a guessing game. At the start of the bear market in late 2007, early 2008, Crocs had been on a roll, more than tripling in price from the beginning of 2007. Then the stock price started to break down. In early 2008, one of the analysts on CNBC’s Fast Money said the stock, trading in the twenties at the time after peaking over $70, was undervalued and it was time to buy. By the time of the bear market bottom in 2009, the stock was trading down to about $1. People had stopped buying its products. This kind of situation occurs over and over again. When you are just guessing, you have a recipe for disaster. A sound trend following strategy will get you out of a position before the roof caves in. This type of strategy will not get you in at the absolute low price of a stock, and will not get you out at the high. The goal is to capture the “meat in the middle” so to speak. Trend following strategies have made some high profile traders hundreds of millions, and even billions of dollars. William O’Neil, who created Investor’s Business Daily, described a sort of trend following strategy in his book “How to Make Money in Stocks.” However, his exit strategies were not very well defined. John W. Henry, owner of the Boston Red Sox, made his fortune by applying trend following strategies in the futures and currency markets. Many of the top performing commodity trading funds over the last several decades have all applied trend following models to generate their performance. How does a trend following strategy actually work? One of the more famous strategies applied in the commodity arena is the Turtle Strategy. It was created by traders Richard Dennis and William Eckhardt, and was a variation on Richard Donchian’s 20 day channel breakout rule. The very basic idea of the strategy was to buy a commodity if it made a new 20 day high in price and exit the position if it made a new 10 day low in price. Short traders would be the opposite. They then applied some stop loss rules and risk management. They taught this system to a group of individuals that Dennis referred to as the Turtles, a name he created based upon a trip to Asia where he noted turtles being grown. He bet Eckhardt that traders could be taught to trade and that they would be successful. There were two groups totaling 21 individuals who were taught the system, and many went on to future success in managing money after generating millions in profits for Dennis and Eckhardt over a five year period. This type of strategy can also be applied to individual stocks, even if just trading from the long side. Since even George Soros has said he has lost more money by shorting stocks than in any other strategy, it is best for the individual investor to just trade from the long side. As Jim Cramer always says, there is always a bull market going on somewhere. In a universe of thousands of stocks to choose from in the U.S. market alone, what are the best stocks to trade? Trend following strategies do poorly when markets are not trending. So, it would make virtually no sense applying the strategy to a stock such as Intel, or Microsoft, which have gone nowhere for years. With that in mind, it is best to apply the strategy to a stock that has demonstrated a tendency to trend in relatively recent history. Therefore, the individual investor should essentially screen for stocks that have been shown significant relative strength compared to the overall stock market over the latest year, and look for an opportunity to enter a position on a breakout. All stocks undergo some sort of a correction now and then, and that is the opportunity to look for, as long as it’s longer term trend remains intact. The investor will look for that breakout opportunity, have a stop loss plan in place, and then simply let the other exit stops, such as the 10 day low exit strategy, trail the stock price. The difficulty in following this strategy is that there will be false breakouts for one reason or another, and as a result, it requires significant discipline to continue with the strategy in the same stock when there has been a string of losing trades. No matter what strategy you use, you need to adhere to it with strict discipline, assuming it has a long term history of performing well. Your plan should be to at least monitor the market on a weekly basis, identify a group of stocks that you will want to trade, and then apply your trading model at the appropriate instance. Do not focus on short term results. Simply execute your plan with discipline and you will come out way ahead in the long run. www.whentobuyandsellstocks.com

Weekly Comments - U.S. Stock Market - May 6, 2012

U.S. stocks posted sizable losses last Friday on the back of a weak jobs report. The markets closed down for the week and the market averages appear to be ready for a new leg to the downside. Visit the link below to learn more! When to buy and sell stocks

Apple's Earnings Report April 2012

Apple apparently came out with a favorable earnings report, as usual, and that is boosting the stock by over $40 above its closing price Tuesday evening. Apple has been a drag on the Nasdaq over the last couple of weeks as many weak longs exited positions. It will be interesting to see if this ultimately becomes a dead cat bounce or a new leg up in the stock. The first key price level is 620. If it struggles with that level in the next week, it will likely test today's low around 555. The overall stock market has been in a tight range dating back to mid-March. There is an obvious potential head and shoulders top in the Dow Industrials, and a break below 12,700 would be the breakout level of that pattern to the downside. Keep in mind, however, that this pattern can be a great continuation pattern to the upside as well if the downside breakout fails, and then the market breaks above the high of the right shoulder. No matter what, we are currently in consolidation during the beginning of a seasonally weak period. With the general election season underway, and all signs pointing to a close election, the market faces significant uncertainty. Add in the issues of Europe, the Middle East, and a slowdown in China, there is very limited certainty as to the direction of the economy. Earnings reports will shed more light on this, but only temporarily. Ultimately, macroeconomic factors will take over, and traders will again focus on these issues. What we are presently left with is a choppy market with many stocks having trouble continuing their recent uptrends. With that in mind, traders and investors should continue to proceed with caution. www.whentobuyandsellstocks.com

When to Buy and Sell Stocks - Commentary for March 6, 2012

Check out the video about our thoughts on today's stock market action.

Morning Stock Market Commentary - March 4, 2012

U.S. stocks will open significantly weaker this morning, with S&P Futures off about 12 points as of 8:30 am ET, and Dow futures off near 100 points. This would be about the weakest open for the year. The trend so far this year has been for the market to then bounce for the rest of the day and close well off the lows. We have not yet had a trading day in 2012 where the Dow closed down 100 points or more. This morning's weakness may be attributed to weakness in Europe markets this morning on the back of weak economic data. Also, estimates for GDP in China have been lowered as well.

I actually took out insurance on my portfolio yesterday by buying a couple ETFs...one is the TVIX, which mimics the VIX, or volatility index. Volatility has been at very low levels for much of the year, and on a daily basis has been contracting as well. The other I purchased is a small cap bearish ETF, TZA. The Russell 2000 has underperformed the big cap averages for most of the year, as Apple has been masking the underlying weakness in the overall market.

Watch out for a true selling day today, or in the near future. If the major market averages all close with losses over 1%, then you have a likely change in direction from here. This is by no means a perfect indicator, and could easily be reversed, but most sell-offs will have a day like this at the beginning of the sell-off.

After a significant rally from the October lows, it is time to play defense.

Scott Cole
www.whentobuyandsellstocks.com

Stock Market Commentary - February 12, 2012

Check out the video below to check out our thoughts on stock market direction.

href="http://www.whentobuyandsellstocks.com">www.whentobuyandsellstocks.com

Stock Market Comments - February 5, 2012

Here is my weekly stock market commentary as we head into the week after an amazing Super Bowl! This is a bull market folks! I have no idea how high this market will go, and how long this bull move will last, but the price action is bullish, while sentiment among individual investors and traders seems to be bearish. I participate in a group on Facebook and I can tell you that the majority of posters there are bearish, and getting killed by this current move to the upside. They justify shorting the market with all kinds of reasons, including the European debt crisis, our own issues here, etc etc. Yet, the market continues to climb.

I also just found this article on Bloomberg.... read it here

This suggests this market has a lot further to go. At some point individuals will take notice. This kind of move can go on for a long time. Yes, there will be modest corrections along the way. However, it appears that it will take a major event to sidetrack this market and cause a steeper correction.

With this in mind, traders should follow stocks that are outperforming the market. One such stock is MDVN... we mentioned it here a few weeks ago when it broke out above $50. It closed on Friday at just shy of $74.

Stay long!

www.whentobuyandsellstocks.com

Stock Market Commentary - February 1, 2012

Check out the video below for today's stock market commentary from whentobuyandsellstocks.com

Apple reported earnings after the bell today, and as is their custom, blew away analyst expectations. At last check, at about 9:30 eastern time, Apple was trading up about $30.

I posted a video on youtube about when to sell a stock, giving the example of Google, which had a poor earnings report last week. As a result, it opened down about 9%, and has traded modestly lower since. Some people will want to buy that stock now. Bad idea. Look for winners, not losers. Apple is a winner. As long as it continues to produce earnings like this, you should stay in the stock, as it continues higher.

The bottom line is if you want to make money in the stock market, you need to get on board stocks that are rising in price, not falling in price. A trend in motion tends to stay in motion, so get on board an uptrend, and you will put the odds in your favor.

www.whentobuyandsellstocks.com

Stock Market Commentary - January 18, 2012

Check out this video about today's stock market action and what it means for the market going forward.



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Stock Market Comments - Morning, January 12, 2012

The U.S. stock market is poised to open relatively flat this morning, after trading higher over night. The first bit of economic news for the New Year has come out on the weak side today, as retail sales numbers for December came out flat, and weekly jobless claims jumped up to 399,000. Williams Sonoma also scaled back earnings expectations for the 4th quarter, indicating that margins were hit due to significant discounting over the holidays.

This data flies in the face of what we have seen and heard in the media over the last month. It will be interesting to see if this becomes a trend.

It should be pointed out that the Dollar has rallied sharply in recent weeks. This will hurt the earnings of the multi-nationals, and those have been the best performing stocks for some time. At the same time, gas prices have slowly ticked up, moving closer to that $3.50 per gallon level, and there are forecasts of $4.00 or more per gallon by Spring. That will kill off any economic growth.

Keep an eye on the major averages. They have been slowly moving upward with low volatility. It will only take one lousy trading day to change the overall character of this market from modestly bullish back to bearish.

Scott Cole
www.whentobuyandsellstocks.com

Stock Market Comments - January 9, 2012

U.S. stocks closed with marginal gains once again on Monday, continuing the pattern in place since last Wednesday. The overall trading pattern during the day has been repeated for a few days now...weakness in the morning due to ongoing European issues, and a very modest rally beginning after the European close.

The trading patterns are somewhat mixed...the Dow and S&P 500 look like they are ready to explode upward, while the Nasdaq and small cap averages are more mixed.

One stock I definitely do not like now is Google. Google had broken out recently to 52 week highs, with a nice basing pattern going back about one year. Today, it closed down over 4%, and formed an island reversal pattern in the process, due to the gap down. It closed below its 34 day EMA for the first time since late November. If there is follow through, expect some weakness in the NASDAQ.

Biotechs lead the way upward today, lead by Inhibitex, which is being bought out. It was up 140% today...yes, 140%!

We had a couple stocks on our watchlist that resulted in new buy signals. SPPI and MDVN both broke through their buy points today.

Scott Cole
www.whentobuyandsellstocks.com

Stock Market Commentary - Morning, January 5, 2012

There is a major tug of war going on with U.S. stocks this morning. Early before the open, U.S. Stocks were looking at a pretty negative open due to weakness in the Euro versus the dollar. As I write, this, the Euro was trading close to 1.28 against the Dollar, off about .0120, which is a sizable move. Normally, this would have led to a big sell-off, as it is expected that a European recession will adversely affect the U.S. However, employment figures coming out starting at 8:15 with the ADP report were quite bullish, with a gain in private sector employment of 325,000. Jobless claims also fell to 372,000 this week, down 10,000 from a revised 382,000 last week. This resulted in some gains in stock futures, but these remain muted by the European issues.

Rick Santelli pointed out on CNBC that the high numbers in the ADP report over the last three years were in December, so it remains to be seen whether there are seasonal factors at play.

Stay tuned!

www.whentobuyandsellstocks.com

Stock Market Commentary, January 3, 2012

U.S. Stocks posted solid gains on the first trading day of 2012 after being called to open sharply higher due to some stronger than expected economic data out of Europe. However, stocks were unable to build on their games for the rest of the day, and the averages essentially closed about where they were trading in the first few minutes of trading, and off their highs.

Strength was seen mostly in the energies and precious metals. One thing I've noticed is that there is a lack of leadership in stocks making new highs. I perform a stock screen of the days biggest movers, and there were just a handful of today's big movers (gains of over 3.5%) that were making new 52 week highs. Instead, the biggest movers were in stocks that have been beaten down. This is not characteristic of a market that is a bull market. Instead, this is simply professional trading as funds rotate from one sector to another, hoping to catch a pop, then exit. This is not the sign of confidence in a market and economy.

With that in mind, it is a good idea to remain cautious.

www.whentobuyandsellstocks.com

Stock Market Commentary - January 3, 2012

Stock market commentary heading into the first trading day of 2012. For more great information, visit www.whentobuyandsellstocks.com

Google Makes 52 Week High

Don't look now, but Google (GOOG) posted a new 52 week high close on Friday. I am not sure if there was any fanfare attached to this, as I did not watch much of CNBC Friday, but I believe this is an important development. Google is a tech leader, and its leadership is required now that Amazon is breaking down.

What I really like about this breakout is that it is coming from a huge base dating back to 2009. The overall pattern has that shape of a cup that William O'Neil loves, and I suspect that a high handle will come in the next few months if you don't hop on now.

Scott Cole
www.whentobuyandsellstocks.com