ParkTwain's Parlor

[siliconhippy]

ParkTwain's Gains Analysis ...

ParkTwain,

Thanks for the insightful analysis. Here is Yahoo's definition of STOCK BETA:

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Beta
The measure of a fund's or a stock's risk in relation to the market or to an alternative benchmark. A beta of 1.5 means that a stock's excess return is expected to move 1.5 times the market excess returns. E.g., if market excess return is 10%, then we expect, on average, the stock return to be 15%. Beta is referred to as an index of the systematic risk due to general market conditions that cannot be diversified away.

Beta equation (security)
The market beta of a security is determined as follows: Regress excess returns of stock y on excess returns of the market. The slope coefficient is beta. Define n as number of observation numbers. Beta =
[(n) (sum of [xy]) ]-[ (sum of x) (sum of y)]/
[(n) (sum of [xx]) ]-[ (sum of x) (sum of x)]
where: n = # of observations (usually 36 to 60 months)
x = rate of return for the S&P 500 index
y = rate of return for the security

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So Yahoo is looking at 3-5 year beta, which looks too stretched (even though your beta correlation is very high for short term gains.) Perhaps a 12-month beta might yield higher correlation, and then your method will get closer to MrMarket's who uses 12-month RSQ (basically a beta on the stock itself, as opposed to a comparison with the market.)

Also, Yahoo's definition is for an S&P500 market benchmark, so beta with a NASDAQ or NYSE base might reveal even more significance. NASDAQ certainly diverges more from S&P500.

But for now, the method you have seems pretty good anyway.

I also noted that www.moneycentral.com has both 5-year and 52-week highs listed. So why go to barcharts?

Regards,


siliconhippy

[ParkTwain]

siliconhippy - barchart.com

Barchart.com lists the RSI value each day for each stock making a 52-week high. Makes it very easy to sort the list by RSI (click on the column name), then examine the stocks with RSI from 68 to about 72.

//PT

[siliconhippy]

Barchart vs MSN for 52 week highs

ParkTwain,

Yes you are right about RSI sorting with barcharts.

However what period is this RSI over? 90 days, 180 days? Which should matter more?

Barchart shows blank info windows during market (busy?) hours most of the time.

siliconhippy

[ParkTwain]

barchart.com -- RSI setting is probably 14 days

14 to 20 days is typical. 14 days is the recommended. That is what I use at stockcharts.com

[carribean_mike]

A couple of questions

Park, I have a couple of questions for you

1) In your positions statement you state that

* 1 to 5 total simultaneous positions (1 to 3 recommended)

How do you determine which stocks to take? From following your post it appears that many potential buys occurs around the same time.


2) In your selling strategy you state:


* If RSI(14) at end of day is not over 70 and if RSI measure is above the inclining trend line of multi-week duration, set a new stop loss at 90% of the 15% profit point, and wait.


My question is -- once you set the new stop loss, when does it move. Is it a trailing stop?

thanks

[ParkTwain]

stop loss idea

I would set it and then wait for the 15% gain. When you get the 15%, then sell. This is designed to be a quick-hitting approach to making your gains. For only a minority of stocks will you get a second 15% beyond the first 15% before you would get a 15% gain from another stock that shows itself to be a strong candidate.

After you sell a given gainer, you put the money into the next strong candidate for another 15% gain.

[ParkTwain]

picking candidates, making buys

My posts were intended to show the set of candidates. To prepare to make the actual buys, you should be looking at beta measure, strength of the industry group in which the company plays, the "story" behind each company's particular earnings and revenue growth situation, the schedule for earnings announcements, etc. Even check the stochastics and other technicals to time your buy. In those posts I just wanted to demonstrate how quickly you can find candidates and make a series of 15% gains by focusing on just a few technical set-up features.

You can modify the approach and wait for 20% gainers or something else, of course. What I had found last year (cal year 2003 and before), while comparing my preferences to what $$MM$$ does, is that I was finding the same stocks he was, but about 3 to 6 months *before* he put them on his short list. I thought that was interesting, so I'm posting today according to what I was using to find the candidates. It tells me, especially in a rising overall market, that the approach of using IBD RS numbers get you into a stock later than necessary.

The "buy the breakout above a previous high point of resistance" is a very powerful approach. It is based on evidence and is consistent with what you would expect human behavior to be. When there are no more (or relatively few) sellers left in a stock, because it has now surpassed its previous high point, and if the real-world story with the company is positive and the MARKET KNOWS THIS, you are in a good situation to make some appreciation on a stock.

[ParkTwain]

casino stocks

BTW, I posted the other day on the STN (Station Casinos) board on Yahoo about this group. Most of them were making new 52-week highs or close to it on that day. I bought STN a few days ago and now am up 6.6%. They also just announced good earnings results and raised guidance, so the market was basically expecting it. It is somewhat cheap right now based on 12 months forward P/E versus earnings growth rate.

[ParkTwain]

Resetting my candidates list -- post 16-Jan-2003 blowoff

Tonight I am starting a new list of candidates using my previously published criteria. I am looking at making a few tweaks, if so I will update the "manifesto" for your perusal.

The action on 16-Jan seems to me to have been a significant high for the markets for the time being. Now is the time to be sifting your data and evaluating where the continuing strengths are in the markets.

What I was seeing on my lists for several trading days going into 16-Jan was that only the pretty speculative stuff was showing up on my screen. It was showing me that the near-term blowoff was at hand. It was reminding me of late 1999, early 2000, you were seeing the junk tech stocks going up on nothing substantial as to their actual fundamental performance.

[ParkTwain]

Found this interesting post on the TEN board at Yahoo

I had found the very strong TEN chart from a screen.

This post is regarding auto parts (TEN) and auto parts insurers:

http://finance.messages.yahoo.com/bbs?.mm=FN&action=m&board=7080418&tid=ten&sid=7080418&mid=8098

[ParkTwain]

STN reaches 15% gain; new picks for 3/1/2004

My pick of STN reached my 15% gain milestone today. Was a wait of about 24 trading days. Looking very strong going forward. Decided to hold 75% of my original buy shares for further gains.

Gains today in STN happened in context of news of Supreme Court not reviewing lower court decision regarding legality of electronic (slot machine-like) bingo games. Casinos and slot machine makers are seen to benefit from today's SC results.

Today's screen leads me to off this short list (in order of strength of my recommendation):

Symbol ... PEG ... Beta ... ROE ... Debt/Eq ... Cash/sh ... BV/sh ... Price/BV

ZQK ... 0.8 ... 0.845 ... 15.41 ... 0.323 ... 0.50 ... 8.034 ... 2.48
OMCL ... 0.96 ... 1.521 ... 31.10 ... 0 ... 1.44 ... 1.47 ... 14.86
FTI ... 1.35 ... 0.899 ... 21.8 ... 0.516 ... 0.44 ... 6.465 ... 4.14
LIFC ... 1.27 ... 1.49 ... 81.8 ... 0 ... 0.75 ... 1.38 ... 5.6

Each of these made a new 52-week high today. Each is under $30/sh. The chart for each shows RSI in uptrend but no higher than 70. The chart shows the +DI line on the ADX (stockcharts.com) spiking today or very recently previously. Each has avg daily vol of >50K per day.

ZQK (youth apparel) has 2 week old breakout in progress, long previous base (3/03 to 1/04) shown on chart. Safer growth, obviously well-managed company.

OMCL (hospital supplies) shows a very recent breakout and offers a higher beta. High price per book value, but low PEG. More research needed on fundamentals.

FTI (oil services, food processing equip) offers reasonable PEG, moderate beta, high ROE, reasonable price per BV, only has 2.5 years of previous chart history (spinoff).

LIFC (bio lab products) has very high ROE, reasonable PEG, higher beta, but price sits in middle of previous 5 year price range with additional overhead resistance to go.

Other new 52-wk highs for today also meeting technical chart criteria above, but whose fundamentals are not as positive: SFY, PRST, SMTS, MLHR, PRGO (just missed the cut), MOT, ZOLT, KFX.

Happy hunting!

[Michaelk005]

I like OMCL chart. Im going to buy some at an $21.50

[ParkTwain]

Setup for upside breakout in UHCO

See my post this evening on Yahoo's UHCO board:

http://finance.messages.yahoo.com/bbs?.mm=FN&action=m&board=7084484&tid=uhco&sid=7084484&mid=742

[siliconhippy]

RE: Park Twain on UHCO

Park,

So how do you judge potential breakouts in advance, and then how would you know if the breakout will be real or fail? Must be a real skill...

siliconhippy

[ParkTwain]

ZQK -- You're Welcome!

Nailed that one on March 2nd.