Top Down Analysis

 

You can search for stocks through the Industry Groups section of the website.  This is what we call Top Down Analysis.  However, keep in mind that neither the Big Chart nor the Best and Worst Industry chart are filtered search engines, which means that you will still need to do further stock evaluation before you invest.  If you would like to be more aggressive with the Big Chart and the Best and Worst Industries chart, you may follow the instructions below.  However, understand that when you are more aggressive you take on more risk.

 

Big Chart

  1. Look for an up-trending pattern of red to two yellows.  Although we normally suggest that you wait until the Big Chart is in green territory, here we will try to get in a little earlier.
  2. If something jumps from red straight to green, it is probably an industry of only a few companies.

 

 

Best and Worst Industries

  1. Once you are in the Best & Worst Industries chart, select the one-week time frame.  The 18-week time frame is our default, but if you would like to be more aggressive, use a shorter time frame.
  2. After you have selected this shorter time frame, skip the industry groups that have disproportionately high returns.  These groups have probably already made their move, are penny stocks, or only have a few companies in the industry.
  3. Go down a little ways on the chart and start looking at these groups.
  4. Once you select an industry, look at the stocks that comprise it.  Bypass any stocks that have had extremely high returns over the past week.
  5. Once you select a stock, follow the following steps.  If at any stock doesn’t meet one of these steps, move on to another stock
    1. Look for average volume above 100,000.
    2. Look for a stock price of $5 or higher.
    3. Look for a stock chart that is moving up.
    4. If you are looking to own the stock, make sure it has a Phase 1 “Good” score of 5 or better, if so, move on to Phase 2.
    5. If you are being more aggressive and using options, the fundamentals are less significant because it is shorter term.  In this case, look at the Listed Options.

 

 

Remember, this approach is more aggressive.  The regular pattern on the Big Chart of Red to Yellow to two Greens is the safer and more conservative way to go, especially if you are looking for a longer term investment.

 

 

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