3/5/2013

Catching a falling knife - Keep buying an oversold stock.

CAN SLIM System - A system for selecting stocks created by Investor's Business Daily founder William J. O'Neil. Each letter in the acronym stands for a key factor to look for in a company. 
Also referred to as "C-A-N-S-L-I-M" or "CANSLIM".

Investopedia explains 'CAN SLIM'

The seven-part criteria is as follows:

C - Current quarterly earnings per share has increased sharply from the same quarters' earnings reported in the prior year. (Beware of items in financial statements that can cause earnings distortions.)

A - Annual earnings increases over the last five years.

N - New products, management, and other new events. In addition, the company's stock has reached new highs.

S - Small supply and large demand for a stock creates excess demand, and an environment in which stock prices can soar. Companies acquiring their own stock reduces market supply and can indicate their expectation of future profitability. Look for low debt-equity ratios.

L - Choose leaders over laggard stocks within the same industry. Use the relative strength index as a guide.

I - Pick stocks who have institutional sponsorship by a few institutions with recent above average performance. Be cautious of stocks that are over owned by institutions.

M - Determining market direction by reviewing market averages daily.

Not Buy Low Sell High But - *Buy High and Buy Higher*

When Stock is going up, no one sells. Therefore a higher demand/higher stock price.

Stock making new price highs tend to go higher.

Stock making new price lows tend to go lower.

IBD - Investment Business Daily

Did my stock close below 50/200 day moving avg?

     50 day avg volume for buying.

Buy and Hold? When you choose to buy and hold, you miss out on today's winners. when my stock is falling in price is my stock gaping low?

Gaping - huge spread between closing and opening.

Is stock selling in high volume (50 day moving average volume)

Has the market trend change? Market trend directs 75% of all the stocks.