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Hey, today I want to share with you some ideas and ways on how to find new hot stocks.
Before We Start - Look at Gold
Let's take a look at GLD for example.
I always start with the monthly. That's my way especially if I'm new to the stock. I'm not very familiar with, but I always start with the monthly. Then I go into the weekly, and after that, I get into the daily.
That's what I do and what I look for. I also look for any ABCD patterns that are involved.
The main questions come down to:
- How long are you looking to be in the trade?
- What are you looking to get out of the trade?
With Gold, you want to watch this ABCD pattern that is almost completed.
If you're familiar with ABCD patterns, you know that once they complete a stock:
- needs to go slightly sideways
- it'll go breakout further after that sideways consolidation pattern
- the pullback scenario
That's what's happening. We are pulling back on slightly lighter volume for now. Today was a more significant break because of that wide price spread bar and below the moving average of the 50-day.
That can accelerate certain things. And if you draw this line across you can see that also comes into the line of resistance and support.
This is a shorter view. If you go into the weekly, you can see ABCD patterns as well.
If you're looking for value by 114, that's always a nice area. The main reason is that you have support there on that level. You can see on the video what is the proper way of evaluation.
Finding New Hot Stocks - Getting Started
Right now we'll talk about finding some new hot stocks. I'll give you some tips and insights, and I'll also do some QA.
I'm also going to rifle through a few that I have currently right now on the screen.
- Why don't we do that first?
We'll do a few quick QA right now. Look at some stocks. Take a look at the market overall. And I'll also take a look at finding new hot stocks. I'll also explain what does it mean and how do you discover these things.
This will give you some insights into starting and getting started.
Disclaimer - Read This Carefully
Keep in mind anything here that we cover and discuss is for educational purposes. It's not any recommendations to buy or sell any stock.
Especially if we mentioned that some of these stocks could be a hot stock, the main reason is that you might be reading this post sometime in the future. Remember this as we go through the lesson.
Penny Stock and Beginners - Is It Good Idea?
This is the question:
"Hi, I am a beginner, do you think starting with penny stock is a good start? Please advice."
That is not a good start. I typically don't recommend that people start with penny stocks. The reason for that is because if you're starting with penny stocks, there are a lot more volatile. They get manipulated. It's a lot more challenging to trade penny stocks.
Think of it like driving a car when you're 16 years old, but driving at 200 mph. It's a different ballgame in that case. You want to be extra careful.
Creating a Watchlist - The Best Tools/Websites
This is the question:
"How to make a watchlist and what tools/websites do I use to create one?"
There is a great video course on this: "How to Scan Stocks & Build a Watchlist."
You can take a look at it on Website - RiseToLearn
How to Close Out A Portfolio?
This is the question:
"How does one close out a portfolio? All at once or pieces at a time?"
It depends on how many positions you have. If you have two positions on two stocks and you're going on vacation, you want to get out fully. Then I would say you could do it pretty much all at once.
But as you start building up an account, positions you'll probably begin to scale out of positions. You are taking profits into strengths.
We'll be going over of this today too as we look into the markets. But usually, it is in pieces or parts at a time. That's the case especially as you start trading larger.
I'm not saying that any of you are trading at hedge fund levels but if you have a hundred thousand shares of stock. Then you might say you'll get out five thousand shares.
The next day you'll get out another ten thousand shares. Three days later another five thousand shares and that's so you may not move that stock specifically in the market place.
Because sometimes when you trade too large, or you have a more extensive account for that stock you might move it around. That's the case if you try to get out all in one day.
The Right Way of Monitoring Volatility
This is the question:
"How to monitor the volatility that affects my option position?"
It's a little bit more difficult question to answer. The reason is that because it comes down to the volatility that you have on hand.
Depending on the volatility that you have to look at the previous volatility for that equity or also the VIX from the overall market.
Then see what the change is. Now, this also is going to affect your position depending on if you have a positive Vega or a negative Vega. But if you still have questions about this reach out to me personally. Maybe I'll shoot you a quick 2-5 minute video and explain it to you based on the position that you have.
The thing to remember: It all comes down to if you have a positive Vega or negative Vega. And then look at how the VIX reacts. That's the simple approach, and that's how you monitor how the volatility affects that position.
Market Orders & Limit Orders
This is the question:
"Sasha I'm familiar with Market Orders, I can sell at any time with them. Does this also apply to Limit Orders? Let's say I set my limit, and I was able to buy at the limit, can I sell at any time I see fit?"
Yes, absolutely. Market Orders and Limit Orders means how you're buying the fish. In this example imagine you go to a restaurant and you're looking to purchase fish. Let's say I want a grouper sandwich, and that grouper sandwich is at market price - it could be $16 one day.
Another day could be $18. You'll pay the market price. Does that mean you can have it anytime? Yeah, pretty much. The reason is that you're paying the market price.
A limit order, on the other hand, is a flat price. It's like $10,99 - you set the rate. The same thing in stocks. If you set the rate that's what you pay, or that's the most that you pay.
With a market order, you might be paying a little higher price than you expect.
Recommendation for ETFs
This is the question:
"I'm currently holding a bunch of ETFs... Do you recommend any specific ones?"
No, I don't. The main reason is that I don't know you. I don't know most people personally. But they ask me questions like this online.
It's more important that you learn to evaluate your risk style, risk tolerance, risk levels and then see what you like. The types of trades you want to put on and then make your own trading decisions.
I can't spoon feed you, and I can't tell you what to do. If you're asking me about a stock and what stock is a good buy or bad buy - it depends. It depends on your whole time and your risk levels. For everybody, it's going to be different in either case that's the long and short of it for the recommendations.
Overall Market - S&P Overview
Here we have the S&P, and you can see we're getting into this 2400 level right there.
We're building a little sideways consolidation level. The Fed released no change in interest rates here. And the market stayed reasonably stable. We did have like a 10-point sell-off here during the day. And then it brought it back up to a negative three.
Overall there is some trouble up here up above. That happens because since that November timeframe we're quite extended. We've had a very nice shot up and then we've got a little pullback in that market.
And if we do get that C to D pattern and if we do understand that explosion we need to have:
- some fantastic things happening politically
- great things happening with earning
- fabulous things happening globally
Of course, this can digest much further. We can digest for half a year or a year. Then go further, and then that's more likely and more possible. But in this case, for it to happen this year, it would be a little bit quick. And if it does, it would be a bit more stretched.
As we get into this 2440 - 2450 level, we start to get stretched. In 2460 it is even more stretched. If we get into 2500 level (which is another 100 points higher) I would say people are euphoric at that stage. Be extra cautious.
Take a Closer Look at Apple
Let's take a look at some of the other popular companies. Here is Apple released some earnings. This one is holding up fairly well since breaking out past this point right here.
It still moving, still holding up well, And then we did earnings. You can see it's still holding up above that level, but if it breaks below this, it may be a buying opportunity.
Keep in mind that usually, the market runs with those leaders. That means if the leaders start selling off the market then later usually sell off. It could be a week later. Or it could be two weeks later. But if you start seeing these leaders (Apple, Facebook, Tesla, Amazon) pulling back be careful.
Amazon, Google, US Steel
Amazon is struggling at around 950. We also have Google doing quite well. We've talked about this one in the charts and the critical charts.
It passed that 900 levels - outstanding. Of course, you do want to be very careful with the gap especially as we get into that 900 level.
However, it's holding that 900 and would be surprised that this continues running further. And then it may come back to test that. You always take profits in strength. That's one of the main things I want to mention.
US Steel had a nice break out around the election time. What's going to happen is steel is going to do great. Steel is going to do fantastic. There's going to be great policies.
Those are the best policies you've ever seen. And what happens is that things go up on euphoria. It pulls back a little bit. Then go a little bit higher on euphoria and then things start to sell off.
It's not realistic where that price is a little bit too far stretched. So we get that major sell-off. And when you look at that stock, we were down about a good 25%-28% in one day.
That took out 5.6 months worth of gain in one day. That's why you always take profits in strength.
Here's what I mean:
As the stock is moving in your favor, you slowly start taking profits in the strength. Look at this moving average. Look at this moving average. Eventually, this comes back to it.
That's what happens. Even if you took profits somewhere around February, you could take profits in the strength.
We went a little higher. Again further stretched - taking profits in the strength. Then we come back, we get under it and then we had some serious trouble. That's what happened as you get overstretched.
Goldman Sachs - Seeing The Bigger Picture
This one is very stretched. As far as at this price level and then continues pulls back a little bit. Now it's struggling once I got under this resistance level.
If you look at it on a long term here, you have resistance at the 250. You can see that it was in 2008 right before the major crash.
Then we're getting back into that 250 level. As you get into the weekly, you can see we broke that level. Now we retried to get above that and then the stock sold off and staying right under that level.
That's what's going on with the market. A lot of things are struggling. They're not pushing higher; they are moving sideways. Be very careful as you continue to look for upside trends and momentums. Be cautious and look for the hot stocks.
Looking at The Hot Stocks
Here're a few questions for you:
- What stocks are you looking for?
- Are you looking for higher dollar stocks?
- Are you looking for lower dollar stocks?
- Are you looking for mid-range price stocks?
One thing is certain. You probably play in a certain range or region of pricing in the stocks. Some people like cheaper stocks other people like mid-range price stocks. Some people love expensive stock as well.
Let's say I created a new scan. I'm using TC 2000 by the way, and you can go to my website (tradersfly.com), and if you want TC 2000, it's under resources. I think there's even a coupon code for $25 off. You get a $25 off discount by going through that coupon code if you're interested in TC 2000.
In either case, you could look at the Russell and search through all the Russell stocks. You could pick S&P, the Nasdaq...
...I mean you have a lot of stocks that you could look through. You have the Dow Jones, the S&P 500, High Cap 1000. If I start looking through this, you could even go through the full Nasdaq.
If you do so, then it's going to search for Nasdaq related companies. I could go to NYSE, and it will search for the New York Stock Exchange. I could go to a Mutual Funds as well.
This is how you can do it:
You can search through this group of stocks. For example - NASDAQ.
I can throw in a condition. Let's say I'm looking for stocks price. I might want to start it out with $8 and go to about $25 or so.
The standard volume is my choice for this example. I choose Ranks. You could say greater than, less than or in between. And there are some other options as well.
I usually like ranks. That way you're getting that top stocks that are trading higher volumes. Or ranks in that higher percentage range.
The next step is we'll do this easy scan, and there you go. You see I have 224 stocks. Now, I can sort it by price. And now I'm starting at those $8 stocks.
What I'll do is I'll start looking at it like this:
- two-day range
- weekly range or
- monthly range
I'll start looking at these stocks, and I'll begin flipping back between the daily range between maybe a three-day or weekly. And then a monthly range. If something catches my eye, I'll flip back in charts.
Use the spacebar here to hit and look at stocks. This one, for example, this is the monthly chart. I would say it's a little extended.
This one would have been great to get as a little consolidation pattern right here. We have that small consolidation pattern.
But I would say it's a little extended. If you look at the weekly, also it's extended. You can look at the daily stock has moved. This was a great penny stock at the $3 range before we didn't catch it up to $3 because we're standing for $8.
We're in a different bracket. In either case, you're starting to figure out which stocks you're looking at. You start getting familiar with it.
That's what I'm doing. I'm looking at the charts, and I'm scanning them. And if one catches my eye, then I may put it on my watch list.
Which Stocks Am I Looking For?
I'm looking for the stock that has clean charts. Stocks with good volume -the ones that have broken out in the past. Because if they had nice breakups in the past, they might have nice breakouts here in the future.
If the chart is smooth and easy to read that's great. GoPro's a nice easy chart to read. I always have a particular stock on the watch list.
You can see a nice digestion period. But what I touch this stock before it gets above that $17-$18 range probably not. The stock has sold off in a big way. Sometimes these things stay down there for 3-5 years.
There is the ABCD pattern as well. The same thing here - major sell-off. The stock is digesting. We'll see if it gets back above it. But again in this case you say next.
What is it doing? Nothing.
You start scanning these stocks. And start looking through and seeing if anything catches your eye. Many of the cheaper stocks, in fact, will be stocks that you'll want to short. Rather than stocks that you're looking for long positions. That is because they are cheap for a reason.
If you're looking for one of those few, then you are looking for cheap stocks. Don't forget to keep it in a watchlist.
It's important to see what is it that catches your eye. This process takes a little bit of time. Sometimes you can have charts rotating on your screen. And other times you can do it manually like this and watch for pullbacks.
AMD was a famous company. There was recently a significant explosion or getting away from that moving average. Now what you can do is wait for a pullback. And you can see already we're getting that. When a significant euphoria starts, that's when you take profits and strength.
That's why we talk about it. If you're waiting for pullbacks, this is what you can do. You can wait for those moments to where it comes back to those levels and create these kinds of patterns.
Some of these things create explosive movements. And then also sell off in a big way. Stocks that are usually cheap they get manipulated.
This one caught my eye here on the weekly. Let's look at the monthly. You can see on the monthly we're getting into that range as well.
I can back this up and say: Is this one I may want to get in or watch right here at this price point?
You can see in 2008-2009 there's some trouble here. But the stock is coming into that level and if it breaks out beyond what can we get more upside? Maybe to the $20, $26 range. It's possible. Perhaps I'll put it on the watchlist. Keep an eye on it, and that's what you do.
Are You Trading More Expensive Stocks?
I already have a couple of these scans set up. I do Russell $11 and higher. And then also 85% volume and beyond as well.
Let's look at some of the volumes that's been moving on and happening today. We can see which stocks have the most volume, which ones are surging in volume. You can also see the others that may be selling off on volume.
Start playing with this. You're still looking for setups. You're looking for the right opportunities.
Am I looking to chase stock? Well, no.
If they're gone, that's it - they're gone.
Instead what I'm looking for then is:
- Where's the next pullback?
- Where's the following setup?
- Where's the next position?
Here is the same thing with Twilio. If you look at the stock, that's why you take some profits.
If you got in it over here at 26 and then you got up into 35 should take in some profits. Otherwise, you see that significant sell-off.
You can see First Solar as well.
Right there you start looking at:
- is it turning around?
- is it getting into the moving average?
- is the volume building up?
The selling pressure is going down, and then the other volume is picking up. Then you start looking at it further.
- Where am I on the monthly chart?
Start looking at it.
Is it a chart that's breaking out on support and resistance or could break out on support resistance sometime in the future?
That's what you do. You start looking at things, evaluating them and start seeing if any stocks catch your eye. Sometimes you buy price. I like trading the higher dollar stocks.
I already know most of these higher dollar ones like:
- O'Reilly Automotive Inc
- Goldman Sachs Group
Humana is breaking out further simply because insurance premiums rise. They make more money. So there was an earlier break out there. The next breakout is here. That's why I watch these old breakouts.
I get familiar with the group of stocks. When you get familiar with the group of stocks, then you watch those trend lines periodically. You're looping and looking at the same thing time and time again. And over time as they break those lines of support lines of resistance then you get in them. Or get out of them and short them.
Here's The Thing With FedEx
I've been watching it right here. You can see a couple of different trend lines on it. There's my consolidation pattern. I'll go back, and I'll scan it. Here's some more resistance.
You can see we're looking at are we hold this level. We also broke that level a little bit. But are we going to hold down consolidate sideways? That's what we're doing right now - is moving sideways. And we're managing to hold that range.
I'm watching where are we going to break:
- Are we going to break up?
- Are we going to break down?
- Where is the volume pushing it?
And that's what you do.
Dominos Pizza Example - What's The Case?
You can see this one's created a stair-step pattern. Stock consolidates and powers higher. That happens multiple times.
We're consolidating, waiting for that next break. If you got in it earlier and you want to add to it that would be the next point. Or you could do it on a pullback sometime when we're bouncing.
Either way, it's okay.
It's a style, a personal preference depending on how the markets are moving and depending on your position. You can do it on a pullback. You could do it on the breakout. It's up to you, but you can see it's moving in these kinds of patterns.
Question About HTA - Easy to Read or Not?
This is the question:
"Was HTA An Easy Read?"
It comes down to experience. Some stocks for some people are easier to read than others. Maybe they're more familiar with patterns. I would say it's a clean chart.
The stock isn't erratic. It has some good behavior especially if you look at monthly charts. It cleans things up for many stocks. If they don't then yes, it's a messy chart.
In this case, you can see we're following this pattern. You have two points right there to make that support. Then you have the third right there that's being created. And if we get in here the fourth and holds theirs, that's fine.
If you look at some versions on the weekly, you can also look at ABCD patterns. You could also do it on a shorter-term.
You're starting to watch what's happening recently. Now it comes down to what's lately happening. The stock is easy to read but here's the issue with this stock. You have some significant volume on the selling action. The second thing is that we're also creating lower highs.
That's usually a problem for stocks if this stock was moving in the way that it is creating higher highs that would be a different story.
But in our case, we create a lower high. It's changing direction. You can see in the past we're creating higher highs but now all of a sudden at the change, of course, we're creating a shorter term lower highs.
The same thing here; shorter term - lower high.
- Is it easy to read? Yes.
- Is it tradable? Yes.
- Is it one for you? It depends on you.
Is Trading With Small Account Possible?
This is the question:
"How can a little guy with small accounts $5,000 see any real gains trading stocks like these?"
Very tough. The market is set up for people with money.
The thing is that the market moves well when the little guy gets hurt.
A quick example - insurance companies like Humana
When insurance premiums rise, and everybody pays more for insurance usually, they grow because wealthy people don't have to pay more on their taxes.
This is what's happening now. Being a little guy, you're forced to pay more for insurance premiums now. The main reason is the policy effects.
When this happens, the insurance companies make more money. They're charging more money, and they're allowed to cost more money. The marketplace is higher priced for insurance premiums.
Everybody's getting billed more on their insurance. But this increases their earnings. When this increases their revenues, the stock price goes up.
The weird and straightforward but also the nasty thing behind the stock market is when the little guy gets hurt the market goes up. As ironic as that is because remember the market is all about big corporations.
With Trump being elected you get big corporations to make more money. The little guy has to pay more taxes.
That's the same thing when you're looking at having a small account. To be able to make it (in this business) it takes a lot of work to make money in the market. That's the case, especially with a smaller account.
Here's simple math:
If you're making 1% on $5,000 the absolute dollar figure of that 1% is minimal compared to buying bread, food at the grocery store.
It still cost the same whether you have $5,000,000 in your bank account or $500 in your bank account. It's challenging.
Many people say they turn to low dollar stocks and high volatility. I can understand that. However, they put on too much risk for what they're capable of.
You have to judge that on your own. I don't advise that they trade low dollar stocks. The reason is that you look at the percentages. Yes, you can make a little more may be on the weak dollar stocks.
But is it worth the additional risk for that?
You have to decide that.
Penny Stocks & Patterns
This is the question:
"Can you play these patterns that you go through work on penny stocks?"
Yes, you can play these on penny stocks. The concept is similar.
The problem with penny stocks is:
- they're manipulated
- they're usually better shorted than going long
You'll usually make more money going along in terms of the overall or general market. That's the case because stocks can go up much further than they can go down.
But with penny stocks, they're cheap for a reason. If you look at buying something from a country that produces horrible goods eventually that product will fall apart.
The same thing happens with penny stocks. They are usually on there for a little while, and then after a while, they get manipulated.
That's the case especially if there's low liquidity. And then what you might even see is the splits happening - like a stock split.
Eventually, they either get sold off, or they're not even listed anymore. Then a lot of people get stuck in positions and holding a worthless piece of stock paper or digital goods.
Be very careful with that. Understand what you're doing.
Can you trade the pattern?
Yes, you can trade the same patterns. Usually, they're in and out much quicker with penny stocks. I would say it's a quicker trade. You have to be more active, and you're taking profits and the strength much faster.
That's the approach I would say you should take or look at when you're trading penny stocks.
Johnson & Johnson - Quick Scan
You can see you still keep stock on the watchlist even if they break out - past a certain point.
Here is our resistance. You can see we broke out stock continues to do well. Eventually that stock came back and we bounced at that level. That's why I keep these stocks still on my watchlist. Then it gives you that opportunity.
Even if I missed it right there at that perfect spot, you could get in it a couple of days later. You had a few weeks to get into that stock before it exploded. And you can see that volume was building throughout those weeks.
If we go to two days, you can see the volume building as we start increasing. And even if you wanted to play it safe right there, there was your breakout point.
You might don't get into it right at that bounce. But you had all this time to get into it because this price level was holding.
If that's holding (it's above it) that's a good support. You can go to daily. There you can notice that it is even more specific.
There is a resistance level. The stock bounced could have bought it on that value. Value buying opportunity moving sideways, couldn't get over it. It comes back but didn't even have enough strength on the sellers to go into the bottom.
- What does this mean?
Well, we're creating higher lows, and it's holding.
Now we got into this, and we broke out. Even if you bought on the dip or the value right here where we're holding higher lows you went ahead. And you can see the volume is starting to build a bit.
You could have got it right there or even earlier. And you could have yet arrived on the break, and you still would have made right amount on that run.
The thing is even if you got in late at 118-119 and you got in up to about $8 it's ok.
You might take profits in the strength. Let's call it $6 or $7 for conservative reasons. Many people should be delighted to get $6 on trade.
Especially on something like Johnson & Johnson that was a little bit slow.
The Main Suggestion for Small Account
This is the question:
"What would your main suggestion be to a college student looking to trade such as a small account?"
I would say if you're looking to trade personally go with statistics. We could probably look at picking up a few books on statistics.
That is all about:
- chances of success
- risk management
- money management
I don't think there are too many college degrees out there that focus on trading. And most of the economics classes are not set up for trading.
They're set up to look at the economy on a macro view. Even though they may teach microeconomics, they're not set up for trading specifically.
I would say you're wasting your time and energy in school as far as traditional school goes.
Instead, you're better off to take something like this and try to invest in yourself:
- a class that cost $2000-$3000
- four hours of coaching
- 20 books
- three video courses
At least that way you get the material that's more specific and direct for trading.
Teachers in traditional school teach you about economics or personal finance. The better approach is to go directly to the people who are trading. And get that material.
Websites for Screen Stocks That's Free
This is the question:
What free websites can I use to screen stocks? Any free basic chart platforms...
I think freestock.com is the free version of the TC 2000. There's a handful of them out there. There is tradingview.com as well.
They're constantly changing. There's more and more that pop up all the time. It doesn't matter. Get one that you are comfortable with. Find one that works for you. I use TC 2000 because it's fast for me. You can flip through charts so quickly. What I like the most is that it's responsive.
You might choose something else. That's a personal preference.
Thanks for joining me today and I truly appreciate your questions.
I hope that these answers opened your eyes and helped you to clear your path when it comes to finding new hot stocks.