Making a Stock Watch List

I am taking the time to help others learn the basics in evaluating stocks for investment using both fundamental and technical analysis. Both tools are equally important in making serious decisions with your hard earned CASH!

If you wish to invest in stocks, treat it like a business, NOT A HOBBY. (ex: a retail outfit can't make money if it doesn't have goods to sell; the same goes for investors, without cash, you can't invest). You need rules and you need to follow these rules or money WILL be LOST. Once proven rules have been established, they cannot be broke or you will lose money. Everyone loses money in investing but we must learn to cut losses quick and allow gains to develop. Small losses are acceptable because they teach us lessons that allow us to win big!

Start your search by looking for stocks with superior fundamentals. After fundamentals are established, look to see if this particular stock is in good company, by this I mean a strong industry group - similar stocks, historically move in the same direction (this is fact not opinion). This is not to say every stock in the industry group will move higher or lower because a sister stock is going in that direction (this is a generalization rule). After the industry group has been confirmed strong, determine if overall market is in a specific trend (up, down or sideways).

If you are long a stock, the market must be in a confirmed up-trend, if you are short a stock, confirm a down trend. Note that 75% of all stocks will follow in the direction of the overall market. Don't fight the trend, the market is always RIGHT.

Let the market and the stock dictate how long you will be in a position. Don't worry about time frames; price and volume will tell you when to exit the position as long as you follow rules.

After fundamental have been established, you must study the technical side of each individual stock, the specific industry group and the general market trends. Record if the stock is forming a proper base, if it's about to break out of a base, if it's extended or if it's pulling back to a key support line.

At this point, add any qualifying stock to your watch list or buy the stock according to the technical entry signals (remember the fundamentals have been established earlier).

Key numbers to use in fundamentals:
Earnings (current, past: quarterly, yearly and future estimates)
Sales (current, past: quarterly, yearly and future estimates)
Return on Equity (ROE)
Price/Earnings Growth (PEG)
Price/Earnings Ratio (rise over time of base)
Debt/Equity
Assets, Liabilities
Accumulation/Distribution ratio
Up/Down Volume over past several months
Number of Institutional Holders (is this increasing or decreasing recently)

Key things to use for technical analysis:
Look at the 1 year daily chart
The 1 year weekly chart
Check volume action when bases are formed
Look at Point & Figure charts for support and resistance lines
Look for new 52-week highs

About the Author

Chris Perruna

http://www.marketstockwatch.com

Chris is the founder and CEO of MarketStockWatch.com, an internet community that teaches you how to invest your money with solid rules. We don't stop at just showing you our daily and weekly screens, we teach you how to make you own screens through education. Through our philosophy, you will be able to create your own methods and styles to become successful.

---

Historical Briefing: Stocks, Finance and Money

The World Bank claims that some two billion of the... Read More

Dollar Cost Averaging

Dollar cost averaging is one of the most popular ideas... Read More

Laws and Efficiencies and Theories of Diminishing Returns

The basis of diminishing return discussions surround such simple notions;... Read More

Fools Gold

The stock market has been in an up trend for... Read More

The Next Bull Market

We are already in it, but you can't see it.... Read More

Attitude Is [Almost] Everything

I often play a little game with myself when I... Read More

A Funny Thing Happened on the Way to the Stock Market

On the 40 year journey through the turmoil of a... Read More

Direction

It is difficult to make money in a bull market,... Read More

The Big Bad Bear

The big bad bear is stirring again. So far he... Read More

Prospering with Mutual Funds: How Anyone can ?Afford? an Investment Advisor

Recently I was invited to appear on a live CNNfn... Read More

Where Is The Beef?

Where is the beef? Or maybe it should be where... Read More

Different Ways of Buying Stocks

Let's say you are interested in this one company. You... Read More

What is a Mutual Fund?

Ever wondered what is a mutual fund? A mutual fund... Read More

So, What is This Stock Market Thing Anyway?

We've all heard of the stock market and probably have... Read More

The Information Age

It is wonderful to be alive in the information age.... Read More

Where Is The Rabbit?

We need a rabbit!This was a pretty horrible week for... Read More

Buy and Hold Investment Philosophy

Wall Street has been preaching the doctrine of Buy and... Read More

What Our Investment Advisor Wont Say Off The Bat

Most advisors will tell you they can beat the market.... Read More

Political Investing

We have two candidates for president that have really different... Read More

Roller Coaster

I love roller coasters. The steeper the better. High and... Read More

The 401(K): How The Insider Has Stolen Your Retirement!

Mutual funds were moderately successful in creating a presence in... Read More

Never Fall In Love!

Recently I watched my favorite football team lose a vital... Read More

I Love To Lose Money

Well, not really. What I mean is I don't mind... Read More

Successful Trading ? Establish Your Risk Level

Before you embark upon a journey of trading stocks or... Read More

Low Expense Ratio

One of the big advertising kicks today from mutual funds... Read More

Enronization

Even if you don't own any of their stock or... Read More

Pamplona, the Wild Investment Bulls

You remember (they show it on TV every year) the... Read More

Its Better

Question: How does it get better when it gets worse?Last... Read More

Big Buildings Can Mean Big Economic Disaster

AS BUILDERS BEGIN WORK ON THE FREEDOM TOWER in New... Read More

Market Experience of a Naïve Stock Operator

Sometime in the third quarter of 1997, someone told me... Read More

The Skinny on Mutual Fund Investing

Mutual fund investing is a lot like Thai cooking. Everyone... Read More

Investing in Stocks and The Game of Monopoly

To begin, you might look at playing the stock market... Read More

Forecasting the Stock Market

Every day I see in the financial section of newspapers... Read More