MarketSmith Scan – Top Five Stocks Up on Volume
Do you have an edge?
You should ask yourself this question every time you consider a new position. Whether you are entering a fund in your retirement account, or an individual stock for your portfolio, you must have an edge. Stacking the probabilities in our favor is what we strive to do.
MarketSmith Provides an Edge
Scan for prospective candidates and weigh the fundamental attributes. We ask a few questions, just to make sure we’re on the right track.
- Is our candidate making money?
- Is the company growing sales and earnings?
- Is it ready to break out?
- Is money flow bullish?
- Is it outperforming the SPX and its competition?
Since above-average earnings and sales separate winners from losers, knowing this bit of information makes our job easier. We want to buy stocks that clearly beat the competition. We also want to confirm we have a strategy or edge. We pointed out KEM yesterday.
KEM Breakout Gives Us An Edge
The edge here is simple. The stock is breaking out of consolidation. This gives us a good risk-reward as support is just below. A stop saves us if we are wrong and KEM pulls back.
Check the column “EPS Growth 5 year = 121%”, a clear edge if you ask me. Analysts estimates are being ratcheted higher for 2018 (+9%); reference the left panel.
After the MarketSmith test, we also check money flow, the panel just under price action. We want this to be positive and growing relative to recent weeks. KEM is bullish in this respect.
All things considered, it should be no surprise that we started scaling in yesterday. Rather than a full position, we start with 100 shares. This way if we’re wrong, we are wrong on a smaller position We’d like 500 shares eventually.
Additionally, we plan to sell covered calls against our position when IV Rank gets above 50%; more on that in a separate article.
MarketSmith Top 5
There are numerous candidates on the MarketSmith “Stocks Up on Volume” Scan this morning. Below are the Top 5.
Note number 4 on the list is FIVE below. We’ve discussed this recently. It’s up huge in the pre-market (96.00) session this morning. It triggered a MarketSmith alert on Tuesday at (78.38). All told, FIVE is up more than 30% this week.
In summary, have a list of questions like those presented above and use them every time you consider a new position. WIth a process in place, you’ll become more consistent. This workflow will define your edge.
As an Investors Business Daily subscriber, we already have an edge. Over the past 30 days, we’ve been analyzing their MarketSmith software and making money at the same time. There are so many ways to identify prospective candidates, that we are still finding new ways to use its interface.
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