Sunday, 13 September 2009

Technical analysis methods

Technical Analysis Indicators and Patterns

When looking at a stock trading chart, the new stock trader can be forgiven for being confused. The technical stock trader on the other hand uses various technical analysis indicators and patterns to understand trading charts. It takes time for a new trader to understand these indicators but over time, it becomes simpler.

There are hundreds of technical indicators and new ones being created every day. Some of these are free and others are paid for. Since it is impossible for the technical analyst to know all indicators that have been created, one is advised to pick a few and use them for technical analysis. Some of the popular indicators that are used are described below.

1. Moving Averages

A moving average is a technical indicator that shows the average value of a security’s price over a period of time. It is normally drawn as a line on a chart and as the price of the company goes up or down, the average price will change.

There are seven popular moving averages: simple, exponential, time series, triangular, variable, volume adjusted and weighted moving averages. The difference between these moving averages is the weight assigned to the most recent data.

2. Relative Strength Index

One of the most popular indicators for all technical traders is the relative strength index or the RSI. It is an oscillator that measures the internal strength of a particular company. It compares the number of days a stock has finished up with the number of days it finishes down.

It ranges between 0 and 100 and over a certain time span usually 14 days. Interpreting it depends on the trader. The most common interpretation is that if the value of the RSI is above 70, then the stock is overbought and is likely to fall in price and if the value is below 30, it is oversold and the price is likely to rise.

3. Bollinger Bands

Bollinger bands are three lines that are plotted on the price that normally measure market volatility. The idea is that prices will tend to stay between the three lines. If the market is very volatile, Bollinger bands will widen and during periods of price consolidation, Bollinger bands will tend to converge.

The best traders use Bollinger bands along with other indicators to get good trading opportunities.

5. Volume

The volume indicator is very important in technical analysis. Volume is simply the number of shares or contracts that are traded at a specific period. The period can be an hour, a day or any other period. Volume provides a clue as to the intensity of a price movement.

Low volume can indicate that traders are indecisive and there is no set trend. High volume is the opposite and during a good trend, the volume traded will be gradually increasing as more traders concur that the price should go higher.

A good technical analyst will learn the best indicators that he can trade with in order to make a profit. Once one has identified the best indicators, he can use these to identify the stocks that he can trade at a particular time.

Fundamental analysis tools or methods

Fundamental Analysis Tools

One of the biggest challenges that any investor has is trying to decide on a company to buy. Though we might wish to buy as many stocks as we want, we are limited by the amount of money we have. As such, we have to find fundamental analysis tools that will make the choice easier and more informed.

Having gone through financial statements like balance sheets, income statements and profit and loss statements and are satisfied with a number of companies, we need to come up with a way to compare them. For this, we use financial ratios.

Financial ratios are used to compare the risk and return of different firms to make intelligent investment decisions. Such decisions range from evaluating changes in performance over time to a comparison among all firms within a single industry at a point in time. Financial ratios are grouped into four categories:

1. Activity Analysis Ratios

Activity analysis ratios evaluate the revenue and output generated by the firm’s assets. They are used to describe the relationship between the firm’s sales and the assets needed to sustain the sales. The higher the ratio the more efficient the firm’s operations as relatively fewer assets are required to maintain a given level of sales.

These ratios include Inventory turnover, receivables turnover, average number of days inventory in stock, working capital turnover and payables turnover.

2. Liquidity Analysis Ratios

Liquidity analysis ratios are used to measure the adequacy of a firm’s cash resources to meet its near term cash obligations. You do not wish to invest in a firm that is not able to pay its short-term debt as it may become insolvent very quickly.

Ratios commonly used in liquidity analysis include the quick ratio, cash ratio, and the current ratio.

3. Long-Term Debt Ratios

You also need to invest in a company, which can afford its long-term debt. This is a great indicator of the viability of a company in the long term. A company with a rate of return higher on assets financed by long-term debt, which has a lower cost, will likely continue giving excess returns.

Ratios used for this analysis include debt to equity ratio, debt to total capital ratio and the capital expenditure ratio.

4. Profitability Ratios

Your main concern is to invest in a company that is profitable and ahs the ability to generate, sustain and grow the profits. The more profitable a firm is, the higher the stock price and more likely it will sustain bad periods.

Such ratios include return on income, return on assets, gross margin, and return on total capital.

5. Valuation Ratios

Investors use valuation ratios more than any other ratios to make investment decisions. These ratios are used as the basic fundamental analysis tools and include the price to book ratio, dividend yield, price to earnings ratio, price to sales ratio and the earnings per share ratio.

The proper use of ratios by any investor will require serious study and interpretation. However, any stock investor worth his salt should take the time to learn them and in time will make better stock investment decisions.

basics in stock market

1. Stock Trading for the Beginner

Stock trading seems like an exotic way to save money or earn a living. However, stock trading is a simple way to invest in the ownership of companies that an investor considers to be profitable. We discuss what stocks are and how the investor or stock trader can earn a profit by trading stocks in the UK.

2. What is the Stock Market?

If you are going to invest in the stock market in the UK, it means that you will need to buy and sell stocks in companies that you like. Like any other market, the stock market is a central place where stocks and shares in companies are exchanged on a daily basis. We discuss what the history of the stock market and how it works for the investor.

3. Types of Stock Traders

The stock market is open to any type of personality. There are different types of stock traders and the common purpose for all of them is to make a profit. We discuss the different types of stock traders in the UK and how they make a profit.

4. Stock Prices and Quotes- How to use them

When you trade in the UK stock market, you have to be able to know their prices. The stock market over time has come up with its own method of showing prices and price changes. A good stock trader should understand how to interpret these stock price quotes.

5. Stock Index - What are they?

Investors need to have a way to figure out how stocks are doing in comparison with competitors or other companies in their sectors. Stock indexes were created to enable investors easily compare the performance of companies in a sector or compare one sector to another.

read more on Stock Index - What are they?

6. Stock Brokers

If you plan to buy and sell stocks in the London Stock Exchange, you will need to use a broker. An investor has a choice in the types of stock broker he needs. We discuss the types of stock brokers in the UK and how to choose them.

7. Stocks and Mutual Funds

The more stocks an individual trader trades in the higher the profit he is likely to make. However, the possibility of more profits in the UK stock market also includes the added risk the individual stock trader will take. We discuss stock trading in relation to Mutual funds and why an investor should consider trading in Mutual funds.

8. Difference Between Stocks and Bonds

Stock trading is not the only opportunity available to individual stock traders. We discuss the difference between stocks and bonds in the UK and when an individual should consider trading in bonds as well as stocks.

9. What are Penny Stocks ?

Penny stocks or Penny shares are becoming more popular with individual stock traders. There are risks and rewards in trading in penny shares in the UK. Some of these risks can be avoided even if the rewards in trading in penny stocks are very high.

10. What are Stock Options?

Most small stock investors think of stock options in terms of their employment package. However, stock options in the UK are exotic methods of leveraging investor money in order to make a profit. Both the seller and buyer of stocks can make a profit when trading stock options.

11. Fundamental Analysis

Stock traders need to know which stocks or shares are good for them to invest in. Fundamental analysis is one of the ways which are used by stock traders in the UK to decide on the stocks that are likely to be profitable.

12. Fundamental Analysis Tools

What are the fundamental analysis tools that stock traders in the UK use? We discuss how fundamental analysis tools like balance sheets, income statements and others are used and interpreted in order to pick the best stock choices.

13. Technical Analysis

Other than fundamental analysis, some stock traders use technical analysis to make decisions on the best stocks to trade. We discuss the thinking behind technical analysis and how it is used in the UK stock market.

14. Technical Analysis Indicators and Patterns

Technical Analysis seems difficult to the new stock investor in the UK. At stocktrader.org.uk we try to make the learning of how to interpret and use various technical analysis tools and patterns to make a profit in the stock market.

15. Bear and Bull Market

What is the bear and bull market ? It is possible for the stock trader in the UK to profit from both a bear and bull market as long as they have identified the type of market they are in.

16. Equities Trading and the Internet

What is the relationship between equities trading and the internet? A lot of new stock investors in the UK are getting to know about stock trading opportunities as they suft the web. It has not always been the case and we discuss how the internet has help changed the trading equities and stocks.

17. How to Research Stocks

Deciding to invest in stocks and shares in our investment portfolio is the easy part. The biggest challenge is how to choose and find the best stocks to invest in. There are various methods including visiting your full service stock broker and even monthly or weekly newsletters. We discuss some of the easier ways to get information about a stock.

18. Stock Splits

What is a stock split and how does it affect your stock investment. UK companies have a number of tools to attract as well as retain shareholders in their companies. the more shareholders a company can attract, the more likely it will fetch a higher price. We see one of the most common tools used by companies called stock splits.

19. Stock Trading Signals

After trying to pick good stocks and failing, some stock investors in the UK tend to look for an alternative especially if they are not confident of their knowledge about the stock market. Stock trading signals companies were created for this type of investor and we discuss their pros and cons.

20. Trading Strategies

It is a rare investor who flips a coin to choose a good stock. Most stock investors in the UK use various stock trading strategies to find the best stocks to invest in. Discipline on the part of the stock trader is essential for success in using some of the strategies we discuss.

Stocks to Buy 9/14/09 September 14, 2009

Friday, during regular trading hours, there were many stocks that continued to break out to the upside. Below is a list of stocks that are worth watching for September 14 , 2009 . Also, check out the Biggest Stock Gainers of the Day. You can also find previous stocks to buy reports - Right Here

Discuss Stocks - www.stockstobuy.org

Stocks to Watch - 9/14/09 - Stock Market Ideas

American Intl Group, Inc. (AIG) - Another day, another downgrade for AIG. Wells Fargo downgraded AIG on Friday with an underperform rating. The stock traded down in the $36's but then seemed to stabilize in the $37's. This is three straight downgrades that barely moved the stock. This is very bullish, especially when you have analysts saying $10-$15 price targets and the stock doesn't tank. At this point, i'd be keeping a tight stop at $34.99 because a break below $35 could finally cause AIG to plunge. On the upside, as soon as the stock breaks above $40 again, I will buy. I would also add more if AIG can break above $40.75 which was Thursday's high.

Citigroup Inc (C:NYSE) - Citigroup traded up near the 10 day moving average Friday but failed and closed very weak. I would be cautious here until the stock actually breaks up through $4.80 again. Something just doesn't seem right with the way this stock has been acting lately. Check out my recent Citigroup Technical Analysis.

Chesapeake Energy Corporation (CHK) - We finally got the close over $25 and you saw CHK run up in the $27's quickly. I now want to be buying any pullbacks at or below $25.

Discovery Laboratories Inc. (DSCO) - Discovery Labs to meet FDA to review lung drug options 9/29/09. DSCO broke the July 2009 high of $0.75 on Friday and ran up to the 200 day moving average at $0.99. This will be a strong resistance level and I plan to buy on a break above $1.00 for a trade. Check out my DSCO Technical Analysis

Las Vegas Sands Corp. (LVS) - LVS caught an upgrade Friday with a $23 price target. I don't see any major resistance until $20 but it will be a slow grind higher as most of the easy money has been made. If I see a pullback to $15, I will be a buyer!

Direxion Daily Financial Bear 3X Shares (FAZ)
Daily Finan. Bull 3X Shs(ETF)(FAS) - FAS came close to $80 on Friday but failed four times in the mid $78's. If FAS can break up above $79, i'd be a buyer again but at this time i'm on the sidelines. I will be buying FAZ if FAS breaks down through Friday's low of $76.31. The major support level after $76.31 for FAS would be all the way down around $72.75.

Cell Therapeutics, Inc. (CTIC) - Waiting for CTIC to break above $1.51 to buy and will add more on a break above $1.56. I will not buy unless these previous daily highs are broken.

YRC Worldwide Inc. (YRCW) - YRCW also broke out this week after closing above the 200 day moving average. No resistance until at least $4.

Hemispherx Biopharma, Inc. (HEB) - Waiting for HEB to break above $2.15 to jump back in....this was the high from Sept 8th.

SIRIUS XM Radio Inc. (SIRI) - Waiting for a break above $0.70 to buy SIRI

Freddie Mac (FRE) - Resistance = $1.97, $2.07

Fannie Mae (FNM) - Resistance = $1.73, $1.86

Bank of America Corp ( BAC ) - Bank of America Corporation closed back below the 10 day moving average Friday and looked very week. I am looking to buy shares on a pullback to the 50 day moving average located at $15.16.

Other Stocks to Watch - September 14, 2009

Tri-Valley Corp. (TIV)
Comarco, Inc. (CMRO)
NeuroMetrix Inc. (NURO)
Speedus Corp. (SPDE)
TravelCenters of America LLC (TA)
The McClatchy Company (MNI)
Presstek Inc. (PRST)
EDAP TMS SA (EDAP)
American Axle & Manufacturing Holdings Inc. (AXL)
Recon Technology, Ltd. (RCON)
Warren Resources Inc. (WRES)
Sealy Corp. (ZZ)
Delta Petroleum Corp. (DPTR)
Exterran Holdings, Inc. (EXH)
Select Comfort Corporation (SCSS)
Commercial Vehicle Group Inc. (CVGI)
Concur Technologies, Inc. (CNQR)
Avanir Pharmaceuticals (AVNR)
UltraShort DJ-AIG Crude Oil ProShares (SCO)
MGIC Investment Corp. (MTG)
EnCana Corp. (ECA)

Penny Stocks to Watch - September 14, 2009

Samson Oil & Gas Limited (SSN)
Ambassadors International Inc. (AMIE)
South Texas Oil Company (STXX)
Altair Nanotechnologies, Inc. (ALTI)
Elixir Gaming Technologies, Inc. (EGT)
FiberTower Corporation (FTWR)
PEACE ARCH ENT GRP B (PAE)
Global Energy Holdings Group, Inc. (GNH)
Pinnacle Gas Resources, Inc. (PINN)
Dejour Enterprises, Ltd. (DEJ)
CytRx Corporation (CYTR)
Pharmacyclics Inc. (PCYC)
Anesiva, Inc. (ANSV)
Majesco Entertainment Co. (COOL)
Gray Television Inc. (GTN)
Radio One Inc. (ROIAK)
Converted Organics Inc (COIN)
DayStar Technologies Inc. (DSTI)
Aeterna Zentaris Inc. (AEZS)
Ivanhoe Energy, Inc. (IVAN)
Vonage Holdings Corporation (VG)
UCBH Holdings Inc. (UCBH)
La Jolla Pharmaceutical Co. (LJPC)

OTC Pink Sheets Stocks to Watch - 9/14/09

Discuss these stocks at http://stockstobuy.org

Black Dragon Resource Companies, Inc. (BDGR.PK)
ROCKELLE CORP (RKLC.PK)
Gulf Coast Oil & Gas Inc (GCOG.PK)
Cardiac Network, Inc. (CNWI.PK)
GENOVA BIOTHERAP INC (GVBP.OB)
Imaging3 Inc. (IMGG.OB)
Stem Cell Therapy International Corporation (SCII.OB)
BELL BUCKLE HOLDINGS (BLLB.PK)
Trey Resources Inc. (TYRIA.OB)
Manhattan Scientifics, Inc. (MHTX.OB)
Global General Technologies Inc. (GLGT.PK)
Caribbean Casino & Gaming Corp. (CGAQ.PK)
Cross Atlantic Commodities Inc. (CXAC.PK)
LECERE CORPORATION (LCRE.PK)
Advanced Life Sciences Holdings, Inc. (ADLS.OB)
BioElectronics Corporation (BIEL.PK)
GOOD LIFE CHINA CORP (GLCC.PK)
Optigenex Inc. (OPGX.PK)
EP Global Communications Inc. (EPGL.PK)
Jedi Mind, Inc. (JEDM.PK)
Verify Smart Corp. (VSMR.OB)
General Growth Properties Inc. (GGWPQ.PK)
Spansion Inc. (SPSNQ.PK)
InternetArray, Inc. (INAR.PK)
IDO Security Inc. (IDOI.OB)
BioNeutral Group, Inc. (BONU.OB)

Friday, 11 September 2009

How to select good stocks

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