Sep 22, 2017
Yes! I love moving averages because they can tell us a lot about historical trading and give us a good idea of where the stock is (or at least should be) headed in both the near and long term. The 50-day moving average is one of the most widely-used indicators in the world of technical analysis, and yet many investors aren’t familiar with how it works or its importance in trading.
A simple moving average – the type that I use in my analysis – is the average closing price over a certain number of previous trading days. So the 50-day adds up a stock’s closing prices over the last 50 days and divides by 50. The end result is the level of the moving average on any given day. There are a few ways I use this data in my analysis.Continue Reading…
Sep 12, 2017
That’s a really good question, and typically it comes down to timing. In NexGen Profit Mulitplier, we will generally hold an option for anywhere from a few days to a few weeks and stocks for about one to three months. That’s a big difference in holding periods, so it puts importance on how imminent a move ahead is.
If the payoff looks like it will take some time to play out, we will more likely target a trade on the underlying stock. However, if a stock is likely to take a near-term pop, we can maximize that upside potential through a call option. For example, a 2% bounce wouldn’t be worth trading in a conventional stock trade. But that 2% can quickly translate into a double-digit winner through the profit-multiplying power of an option.Continue Reading…
Sep 07, 2017
Thanks for your kind words! Your question is a good one. Critical support levels are one tool I use to judge the health of a stock’s chart, but they are not the final word on a trade. As you’ve seen, there are situations where other factors that move individual stocks and the overall market need to be taken into consideration.
Once the support level is broken, I need to see a strong likelihood that it will bounce for us to stay with it. I reexamine all of the factors that led to the support break to determine if we need to make any adjustments. This is when I get in touch with my thoughts so you are kept updated on my latest outlook.Continue Reading…
Sep 01, 2017
That’s a great question, and the key is implementing a risk management strategy. Many think that risk management is all about managing downside, and that’s true. But it’s not all stop-losses and support levels. It actually starts with the timing of our entry.
When it comes to stock analysis, there are two sides to the coin: fundamental and technical. Fundamental analysis looks at the company itself and takes macroeconomic factors into consideration.Continue Reading…
Aug 25, 2017
That’s a great question, and my stock selection strategy is something we’ll talk about often. One of the first things I look at when analyzing potential investment opportunities (whether for the long or short term) is the company’s fundamentals. Within those fundamentals, I analyze growth of earnings and revenue as well as the PEG (price-to-earnings-to-growth) ratio, which gives us valuation. So it does come into play in my research.
I will say that the fundamentals are not as important when you’re looking for a short-term stock to trade. However, we will still look at them because they help us stack as many factors in our favor as possible. Just because a chart is pointing higher doesn’t mean that the stock is strong on its own. The company could be falling apart at the seams, and that’s exactly what the fundamentals help to tell us.Continue Reading…
Aug 18, 2017
That’s a good question, and my answer is: It depends. I’m not trying to be funny, so let me explain.
It all starts with what I sometimes refer to as the three-legged stool that incorporates macro and micro analysis. The big three are fundamentals, technicals and intangibles.
I’ll be explaining much more about these in the coming days and weeks, but to really find the best NextGen stocks, I want to see strong fundamentals that show growth (among other things), a solid chart that indicates buyers are in control and intangibles to drive the stock higher. These can be everything from a sweeping theme (like the millennial boom we’ve been talking about) to a specific event to, quite honestly, gut feel sometimes.Continue Reading…
Aug 01, 2017
Thanks for your kind words! The relative strength index (or RSI) is a technical indicator that serves as an overbought/oversold oscillator to measure a stock against itself. It could be considered a momentum indicator when it is moving in one direction, but I wouldn’t put that label on it. There are many times when the RSI moves sideways in overbought territory as a stock remains in a very strong uptrend. In that situation, it would not be a reliable measure of the stock’s true momentum. This can also be said for when a name is falling and the RSI is low.
However, momentum does come into play when using the RSI to identify buy signals. The index is a scale of 1 to 100, and when the RSI moves out of oversold territory (0-30) and back into the neutral zone (30-70), it creates an RSI crossover buy signal.
Jul 26, 2017
If I had a nickel for every time I came across an investment strategy that claimed to know how to trade earnings I would be a very wealthy man. Unfortunately I’m not swimming in nickels, and the folks who followed the advice of the so-called experts are likely on the lookout for some extra cash.
When it comes to trading around earnings – by that I mean buying a stock right ahead of its report because you think you know what will happen – the only true statement is that it is pure gambling. Unless you have some sort of insider information – which you’re not allowed to trade on anyway – there is no way of truly knowing what the actual numbers will be. And it’s even more difficult to predict how investors will react to the report and management’s guidance.Continue Reading…
Jul 21, 2017
I believe there is a time and place for options in investing, but I don’t see them fitting into our current approach here in NexGen Investor. Not only does the shorter-term nature of options run at odds with our longer-term investments, but they also carry a serious risk factor that not all of us have the tolerance for.
That said, I do have a lot of interest in options personally and have studied different strategies that range from longer-term covered call plays to more complicated shorter-term trades. I’m not ruling out a future newsletter that incorporates some of these tactics, so if you’d be interested in that kind of service please let me know by emailing email@example.com.Continue Reading…
Jul 15, 2017
This is a good question and an important point to clarify: stop-losses and critical support levels are not the same thing. The critical support level is the area that a stock needs to hold on a closing basis in order to remain bullish in the short-term. That level could be price support, a trend line, a moving average, or another level of support altogether.
The reason I refer to them as critical support versus a stop-loss is due to the volatility in individual stocks. There are many instances when a stock breaks the critical support level intraday and rallies back to close above the support level. Or a stock may break support for a couple of days before rallying. If we only used stop-losses (orders you place with your broker that automatically trigger when a stock hits a specified price), it would result in us getting kicked out of a position during any intraday pullback and missing out on subsequent rebounds.Continue Reading…
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