You may not yet share our enthusiasm for the rolling stocks strategy, but that is understandable. The most basic tenet of this strategy is that we find stocks that presents three or more buying opportunities in a 12 month period at a specific price.
What kind of stock (parameters):
Typically stocks with volume over 100,000 shares traded daily, traditionally stocks priced at $2 or less, but there are very good rollers up to $35.
What’s used (probabilities):
Stochastics, MACD, Moving Averages.
What to look for (setup):
Stocks that are non-trending (or rolling), look for a flat or gently rolling 100 to 200-day moving average line.Entry:
The three green arrows comprises of three technical indicators that are (you will find this on our stock charts)
- Moving Average
- MACD Histogram
- Stochastic Oscillator
The moving average is a technical indicator that measures the trend of a particular stock. An entry signal occurs when the price is above the moving average. The MACD is another technical indictor that measure momentum. An entry signal is created when the MACD crosses above the horizontal signal line The Stochastic oscillator is another momentum indicator that measure the price of the stock in relation to the range the price has been in over a period of time. If the stochastics oscillator dips down below the 25 line – it is said to be in an oversold situation and likewise if it goes above the 75 line – it is said to be in an overbought situation. A buy signal is produced when the stochastic indicator rises above the 25 line. This indicates that the momentum of the stock is gathering to take the price of the stock from its low range into its high range.
Look for the three green arrows to line up vertically. The three green arrows are combined on the same chart and a buy signal occurs when all three line up suggesting Long - stochastic breaks above 20 after being below, look for a bullish (go long) candlestick, also look for a confirmation of some sort (+DI crossover –DI) or for Short - stochastic breaks below 80 after being above, look for a bearish (go short) candlestick, also look for a confirmation of some sort (-DI crossover +DI)
This is not rocket science or brain surgery. Actually, it is probably more complicated, since rocket science and brain surgery are pretty much exact sciences. Stock picking is not. A slew of cross-currents go into the thought process. Here are some of the other factors we consider, though there are some we don't disclose (can't give away all of our stock picking secrets).
Recent Gains. Multiple times, every day, we scan the NYSE, NASDAQ, and AMEX for those stocks between $1 and under $35.00 that are in a rolling pattern. We then track them for a few weeks to see if they have "legs". And, of course, we learn what moved them to begin with.
The Balance Sheet. Pretend that stock picking is comparable to creating the Universe. Look upon the Balance Sheet as The Big Bang. Does the company have ample cash and assets to keep it afloat for the next year or two? Is it laden with too many liabilities, such as a heavy debt load? If the Balance Sheet seems reasonably sound, then, half the work is done.
Analysts' Ratings. Although we do not give this much weight, seeing analysts covering a company does provide some degree of comfort.
Institutional Ownership. We do not give this much weight, either, except if a brokerage(s) owns a good chunk of a company, then they may be more inclined to see it succeed.
The Story. The company must be relatively easy to understand - after all, who needs a physics lesson. Is the company in a hot industry sector? If it's high tech or biotech, what kind of proprietary technology do they own? Number of patents? What does their customer base look like and how deep is it? Then, we read the recent news, which can steer us toward a better vision for the future. For example, has a technology company had new product releases? Or has a biotech neared a Phase 3 clinical trial or received an FDA approval? Also, we like a company to be over four to five years old, because that gives us an idea as to their staying power. And, needless to say, we look for any snags, which, in some situations may not be all that detrimental.
Target Prices. Besides putting all of the above at the core of our research with every rolling stocks list publication, we also put target support and resistance price targets on all stock picks. However, you need not keep in lockstep with us; choose a target price that feels good to you.
YOUR Big Question. How should I use this Newsletter? We suggest patience, patience, patience – there will always be stocks to buy – select only stocks that are below or at their resistance - no need to be panic about not getting into a stock – there are many to choose from – we list 10 to 12 each week.
A Final Thought. This formula has been good to us since we started publishing in 2004. Since then, over 75% of our closed positions are for gains of 20% or greater! That is probably why we have subscribers who keep coming back for more.
What are Rolling Stocks? Rolling stocks, sometimes called Bouncing stocks or
Channeling stocks, are stocks that oscillate (roll)
between a high price point...