Archives for December 2019

Stock Analysis – Big Profits Made Easy with Candlestick Signals

What is the basic premise for  stock analysis? Find the positions that have the biggest potential! Most stock analysis is done through fundamental research. Analysts base their stock analysis upon potentially improved earnings over a specific period of time. This is how most MBAs are taught as far as the basis for stock analysis. Unfortunately, there is one major flaw with this approach. The fundamental elements may be pertinent today but may not be important in six months from now. This becomes the biggest risk for long-term stock analysis. In years past, the fundamentals of a company could be anticipated for the future based upon one fundamental projection. The technology of that company/industry was not likely to change very fast. Until recently, meaning the past decade, the technological improvements of most industries was relatively slow.

That is not true today. Stock analysis today has one major additional criteria. What are the technological improvements in that industry capable of doing in the near future? The near future could mean anywhere between three months to three years. What might be a viable advantage for a company today, with the announcement of improved technology, could be completely negated in  mere months if new technology enters that market. We are living in a technology boom. Investors may have seen the bubble back in the early 2000’s but that was a bubble in technology stock prices, not technology itself.

Candlestick signals help exploit reaping large profits from markets that are technology driven. The 12 major signals become dominant factors for identifying new investor sentiment coming into a stock position. It can be assumed that the smart money, the money that is closely following specific companies, starts creating candlestick buy signals well before a major announcement occurs in a company. Most investors do not have the capacity to follow what every single company in the market is doing. Fortunately, the candlestick signals can monitor when something is happening in a company. The 12 major signals have an immense amount of information built into their formations. Click here for information on the 12 major signals CD training package. Adding that information to ‘recognized’ trading patterns creates an even more powerful investment platform. Investors trade in patterns.

Patterns reveal an immense amount of information. Utilizing candlestick signals with a few investment patterns can dramatically improve an investor’s portfolio return. This is not rocket science. This is visually analyzing high probability situations.

Big price moves – a simple dissection of the term ‘pattern’ makes understanding how to participate in big price moves much easier. A pattern is something that can be recognized. That recognition usually includes price movements that have occurred many times in the past, thus forming a pattern. Successful stock analysis utilizes what has happened in the past. Applying candlestick signals to a pattern makes the probabilities of a successful pattern performing that much more compelling. As illustrated in the Adolor Corp. chart, a fry pan bottom pattern could be easily recognized. The fact that there was much indecisive trading during the formation of that pattern, with doji’s, spinning tops, small hammers, and inverted hammers made recognizing the fry pan bottom that much easier. A small belt hold signal bouncing off the 50 day moving average became more evidence that a new uptrend was going to start. This signal occurring at the end of a fry pan bottom pattern made the probabilities that much greater that a strong uptrend could occur.

Long Term Investing with Candlestick Patterns

Long term investing in the stock market can be defined as the holding of a security for a minimum of 5 years, to as long as 30 years. This is a more rigid definition, although it is one of the more subjective stock investing concepts, depending on the individual.

Normally, long term investing provides a means for a person to make ends meet during retirement, with the idea that no one can successfully retire without financial freedom. So with this idea in mind, successful traders purchase securities with the intention of holding the security for an indefinite time period, adding to it through the years, and acquiring enough dividend income to offset the loss of income after retiring. There is also a desire to leave some money behind to loved ones to relieve their financial burdens as well.

So if a security is going to be held indefinitely, what long term investing criteria should you be looking for in that security to ensure the best investment of your money? Dividend income is certainly a given. And since there is no motivation to sell the security, capital gains may not be an issue.

So what should you be looking for in your long term investing portfolio? Purchasing securities simply for the dividend income isn’t good enough. To improve your risk reward ratios, and to ensure that a company isn’t participating in fraudulent activities, securities should be purchased from companies that have a long history of raising their dividend every year. This will eliminate the risk of investing in a start-up company that may not even be around in a year or so. After all, the money has to be there to pay the shareholder.

Also, the rising dividend every year would help offset the risk of inflation and the risk of a lower stock price during the year would actually accelerate any income from the security.

Since you would want your position in the stock to grow through the years, resulting in increasing dividends regardless of stock volatility, the dividends would be reinvested into the stock until retirement. Therefore, a lower stock price would purchase more shares at a higher dividend yield and would simply accelerate dividend income.
When would you want to sell a stock in your long term investing portfolio?

Times and reasons to sell stocks vary. If you eventually have too much money tied up in just one stock, and it’s making you uncomfortable because it conflicts with your overall stock trading plan, sell some of it. Or, a company may stop increasing its dividends consistently which may also motivate you to lighten up on your position or divert your funds elsewhere.

Also, a company may reduce their dividend. When and if this happens (and it does) do not be overly anxious to sell the stock. First, figure out why the company is reducing their dividend. It may be for debt reduction, acquisition possibilities, or for other money management reasons. Or, the company’s dividend yield may have been greater than the dividends paid by their peers. However, to be safe, do not add to your holdings in this company and give management a chance to see how they handle the extra cash, since they appear to have better use for the money other than paying their shareholders. The resulting growth in that company may make up for the lower dividend.

The Stock Market – What Are My Choices?

The financial markets provide the best location for purchase or sale of financial “instruments”. These markets also guarantee liquidity, establish asset prices, and reduce the expenses occurred while operating in the financial markets.  For the beginner investing in these financial instruments, it’s always good to bring the markets down to their basics. The markets can be realistically divided into two separate entities; the market of promissory notes and the stock market.

For the sake of this investment newsletter, we will focus on the stock market. As mentioned before, funds are typically invested into a company, and the investor becomes a part-owner. The amount of influence, if any, which the investor possesses in making decisions within the company, depends on the percentage of shares that are possessed. Depending on the company and its size and standing relative to the rest of the market, investment options are divided into several basic categories: blue chip stocks, growth stocks, income stocks, and defensive stocks.

Blue Chip Stocks are shares of large companies having a stock price history of profit growth, annual return in excess of $4 billion, significant capitalization efforts and a stable record of paying off dividends. Such indicators are perfect “how-to invest in stocks” lessons for beginners. Such giants of the stock market are McDonald’s, Intel, and Nokia, to name a few.

Growth Stocks are shares of a company that tend to grow faster; the management team typically pursues the policy of reinvestment of revenue into further R&D and capitalization of the company’s assets. These companies rarely pay dividends and, if they do, the dividends are minimal as compared with other companies in the stock market community.

Income Stocks belong to companies with high and stable earnings that pay handsome dividends to the shareholders. Shares of such companies are a staple of mutual funds and a cornerstone for retirement plans of middle-aged and elderly people. Companies on the stock market with income stocks are Citigroup, BP Oil, and Progress Energy.

Defensive Stocks tend to remain stable under difficult economic conditions. They include companies in the food, tobacco, oil, and utilities industries. Commodities trading in these financial instruments frequently does well in difficult times because the commodities that they provide tend to be in demand in spite of economic downturns or stock market crashes. Defensive stocks are not leaders of the stock market during economic expansion because they do not experience the dramatic upswing in demand of other companies.

When investing in the stock market, it is important to examine companies carefully for income statements, balance, cash flow, and other factors. Once secure with a company’s stability, it is less likely that investing mistakes will be made, knowing that each company in a portfolio contributes to, or reduces, the bottom line.

New to Trading, or simply looking to increase your profits? Read Stephen Bigalow’s Daily market comments to know where the stock market is heading!

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