A Few Stocks To Watch

I'm sitting on a little bit of cash right now, which is fortunate because the stock market pulled back a little on Thursday...potentially offering up some good trades. I'll be looking to put some of that cash to work and here are some stocks that I'll be watching and trading if I see a good setup. Also, I updated my watch list ticker at the top of the site, so there are some fresh stocks up there that are worth checking out.

Here are the charts:

CAST
CERN

NVEC
PEGA
QCORVMED
Have a great 4th of July weekend!

TLT

QCOR = Sell

I don't know what's going on with QCOR but the market is saying that it's a sell and I don't fight the tape. The S&P 500 closed up 10.79% (can you say bear rally?) and QCOR closed up a measly .83% and then it even traded into negative territory in the after hours(which doesn't mean much). That kind of divergence is not usely a good thing. Here's a 5 minute chart comparing QCOR to the S&P 500 for the last 2 days. As you can see, I used a yellow line with crude asterisks to show the spread between QCOR and the S&P. At this point, I don't care what the technicals say in the near future, this stock was left behind on a day when it should have been rallying. Either there is something majorly wrong with this company or this is just some crazy action that you can only find during a bear market in a high flying stock. Regardless, it's too risky for me at this point. Like I said, I don't fight the tape and the tape is telling me to stay away.

Good luck out there.

TLT

Honor Thy Stop...and Other Musings

Well, good morning. The markets are in panic mode and I even heard some chatter on Biz Radio this morning about the markets potentially being halted today. Right now that seems unlikely but we'll just have to wait and see.

As for honoring the stop, yesterday was a perfect example of how dangerous it can be to second guess yourself after you've made a game plan and initiated a trade. Perhaps QCOR is a little too volatile for a tight stop but that type of stop fits my personality. I have found that I can handle my emotions better by getting stopped out sooner and taking a couple of losses rather than using wide stops and sitting under water waiting for my position to come back. It works for me but not necessarily everyone.

When I take a position, I generally try to zoom in with an intra-day chart to pin-point a precise entry and if the position doesn't take off pretty quickly, it's usually a sign that I'm wrong and need to get out.

While tight stops may not be for everyone, one rule that does apply to everyone is honoring your pre-determined levels (whether they're stops, profit targets etc.). Had I lowered my stop or even just pulled my stop, I would be hurting today. Sure taking a small hit yesterday was not fun, but it's necessary and it's part of the plan. See the 15-min chart below. The green arrow shows where I went long and the red line shows where I got stopped out. More importantly the yellow line shows what I would have suffered through if I'd not have had my stop. Whew! That kind of drop can wreak emotional havoc on me and I imagine many other traders as well.

Bottom line, you've got to have a plan and stick to it if you ever want to even have a chance to make it as a trader. I'll be looking for new opportunities to enter QCOR and I'll let you know if I see a good set up.

Good luck out there.

TLT

QCOR: Trending Up in a Down Market

Finding stocks that are trending up in this bear market can be difficult but you can find some potential long candidates with a little work and a lot of patience. One that is really impressive right now is QCOR. This stock has been on a rampage and is still trending up in an aggressive manner. If your gonna go long in this market for any time period longer than a few hours and shorter than a few years, stocks like this are a good way to go.

One strategy that can work out favorably is to buy a stock like QCOR and simultaneously by a broad short index fund, like SH. This strategy can minimize you're overall returns but it will also cut out some of the volatility. If you buy a stock like QCOR and the broad markets tank, they could easily drag down QCOR with the overall market. On the flip side, if the markets rally, a well performing stock like QCOR should rally more than the overall market and then you get to book the differce between the index and the stock as profit. Let's take a look at the QCOR chart.
Above is a daily chart from QCOR saved after yesterday's close, which was October 28, 2008. I like the look of this stock so much that I'm calling a buy right here. If I'm buying in this market, this is the kind of stock I'm gonna buy. As of this very moment QCOR is trading at $7.77. I'll put in a protective stop at $7.45, which is just over a 4% stop loss and it's located just under the short-term trend line. Hopefully it will provide a little resistance.

There are 3 main factors that are triggering a buy for me.

1) Long-term trend is up--this means I'll only trade to the long side.

2) Good short-term trend that's making new highs on higher than normal volume--love to see this.

3) Moving averages are all saying buy and they're not spread too far apart, MACD says buy and the bb width is moving up but not setting highs.

So I've got my buy signal and my stop loss figured out, now I just need to set a price target. Since it's a strong stock making new highs, I'm going to shoot for $10.00 a share. If we hit that I'll immediately sell half and then move my stop on the other half up to just under $10. This is a profit target of roughly 28%, so I'm risking .04 to make .28. That gives me an R-multiple of 7 or a risk to reward ratio of 7-1. This is a somewhat big R-multiple (which is good) but, when using a trend following style system, I need high R-multiples because I could easily get stopped out by a violent whip-saw. If that happens, and the buy signals are still intact, I'll just re-enter the trade and try again. A high R-multiple will provide a profit even if you have a couple of unsuccessful entry attempts.

I will also use a wide trailing stop, probably 5%, just in case the stock goes up and runs out of steam before my $10 target.

I'll give and update within the next week and let you know how it's going.

Good luck out there.

TLT