Online Stock Trading

Friday, July 14, 2006

Learn to Calculate a Stock's Pivot Point

By Chris Perruna

Stocks breakout from properly formed bases everyday but many investors don’t understand how to locate a pivot point or what patterns to study that may contain this very important buy signal. A pivot point can be described as the optimal buy point or the area at the end of a familiar base pattern where the stock breaks out into new high territory. William O’Neil, the founder of Investor’s Business Daily is considered the pioneer of the pivot point in modern times. As Jesse Livermore explains in his book (1941), the pivot point can also be described as the point of least resistance. When a stock breaks the point of least resistance, we are presented with an opportunity where a stock has the greatest chance of moving higher in a short period of time, especially when volume accompanies the breakout.

The pivot point can be calculated as the stock is forming the handle on a cup-with-handle base. The ideal buy price would be $0.10 higher than the highest spot during the handle, also know as the top of the right side of the base. The intraday high can qualify at the highest point and does not have to be the closing price of the stock. If the stock closes at the high for the day, then we will use this number as the high point.

The exact methods used for finding pivot points vary depending on the base pattern that is forming on a daily and/or weekly chart.

When a flat base occurs, an investor should look for a move $0.10 higher than the top point on the left side of the base or the start of the formation.

A saucer-with-handle follows the same rules as the cup-with-handle and is described in detail above.

A double-bottom formation triggers a pivot point that will be $0.10 higher than the middle peak in the “W” shaped pattern.

Many investors will try to cheat the rules and place a position prematurely before the stock breaks out and passes the pivot point. I do not suggest buying until the stock triggers the pivot point on above average volume also known as qualifying volume. The area considered as the least amount of resistance is weighed so heavily because all overhead sellers are gone as we break into new high territory. The pivot point usually comes within 5% to 15% of the stock’s old high 52-week high.

Don’t chase a stock that is 5% or more above the proper pivot point. This does not mean that you can’t buy on normal corrections and pullbacks to support or moving averages, especially if the stock remains in an uptrend. This rule only applies to the pivot point area as the stock becomes extended. If you buy with the pivot point and sell when a stock falls 7-10% from the pivot point, I guarantee that your yearly performance will increase dramatically.

Chris Perruna - http://www.marketstockwatch.com

Chris is the founder and president of MarketStockWatch.com, an internet community that teaches you how to invest your money with solid rules. We don't stop at just showing you our daily and weekly screens, we teach you how to make you own screens through education. Through our philosophy, you will be able to create your own methods and styles to become successful.

Article Source: http://EzineArticles.com/?expert=Chris_Perruna

Wednesday, July 12, 2006

Penny Stocks - Risky Investment Or High Payoff, You be The Judge

By Tim Gorman

Penny stocks are stocks that normally hold a face value of less than $5. Many small companies offer these low-priced stocks to be traded on the Over-The-Counter-Bulletin-Board (OTCBB) and the Pink Sheets. This is mainly because neither the OTCBB nor the Pink Sheets require the same minimum requirements as the NASDAQ or the New York Stock Exchange (NYSE), set by the Securities and Exchange Commission. Businesses that are new or close to bankruptcy may issue penny stocks as a quick and easy way for these businesses to create quick capital and try to save the business from having to file bankruptcy in a court.

As you can imagine all of the aforementioned factors- low price, lack of stability and lack of standards- make penny stocks one of the most risky investments for anyone that is interested in playing or trading on the stock market. The fact is most penny stocks do actually end up in bankruptcy, but the lure of the great payoff if a company does succeed, is enough for many people to pursue the buying and selling of penny stocks. There are many other reasons why penny stocks are risky and it includes:

Low or poor liquidity: Since penny stocks are not traded very frequently, there may be difficulty finding a buyer. To interest someone in buying these stocks, the price may have to be priced substantially lowered.

Little or incomplete information about the company: Most of the companies that issue penny stocks do not have enough reportable history to learn a significant amount about them for those investors interested in doing research prior to investing their money. This is also due to the fact that the OTCBB and the Pink Sheets do not have to issue financial statements.

Potential for fraud: Penny stocks are often sold through spam email or off-shore brokers by con artists due in large part to the lack of regulation that penny stocks are not forced to abide by or suffer from.

Although some penny stocks are fraudulent and others are companies facing bankruptcies, this is not true in every case. Quite possibly some of the businesses will one day be listed on the NASDAQ or NYSE, but are currently struggling to meet the requirements. The opportunity to start with these companies from the very beginning can pay off in the end, given the growth potential. If you are able to get in on the ground floor with a company that does find success, you could ride all the way to the top.

It can be difficult determining which of these stocks has the potential for growth. The easiest way to become a victim of fraud is to do little, or even worse, no research. Obtaining this information can be time consuming and difficult, unless you have a very good knowledge of what it is that you are seeking. There are some companies that claim to have “inside information” about companies that issue penny stocks, but there is the possibility that this is a front in order to push a particular stock on an unsuspecting investor.

As an investor, you can either do research or take your chances. The fact that the stocks are very low in price means that if you do buy them, the chance that you lose a lot of money is small. If you are willing to take a loss and understand that the company could go under, they can be a fun and very interesting addition to your portfolio. It is important to remember that your odds are not very good. Most penny stocks will end up in a total loss.

It can be difficult to find a broker that will buy penny stocks. This is due in part to the difficulties in tracking them. There are some online brokers that specialize in penny stocks. Brokers are required by regulations to obtain written confirmation from the client regarding the transaction. In addition, the broker is required to give the client a document that outlines risks when it comes to speculating with penny stocks. Lastly, the broker must inform the buyer the amount of compensation that the firm will receive for the trade and the current market price of the stock. The client will receive monthly statements, which detail the market value of each penny stock that has been purchased.

As you can see penny stock s are an extremely risky investment but there are some instances where the rewards actually outweigh the risk associated with investing in an unknown company. The key is to actually find the right one.

Timothy Gorman is a successful Webmaster and publisher of Online Stock Trading Secrets. He provides more stock advice, information and ways to make money with penny stocks that you can research in your pajamas on his website.

Article Source: http://EzineArticles.com/?expert=Tim_Gorman

Tuesday, July 11, 2006

Trading Vehicles

By Don Heggen

The best Trading Vehicles have two characteristics that are paramount: Price and Liquidity.

If you're trading stocks, look for good liquid trading markets that are tight and fluid.

Bid and Ask quotes are narrow and close to the last trade. The quotes have depth to them
and can accommodate large orders without disturbing the price.

All this results because of the competition between large numbers of market participants.

The opposite situation is present in thinly traded markets.

Lack of large numbers of market participants means quotes are wider and smaller in size,
resulting in huge "slippage", choppy markets, and disappointing order executions.

If you can't get in or out of a given market with ease, you're in the wrong market.

If the trading crowd is not interested in a particular market neither should you.

Go where the action is.

For instance, Exchange Traded Funds (ETF) are the closest you can get, in a single
security, to being able to trade "the market".

In appearance they resemble an index fund, but they trade exactly like any other stock.

Index funds don't encourage short term in-and-out trading. They call such activity
"disruptive". And, truthfully, they're right. It is disruptive, distracting, and annoying
to the fund portfolio manager.

The ingenious way ETFs are put together, all the in-and-out trading in the world will not
disrupt anything inside the unit portfolio. In fact, they were designed to accommodate and
encourage such activity. Why? Because the public wanted it, that's why.

Traders and investors wanted a vehicle that they could buy-and-hold, collect dividends,
trade, buy on margin, sell short (without that outdated "up tick" rule), options trade,
and whatever else they wanted to do with it, and did Wall Street ever deliver the goods!

Broad based indexed exchange traded funds hit the ground running and never looked back.

They have had a profound effect on the way investors and the entire investment management
industry think about investing.

In fact, they have proved so popular they spawned a universe of sector ETFs on industry
groups.

All the requisites of an excellent trading vehicle are present.

Also, as a trading vehicle, Single Stock Futures (SSF) are a traders' dream come true.

In legal terms, an agreement between two parties where one party commits to buy a stock
and one party to sell a stock at a given price and on a specified date.

The contract is completed at expiration or, in most cases, by offset prior to the
expiration date.

The many advantages are:

(1) Greater leverage: Lower margins (20% vs 50% for stocks) and no interest to pay.

(2) Greater cash flow opportunity: Treasury Bills can be used as collateral.

(3) Easier and cheaper to sell short: No need to borrow stock, no uptick rule, no
dividends to make up. SHORTS even earn the "basis" premium that the LONGS pay.

(4) An almost perfect hedging device, SSFs are more efficient than options. No strike
prices involved. The only difference in price, between the futures contract and the
underlying stock, being the basis which zeros out by expiration.

(5) Foreign investors can reduce currency risk.

(6) Additional sophisticated trading strategies not otherwise available.

(7) Broad liquid markets make these ideal trading vehicles.

If you like ETFs, you'll love SSFs.

Because No One Cares More About Your Money Than You

http://dynamic-stock-market-strategies.com

Good trading,

Don Heggen

Article Source: http://EzineArticles.com/?expert=Don_Heggen

Monday, July 10, 2006

Oil Stocks As A Long Term Investment

By Christopher W Smith

The demand for world oil is increasing while world reserves are decreasing. This is a known fact. The current price of oil can certainly confirm this statement. Consensus also agrees that we will never see $25.00 oil again. The logical conclusion to our above statement is oil stocks should be a good long term investment. However, the location of the oil companies’ reserves can affect their bottom line and valuation.

Some of the largest reserves in the world are found in Venezuela, Saudi Arabia, Russia and Canada. Political unrest in Venezuela, unstable and unpredictable government in Russia and Osama Bin Laden targeting Saudi Arabia leave Canada, namely the Alberta Oil Sands, as the largest, most reliable oil reserves in the world.

Companies like Exxon Mobil Corp., Royal Dutch/Shell Group and Canadian Natural Resources Ltd. are planning to spend billions during the next 10 years to develop Alberta's unusual oil deposits as demand for crude rises and output from existing reserves decline. Oil sands output in Alberta may double to 2 million barrels a day by 2013, according to a presentation by Enbridge Inc. earlier this month. Oil sands are deposits of bitumen - heavy oil that must be treated to convert it into crude oil for use in refineries to produce gasoline and diesel fuels. The U.S. Energy Department revised its global oil resource estimates to include the oil sands 174 billion barrels of proven reserves that can be recovered using current technology.

With demand for oil and other commodities from China and India increasing due to their growing economies, strong trading relationships are procuring with Canada - a country with numerous resources, political stability and neutral military views.

Companies with reserves in the Alberta oil sands look like a great investment for the next decade
There are many companies with reserves in the Oil Sands here are some with strong exposure.

Suncor Energy Inc. SU.tse , Western Oil Sands Inc. WTO.tse and the Canadian Oil Sands Trust COS/UN.tse

Trading Penny Stocks | investment strategies for penny stocks
1source4stocks.com provides penny stock traders with online trading and investment tips, online trading strategies, and penny stock picks.

Article Source: http://EzineArticles.com/?expert=Christopher_W_Smith

Sunday, July 09, 2006

Stock Chart Reading

By Al Thomas

As an investor you will want to check
out any equity before you buy it. Many investors
go to Morningstar which is one of the largest
providers of mutual fund information in the world.
It is assumed that their information is correct.
After all that is what you are paying for.

Recently the SEC (Securities and
Exchange Commission) called them on the carpet for
not correcting an error within a reasonable time
(whatever that is according to the SEC). Everyone
makes errors and this was no big deal.

It seems that when you went to their
site and drew up a chart or asked for statistics
on Rock Canyon Top Flight mutual fund it failed to
notify the potential buyer that the fund had
issued a very large dividend of approximately 25%
and the NAV (Net Asset Value) dropped from $15 to
$11 to reflect the $4.00 dividend.

When you ask for a chart of this fund
on MarketWatch, Yahoo, TheStreet or Bloomberg they
only post the NAV and do not make any adjustment
for the dividend or capital gains distributions.
Looking at the chart it appears the fund fell out
of bed. Because I look at so many charts I knew
immediately that this was a distribution and not
some calamity. It is best to call the fund to
verify this.

Most funds that make dividend and capital gains
distributions usually do so in December, some in
November and very few at other times during the
year.

Some nitpicker called the SEC and made
a complaint about Morningstar. Not that I am a big
fan of them (in fact I think their reports are
worthless) they get their price information from
other sources such as the above. If you are not
familiar with the requirement of mutual funds to
disburse their profit before year end you might be
fooled when you see the price suddenly drop.

This is important for potential
investors. I caution everyone to get a chart on
the Internet of at least a one year performance of
any mutual fund before buying. It is better to go
back to year 2000 to see if the fund manager was
able to keep from losing money during the last 4
years. Almost none of them could so they bamboozle
about how they did better than the S&P500 Index
which had a huge loss of 50% and remains down 25%
from those highs at this time. Don’t fall for that
one.

Once again I caution that any purchase
should have an exit plan. One of the basic rules
of investing is never to lose a lot if you are
wrong. Small losses will not ruin your portfolio,
but big losses can ruin your retirement. Set your
loss limit (5%, 10% or ?) and stick with it.

Charts can help you with
buying/selling decisions, but check out their
accuracy as charting is not an exact science.

Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!"
has helped thousands of people make money
and keep their profits with his simple 2-step method.
Read the first chapter at http://www.mutualfundmagic.com
and discover why he's the man that Wall Street does
not want you to know.

Article Source: http://EzineArticles.com/?expert=Al_Thomas