Perspectives Weekend Edition - Nov 5
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Commentary
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What does it take to be a good trader? Many would say it is an excellent
understanding of the stock market, or perhaps a lot of good contacts.
Having access to technology and the ability to get trades in quickly are
important. But above all else, the one thing that is more important to
successful trading is something that seems very simple.
Discipline.
Sounds simple, yet it is the greatest failing of people who lose in the
stock market. Successful traders realize that they will not be right all
the time. Many successful traders are profitable on less than half their
trades. Given these losing probabilities, the reason winners make money is
because they cut losses short and let profits run. They have the discipline
to hit the eject button when they are proven wrong. And those who
consistently lose money? They hang on for the dream
Fear of taking a loss or fear of missing out on an uptrend cause many
market participants to hang on to losing positions. So often, these traders
tell themself that they will sell when the stock falls to a certain point.
However, when it does, they find a reason to establish a new limit. Too
much attention is paid to the story and not enough attention is paid to the
message that the market is giving.
When you take a position in a stock, you have to establish the point that
the market will prove you wrong. Whether you choose to base that point on
support and resistance levels, or the announcement of news, this point
represents a bad outcome of your trading decision. If triggered, the exit
sign is flashing. Head for the door.
Failure to take a loss when proven wrong will have two effects. First, it
will likely make a potentially small loss grow into a big one. Remember,
successful traders take small losses. A big loss takes more time, so it
also ties up capital. And it will take more profits to recover.
Second, it will create fear for the trader who is seeing profit and does
not want to feel the pain of a loss again. To avoid the potential
disappointment of another loss, some traders take profits too early simply
to lock in the good feeling that comes with making a win. Unfortunately, to
be a successful trader you have to limit losses and let profits run. If you
have small profits and big losses, well, you lose.
Maintaining discipline when trading is essential for success. If you have
it, only simple rules of trading are necessary for success. Be strong, it
is easier said than done.
Enough Said.
Scores of Friday's Most Active Stocks
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NASDAQ
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Company Symbol Stockscore
Qualcomm QCOM 80
Microsoft MSFT 35
Xilinx XLNX 82
Intel INTC 57
Cisco Systems CSCO 69
US Over the Counter Bulletin Board
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Company Symbol Stockscore
DSL.Net DSLN n/a
FutureLink FLNK 69
Lumenon Innovative LUMM 69
Nextpath NPTK n/a
Planetrx.com PLRX n/a
*stocks require 200 days of trading to calculate a Stockscore.
Alberta Stock Exchange
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Company Symbol Stockscore
Cell Loc CLQ 73
Highpoint Capital HGP 33
Off-Site OS 72
Valu-Net VNE 41
USA Video US 29
Vancouver Stock Exchange
====================
Company Symbol Stockscore
Edispatch EWD 74
Unique Broadband UBS 58
Image Power IPZ 58
Sideware Systems SYD 38
Hilton Pete. HTP 52
Toronto Stock Exchange
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Company Symbol Stockscore
Nortel Networks NT 63
BCE Inc BCE 72
Bank of Nova Scotia BNS 42
TD Bank TD 60
JDS Fital JDU 74
Stocks to Watch
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Cisco Systems (CSCO)
NASDAQ
Stockscore - 69
Rating: Optimistic
Reference: http://www.cisco.com
- Cisco Systems provides networking solutions that connect computing
devices and computer networks, allowing people to access or transfer
information without regard to differences in time, place, or type of
computer system. The stock is at a critical point as it is testing overhead
resistance at $74. If it can break through that, we should see the stock go
into an uptrend. However, the resistance could prove tough to break and we
may see a pullback. With the recent positive behaviour that the stock has
made, I would suggest there is a pretty good chance of a breakout. Tech
stocks are looking good, and CSCO is a good candidate for a break to the
upside.
Lumenon Innovation (LUMM)
OTC BB
Stockscore -69
Rating - Optimistic
Reference - http://www.lumenon.com
- Lumenon was founded in Montreal in 1998 by two scientists, Dr. S. Iraj
Najafi and Dr. Mark P. Andrews. The Company was created to capitalize on
their widely publicized innovations in compact integrated optical circuit
design and glassy materials for integrated optics. Lumenon introduces
PHASIC™ the definitive optical chip technology based on a synergy of
unique design tools and innovations in proprietary hybrid glass integrated
optics on silicon. The company’s advances in glass integrated optics
position Lumenon to lead in the market for passive and active optical chip
product solutions for long-haul and short-haul telecommunications, desk-top
local area networks (LANs), multi-media LAN, Intelligent Home Network, as
well as fiber channel. The stock has been doing very well of late, having
appreciated better than 60% this week alone. That is a sign of euphoria,
and makes the stock a good candidate for a quick short trade. I expect
we'll see the stock pull back from the $14 level to perhaps the $11 level
early next week. If you are a nimble and experienced position trader, take
a look.
Valu-Net Corp (VNE)
ASE
Stockscore - 41
Rating - Neutral
Reference: http://www.vncorp.com
- Valu-net is a leading online marketing and technology company providing a
complete range of services to meet the growing demand for secure electronic
commerce. Valu-net provides integrated Internet marketing programs,
proprietary electronic commerce and secure transaction processing to both
traditional and on-line businesses and to Internet Service Providers. The
stock has had a good run recently, but was halted Thursday pending news.
VNE issued news Friday, stating that they would join forces with Applied
Innovations Group to build Computer Discount Depot Inc., a business to
consumer website. The stock is now at resistance, so I expect that we will
see it stall at these levels next week, and we may see profit taking. Could
still do well longer term, but it will probably take some time to chew
through the $1 level.
Image Power (IPZ)
VSE
Stockscore - 58
Rating - Neutral
Reference: http://www.imagepower.com
- Image Power Inc. is a developer of still image compression products and
technologies. Using the company's core technology combined with licensed
patents, Image Power produces image compression products for developers,
end user s, and embedded applications. This week, the company announced an
agreement with the University of British Columbia for the development of a
new wavelet color codec compliant with the JPEG2000 Commitee Draft. The
stock was hot this week, making better than a 65% gain this week. It looks
good to continue toward resistance at $0.70, but owners of the stock should
consider that there are a lot of sharholders in this stock at higher
prices, who may decide to take their money out on this strength. That
overhead makes the stock risky right now, so dance close to the door.
TD Bank (TD)
TSE
Stockscore - 60
Rating - Optimistic
Reference: http://www.tdbank.ca
- Toronto Dominion Bank is a chartered bank, serving individuals,
businesses, financial institutions and governments through a network of Cdn
branches. The bank also offers a range of credit, non-credit & financial
advisory services to businesses,gov ernments & correspondent banks through
offices worldwide. Subsidiaries (Waterhouse Inv.Serv., GreenLine) offer
discount brokerage & a full range of trust services. Financial stocks are
starting to look decent again as inflation fears subside and interest rates
begin to stabilize. TD has been reversing its downtrend over the past few
months and looks like it is gearing up to make a move back toward the $40
level in the months to come. Good stock to consider for the more
conservative portion of your portfolio.
The Scores - What They Mean
======================
***The scores that are attached to the stocks are based on a proprietary
model developed by Stockscores.com. This model factors in numerous
technical analysis indicators and utilizes the past 200 days of trading
data. Stocks that have not traded for 200 trading days will not have a
score calculated.
Scores greater than 70
Bullish
This stock is worth considering as a buying opportunity. Our model
indicates that the stock has good potential to go higher in the short term,
and is worth taking time to consider. Complete your due diligence on this
stock so that you can make your own judgement on the quality of the company
before making a decision, and remember that our score is valid for the
price that the stock is at when we applied the score. Of course, a score of
98 has more potential than a score of 72, but all stocks in this range
deserve your consideration. In addition, if you are short this stock, you
should consider covering the short position.
Scores between 60 and 70
Optimistic
Market activity is beginning to indicate improved optimism for this stock
and it should be put on a watch list as a stock to consider. If you already
like this company's fundamentals, you should now look for the signals that
the time is right to own the stock. If you own the stock, you are likely in
good shape but may want to consider taking profits if profits are high. If
you are short the stock, you should approach your position with some
caution and watch for the signal that it is time to cover.
Scores between 40 and 60
Neutral
Market activity is doing little to indicate the future direction of this
stock. The stock is likely in a trading range, or, if it has been in a
strong trend over the recent past, it may be starting to reverse that
trend. If you own this stock and are in a profitable position, you should
consider whether the stock is reversing and it may be time to take your
money off the table.
Scores between 30 and 40
Cautionary
Market activity is beginning to indicate caution is warranted for this
stock and it should be put on a watch list as a stock to sell or short. If
you believe that the company's fundamentals do not warrant the valuation
the stock has received, you should now look for the signals that the time
is right to short the stock. If you are already short the stock, you are
likely in good shape but may want to consider taking profits if profits are
high. If you are long the stock, you should approach your position with
some caution and watch for the signal that it is time to sell.
Scores less than 30
Bearish
Market activity is very negative on this stock and it may be very risky to
hold this stock. Shorting opportunities should be explored after doing the
appropriate due diligence. If the stock has suffered a major sell off
already, traders may want to watch for signs of a reversal bounce as a long
trading opportunity, but be sure to watch for the technical reversal which
will likely be accompanied by an increase in the stock score.
As a final thought on this new scoring system, it is important to consider
where the score has come from. A stock that moves from 60 to 75 is likely a
better opportunity than one that moves from 90 to 75. Also, consider where
the stock is relative to the score. Again, a stock that has made
considerable gains of late may have a good score, but entering the stock
given the gains it has made will be riskier. Risk is factored into the
model, but use some of this common sense.
Finally, remember that this model is generated by a computer and should not
be used to make investment decisions. It is a tool which can help you find
opportunities from the thousands of stocks that are out there. However, you
have to do the work to take the list of stocks with the scores you want
down to the stocks you want to put your money on.
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