June 18, 2011

Monster Stock Hunting Rules

1. You must be patient and wait for Mother Market to give you the green light. Historically, your best odds of success is in the confirmation of a follow-though day when the market begins to pick up and start a new uptrend after a correction (That is, 10% fall from its recent peak) or a bear market (that is, 20% or more fall from its recent peak), The best confirmations usually occur between the forth and twelfth day of the upturn. It takes time for the big money funds to start piling into stocks.

2. Once you have the confirmation from the market, begin seeking out strong fundamental stocks, mostly new names and younger companies that have built sounds bases during the prior down trend. The more confined and flatter the base building period, the better. You want to see strong prior quarters financial  performance of rising sales and profits numbers. Acceleration in numbers is key.

3. When the most resilient fundamentally solid stocks during the prior down trend break out of their basing periods on strong volume and make either new 52 week highs or even better all time highs, those are the next potential monster stocks. When you see a number of them breaking out you can be certain that a new up trend has begun and has the potential to sustain. If the rally fails, cut your positions and let go.

4. If the market up trend persists and continues to drive higher, the new market leaders will be right there with it making new highs. It is critical that you have the patience and see that the best performers are acting right and continue to do so. Rising in higher volume and pull backs in lighter volume.

5. When it's time to sell it is time to sell. Typically, they will either slow down and/or end in a parabolic fast move....The Climax run. When the 50 day moving average is sliced in heavy volume, you know the big money is leaving in a hurry. If the big fund money is selling, so should you.

Small excerpts from:
-Monster Stocks: By John Boik (pgs. 174-179)

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