All month I've been discussing my method for funneling stocks on to my watch list. In this last iteration, we'll wrap up the discussion by examining a recent real world example.
Must Haves
On April 13th one of my readers sent me an email to ask for my opinion of $CLDN. He saw that the stock was trading in the $18 range but the last option call was at $7.80 and he couldn't understand why things were so out of whack on it. This stock wasn't on my radar when he emailed so I had to check it out before I could reply back with my thoughts.
I did a Stock Checkup on IBD® and, instantly saw why it wasn't on my watch list. Basically, it hadn't established itself as a growth stock yet and here's why:
- EPS rating was 4 and, for me, it's got to be 90+ to even be considered.
- The RS rating is 89 and I've got to be 90+ there too.
- Acc / Dist is an E and I need a B or higher
- This was a thin stock, unable to break $100M a day in volume
Variables
Just 2 days after sharing my thoughts on the risk involved with this stock I published a blog post that discussed the variables section of my funnel. One of the specific examples I gave had to do with a bio-tech that "looked good" but had enough baggage that it could be weeded out of consideration.
Obviously I wasn't going to get involved with this stock at this point, however, it was at the back of my mind over the next few weeks. Then this article popped into my Twitter feed just yesterday. $CLDN has lost more than 80% of its value because of negative test results for their new drug...ouch!
I may look prophetic here but it really just boils down to my personal system for selecting stocks. When I follow my own rules, I'm able to limit my risk. When I limit my risk, I'm able to avoid the financial ruin that can come with being involved in these types of stocks.
My Stocks & My Trade Plans
I'm using my $CLDN conversation as the example in this case but I get asked about these types of stocks all the time. I've decided to branch out and start offering premium services to help fill what appears to be a significant need out there. Here's a summary of what I'll be offering:
- Virtual Trade Plans: For every stock on my radar, I create a trade plan. Subscribers to my weekly trade plan service will receive a PDF every Monday morning for each stock that has made it to the bottom of my funnel. Each plan will include basic details on the stock, market condition overview, entry conditions, and exit conditions.
- Premium Blog Subscription: Until now, I've offered my Monday Market Spotlight posts for free but that will change starting on May 4th 2015. Subscribers to my premium blog will receive my market outlook as well as my full watch list which is updated every weekend.
- Group Mentoring Service: Want to learn my system in depth? I'm now offering mentoring for groups of up to 3 people at a time. Mentoring sessions will include a 4 Webinars per month with 30 minutes of live education followed by 10 minutes of Q&A per participant. Sessions will be recorded and available on-demand after the fact.
- 1 On 1 Mentoring: Want a session that is more focused on you? My 1 on 1 mentoring offers you a more personal and interactive experience that is designed around your particulars. Sessions will be recorded and available on-demand after the fact.
If you'd like to purchase, you can sign up below:
Next Month's Theme
During the month of May we're going to dive into the importance of back testing your own trading system. I'll give you examples of how I use options trades to both replicate my success and learn from my losses. We'll also take a closer look at the weakness of the current bull market to shed some light why back testing is more critical than ever.
As always, keep your questions and comments rolling!
Happy Trading!
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