Fine Tune Your Stock Watch List

PHOTOGRAPH BY RYAN MCGUIRE 

Last week I shared my very strict criteria for building a Growth Stock Watch List. I shared my philosophy of how I analyze the markets every week looking over the performance of the $SPY (General Market Performance) and the $QQQ (Growth Stock Performance). I am only looking for 1 or 2 stocks to take a position. After all, one needs to have just a handful of stocks (5 to 10 maximum with portfolio size of a maximum $1,000,000) to Out Perform the general market. Concentrating your portfolio is the approach to take. We had a very successful rally on Thursday and Friday of last week. Market has resumed it's uptrend and now is the time to add to your profitable stocks that endured the correction during the last 6 weeks.

Let Data Drive Your Decision

Are you tempted when Cathie Wood (founder of Ark Invest) on CNBC is singing the praises of market sell off of Growth Stocks or perhaps your lawn and pool maintenance guys are telling you about their recent account set up with Robinhood platform and how they have made 100% returns on some of the meme stocks?  When it comes to stock watch list building, only focus on the data that you can verify. 

There will always be a fair amount of noise out there so you've got to learn which information you can tune out, and what you should actually be paying attention to.  I like to keep things simple and with as few moving parts as I can.  It helps keep me from getting dragged into the dreaded cycle of  analysis paralysis  that every stock trader fears.

Examine Market Conditions

I like to start by taking a look at the chart action of the 2 major indices - $SPY and $QQQ. Once I've gotten a clearer picture of the general market I then like to hone in on the 11 major sector ETF's to see which is showing the most life. If you aren't familiar with the sectors, they are:

1. XLK = Technology
2. XLV = Health care
3. XLI = Industrials
4. XLB = Materials
5. XLE = Energy
6. XLF = Financials
7. XLU = Utilities
8. XLY = Discretionary
9. XLP = Staples
10. XLC = Communication Services
11. XLRE = Real Estate

Now that I've got the best performing sector in hand, I want to look at just the top stocks in that sector. This is how I get an idea of where the momentum lies. For me, the Relative Strength is the key component in this stage of the process.

Have The Right Tools

Adding a stock to your watch list is only the first step, now comes the real work!  There are countless tools out there but since I focus only on  growth stocks,  my tool kit begins and ends with IBD (Investors Business Daily).  The true value of IBD® is the quality of the data they provide.  In addition to their full break down of the IBD 50 (Computer generated list of top stocks) along with their mini charts as well as their special stock screens and the Big Cap 20 list, their editorial section daily along with their end of the day market analyses video, sheds light on the news of the day as it relates to the markets.  

The reason IBD® is so critical for me is because they've combined the science of fundamentals and technical analysis with esoteric elements like momentum.  They've done all the leg work for me and I trust their proprietary ratings so it's a no-brainer as far as I'm concerned.  

I also like to cross reference my research with some other industry sources like Schaeffer's, Barron's, and Value Line.  My active tweeter account  @spotlightamin  is actually configured to instantly publish new content from these trusted sources and some of the people that I follow diligently throughout the day so have a look if you'd like a consolidated stream.  

This should give you a fair idea on getting through your initial prep work and building out your watch list with the lowest hanging fruit. 

Mentoring Program

If you are seriously considering getting up to speed with learning about Growth Stock Investing and trading, Zoom weekly live Meetup session may be one of the best ways for you to:

1. Look over my shoulder every week as I go through the process of looking for stocks of interest.
2. Analysing the stock charts to decipher the institutional behaviour.
3. How to Annotate stock charts on the brokerage platform for future reference.
4. Going through the Investors.com website to extract some fundamental and technical aspects of the stock.
5. Developing an appropriate Trade Plan for the stock.
6. How to position size when you take an initial stock position or add to the existing position.
7. Look over some of the conservative option setup to consider to either protect your stock or to increase the profitabilty for slight moves in the stock.

It will be a monthly subscription based service with a blog post weekly to help keep the subscribers abreast of the stock positions taken.  Subscribers will have the opportunity to present Growth Stocks of interest every week that they would like for me to highlight.

Send me an email at: 

investorspotlight@gmail.com 

if you would like to participate in this subscription service.  Class size will be limited to allow for everyone to fully participate in the discussion of the stocks.

Happy Trading!

Amin Hemani