Your Questions About How To Pick Stocks

Mark asks…

I want to start investing in the stock narket?

So I just turned 18 and I want to start investing into some stocks. I know there’s places like scotttrade but my dad said they might make you have a couple thousand dollars to start an account. But I was just looking to invest a couple hundred. Does scotttrade make you put in a couple thousand to open an account? If so is there another company that would open one for less?

John answers:

First: Go to the library and read every issue of financial magazines on the shelf.
Two: pick out your favorite magazine
three: find the last year of issues and read them
four; open a simulated account on Yahoo finance
five; simulate trading rather than waste your hard earned money
six: track your investments and figure out why the winners won and the losers lost
seven: after you know the answer to number 6 start investing money

Nancy asks…

Is now the time to get into financial stocks?

Are National City Bank and/or Citibank a good pick for a stock?

John answers:

Very hard and nearly impossible to say. My father (he is very knowledgable about stocks) thinks it’s almost time, but who knows. As for me, Im sticking with what I know best, retail. Im talking about companies like Apple (AAPL), Dick’s Sporting Goods (DKS), and Game Stop (GME).

Good luck trying to catch a falling knife.

Maria asks…

How to set an order for a stock at a price higher than its trading?

I want to set up a buy limit order that will fill if XYZ stock reaches an amount HIGHER than the trading price. in other words, i want to buy on the momentum, NOT the fall. last time i did a limit order it filled at a price lower than my limit. i dont want that.

so what kind of order is this? order stop? trailing stop? what?

John answers:

I don’t think a “Buy Stop” as suggested by @Raysor would work unless you had a short going on the stock. That order is designed to protect the shorter from a rising stock value much like a stop loss protects a long term player from a drop in price to protect profits.

Also this would not satisfy you requirement to buy on momentum….which is usually related to the difference of one price to the last price. A slow creep to the price point that you wanted would NOT be a momentum related rise….hence an order (if the BUY STOP were possible without a short in place) would be generated with no regard to momentum. (high momentum would be a fast rise to that point not a slow creep).

I don’t think that there is such an order that would fill your need.

It would be better if you learned charting techniques that are aimed at market timing…such as this chart that I use

http://stockcharts.com/h-sc/ui?s=JPM&p=D&yr=0&mn=6&dy=0&id=p79927633474

if you look at May 13 you see the Slow Sto pegged into the +80 range ( the slow Sto usually leads) the MACD has been rising since mid April….the trigger is the sudden rise in the BBwidth….that is the buy signal

the sell signal (or at least the signal the run is over) is on May 30…a slight drop in Slow Sto started (again it usually leads), MACD has plateaued and slight change in direction…again the trigger is the BBWidth…when it reverses direction the run is over and it is time to collect profits.

The next surge/serious fall occurs when the BBwidth falls to its normal trigger level (in this case < 7.5)

this happened on June 19….but "note" the Slow Sto is still negative…the MACD is still negative as well…..this time the rise in the BBwidth is a SHORT signal. The end of the short happens when the Slow Sto and MACD rises and the BBWidth falls as it did on June 26 (this is not as clear as most short ends are)

You see a repeat of the Buy signal on July 5…..All three indicators must react before an end of the run is shown….even though the BBwidth fell the MACD and Slow Sto were fine…this would be a hold for me or you could use the BBwidth as a trigger to sell.

This is a 5 min cook's tour….if you look at other complete chart posts of mine you will find I combine this with 3 other charts.

This is a lot better than arbitrarily picking a stock and setting some kind of buy order in the future IMHO

James asks…

Can anyone give me good information on day trading penny stocks?

I recently started day trading penny stocks as a hobby and I’ve made some pretty good returns and was thinking of maybe turning this into a full time job. I use one company called the Bull Exchange because you can get great results really fast from their stock picks. I’m thinking to diversify into about 10 different penny stocks each day in hopes of making 100 to 200 dollars a day after commissions and I was wondering if anyone had any good experience they could share with me on how to turn this into a full time job? Thanks

John answers:

Bull Exchange or any “stock picking” site is either a pump and dump scam or nonsense. No real stock analysts work on penny stocks, because there isn’t enough reliable information. You won’t ever see Warren Buffett or Hedge Funds wasting time trying to invest in companies with unknown accounting numbers and principles. Plus, if you knew a stock was going to do well, you wouldn’t tell the entire internet. Google and research “pump and dump scheme” before you continue blindly following a website.

On the whole, there is no way to successfully trade any sort of stocks without tons of screen time, ie practice, training your instincts, learning fundamental analysis, TA, etc. Fwiw, if you’re going to trade, play regular stocks, currencies, etc. Penny stocks have low liquidity, less financial information, higher chances of going broke, more opportunities for dump and pump schemes, etc.

Paul asks…

How do same day substitutions work in stock options?

Lets say that Coca Cola stock is trading at $44.05 on the expiration date and I have ten $40 call options. Parity would be at $4.05. Lets assume that the bid on the stock is $3.95 which is $0.10 below parity. In that case I would lose $100 by selling my option on the open market. I understand that most brokerage firms have what is called same day substitution which means that I can sell 1000 shares of the stock for $44.05 and exercise my $40 calls without having to put up any margin if I notify my broker in advance of my intent to exercise my call options and complete the transaction in the same day. Do I need a margin account to do this and how much advanced notice do I need to give my broker to do a same day substitution?

John answers:

Yes off course why not. This one more profitable work as a part time or full time. I would suggest to you how to increase you income or financial strong. There is definitely some amount of risk involved but once you get everything right then this would be the easiest money you are going to make in your life. Learning to read stock tables and charts patterns is very important. You need the perfect amount of guidance and education to make the perfect stock trading strategy and winning stocks picks. For more information about this just visit 11charts.com

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