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Stock Market Data Calculations - Choosing Stocks Part 2/2 - Some Obvious Factors

Jun 21, 2008
Let's say you are looking to make some short-term easy gains in the stock market. Who isn't? Significant gains happen on a daily basis. The question is how can you find the stocks about to make theses gains without being an insider or receiving a hot tip from your Uncle?

Here is a list of some easy factors I have found which often indicate where the profit can be and you won't have to rely on your Uncle.

Let me further define exactly what we are looking for: An undervalued stock that has the ability to make significant (>5%) gains in the near future.

Factor #1

Recently Depressed: I don't mean as in a mental state. Has the stock had a down turn in say the past month? Do not let a sudden plunge detract you from the stock, these are often caused by a misinterpretation of the stocks data and may be an indicator that a correction is upcoming.

Factor #2

Previous days open to close (you can look at a chart): Has the stock started to come back. We are not looking for a large improvement, simply a sign that the slump is over.

Factor #3

Analysts Opinions: I have found it bodes very well for a stock if 1 or more analysts have rated it in the Moderate to Strong Buy range. Opinions, weather you agree with them or not, influence the market and as such make themselves a valid indicator.

Factor #4

No news: No news is good news. If nothing has happened to the stock in the recent past and the market has had time to digest whatever reason (if there is one) the stock is currently deflated the time for a change is often near.

Factor #5

Increased Volume: Like a recent rise in price a recent increase in the volume of trading shows that the stock is starting to draw some people's interest

Other factors:

Ratings (MSN, Charles Schwab, etc. all have their own rating systems) - although these can indicate they often include factors better suited for longer term, stay the course, type gains. My suggestion when reviewing any of these ratings is to not give them much weight when contemplating the short term

Earnings Reports - is one upcoming or just passed? If so you may want to count this as recent news and disregard the stock. However, you may want to do a little more research. A decent earnings report for a deflated stock can often bring some of your biggest gains.

Your own - I often find that each investor has his or her own special tidbit of data that they have found helpful. Feel free to add yours here.

Do all these factors often occur together - Not for any one stock, but if you look at a large number of stocks you can usually find one or two on a daily basis. I have found several methods which are a great help in identifying stocks displaying this type of behavior such as comparing stocks to their indexes, watching for volatility, detecting movement, etc. What is most important is that when they do occur - and you find them (baring catastrophic disaster or a monumental over-site) - you have an almost certain candidate for a decent short-term gain.
About the Author
Stock Calculations (http://www.StockCalculations.com) is a complete macro research package. We'll do the macro, you do the micro. When it comes to manipulating stock data, it's is a real time saver. Stock Calculations completes a total package for wise investing.
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