Adding Stocks to a Watch List
[See "Our Watch List selections" at the end of this post]
August 16, 2010
The date is not really important and the way the market looks today will probably be different tomorrow and certainly much different in future week and months. But it is useful to choose a number of stocks that, for whatever reason, we find of interest, whether they be stocks in the news, with upcoming earnings releases, stocks from active sectors, traditional market leaders, whatever, they are useful to watch and follow their progress to see whether that progress can be related to any particular “standard” stock chart patterns.
A look to see how the stock market is performing should be a regular practice and appropriate to do and briefly comment on in this blogsite, called How to Trade Stocks Guide, because it gives us reference points for comparison, especially with our emphasis on the use of stock charts to enable us to observe what happens with the market and some specific stocks in the following weeks, using real stocks for reference with their action depicted on their stock chart.
We can look at the stock market from the viewpoint of trading and what’s involved in selecting stocks to trade and introduce terminology used to describe its various aspects in what is shaping up to be an active market for 2010.
I assume that anyone who may initiate a search and clicks on this site is probably in the early stages of becoming involved in trading, wanting to do some due diligence by checking out various information sources as they begin to learn how to trade stocks or they may be wishing to add to what they already know in order to prepare themselves for the real action that will involve putting cash at risk with the anticipation of making winning trades.
Today we will choose some stock candidates
– but for illustration purposes only!
Let us select some stocks to examine so we can just comment on them and their characteristics and their trading patterns if any and why they may be worth buying. Or worth selling.
There are thousands to choose from but it might be more interesting to select a well known issue or two, such as Apple, or Rimm, in the technical sector and a few from other sectors. We can follow their progressfrom time to time, or see how they have performed in recent times by using available internet information sources such as CBS Marketwatch or Yahoo Finance, and we will see whether any conclusions can be drawn from them. We might also look at a couple of indexes, exchange traded funds known as ETF’s. whatever we can use for discussion while trying to keep some semblance of continuity as we cover various aspects of the market.
Don’t trade against the trend
We will discuss trends later but for now I should just say that we are now in a down trend of a market correction that started about a month ago after the previous six months of upward trend since an earlier month-long correction in the summer of 2009. A general rule is to refrain from trading against the trend unless there are very good reasons to do so. But in order for us to have an example of an active stock to discuss, I will select one that I think may have merit and take a small long position ( only for my Pretend Portfolio of course). If it turns against us, that is, falls in price, we will be able to demonstrate what to do to control the amount of loss that we will suffer.
As we gradually introduce descriptive terms and processes we will build a glossary to provide a more detailed explanation for later reference, for instance, a description of ETF’s or sectors, mentioned above, and why some sectors are more in vogue than others.
Stock charts, an important visual aid
A stock or stock-index chart shows very graphically the fluctuating prices over a particular time-span leading up to the present and it can help in tracking the performance if we continue to watch that same chart, with others, as the trading days and the market action unfolds over the following days and weeks. An explanation and examples of charts are given in following pages of this series.
Closing prices
It is customary to look at the closing prices for each day’s trading on the DOW, the Nasdaq, and the S&P, the major stock exchanges that provide a barometer of the current state of the market.
Prices fluctuate throughout the day but it is the closing price that is the most important to watch, and sometimes the trading activities that take place towards the end of the trading session can indicate something of value when considered in the context of the stock’s trading pattern or latest news.
The charts and the recent past
A simple perusal of a chart of the trading over the last two years, shows the market is currently experiencing a correction after being in an upward trend since early March of last year, 2009. There was a prior month long correction starting in June. The link below will take us to this chart.
At the time of this writing, February 12, 2010, the charts show that the primary trend remains upward but the DOW, having broken through support levels at 10,000, is indicating a further correction to possible support at 9700, or lower to 9500, or even lower than that.
At this date, events affecting the market include the sovereign debt problem, as it’s known, meaning the financial crisis in countries of the European Monetary Union, and especially in Greece, Portugal, and Italy, where massive public debt is overwhelming. The US and the UK are also grappling with similar problems for which the outcome remains uncertain and the markets abhor uncertainty. Attention is also focused on the U.S. Dollar.
Other markets around the world have problems too while China tries to slow growth in its economy in order to contain inflation.
So the foregoing is already giving us a few terms for our explanation list as we begin our discussion on our How to Trade Stocks Guide website.
The “market” we refer to is comprised mainly of stocks listed in the indexes of the Dow Jones, the NASDAQ, the NYSE and the S&P 500, with perhaps some exceptions.
The explanations for terms already used in the above paragraphs can be found in the [proposed] Glossary that will be commenced in a day or two
Terms so far are:
Correction ♦ Trend and primary trend ♦ Support and resistance ♦ Stock and index chart ♦ DOW, and also the Nasdaq and the S&P
Moving averages, the 20-day, 50-day, and 100-day
Our Watch List stock selection for future analysis:
Our Watch List should include AAPL, RIMM, GOOG, TXN, MSFT, IBM, XOM, SU. and BP ( new addition added after the oil spill in the Gulf of Mexico) We can elaborate more on these choices when we have had a chance to check their charts which can be seen without charge at http://stockcharts.com/. Just enter the ticker symbol: AAPL, RIMM, etc) in the box beneath the menu bar and click “GO”. You can also check them out at http://finance.yahoo.com/.
What’s next?
Next we want to look at charts and what we can deduce from them, we will be noting the patterns of stock movement and their relationships to superimposed reference graph lines such as the 20, 50, and 100 day moving averages — and others.
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Tags: Explanation by Jim R
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