In the last newsletter, I promised to provide some potential long candidates which are shown below. Before anyone jumps on these remember my #1 and #2 rules:
 

I determine my criteria for possible candidates. Keep in mind my criteria and yours may not be the same. I wanted to make sure I had good quality growth stocks with a long history of solid growth and financial stability. Granted they maybe a little shaky now. To this I used the Conscious Investor program from http://www.consciousinvestor.com/ . This is a program intended for long term investing. It was developed by Dr. John Price from Australia. I use it for my long term portfolio. However, in this case I decide to use it because it does an excellent job of finding companies that have a long history of being a top performer.

My intent, however, is not to hold these for a long term play but as short term trade. With the current market conditions, my thinking was that stocks that have performed well in the past will be the ones to recover first. So I wanted to start with solid companies. 

I decided for this exercise I would use most of the default values in the program. I'll list them here but not explain them. For that you can checkout the program.

1. Financial risk.... 50%
2. Stability............ 85%
3. ROE................ 10%
4. Market Cap...... 500 million - default is 10 million - I wanted larger companies
5. Years of history. 4
6. Base stock return on current price 
7. Return per year at current price...... 10%
8. Forecast growth............................. 100%

This resulted in a list 192 stocks

I exported the list to an excel spreadsheet and created another excel file of just the symbols.

I saved this as a text file.

I imported the text file into Telechart as the top-growth-companies watchlist.

I removed all stocks with the 90 day average volume less than 200K. That lower the list to 122 potential candidates

At 10:15 am I updated my Telechart historical data. This allowed me to see the potential patterns that could develop.

I then sorted the watchlist to look for bullish Kicker signal. Now I am down to 12 potential candidates.

I quickly browsed the 12 stocks and removed the one I did not like. Only 2 were removed

Using a paper worksheet I enter:

1. Stock symbol
2. Long
3. Entry price
4. Exit Price
5. Target #1 price
6. Target #2 price
7. Target #3 price

I opened my excel portfolio tracker spreadsheet and on the candidate worksheet I entered the paper worksheet information. Below is the results in 2 parts due to the width of the spreadsheet. Part A consist of the inputted data plus the calculated Reward to Risk for each target

Part B consist of the calculated results for number of shares, stop loss%, dollars at risk based on the initial stop loss price, profit for each target if you were to take partial profits as it hits each price target, Total profit potential, Max dollars to be  risked on this trade, and Max dollars to be invested in this position.

Notice that although we intended to "Risk" $500 per position several cases the resulting Risk is far less. This is because our other limiting factor in calculating the shares was the total dollar invested. The calculation is set to not allow the Max Risk or Max dollars to be exceeded. 

Above I told you I sorted on the Bullish Kicker signal. Reason being that is the strongest and most profitable of all candlestick patterns. All of these stocks, with the exception of ITW, will have formed  morning star like signal if they close above their opening price.  

Prioritize the list based on your choice between, Reward to Risk, shares or total profit.

Since I prefer to enter at the closing price I will wait until 3:45 pm today, March 10, 2009. Then based on my prioritized list enter the top 3 if and only if they are still valid trades. Remember the Morning Star signal does not require confirmation. 

Summary:

As always I want to hear your thoughts on these and any subjects. Please, feel free to send an email with your suggestions, complaints, and comments to    kermitp@tradingourway.com  
 
Thank You, for taking the time to read our newsletter and good trading to all,
 
           Kermit Prather