BEING CUTE WORKS IN HOLLYWOOD, BUT NOT ON WALL STREET
There are so many traders and investors out there who try to be cute with various strategies that make them feel as if they are the second coming of Paul Tudor Jones, Bruce Kovner or Paulson. When it comes down to it, if you want to invest in small to mega-cap stocks, it pays to look for those stocks who have the most momentum, relative strength or smoothest ascending channel and buy them at various opportunistic points.
Those opportunistic points will come around every so often. They usually come in the following forms:
1. A perfect technical pattern. They come in various shapes and sizes. And they can leads to some decent profits, with minimal risk if you know where to lay your stops and what to look for once the move begins.
2. A dip. You want to buy the strongest names during the most recent rally whenever the market dips. Often times, people try to get wayyyy too fancy, and buy names that have some sort of value angle or future catalyst. Then when the rally resumes, they wonder why the market always seems to leave them behind. Don't be fancy...stick to the names that have worked in the past. I outlined five of them last night.
3. A catalyst. If there is one catalyst to play on a high-flying stock that is constantly hitting new multi-year highs, it would be earnings. Earnings rarely disappoint on these stocks. And often times, those names with the greatest level of doubt, will see the greatest spikes following earnings...think NFLX. A good number of shorts and skeptical bulls makes this type of play possible.
Bottom line, focus on what's working...odds are that it will continue to work. Simple...just don't allow yourself to get in the way.
