Stock Pick of the Week: January 1st, 2012

Happy New Year everyone! While I can't report that I had a stellar return on last week's pick I can say that it wasn't a waste of time. Last week I said I wasn't going to buy into it... yet. I wanted to wait and watch it play out. Thank goodness I did.

Last week there was only 4 trading days because of the observed Christmas Holiday on Monday.  So we notice that the candle stick pattern from the Thursday and Friday before looks like it's a bullish pattern and indeed on Tuesday, it did jump up... a little.  Not enough for an investment of $500 to turn any sort of profit.  In fact, because Wednesday closed lower than the Tuesday close, I may have made a couple bucks on the trade but then lost it all plus more on the trade commissions.

Right now this stock is kind of playing out the way I thought it would.  William's %R is dropping, volume is leveling out and the candles are getting ready to drop into the TAZ.  According to Elliott Wave, we're looking at entering the 4th wave this week.  Also according to Craig's 4 wave system, we're entering the 4th wave as well.  This would be a great time to short the stock if we had enough money to do it.  Unfortunately, you need a minimum of $2500 to short stocks so for now we're going to wait.

Remember, I'm only investing $500.  That means that the risk comes pretty quick.  I want to be absolutely sure that I'm going to make at least a $5 return after commissions on each investment, preferrably more.  Thank goodness I had such a high return last month.  It padded the cash reserves, removing emotions so I don't feel the need to get in on the first tempting stock I see. That leads to excessively risky trades.

Just like Mr. Warnock said about reading Astrological Charts, with reading a Stock Chart, you need to be almost clinically objective, even when it comes to taking losses.  We're not always going to have winners.  That's just reality.

And speaking of Astrological Charts and Stock Charts, I had someone ask me if I ever thought to combine the two fields.  I would love to learn how to do that, so this week I will scour the internet to find hints and clues.  In the meantime, I'll cast an horary chart and post my interpretation next week.

Until tomorrow...

How to Become a Day Trader

I promised I was going to share some insight into trading, though to be honest I'm really not a day trader... yet. I hope you'll join me and share some of your experiences. Here goes. One of the best free sites that I've found is called Swing Trade Stocks.com. The author of the site offers a great basics "course" if you will. The tricky thing is this: even though the overall tendency of the market is predictable according to the Elliott Wave Principle, the daily activity is more volatile. It's kind of like astrology. You look to the stars for signs and seasons to determine the general happenings of things, but to predict something as minute as an atomic shift in space is extremely complicated and pert'near impossible. But our goal as apprentices, is to learn the large circles (or waves) and then work our way inward. So the next step, after checking out the finviz.com to be the best free stock screener with definable fields, then I pull up the charts on stockcharts.com to take a more detailed look at them, and if they look appealing I'll follow them on freestockcharts.com. Finally, we'll need to experiment before we just go and blow our money on something we really don't know a whole hell of a lot about. I found a great stock trading game at How The Market Works.com. I encourage you to try out all of the above and we'll explore each of them a little more in depth in other posts. Good luck and happy trading.