A good stock trading tip is to look for well-formed base patterns in potential stock trades for higher returns. Base patterns form the launching pad that runaway stocks use as a platform to explode into higher price values.
Consider this lesson from Investors.com:
“When scouting for excellent base patterns, focus on those that have more up weeks in heavy volume than down weeks in above-average trade. If that’s the case, buyers are in control, not sellers.
A stock’s price action is important, but a move means a lot more when it’s accompanied by big volume. This combination can give you clues about the future direction of a stock.
Herbalife (HLF) forms a classic base pattern as accumulation is revealed through the stock’s volume.
CAN SLIM investing involves identifying stocks being scooped up by the big money. So focus on stocks in bases with more up weeks in high turnover than down weeks in big volume. They’re the ones being accumulated by professional investors, such as mutual funds, banks, insurers and hedge funds.
On the flip side, bases with more down weeks in big turnover than up weeks tell you that they’re under distribution, or being sold heavily by institutions.
Professionals don’t always buy at new highs. Some do their shopping during consolidation periods, which create various chart patterns.
Institutions will take weeks or months to build a full position into a stock. Their buying leaves footprints in the form of tall volume bars…
Exchange Traded Funds have alot to offer over individual stocks (Flickr.com).
The stock market and volatility go hand-in-hand in today’s 21st century stock market but Exchange Traded Funds, ETF’s, have helped smooth over some of the market’s peaks and valleys. If you’re goal is steady gains then you’d be hard-pressed to find a better instrument to help you along that path. If you’ve never considered ETF’s as part of your overall strategy, then you may reconsider after reading about some of the unique advantages that they offer to help your trading achieve smoother performance without the sleepless nights.
Access to Alternative Markets
ETF’s give you access to markets that would otherwise be out of your reach. Gold, currencies, copper, timberland, energy, and other investment classes are available to you through ETF’s instead of you having to trade the Forex, store physical assets, or pay margin costs in the Futures market. Plus, you can hedge portfolio using ETF’s but without the costs of rolling over futures contracts or paying the wide bid/ask spread in the Forex.
Option trading can help you pick up strong stocks at a bargain by selling put options and there is fertile ground in the energy sector. A recent option play in the natural gas segment that might be worth taking a hard look at. Forbes contributor, StockOptionsChannel.com, wrote a good piece on a stock that has potential but could be picked up at a discount and makes a compelling case, but there is one thing that troubles me about it.
Check it out and be sure to read my commentary at the end:
“Looking back to 166 days ago, DCP Midstream Partners LP DPM -0.51% (NYSE: DPM) priced a 12,500,000 share secondary stock offering at $48.90 per share. Buyers in that offering made a considerable investment into the company, expecting that their investment would go up over the course of time and based on early trading on Tuesday, the stock is now 7.5% higher than the offering price. It should be noted that investors at the secondary have collected $1.50/share in dividends since the time of their purchase, so they are currently up 10.6% on their purchase from a total return basis.
Investors who did not participate in the offering but would be a buyer of DPM at a cheaper price, might benefit from considering selling puts among the alternative strategies at their disposal. One interesting put contract in particular, is the January 2015 put at the $45 strike, which has a bid at the time of this writing of 45 cents. That would result in a cost basis of $44.55 per share before broker commissions in the scenario where the contract is exercised. If the contract is never exercised, the put seller would still keep the premium, which represents a 1% return against the $45.00 purchase commitment, or a 2.3% annualized rate of return.