Friday, July 28

Daily Stock Trading Ideas

Welcome to Moby's Daily Stock Trades!

With all this volatility in the markets, stocks are often oversold and overbought -- creating very strong short-term opportunities to profit.

While we are normally long-term investors, this is a good way to try and profit in the short run!

Therefore we compiled a list of up to 10 stocks with solid short-term momentum -- aka selecting stocks that will likely continue their upward trend over the next day or two.

This list will update EVERY SINGLE DAY, so make sure to check in!


What Is Momentum?

The main idea behind momentum is that stocks that are increasing in value are likely to continue to increase in value. And conversely, stocks that are declining are likely to continue to decline.

By using the names on this list, the odds are in your favor!


Selection Method:

We use large-cap US-listed companies as our starting universe, and refine it down to a list of about 10 names.

We take a four-step approach to selecting these stocks:

  1. Look for stocks with consistently positive momentum over the last two weeks.

  2. From those stocks, we look for stocks that have had consistent movements upward. We want to avoid stocks with few large jumps, as that is a less predictable path forward.

  3. We look for stocks that aren't just moving with the market (i.e. lower beta is better).

  4. We diversify across sectors if possible, selecting at least one stock from each sector of the stocks that get through to this stage.

In the end, we have a group of stocks that are somewhat independent of each other but with positive trending prices.


How to Use This List:

This isn't a strategy like our GARP and High Dividend strategies, nor is it like our long-term stock picks, these are what we would consider short-term trades. The idea is that you invest in these companies while they're moving upward and sell once the trend starts to die. In general, these positions aren't meant to be held longer than a few days.

With that in mind, there are a few ways to use this list, depending on how actively you want to manage your positions.

  • Passive

    • If you don't like looking at your brokerage account every 5 minutes, you can buy all the names on the list and hold them through the day.

  • Active

    • If you fancy yourself a little hedge fund and like to trade in and out of positions, you may want to take a more active approach.

    • A good rule of thumb is to use a 2% drawdown as your stop-loss.  So you can buy all of these stocks at the beginning of the week. Any stock that loses 2% from that initial buy, can be closed out, and let the winners run. As your winners climb higher you may want to reduce your positions a little and lock in those gains.

A Word of Caution:

While buying stocks with strong long-term momentum is a great and relatively safe way to invest, these stocks represent very short-term momentum.

Short-term momentum is much more volatile and should be approached with caution.

Short-term momentum can also reverse quickly, so we encourage you to set a stop-loss and profit target when initiating a trade.