Zeev's Turnips Patch-No Politics (ZEEV)

[fabian]

W-stocks, the opposite of death-stocks, how to identify...

"W" stocks are one of the most powerful setups for identifying stocks with a high probability of major gains.

When a stock goes W [stands for Winner, Wonder-take your pick], the probability of the next big swing trade move being up is about 75% [in our experience, observation, and opinion only]

We were asked if we were serious about our piece on Death "D" stocks.
Yes-A tremendously powerful tool at one's disposal IOHO.

What you need to know about W stocks is that they are the opposite of D stocks.
Take every D stock characteristic and reverse it.

You should review post: http://investorshub.advfn.com/boards/read_msg.aspx?message_id=38069509
and reverse every characteristic.
We would urge you to spend time and fully understand this and the previously linked post. Print them out if need be.

The three keys to a stock gaining W status or "going W" are:

1. Significant sudden big increase in price
[most often it will show as a gap up at the open although a gap is not required]
2. Significant increase in volume...the more, the better
3. News. Unexpected news that caused the above
Amateur investors are afraid of W stocks. Why would you willingly pay significantly more than the stock was yesterday?
Doing well in the market is not intuitive. In some ways it requires going against "human nature"
We don't rush to go buy a skill saw or new car when they raise the price 5 or 10%.
The market is not buying a skill saw or car.
You buy when the reward to risk ratio is best and the reward risk ratio being best is not a function of where a stock's price is vs. it's 12 mo range. Many times the reward to risk ratio can be better when a stock goes W. [which is normally well up from it's 12 mo lows].
When it goes W, the reward to risk ratio "resets".
The best W stocks are those already in an uptrend.
A stock "goes W" if it opens with a good % gain, on high volume, accompanied by news. The best kind of news is unexpected earnings news although other news will do.
There have been tons of W stocks since March 9th.
Some stocks have gone W, then gone up, then gone W again confirming the next move, A few have even gone W three times which is very unusual in less than 3 months.
Ordinarily, one would buy as close to the price a stock goes W as possible. It is riskier to buy a stock that went W a month ago and has gained another 25$ or 35% since it went W.
Best to move on and wait for a new W stock.
What is an example of a W stock we recently took advantage of?
Two weeks ago the day before engs announcement we bought more JST at$20.19. The technical action tipped us of that the engs would be good and the stock might go W. Engs came in better than expected and the stock went W at the open. We added more JST when it went W...buy in was $23.11 [buys were reported on Zeev's]. Others probably thought $23.11 was "too late" to get in as it was a 6 mo high and the stock had traded as low as the $18s the day before.
We had no hesitation adding when it went W.
JST in ony two weeks of sideways market action had been a big winner and is now at $29.10.
The beauty of D and W stock methodology is that it's so easy to identify. The big price increase [or decrease it's a D stock] and the big volume bar underneath sticks out like a sore thumb. Once you see that, check to see if it was caused by news.
As you might expect, W stock swing trading works best in a netural to uptrending market just as D stocks work best in a neutral to decling market.
We would also highly recommend IBD as a further check of a W stock prospect. We favor W stocks with high ratings by IBD.
Here are just a few stocks we can point to that went W in the last few months. FSLR, FEED, WX, JST. Check them out and you can easily spot when they went W and then look at the following action.
Do not expect stocks to gain every day after they go W.
JST went right up but it's very normal for a W stock to consolidate or pull back a little to catch its breath and rest up for the next move.
One thing about W stocks is they look kind of "scary" to buy when they go W. They seem so "high". High is a very relative term in the markets and in the passage of time...just like JST, FEED, WX, FSLR...what was high does not appear so high after all.
By the way...check out FEED especially. It has been a marvel.
FEED went W March 16th when it gap opened on volume at $1.50, up $.30. It again went W on engs news April 16th when it went from $2.50 to $3. FEED again broke out yesterday to over $6 on very high volume but it did not go "W" as there was no news.
A side point. Today we were asked about BAC and AIG. Our reply was we don't screw with crap stocks. They are companies with flaws. We don't care if they go up. Why take on un-necessary risk?
There are tons of stocks with charts as good or better but with way better fundamental characteristics and IBD ratings.
Unless you are a homeless person, why go dumpster diving?
Hopefully none reading this is in a position where they dumpster dive for discarded junk. We see so many dumpster diving with their hard earned money when they woudn't think of dumpster diving at the apt. complex down the street.
Why dumpster dive in the market when you don't have to?
Leave that to the rag pickers.
[this is not a condemnation of low priced stocks of which we have found many gems in the last 6 mo-low numerical price is not the issue].
If you have good main income outside of the market, then by all means treat the market, investing, trading like some funny game and break all the rules. Cut winners quickly and occasionally let losers run. Get your kicks picking up $1 bills on a busy freeway for the fun of hoping you don't get run over. Hold prejudices/biases like perma bear, perma bull. Don't spend the hours it takes to do the research. Just don't be surprised at the outcome.
For some of us, this is a business. We spend 60+ hours a week at it, it's our job. It is interesting, even enjoyable at times, but...no game. If we fail, there is no safety net and no Gov't handout for failure.
W and D stock methodology are just two tools in a tool bag.
We have many other "tools". Know your tools and use the right tool for the right job.

Fabian
The normal disclaimers apply. We are no longer a financial advisor [thankfully]. We are only registered with DMV [Dept. of Motor Vehicles]. We work for ourself only for the last 19 years and intend to keep it that way.
Thoughts and opinions expressed are our own and should be considered a starting point for doing your own D.D. and research. We are not recommending you or others buy or not buy any stocks mentioned. We are not recommending you adopt any stragegy mentioned. Your decisions and actions are your own.