Skip to main content

More tips for TradeRadar users

As I continue to use the TradeRadar software to analyze many different stocks in various situations, I am getting a better feel for the strengths and weaknesses of the BUY and SELL signals. There are definitely a few nuances users should be aware of when trading based on the signals.

Beware of earnings announcements --

Let's use a BUY signals as an example. Things will work the same for a SELL signal except in reverse.

When a BUY signal is generated, it is the result of a clear downward trend being broken. The stock has made a bottom and begun moving up. The downtrend may have lasted six months, a year or even more. Given the fact that the stock has been in a bearish phase, there is a certain amount of risk in buying the stock. We often see false rallies within bearish trends and there is always the potential that a BUY signal is a trap.

This is why I always recommend that users of the software do some research to become comfortable with the stock generating the signal. It is always worthwhile to verify that the fundamentals are turning positive and the TradeRadar signal is confirmed by a few other technical indicators.

I bring this up because earnings season is upon us. We often seen extra activity in a stock just prior to its earnings announcement. There are times when this activity moves the stock enough to generate a TradeRadar signal. If the earnings announcement is positive, the stock continues the new trend identified by TradeRadar. If the earnings announcement is not so good, the stock can get slammed. Hence, it pays to be extra careful at this time of year and look for confirmation of the signal.

Those who have purchased the TradeRadar Alert HQ lists of stock signals know that I always provide several technical indicators with each stock pick. These indicators include 50-day moving average assessment, DMI, Aroon and Chaikin Money Flow. These same indicators can be viewed at StockCharts.com and I would encourage users to take advantage of this great, free site to assess the charts of stocks that have generated signals.

Look for good entry points --

Another aspect of the how the TradeRadar software generates signals is the fact that a stock has to begin moving before the signal will manifest itself. In the case of a BUY signal, after a downtrend completes, some stocks then move up quickly. What I have observed in these cases is that by the time a signal has been generated, the stock has moved into a somewhat overbought state. This can be seen by looking at RSI or Bollinger Bands. Looking at the charts at StockCharts.com, a user will often see the stock pressing up against the upper Bollinger Band.

In this kind of situation, it can be prudent to wait. Often the stock will back down toward the midpoint of the Bollinger Bands. In terms of timing, it may be more appropriate to initiate the trade at this point. It provides a lower risk entry point.

I hope users of TradeRadar find these tips helpful. If anyone has tips they wish to share with the community of users (and there are about 500 of us now) please feel free to comment on this post or begin a discussion on our user group forum.

Comments

Popular posts from this blog

Unlock Stock Market Profits - Key #1

This is the first in an ongoing series of articles where I discuss what I feel are keys to successful investing. It is based on a post that provides a summary of the ten keys that individual investors should use to identify profitable stock trades. (Click here to read the original post)

There are two basic steps to investing. First, you need to find stocks that seem to have some potential. Then you have to determine whether these stocks are actually good investments. There are many stocks that at first glance look interesting, but further research reveals that there are too many negatives to warrant taking a position.

This first post in the series starts at the beginning: getting good investment ideas.

Key #1: If something special is happening to a stock, it will be reflected in some kind of unusual activity in the markets.

As individual investors, we will never be the first to know; however, unusual activity can be an early sign that allows us to follow the Wall Street professionals and …

Unlock Stock Market Profits - Key #4

This is the fourth article in a series of posts describing 10 tools to help you identify and evaluate good investing ideas. It is based on a post that provides a summary of the ten keys that individual investors should use to identify profitable stock trades. (Click here to read the original post)

With this fourth post, we will continue another step along the path of finding stocks that seem to have some potential. The first post in the series discussed how to use unusual activity to identify investing ideas. The second post described how to use stock screeners. The third post described how to use lists of new highs and new lows. This post will focus on identifying social or business trends in order to find investing ideas.

Information on new trends might turn up anywhere. In conversation with friends or business associates, in newspapers or magazines, on TV or though your work. The key is to be aware of trends and how they start, stop or change. We'll start by describing what to lo…

Free stock alerts, Trend Leaders, Bollinger Band Breakouts and Cash Flow Kings for Jan 16, 2009

This post is to announce that the latest list of free stock alerts is up and available at Alert HQ. Each week we scan over 7400 stocks and ETFs looking for fresh BUY and SELL signals. We apply a combination of proprietary and standard technical analysis techniques to identify those stocks that are beginning to move. Our goal is to identify stocks or ETFs that are undergoing reversals, either to the upside or to the downside.

Wait, there's more...

We also use the Alert HQ process to generate more free lists of stocks and ETFs

The first byproduct of the Alert HQ process is the Trend Leaders list, our collection of stocks in strong up-trends. These stocks are registering strong signals using Aroon analysis, DMI and MACD. They are also above their 50-day exponential moving average. This week's list is now available at the TradeRadar site on the Trend Leaders page.

As another byproduct of the Alert HQ process we have generated a list of stocks that have broken either above their upper…