Jack Carter Trading

Last week, I analyzed the broad market for you using three ETFs that track the three major indexes:

DIA which tracks the Dow Jones
SPY which tracks the S&P 500
QQQ which tracks the Nasdaq

In that post, I showed you how I could tell the broad market was weakening… or at least how it wasn’t as bullish as it had been for the last few months.

That was Thursday.

3x More New Lows Than New Highs

Now on Tuesday, we have 3 times as many stocks making a new 52 week low as we have making a new 52 week high.

Only about 7 stocks really qualify as making new highs according to my custom-built TrendPoint software.

Meanwhile, there are 40 or more making new 52 week lows.

That’s a real tell-tale sign that the market has cooled off.

Now the market’s stuck between being bullish and bearish.

But when you have 3 times as many stocks making new 52 week lows as you have making a new 52 week highs…

That tells you that maybe there’s some more money on the short side.

Spotting Bearish Opportunities

I haven’t talked about shorting stocks in forever, but I’m going to give you a few tips:

First, stocks fall a lot faster than they go up.

The joke is that “Stocks take the stairs up and they take the elevator down.”

That’s just one of the best parts of being in a small bearish condition like we seem to be in right now. Things can move really fast.

Second, you can find really great stocks to short just by finding a list of stocks that have hit a new 52 week low.

Remember when I talked to you about being in a stock picker’s market and how you can find stocks that are going up even in a bear market?

Well, I also have a set of rules for spotting sinking stocks:

New 52 Week Lows – Find a stock that’s making new 52 week lows. You can do that on ****this page.
Over $100 – When you pick one of these new 52 week low stocks, it’s best if the stock is over $100. That way, psychologically, it seems to have more room to fall. I wouldn’t short a low-dollar stock.
4-6 Month Downtrend – It should be trending down steadily for 4-6 months, consistently making new lows.
Over 500,000 shares average daily volume
Must trade on a major exchange
Must have tradeable options

Free Filtering Tools

I use my custom-built TrendPoint software to filter out stocks that don’t meet these rules.

But you can do the same with some free tools.

First up, these pages will give you lists of stocks hitting new 52 week lows:

Wall Street Journal – New 52 Week Highs and Lows (scroll down to lows)
Barchart – 52 Week New Lows
Yahoo Finance – Recent 52 Week Lows
Barron’s – New 52 Week Highs and Lows (scroll down to lows)

Next, you’ll have to use a tool like this FinViz scanner to set the rules like minium price, average daily volume and so forth.

And finally, use this trend spotting tutorial to verify the 4-6 month downtrend.

Roll Up Your Sleeves

So start to look at some of those higher priced stocks that are coming down.

And remember, you don’t have to short 100 shares. You can just short a single share.

Or you can even paper trade it to make sure you work out all the kinks before you risk real cash.

Get some practice before you go to the big leagues, you know what I mean?

Trade well,

Jack Carter

Just a quick note: I went live with my fellow trader, Geof Smith to help him share how he’s using what he thinks is the most overlooked ticker in the stock market to target an extra thousand per month. Check it out right here.

Now back to our top stocks for the week:

To help you discover the power of trends, every week, every week, I share with you a handful of the top trending stocks.

These stocks are picked by the custom-built TrendPoint software I designed to pick the strongest trending stocks in the market right now.

If you know anything about me, you know that every trade I get into starts with a trending stock.

Unless a stock is in a strong trend, I don’t want to hear about it. In my book, wishy washy stocks are the quickest way to losing money.

This Week’s Stocks

Markets have been losing their steam a bit lately, but they’re still technically bullish.

So here are your 3 bullish picks for this week.

Remember, we always trade in the same direction as the broad market.

FANG
GOOG
INFA

And don’t forget about last week’s picks, which you can find here.

This week’s stocks show a strong trend and could still be in play for the next few weeks.

What can you do with these stocks?

Well, there are a couple of things you could consider — after doing your own research, of course:

You could just buy the stock. This is probably the simplest thing you could do. Then just wait for it to go up and sell when you hit a profit target you’re comfortable with.
You could buy an option. You know I’m not a fan of speculative plays, but every once in a while it doesn’t hurt to throw a little cash at a speculative option. Of course, while options can move bigtime if the stock goes up… the downside of options is that you have a time limit on how quickly you need the stock to make that move.
You could do an income play. If you’ve been following me for any length of time, you know that I’m a big fan of income plays, because they increase your odds of winning. We do this by SELLING options instead of buying them. If you haven’t tried your hand at income trading yet, I urge you to try this exercise for yourself.

Without risking any money, it will really let you see the power of income trading and why it’s my favorite method.

Whether you end up doing naked puts, covered calls or some kind of spread, this is really my preferred method to use when I’ve found a great trending stock like the ones on this week’s list.

That’s it for now.

Stay tuned, because I’ll be sending you a new list of TrendPoint Best Trending Stocks every week! (usually Mondays)