Everyone knows me as the guy who trades supercharged stocks.
So the question I often get is “Jack, how do you find these supercharged stocks?”
It’s a reasonable question and the answer is a lot simpler than you might think.
In fact, even though I use a custom-built piece of software…
You can achieve a similar result using tools right available to you for free.
Separating the Wheat from the Chaff
The first part is filtering down the thousands of stocks available on the stock market to a much smaller list of stocks with high potential.
For that, I look at lists of stocks hitting new 52 week highs.
There are plenty of free tools that will let you do this, like this Wall Street Journal list updated daily (or possibly even more frequently) or this page on Barchart.com.
Your trading platform might even have a ticker or some tool that does the same kind of thing. The specific tool doesn’t matter.
In this stage, it’s about whittling down the list to just those stocks that are hitting new 52 week highs.
So go look at a few different tools and see which ones are most comfortable for you. Then you can move on to the next step.
Spotting The Trend
Once you’ve got that list, it’s time to go to work. This is where my custom-built software makes things a lot easier.
But again, you can do this right from home with a little bit of effort.
What you want to do is set up your chart to show you a 6 month daily bar chart. That’s 6 months worth of data with daily candles.
The next thing you’ll need to do is set up 3 technical indicators.
Each platform is different, but what you want to do is set up these 3 indicators:
- 20 day EMA (Exponential Moving Average)
- 50 day EMA
- 200 day EMA
The 20 day EMA is going to represent the stock’s short-term trend.
The 50 day EMA is going to represent the stock’s mid-term trend.
And the 200 day EMA is going to represent the stock’s long-term trend.
I gave you some more detail about setting this up in this article.
Here’s what that looks like on my custom-built software. (I know it looks like an old Atari game. No need to laugh at it.)
What To Look For
Ok, assuming you’ve got your chart set up… now what?
Well, there’s a few things you want to look for:
First and foremost you want to make sure that the stock’s price has steadily risen higher over that 6 month period.
We want to avoid stocks that suddenly popped because of earnings or other news. This is because when stocks suddenly pop, they can just as quickly sink back down.
Those stocks are not good for the kind of trading we’re trying to do.
Stocks that have a nice, long, smooth, uptrend are the kind of stocks we are looking for.
The next thing to look for is that the stock is above all 3 of those indicators we set up before.
When a stock is above all 3 of those indicators, it gives the stock a very high likelihood of continuing that uptrend.
Think of it like high school physics: An object in motion will tend to stay in motion.
If the trend is a 6 month gently rising slope, we can continue it to continue.
The Secret Sauce
Now here’s the “secret sauce” that helps me win more trades than the average trader.
I look at the broad market and I aim to make trades that are trading in the same direction as the broad market.
How do I do that?
Simply use those same 3 indicators above to look at the SPY, the DIA and the QQQ.
Those are the tickers for the 3 major indexes. And you can look at them just like stocks on a chart.
If those 3 indexes are each above the 3 indicators we set up, that means the broad market is bullish.
And you can feel confident placing bullish trades on an individual stock.
What Now?
Now that you’ve got a set of stocks, you need to decide how to trade those stocks.
Once I find a stock I’m interested in trading, I like to place a trade that only keeps me in the market for a few days.
It’s not necessary, but that’s just another step I take that dramatically increases my odds of wining the trades that I place.
And even more than that, my favorite kind of trade to place is one that lets me win even if the stock decides to take a breather.
I actually recorded a video today teaching a strategy I use which puts all of these moving parts together.
If you want to see the kinds of results you can get using the steps I outlined above, I urge you to check it out by clicking here.
Trade well,
Jack Carter
