Investors, traders, speculators, and gamblers have this in common. They make probabilistic bets about future events or outcomes. Presumably, each has a plan --a system-- by which buy/sell decisions are made. If the plan is sound and if market conditions favor the plan, they make money. Else, they do one of several things. They quit. They double down. They jump to a new plan. Or they trust the plan, but cut position size. The latter is the only choice that makes sense. So let’s put together a simple plan and try to make some money in today’s frantic market.
The simplest plan is the oldest, “Buy low, Sell high.” So, how does one know when prices are low and prices are high? Simple. Use a technical indicator, such as RSI, to tell you so. The customary price levels for over-bought and over-sold are RSI 70 and RSI 30. Finviz makes it possible to scan for stocks meeting those criteria. If the list of over-sold stocks is filtered by gainers vs losers at market close, then it’s easy to see --by hovering the mouse cursor over each ticker-- which charts seem to be coming off a bottom. If the news and fundamentals are pulled for those tickers, it’s possible to find a few that might sustain their breakout.
The next step is to size a position that reflects one’s capital and tolerance for risk and to get a fill on one’s order. Sometimes, the market immediately confirms that one’s entry was correct, and you end the day ITM on the position. Sometimes, you are too early or just plain wrong. A day or two will tell you so. If the latter, your resting stop will trigger, and you’ll be kicked out. OTOH, if prices have moved up from your entry, you should swap the resting stop for a trailing stop and even consider adding to the position by some predetermined percentage.
Here are examples of stocks over-sold as of 12/18 that seem to have decent fundamentals and that might be worth tracking or taking a position in Monday.
Note: The described system and chart template are just a variation on Quill’s Simon Sez trading system, about which he has posted extensively.
Standard Disclaimers. Nothing in this post should be construed as investing advice, and I might buy the mentioned stocks for my own account. Or I might not. It all depends on what happens tomorrow in response to this weekend’s craziness. High seas piracy by the Trump administration? You gotta be kidding, making the energy sector worth watching.
