Given the Fourth of July holiday spirit last week, I wrote about finding "Firework Stocks." A Firework Stock is one that shoots upward in price and goes on to do a double, triple or quadruple in a matter of weeks. In that essay, I said that these stocks could be found by using the "Price-Volume Winners" and/or the "Teeny Boppers" searches, which are both located in the Strategies - Price-Volume Group of UniSearch. Although both of these searches are quite good, I am going to present another search technique today that I like to use.
The whole idea, here, is to spot these guys at the lowest possible price. This is not an easy thing to do because a lot of low-priced stocks go up 50 to 100% in a day, only to crash back to earth.
The best way to overcome this problem is to find the guys that keep hitting new highs. So the key to this technique is to find low-priced stocks which have had successive price break-outs. I do this by using a combination of the Delta function, WatchLists and graphs. Here's the procedure:
1. Run Price Deltas on all stocks greater than $1.00 and less than $10.00, sorted in descending order of percent price gain.
2. Put the top 50 stocks into a WatchList. (The cumulative WatchList.)
3. Repeat step (1) the following week.
4. Create a new WatchList made up from the top 50 stocks from step (3) that match the stocks in the WatchList from step (2). (A new WatchList of matching stocks is created every week.)
5. Add the top 50 stocks from step (3) to the cumulative WatchList from step (2).
6. Sort the stocks in the weekly WatchList created in step (4) by VST and look at their graphs.
7. Select the stocks that show a chart pattern in which Price flat-lined, or was in an up-trend, for several months; then broke-out to a new high on above average volume.
As if you hadn't noticed, this technique is rather complicated. But do not fear, VectorVest will do the work for you. As of tonight, you will find a new search in the Delta Stocks Group of UniSearch called "Finding Firework Stocks." You will also find a new WatchList Group, called "Firework Stocks - 2005," which will contain two WatchLists: The cumulative list, called "FWS 2005 Cumulative," as of 01/14/05 and the weekly list, called "FWS 01/14 Matches," as of 01/14/05. You will receive the up-to-date cumulative WatchList and the complete set of weekly WatchLists next Friday. For now, I suggest that you examine the graphs of the stocks in the "FWS 01/14 Matches" WatchList. Remember, you're looking for nice, smooth price patterns of a stock that has been flat-lining or rising; then explodes higher on above average volume. See how many of those stocks you wish you had purchased.
This technique nailed FORD, which, peaked at $23.00, at $4.11; DSTI, which peaked at $16.13, at $2.72 and NTRI, now at $14.71, at $3.25. If you're willing to raise the current price in the Finding Fireworks search we have sent to you, you will find many More Big Winners.
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