VectorVest Views 6/10/05.
One of the most frequently asked questions we receive is, "How can I find those top-rated, high VST-Vector stocks before they have moved up so far?" The answer can be found by looking at Standard graphs of these stocks. As of Thursday, June 9, Nutri Systems, NSI, was the top stock ranked by VST. Its graph shows that RT went from 0.84 on 08/20/04 to 1.10 on 08/23/04 at a Price of $1.85 per share. Its Price peaked four days later at $1.98; then moved lower. Subsequently, it got an "S" signal at $1.56 with its RT at 0.91. Shortly thereafter, RT crossed above 1.00 again to 1.05 on 10/06/04. Price exploded to $1.89 the next day, and NSI was on its way to the top.
You may look at as many of these graphs as you wish. Invariably, the big price run-ups go back to a time when RT was below 1.00. In some cases, like Urban Outfitters, you may have to go back a couple of years to see the critical RT move, but it's pretty easy to see when it happens. Best of all, we find these moves with a click of a mouse button by using Trends in the UniSearch Tool.
I tested a lot of different combinations of RT crossover sequences to see how well they worked. The one I like the best is illustrated in this week's "Strategy of the Week." It specifies that the stock have three consecutive weeks of RT < 1.0; then one week of RT > 1.0. In doing this work, I found that it was extremely difficult to develop a strategy that gave outstanding results over the last seventeen months. Nevertheless, I could find many big winners by looking at the VectorVest graphs. So I have this suggestion: Learn how to cherry pick your selections using VectorVest graphs.
On December 3, 2004, I wrote an essay called VectorVest Simple. In this essay, I explained how I like to cherry pick stocks using graphs. Basically, I prefer to buy stocks with smooth, steady price patterns. I shy away from stocks with erratic, disjointed price movements. Now let's suppose you ran this week's "Strategy of the Week" as of 08/27/04. This is the Friday after NSI had the RT crossover cited above. (I run this strategy only on Fridays since it entails a week-to-week Trend search.) Highlight the top 10 stocks and click on Graph in the Local Toolbar. Create a Custom Graph extending from 01/03/03 to 08/27/04. This allows us to see only what we would have seen as of 08/27/04. Well, let's see what we have:
1. The top stock, SELA, has been in the database only a month or so, so there's no way I would have bought it.
2. The next stock, HOM, looks like its coming out of a long downturn. It's more volatile than I like to see, but I'll keep an eye on it.
3. SOTK, the next stock, appears to have consolidated after a rally. It, too, is worth watching.
4. The following stock, RGN, appears to be treading water, but its RT has been hitting higher lows. It doesn't cost anything to watch it too.
5. GIGM has had two false RT crossovers in the last six months. Is this another one? Could be, but I'll watch it also.
6. NSI, appears to be making a serious up move after a long consolidation. Its RT hit a low of 0.13 on 08/05/04, then soared to 1.35 on the 08/27/04. It looks like my best candidate so far.
7. The next stock, MRY, is not perfect, but it is also coming out of a consolidation. So let's see what it does.
8. NNPP, is too erratic for me. Does it ever have two days in the same direction?
9. SWB is worse than NNPP.
10. All I have to say for BDSI stock is, "Uga uga, uga, boo boo uga."
So our quick inspection shows that we would have eliminated SELA, NNPP, SWB and BDSI from the candidate list. Quick Test shows that over the next three months nine of the ten stocks went up for an average gain of 46.07%. SELA was the only loser. From 08/27/04 to 06/03/05 nine of the ten stocks went up again, gaining an average of 99.48%. HOM was the only loser and NSI was the biggest winner with a gain of 556.57%. Had I gotten into it based upon the 08/23/04 move, I probably would have gotten out of it when it got the sell signal on 09/16/04. But I would have caught its big up move. Here's how.
Let's face it. It's awful hard to make a purchase decision when you're looking at the hard right side of a graph. So what I do is run searches back in time. For example, had I run this RT crossover search on 09/27/04, 10/27/04 and 11/27/04 using the 08/27/04 search date, I could easily keep track of what these stocks were doing. I would have seen that NSI tanked as of 09/27/04, but took off after that.
You may think all of this is a lot of work, but I don't. Finding winners by bottom fishing is fun...especially Bottom Fishing Using RT Crossovers.
PS. I actually did buy NSI under $4.00, but I used Rocket Boppers to find it.