Thursday, April 14, 2011

Book Review - How to Make Money in Stocks: A Winning System in Good Times and Bad

Today I thought I'd do something different for my post and write a review on the first investing book I ever read. How to Make Money in Stocks by William O'Neal isn't a true quantitative investing (QI) book but instead covers some of the fundamentals that QI was founded on.

The whole book is based around the CAN SLIM parameters for assessing a stock. Many of these are fundamental analyses that don't really apply to this blog. What does apply however is the timing and chart recognition sections, of which there are a lot. He covers how volume should positively correlate with stock price for there to be increases in price, and he introduces his 'cup with handle' pattern as the chart pattern that all great gainers demonstrated. He also discusses other patterns: cups without handles, flags, double bottoms... all of which are rooted in technical analysis. The first section of the book really is the coolest. It's a collection of charts from the best stock over the past century. One thing you'll realize is that market action really hasn't changed nearly as much as you'd think over this time.

The writing is also very straight forward and concise. You don't need a glossary by your side to read the book, nor follow CNBC on a daily basis. The most recent edition was also written post-recession and offers some interesting insight into the whole thing. Sometimes I find it funny to read books written just before the crash...and see how oblivious some of those writers really were...but not with this one.

I really think this is a fantastic book, for both novices and experienced investors. It  taught me a lot about how people think about the market (which is a very important thing to always consider). If you do nothing else with the book, stare at the charts of all the great gainers, look for patterns beyond what he talks about, and learn about what matters to the majority of investors.

Monday, April 11, 2011

10 High Momentum Stocks

In my daily update of the Bat Computer Market Analyzer I give you the momentum of the current Nasdaq market. Momentum measures how much up or down a stock is going on a certain  volume. A highly positive volume means a stock price is rising on high volume while a highly negative momentum means a stock price is falling on high volume.  See here for the equation...

I though I'd take that measure and apply it to find the top ten stocks with the highest momentum. The first time I ran this however, I ended up with a whole bunch of stocks that gapped up on high volumes (i.e. from a buyout offer). So I added one caveat, I'd limit it to stocks that haven't gapped up > 1% in the past 10 days (the same period I calculate the volume over). So here it is...the top ten momentum stocks

STEI week we'll check back and see how they do.