Stock picking...touching on my theory

I thought that how I pick my stocks may be of interest so I shall elaborate just a little. I won't try to go into much detail as the charts would help a ton here...I'm working on that so this is an overview of what I start out looking for to add a stock to my list of potentials. Picking from that list needs the charts.

My picks are strickly based on the price action on the charts. I mentioned before how I started investigating companies for their fundamental value for long term investments. What I have found since is that the price is a better indicator of the viability of the company to produce profits for me.. Where my method shines is that it eliminates my personal judgement on the health of the company and makes picking potential trades easier, quicker and the base of companies to choose from is larger as a result.

I happen to like a little more activity so picking a stock that is not necessarily a long term performer is not a concern. I will sell for a profit and await the next trade setup.

Basically, any stock has three variables to work with, price, time and Volume. The charts are just graphs with price over time plotted and the volume is a bar graph across the bottom. There are overlays and indicators but they are less important as they are based on these two or three numbers anyway and there are only a certain number of ways to crunch the numbers and their relationship...but I found the simplest to be the best for my purposes.

What I look for is a stock that has a volume average of over 200,000 shares per day, a price averaged over 60 days within $10 and $30. That's about it. These criteria have given me about 200 stocks to pick from, 25-30 are following a pattern that looks like it should produce some interesting trade possibilities and I have charted most of those and proiritized them based on when they may be ripe for a profitable trade.

My current holdings are
Biovail Corp (BVF)
Linamar Corp(LNR)
Energy Savings UN (SIF/UN) (UN = income trust)

Note that BVF is a Short position. That is it's very own topic though.

LNR is the best performing so far. Even though it is currently languishing it is still around 20% gain since buying it a few weeks ago. I choose not to sell it as it looks like it has the potential to move up substantially. If I am wrong I already have a Stop in place to see a $1.90 per share profit. If the price looks unlikely to keep going I may choose to sell or move my stop closer to take more profits. I would be happy with the $1.90 (13.4% gain for the trade) so I will let it flail around for a while and take advantage of any further price moves up....update, since starting this entry I have moved my stop up $0.60 to see a $2.40 profit. I felt that if the price fell below $16.50 then it was time to take some profits and move on. That still leaves enough room for a potential rally to a new level, just in case. That makes this a 17% profit on the trade.

Keep in mind that my trading strategy is still a work in progress. I am tweaking certain aspects of my methodology... weekly...as I see problems arise or good things happening. I have pruned a couple of my early trades now as they wouldn't have fit under my newest version and really didn't look like they were going anywhere except potentially down..


JD.