The Market Trend
Once you know the major market trend. The majority of the money-making battle is over, Because 85% of the stocks move in the direction in which the market is trending.
This is an example of the S&P 500 over the past 20 years. You can see that TradersPro clearly and accurately identifies the trend of the long-term market. This is the first place you will start to identify the market trend.
- What direction is the stock market moving? Up or down?
- How long has this trend been in place?
- Is the Long-Term trend too extended to make a trading decision?
You can determine this by checking the Market Trends page of TradersPro each day. The arrows, red or green will tell you the current trend.
How long has this trend been in place?
Uptrends and downtrends can last for years. However, in some very strong markets, like the one we have seen over the last 10 years, if a sell signal is given but the trend is still not ready to turn down, you’ll receive another confirmation green signal, allowing you to know when it’s safe to get back into the bull market.
Is the Long-Term trend too extended to make a trading decision?
The slider bar that is located at the top of the Market Trends page shows the range of the bull and bear markets. The high end being 5 the low end being -5 (It has been much higher and lower the past 18 months -10 and +10.
The line below the slider shows the trend and rank of the bull or bear market. In this example you can see the slider is around 5 and the green line represents the current trend. It is clear the bull market is weakening as identified by the slope of the line moving down.
The Buy Sell ratio will then confirm the short term conditions of the market by showing how many stocks are Buys in the TradersPro database and how many are Sells.
In this example. While the overall uptrend still is intact with a bullish green arrow the short-term signals are showing a weakening overall trend that is improving and the buy/sell ratio is showing a above 1, with the green line over the red line.
Identify Strong Sectors
Now that you know the overall market trend direction both long term and short term, we can look for what sectors are performing best.
Find sectors leadership, then screen for individual stocks in that sector. The higher the strength rank the stronger the stock. A stock with a strength rank of 98 means that it is currently stronger than 98% of all other stocks.
In the current market conditions construction is the leading sector. It is based on the Rank Average that is currently 69. This means that the average performance rank of all the stocks in that sector is 69, which is higher than any other sector, thus getting the Rank of 1.
Clicking on the blue number 53 in the buy column of the Retail- Wholesale row will pull up those stocks in the search results tab.
These are the best performing stocks in the best performing sector. These are prime stocks to look at to trade or invest in.
If you click on any of the stocks on that list it will pull up the chart page. If you click on BZH you will get the chart shown below. You can see the stock has been performing very well and had a new buy signal just days ago.
The strongest sectors and the strongest stocks will start to float to the top no matter what the market is doing.
There will be sectors that do very well even if the stock market as a whole is going down. That said, the optimal time to make the best trades and the most money with the least amount of risk is when the uptrend is new, the bull bear rank slider is trending up and the Buy/Sell ratio is showing 1 or higher (more buys than sells) or crossing over to that.
Find Strong Stocks
In strong bull markets stocks that have 95 or higher ranks will follow the path of least resistance which is up. This stock was a 94 rank at $7, then a 98 rank at $12, 94 rank at $19, 99 rank at 27 and 99 rank at 35.
Most people would not want to buy a stock on the way up, becuase they assume it it “too high” and the trend had gone too far. The stock continued to trend higher from $7 to $34 while it maintained the 94 rank or higher of a twelve month time frame.
Take Action To Buy
In Step 4 we are ready to take action. In bullish market conditions, when the uptrend is new or simply not extreme, the bull/bear rank slider is trending up and the buy/sell ratio is showing more buys than sells or crossing over to that AND you have selected a stock to buy, it is time to buy the stock.
In the example of BZH from the sector scan, the buy signal would be after the most recent hold signal. In this case it also comes after a sell signal as well. This is the ideal trade setup. Trades are considered new buy signals when the stock has gone from hold to buy.
Make trading and investing fun again. Practice this process a few times by looking for these conditions and building a portfolio of stocks in the portfolio builder. It takes 5 Mins or less each day to consider, review and put into action these four simple steps to pick winning stocks.