Step 1. Generate stock investment ideas
The market constantly reinvents itself. Today’s leaders could be tomorrow’s laggards. This link discusses ways to use MarketSmith to guide your search for potential investments including how to create a stock watch list, stock screening techniques, and how to identify top performer for potential investments.
Step 2. Perform more indepth analysis
After you’ve populated your Watch List using the concepts outlined in the Generating Ideas section, your next step is to do an in-depth fundamental analysis.
Here are a few key fundamental metrics to watch for -
- Earnings per share in the latest quarter up at least 18-20% versus the same quarter a year ago
- Earnings growth accelerating in recent quarters compared with earlier rates of change
- Annual earnings for the last three years should be increasing at a rate of at least 25% per year
- Sales up 25% or more in one or more recent quarters, or at least accelerating in their percentage change for the last three quarters
- Return on equity of 17% or higher
Step 3. Use technical analysis to decide market timing
Your goal is to buy the very best stocks at the very best times. This section discusses several major technical charts to help guide your investment decision -
- Cup with Handle
- Saucer
- Double Bottom
- Flat Base
- Ascending Base