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How to Find the Next Hot Stock Market Play

How to Find the Next Hot Stock Market Play
Stockscores Foundation for the week ending November 22, 2021

In this week's issue:




In This Week's Issue

  • Money Show Canada Virtual Expo
  • Stockscores Market Minutes Video – Successful Stock Traders Do These 3 Things
  • Stockscores Trader Training – How to Find the Next Hot Stock Market Play
  • Stockscores Market Scan – Scanning for the Next Hot Stock Market Play

 

MoneyShow Canada Virtual Expo

See a free Stockscores webinar at the upcoming MoneyShow Canada Virtual Expo

How to Profit in the Market, Do You Use This Basic Technique?

Thursday December 2 2021 1:35 – 2:05 ET

Presented by Tyler Bollhorn from Stockscores.com

 

Stockscores Market Minutes – Successful Stock Traders Do These 3 Things

Profitable stock traders keep it simple, here are three things that will help you make more money in the stock market. As always, my analysis of the stock, currency and commodity markets, the day trade of the week on LGVN and a Market Scan in search of position trades.

Click Here to Watch This Week's Market Minutes video

To get instant updates when I upload a new video, subscribe to the Stockscores YouTube Channel

 

Commentary of the Week – How to Find the Next Hot Stock Market Play?

Stocks traders should set out to find the next hot stock, the big winner that can bring strong performance to our overall portfolio. The problem is, most of us miss out on the early entry into the big winners because, as humans, we are designed to fail in the stock market. To find the big winners requires an awareness of how our human characteristics stop us from finding big winners.

In this article, I will give you a simple formula for find the next hot stock or sector.

Humans learn from what has happened in the past. We believe in stocks that did well and transfer that feeling to expectations of the future. It is hard to forget about a stock or sector that made substantial gains so, when we hear about something similar, we pay attention.

Remember Cannabis stocks from a few years ago? They made big price gains and a lot of wealth was created for those that got into the sector early. However, if you did not sell when the upward trend was broken, those big profits went up in smoke.

While the group has fallen significantly, many traders still watch the group for trading opportunities. They are looking for hot stocks in a sector that is no longer in favor.

The next group of top performers will come from an area that are not aware of yet. If you are a normal human, you will not believe in it when you hear about it. If someone gives you a stock tip from a group that you have never heard of and has not shown any strength yet, you will likely not believe in it. Without the proof first, we humans tend to doubt.

Think back to when you hear first about Cannabis stocks. I know that for me, it was before legalization, when Cannabis was relegated to illegal grow ops. The idea did not make sense for anyone who was looking backwards, rather than what could happen in the future if things changed.

This is one of the characteristics of super bull markets. They don’t make sense at first.

Anyone who has read my columns or watched my YouTube videos will know that I look for abnormal trading activity as the sign that something significant is happening with the company. I want to focus on stocks that few people paid attention to in the past but then come alive with a surprise burst of buying interest.

Here is the formula for finding the next hot stock or sector.

  1. Abnormal price gains with strong volume after a lengthy period of a sideways price trend.
  2. No significant downward trend in the stock or sector in the last year. The chart should show that this is the start of a new trend, not a bounce back after a downward trend
  3. The price gain that the stock should be a surprise and should not make any sense. It should be a new story that has not yet hit the mainstream

One of the hot sectors of the market this year has been Lithium stocks. It was a new story for most people. The stocks came alive late in 2020 or early in 2021 with strong price gains and abnormal volume that surprised the market. The group had been trading with very little activity before it started to trade abnormally. Most people were unaware of what lithium is used for.

The perfect set up and today, many of these stocks are up more than 200% this year.

The next hot group only comes along a few times a year so you have to be patient. Just remember to look for surprise abnormal activity that does not make a lot of sense because it has not happened before.

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To find the next hot stock market play, we need to look for abnormal price and volume that surprises the market. The stocks should not be fighting against a long-term downward trend because a recent downward trend means the group is coming from much higher price levels. It was a hot stock, but no longer is.

Set the Stockscores Market Scan to the following:
• Price < 15
• Sentiment Stockscore > 50
• Abnormal Activity = Abnormal Up
• Abnormal Volume = Abnormal Volume
• Numnber of trades > 200 for Canada, 1000 for the US

Run this daily but expect to find new ideas only a few times a year. Look for similarities in the stocks that are found by paying attention to the company names. For example, if you run the scan and three Biotech companies come up, look in to what they do and see if there is a similarity.

I ran this today and the Market Scan found 12 candidates. I then inspected the charts to see which are breaking from predictive chart patterns.

I did not like anything I saw but I continue to do this daily.



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References

Disclaimer
This is not an investment advisory, and should not be used to make investment decisions. Information in Stockscores Foundation is often opinionated and should be considered for information purposes only. No stock exchange anywhere has approved or disapproved of the information contained herein. There is no express or implied solicitation to buy or sell securities. The writers and editors of this newsletter may have positions in the stocks discussed above and may trade in the stocks mentioned. Don't consider buying or selling any stock without conducting your own due diligence.

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