Becoming an investor does not need to be an overwhelming task if you learn some basic principles. The first thing to remember is there are no absolutes. Any great stock can become a stinker overnight through no fault of their own. Events like the weather or a natural disaster, a major corporation filling for bankruptcy or chapter 11, or the public losing confidence in a business can affect the price of a stock or an entire sector.

Savvy investors need to keep up with current economic trends by reading the business sections of their local and national newspapers, as well as listening to the business news television stations. CNBC and its web site is one of the best resources. Other web sites like Yahoo’s Financials, has easy to understand articles and stock researching tools.

Begin your investing by deciding what your goal is, your strategies will be different depending on the final outcome. Are you investing for your IRA? Do you want something for the short term? How much time do you want to spend keeping tabs on your investments? The riskier the investment, the more time you need to spend in research.

You could also consult a stock broker or an analyst (a paid person that guesses about the economy), or learn to look for the information yourself. There are certain things to look for to help guide your stock picks. Remember, these are only guides and in no way are a guarantee you will not lose money.

Many of theses items can be found for free on the Internet. Yahoo Financials is a good place to start looking for stocks. Click on the Finance tab, then Investing, then Education. Familiarize yourself with the terms below. Then start Yahoo’s stock screener.

Click on Investing, then Stocks. You will find a wealth of information here. The novice investor should start with the terms below. Click on the stock screener tool in the upper left corner, next, click on “Launch Yahoo! Finance Stock Screener”.

Click in the “Criteria” box and choose some of the below options, then click on “Run Screen” when finished. Experiment with different options. The results can be exported to a spreadsheet and to a portfolio.

To go directly to an individual stock, click on its symbol. To find other items of interest for an individual stock, click on the links on the left side of the page. Try the following options and use these percent ratios as a guide:

PROFILE

Company Name & address information

Sector

Industry

Business Summary

YAHOO KEY STATISTICS

Valuation Measures

Forward Price-to-earning ratio of 16.4

Median price-to-book ratio of 2.3

Trading Information

Average beta of .75

Dividends & Splits

Average dividend yield of 2.4%

ANALYSIS ESTIMATES

EPS Trends

Current Read More »

Here are three simple ways to benefit from falling stock prices:

1.Buy a put.

Buying a put option gives you the right, but not the obligation, to sell 100 shares of the underlying stock at a given price, called the strike price. If you think stock XYZ is going to fall to $20 a share, and it is currently trading at $40 a share, then you could purchase a put option with a strike price of, say, $35/share. Right now, that put option has no intrinsic value; after all, who wants to sell at $35 when the stock is now trading at $40? Because the stock price is currently higher than the strike price, you can probably buy the put fairly cheaply. When that stock does fall to $20, you can sell the put, which will now be worth over $1500!

2.Sell a call.

A call is the opposite of a put. Buying a call gives one the right, but not the obligation, to by 100 shares of the underlying stock at the strike price. In the previous example of “stock XYZ”, you could sell a 35 call. Right now, that call would be worth at least $500, since buying the call would enable someone to purchase 100 shares at $35 a share, for a total of $3500 dollars. They could then turn around and sell that stock at $40 a share for a total of $4000, netting $500. In reality, the call will sell for a little more than $500, since actual value is always more than intrinsic value.

When stock XYZ falls to $20, that $35 call will have no intrinsic value. You can either buy it back cheaply or wait in the hope that it will expire worthless.

3.Short a stock.

When you short a stock, you “borrow” it from your broker so you can sell it without having bought it. In the mean time, you will be paying interest on that borrowed stock. Holding a short stock position is not something you want to do for a long period of time. However, if you sell XYZ short at $40 and it falls to $20, you can buy it back for half of what you sold it! That’s a great trade! Buying back the borrowed stock is called “covering a short”.

The three strategies above are all ways to profit from falling stock prices, but they each have different risks. Buying a put option means that the stock has to drop enough that the put will be “in the money” enough to make up for the premium you paid Read More »

Discover the key technical elements to determine if you should buy a stock.

1. Prior to a stock price rise, the volume will diminish, until all sellers (supply) have exhausted themselves. Odd small lot sales can be a signal of the end of the price decline.

2. In a downtrend the bottom will occur in the 3rd, 5th or 7th wave down. Now the price can make a dramatic jump here and will tackle overhead resistance. The key thing to look for is a very large increase in Volume. Institutions will move in and usually make their purchases between 3:30 and 4:00 p.m. This is called looking for Footprints. So essentially we are looking for strong hands to move in.

3. They say don’t buy the first breakout. If you do buy the first breakout run with tight Stops. You can also wait for price to return to test the breakout point (support level). If price successfully tests support and breaks above this point you can buy the stock. You can also put in a buy stop at 3 percent above the breakout level. This will keep you out of the stock unless it breaks out.

4. If price has been in an uptrend but is correcting, look to see how it reacts to the 38.2 and 50% retracement levels. A stock that rebounds from the 38.2% Fibonacci retracement level is a strong stock.

5. If price gaps up with large volume and the gap is not filled that day, with price ending close to the high of the day, then this confirms a ‘rising stock price’. If the gap occurs over a resistance point then this is double confirmation to enter.

6. If you see a very long white candle with a long tail occur with volume pay special attention and be prepared to buy if positive buying occurs the next day. Candlestick formations to look for are Bullish Engulfing, Morning Star and Three White Soldiers.

7. When the up days outnumber the prior down days this usually confirms that you have entered a bullish uptrend.

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