I MUST BUY STOCK!! But Which One?

I wanted to provide a little bit of value here at iBC — rather than rant about the market.

Turn off CNBC, grab your favorite bottle of vino, and read this Shakespeare-esque diatribe against phony traders everywhere.

First I need to provide some backdrop.

I “ran into” a trader today on Social Media. Said ‘trader’ is a joke. He’s a phony. He couldn’t trade himself out of a wet paper bag if he tried. I don’t want to use the ‘F’ word, but I’m pretty sure he’s crossing the line (fraud….if you can follow along).

But hey, he has “30 years trading experience.” He must be legit, right? He incessantly posts his daily PnL on Social. Boasting his 4-figure gains daily. “I made $7,000 today drinking wine at my house in the foreign lands,” he proclaimed.

“I’ve had it,” I thought. “I’m calling bull shit.”

To make a long story short, we bantered back and forth for shits and giggles until he subsequently blocked me. Nothing accomplished.

But it got me thinking. Every DAY he posts his PnL from trading AAPL.

EVERY. SINGLE. DAY.

First: stop dry-humping AAPL like it’s your first prom date.
Second: if you must BUY stock, which one do you buy?

If you look on Social, everyone and their mother can apparently only buy long stock; dear God we would be shamed into the fiery depths of hell if we shorted this market (or better yet, sold options).

So let’s say that it will not change. I will ONLY buy stock with a long bias, even if the market is swan diving into an oblivion. What we must do here is identify the criteria for which we are buying stock, right? Certain stocks are green every day, every week, every month — even in bear markets. Find them.

The goal here is find stocks that are trading higher than they opened on a specific time frame. For example, we opened at 191.96 today in the SPYs. For literally 98% of the the trading day, we were trading below this price and we have a red candle. All day, no buy signal. No real reason to test longs, as we are lower than we opened for the day, the week, and the month throughout the day today.

However, if you look at KORS (below), you can see that not only are we trading higher than we opened for the day, but we are trading higher on EVERY time frame. We are not within the prior months range, and we are most definitely breaking out. We cannot identify any sell signals on long time frames (day/week/month). Yes I understand it was a gap up due to earnings, but the rules still stand the same. We want to be trading in the direction of the trend, and I’d say this trend is bright green.

KORS is a great example in hindsight, but will also be in play the entire month. But there are also other ways to find stocks that you want to buy. Scan for stocks that are outperforming on the day/week. Scan for stocks that are trading above last weeks/months highs. These are all PROVEN stocks that have bucked the trend. Buy stocks that are on the highs when the market is on the lows – clearly they are getting bid up.

In summary, our goal as traders is not to prove to the outside world that you are a better trader than anyone else. Our goal here is to put ourselves in highly probable situations that we can take advantage of, and maximize profits. Start trading the trend, rather than fighting it.

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