iBankCoin
Full-time stock trader. Follow me here and on 12631
Joined Apr 1, 2010
8,861 Blog Posts

Value Betting the Stock Market

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There are many different ways to define what a “value bet” is in poker, but just imagine that you are playing in a hand and all of the cards have been dealt. You are reasonably sure that you have the best hand, and if you won it right here right now, you would be happy taking the money that is already in the pot. You have the option of making one more bet, or you can simply “check,” and see if your opponents check as well, so that you can have a cheap showdown and see who really won the hand. So long as you believe your hand will win more times than not in this specific situation (positive expectation), the correct play is to go ahead and bet. If you are a wild and overly aggressive player, then you will necessarily be “value betting” when it is correct to do so, even though you will make plenty of other mistakes to offset the proper betting.

However, by far the most difficult challenge for disciplined gamblers is leaving money on the table. In other words, if you determine through your analysis that there is a reasonable chance that you have the best hand, then you should almost never miss a bet. There is a crucial difference between being a patient and conservative trader, versus being passive and not extracting as much money from, say, Mr. Market as you should. There are times when you are going to have to push yourself to maximize profits without becoming greedy and losing your discipline. This often means taking profits in extended stocks and rotating that capital over to others that are not.

Recently, the broad market has broken out and is short-term extended. While there is a plethora of charts that need to consolidate, there are also quite a few that have set up behind them. The easiest strategy would be to turn cautious on everything and declare nothing to be buyable at these levels. Instead of taking that route, I am sticking with my stock picker’s market thesis. Therefore, it follows that some names will still be actionable even after the run that we have seen.

Below, you will find ten specific stock ideas that, in this situation, represent the closest thing to making “value bets” ┬áthat the stock market has to offer.

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31 comments

  1. Nicola

    Great analogy and great charts

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  2. RaginCajun

    Great looking setups

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  3. Ivan

    Good setups, but I have no idea how you draw those trendlines. How about the upper trendlines on PAY and CRM(?!?).
    Otherwise, thanks for the great posts and alerts.

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  4. J Cortes

    Awesome,great charts thank you for sharing.

    J Cortes

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  5. TrendRida

    SINA fits in nicely with this list. Plus it should get a little loving from the RENN IPO this week….

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  6. zzzdoc

    Hi C&W,

    Very interesting charts. I am interested in CBD. I see the breakout, but also saw that it was done with a lower volume than the previous day. My gut feeling tells me that the price will come down on Monday to previous resistance and then go up again. Would you agree with that?
    I really appreciate your charts.

    zzz

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    • chessnwine

      Well….although you are technically correct, the volume was still well above average and was not a huge drop off from Thursday. I think the volume confirms in this case. I would use a benign pullback as an entry so long as breakout area holds.

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  7. Growly

    More great looking charts here, chess–you are the chart machine! LULU is a bit painful to see–wish I had adopted buy-and-hold when I sold at 53–never thought it would have broken 100 so quickly…

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  8. hahaha

    nah just 3bet bluff the river

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  9. drummerboy

    pwav baby,up to my knees on that baby,should be up to my hips.lol. thanks chess.

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  10. Cheesetrader

    Sweet charts, CNW – thanks for these – holding some LULU right now on the $100 with lovely upside potential here. Surprised you didn’t add in TPCG from the chem group you posted a while back – trying to breakout of flag highs.

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