You can pause the video and set up your own screeners to look at the same stocks I look. But please make sure you are doing an in-depth analysis of every stock. A stock screener is not (!) a trading signal or trading system.

If the video is not loaded, use this link: https://youtu.be/NlEZ2uBqVLY

Der Beitrag Video: How I screen for growth and momentum stocks with FinViz free version erschien zuerst auf Trading Blog - Julian Komar.

Huge profits don’t emerge from huge risk, they emerge from uncertainty. Millions of analysts analyze large and known companies like AT&T, Walmart or Apple. Of course those companies can grow and accelerate its growth, but often they will not disrupt markets (again). Because of this the potential is limited and the most CEOs try to smooth their stock prices to don’t scare investors.

What is a high potential or disruptive stock?

For me high potential means a potential for future surprises. A high potential company is mostly active in a sector with huge growth or a potentially bright future. There must be room for uncertainty that is filled by imaginations of investors and traders.

Disruptive can be high potential, but there is much more uncertainty. A disruptive company creates new markets, products or completely change them.

Most of those companies do not have any profits or a clear bright future. There are only imaginations by investors which drives the stock prices. It can be a startup which goes bankrupt the next day because their product failed or a company where a new drug is not approved.

High potential or disruptive sectors

If you want to find sectors with high potential you have to ask yourself: How will the world looks like in 3, 5 or 10 years? What are sectors which creates products which everyone will use future? Here are some examples:

• Medical: The developed countries have a demographic problem. This will help medical companies to create profits in future. In addition there will be new products, services and processes. The costs are exploding and new companies will help them to reduce.
• Internet: Common services will be replaced against internet based services. This touches every sector: Food, jobs, medical, banking and much more.
• Technology: You will find semiconductors in every product in future and every product is connected to each other. The Internet of Things will revolutionize every sector.
• Security: In the lasts years we saw a huge change of war tactics by terrorism. New companies and technologies will deliver the answer to this and help us to make the world more secure.

Examples of disruptive industries

The upper sectors are the most interesting for potential future growth. Inside these sectors we will find disruptive companies and industries:

• Biotech: This is one industry with a huge potential. Imagine what will happen if a company finds a cure for cancer or a therapy to extend peoples life.
• Medical cannabis: More and more companies created medicine with Cannabis. This is a complete new sector and helps to reduce costly normal cures.
• Machine learning and Artificial Intelligence: A lot of people know these buzz words. But this industry is currently at the starting point of a long journey. Machine learning will help us to create medicine, make our life more secure and creates new industries. Everyone can use such algorithms but it’s more important what a company does with it.
• Weapon detection: It’s the goal of our governments to make our life more secure. But you can’t control every pople at the metro or airport. A solution can be found in software and machine learning. Such a solution is fast and do not need a lot of security staff. You will see an example below.
• Blockchain: We don’t know if this technology will revolutionize industries or sectors. But there is a possibility that it will have a huge influence on the world trade and other markets. One thing I can say for sure: Known companies will not be the leader in this industry.
• Aerospace: Think about Space X and their mission. The space will be discovered one day and there will be companies which will develop revolutionary technologies for this. We need new rockets and space shuttles.

These are just a few new disruptive industries as examples. There are much more and sometimes they are hard to find.

Technicals are more important than fundamentals

If you analyze only fundamentals you will miss such companies. Mostly they do not have any earnings or sometimes they do not have sales. Because of this there is a high risk in such stocks. But if you look at the technicals of such companies you can find a next new leader.

A disruptive stock which explodes to the upside is telling the story: Capital is flowing into the stock and investors begin to believe the story behind the stock. That’s everything you need to know. You are not interested in the company itself, you are only interested in price moves.

Often a disruptive company surprises with news. Maybe a new technology finds first customers or is approved by an agency. Sometimes the whole company is bought by another one. Such news with drive the stock price higher and bringt a great profit.

Manage risk strictly

Companies which do not have earnings or sales are only driven by believes of investors. There is a huge risk that such a company will go bankrupt overnight or publish bad news. Because of this you have to manage risk more strictly than normal. Here are some tips:

• Be prepared for a 50% overnight gap. Example: If a biotech stock opens with a 50% gap and you have a 25% position, your loss is 12,5% of your whole capital. Make sure you limit your position size to 5-7,5% for biotech stocks.
• Never trade against the trend. If a disruptive stock is in a down trend, never trade them. That stock is not in focus of investors and traders. Only trade them in uptrends.
• Be prepared for higher volatility. Small caps and disruptive stocks can be more volatile. Make sure you don’t get stopped out with a 10% move against your position.
• Do not get crazy with disruptive stocks. If your disruptive stock shows a large profit you are maybe tempted to go all in. But that’s risky. Although you have a huge profit cushion there is a danger of bankruptcy or bad news. Limit your position size to 25-35% at maximum!

5 examples of disruptive stocks

Now you read a lot about what’s high potential or disruptive. The companies below creates disruptive product and you maybe never heard about them. But remember: A disruptive company means not that the stock chart looks great! Often it’s the opposite. But you want to monitor such stocks and one day the news is out and the stock is in focus. Then you are prepared to wait for a great setup!

$CRSP – CRISPR Therapeutics

Some of you maybe know this stock. It’s a biotech company which develops a revolutionary cure for cancer. The stock chart looks not bad and maybe a decent setup will appear soon.

$VUZI – VUZIX Corp

This company develops smart glasses. Think about what smart glasses can change in future: Maintaining machines, additional information in your daily life, entertainment … The stock charts looks really bad. But maybe one day a news is published and the stock explodes.

$SSTI – Shotspotter / $PTOTF – Patriot One Technology

Both companies are focused on new ways to detect weapons and shootings. The goal is to make our life more secure and they use machine learning to do this.

Shotspotter is focused on detecting shootings at universities and public areas. This is a technology every city and university is interested in! Maybe a story for high growth.

Patriot One is focused on detecting weapons and bombs. It uses software with machine learning and some hardware to do this. Imagine that every airport and metro station uses this technology. The stock charts looks not so good at the moment.

$WATT – Energous Corp.

Everyone knows wireless charging, but this company created a technology for real wireless charging. Go on their website and look at the videos! Every device is linked to each other and they are creating a huge network to charge their batteries. Imagine if you are taking the bus and your smartphone battery is loading automatically.

$WNDW – Solarwindow Technology

Solar technology is nothing new. But real solar windows are interesting and disruptive. The company is founded to develop this technology. The first customers are constructors of skyscrapers. They can use solar windows for the whole frontage of the building. But the stock chart looks really volatile.

I have some other companies for you: $IIPR, $TWMJF, $LUNA and $RKDA. Try to find out more about the companies and their stock charts.

Recommended books

Here is a small list of recommended trading books about this topic.

[amazon box=”0071469796,0071807225,1614271690″]

Der Beitrag Disruptive stocks: 5 examples and trading tips erschien zuerst auf Trading Blog - Julian Komar.

I always try to combine 2 dimensions:

1. Technical strength and chart pattern.
2. Potential to surprise and create high demand.

Baozun – High potential China eCommerce stock

I never analyze fundamentals or try to interpret them. The reason: I believe that the fundamentals are always late and the price will move before. But I want to make sure that a stock has potential to surprise and attract money.

Baozun belongs to the China eCommerce sector. It’s a young company and the stock has only 2,5 years trading history. That’s good because the best price moves happens in the first few years of the stock. The reason is simple: The company is unknown and if it’s an attractive company, a lot of potential buyers are willing to buy. In addition a company will make an IPO if the fundamentals and growth are extraordinary good. So young stocks are always better than old stocks, where every detail is known and the company cannot surprise the market.

China is a huge growth market. It doesn’t matter how fast China growths. It’s only important that investors are interested in China stocks and see a bright future. That leads to increasing prices for stocks of that sector.

In addition Baozun is in the eCommerce sector. That is an additionally plus because this sector is growing fast and will revolutionize the traditional old retail sector. A company like Baozun can profit from that and maybe can grow faster than any other company. There is a huge potential for surprises.

You can see that Baozun has high potential: Growth from China, growth from internet sector. In addition the EPS growth is very high, also sales are increasing. The IBD rating for that stock is good.

Technical strength and potential

Now we come to the more important part in my opinion. A young stock with a high potential should trade on new all-time highs. Of course Baozun is doing that. Every new high is a new all-time high and there is no overhead resistance.

The stock rose 1200% from the low in August 2015 until today. Is this too high? No! Stocks with such a growth rate can reach much higher prices. Of course the P/E ratio with around 90 seems to be high, but the forward P/E ratio only reaches 26! I don’t work with P/E ratio, but you can see that there is a lot of potential to the upside as long as the company growths. Always have in mind that a stock can rise much, much higher if there is a high demand and a strong trend.

The trading volume of Baozun increases in May 2017. That shows that institutional money is flowing into the stock and the liquidity increased. Higher liquidity, a strong trend and good fundamentals means that more and more institutional traders will have that stock on their list.

I am not a big fan of price goals. I never use them. But I cannot see any reason why this stock should not go higher and trade at $100 or more.

The Baozun weekly chart

In the weekly chart you can see that this stock has not a long trading history. That’s good! Young and fresh stocks with less than 10 years trading history produces the strongest trends. You can see that if you go back in time in stocks like Apple, Amazon etc.

You can also see that the stock is trading at all-time high prices. That’s good, too! There is no one you needs to sell to close a past trading position at break-even. And there are no history prices which can be used as orientation marks for trader.

Look at the volume. It’s increasing which shows a higher interests in the stock. There are two big shakeouts which throw out all weak hands and leave room for new traders. In addition the volume is higher on strong weeks and lower in consolidation. That’s exactly what you want to see: Strong buyers and weak sellers.

Daily chart of Baozun

The daily chart shows perfectly the consolidation between September 2017 and February 2018. The trading volume dries up in that time which shows me that not a lot of stock holders are willing to sell. This is a good signs because the strong hands will hold their positions.

With the earnings in February 2018 the stock exploded and gapped up to a new all-time high. This is a very good sign. There is a lot of demand behind it! The buying continues the whole day and you can see the terrific trading volume at that day: 10 times the average 50 day volume!

Now the stock consolidates calmly and prepares the next move. When it’s time to enter? I don’t know, but you will see it if a new all-time high is printed with higher volume.

Of course don’t ignore other scenarios. The stock can gap down on bad news and destroy the whole chart situation. That’s why I only act if I see a strong breakout and new buying pressure.

Recommended books

Here is a small list of recommended trading books about this topic.

[amazon box=”B0755Y5LCZ,0071494715,0071614133″]

Der Beitrag Baozun ($BZUN) chart analysis – China eCommerce stock erschien zuerst auf Trading Blog - Julian Komar.

For a lot of people it goes against their beliefs to buy new highs. Why? Because the stock seems to be expensive in that moment. But the stock market works not like a supermarket. Cheap stocks are mostly not a bargain, they are rotten eggs.

The most persuading argument for me to buy a stock on a new all-time high is: What must a stock do if it should move up 10.000% in a row? Answer: It must take out old highs and reach new highs.

Example: Amazon – New highs are buying opportunities

Amazon is one of the most successful stocks in the last years. I put a simple 52 week high line (with a Donchian Channel) on the chart. You can see clearly that every 52 week high was a buy opportunity.

Of course the stock had some seriously corrections, but that’s why you need a trading system with risk management and not only one indicator.

There are plenty of similar charts next to Amazon like Apple, Netflix, Nvdia and many more. All these super stocks have in common that they continuously reaching new 52 week highs and especially all-time highs.

The difference between a 52 week high and an all-time high: Overhead resistance

Not in all cases is there a difference between a 52 week high and an all-time high. Because if a stock is priced on an all-time high, it is automatically a 52 week high. The only difference is “overhead resistance“.

With overhead resistance I mean all potential seller that would sell a stock at higher prices. These traders had bought a stock at a higher price and now their trading positions show a loss. If the price returns now to a higher price they maybe close their position for break-even. The problem is that a seller is a seller and they are able to stop a price move.

If a stock is priced on an all-time high, the stock has “blue sky potential“. That means every trader has a position that shows a profit. No one is urged to sell because the trading position hurts.

But there are situations where the overhead resistance is absorbed by other traders. In these situations the stock quickly moves to new highs and afterwards maybe to new all-time highs.

All-time high trends lasting longer as you think

A stock with “blue sky potential” can trend longer as you think. If there is no serious selling pressure, the stock can move a long time until it hits resistance.

Stocks on new all-time highs have no technical resistance because there is no trading history. A trader cannot look back and search for important price barriers other similar. The only situation where an all-time high stock can reverse is if the bias in the stock changes. This normally takes a longer time and is caused by bad news.

You will see a change in an all-time high stock quickly. Normally it is gapping down or moves quickly to the downside. In that situation new overhead-resistance is created.

But if there is no bad news or anything similar, the stock can move much longer as you think.

Bull markets and new highs

Of course all upper examples are selected in hindsight. But normally bull markets produces a lot of similar examples.

It’s not possible to catch every superstock but you may ask yourself: Where do I want to fish?

• Do I want to fish in a sea with small, stinky fishes and where my odds are bad to fish a big one?
• Or do I want to fish in a sea where some really big fishes are swimming.

I prefer the last one.

So you can see that the important question is about the odds. That’s what stock selection is about. If you combine multiple criteria, the odds will increase and you maybe fish a really big fish out of the sea of stocks.

Should I trade in the weekly chart because of 52 week highs?

You can do it if weekly charts are your preferred time-frame. But it’s not necessary. I personally prefer the daily chart. And you should not blindly use a 52 week high as a trading signal.

The upper examples should give you an idea about stock selection. It’s much easier to trade a stock on a new all-time high. The selection is easier because the stocks are obviously visible, there is no overhead-resistance, often smooth trends emerge and the moves to the up-side are faster. That’s why I look for stocks on new all-time highs.

Recommended books

Here is a small list of recommended trading books about this topic.

[amazon box=”0071494715,0071614133,0071807225″]

Der Beitrag Buy high – sell higher: What must a stock do to rise 10.000%? erschien zuerst auf Trading Blog - Julian Komar.

Yes, I also spend a big portion of my time to find setups. But the methods stay the same. In the past I developed multiple ways to screen the market for interesting setups. Today I only seldom adjust the programming codes.

Do you have to be a programmer to find good setups? I don’t think so. Programming knowledge will help you and you should learn to program, but there are many other ways to discover great trading setups. I will show you 3 …

3 easy ways to discover great momentum trading setups

Here are some simple ways to look for great momentum trading setups. The methods are not complex or science and the tool I use is free!

Looking at biggest winners today/week/year

Momentum stocks have one in common: They are rising fast. So you can use the top gainer lists to look for setups.

I mostly look at these criteria at Finviz:

1. Stocks that moved more than 5% today. These are really strong movers and you maybe want to take some of them on your watchlist.
2. 10% week winners: Here are stocks included that moved more than 10% a week. Mostly strong momentum moves starts with a strong move over a few days. I go trough all stocks in a Finviz chart gallery and maybe add some to my watchlists.
3. Strongest stocks for 1 year: You will make the discovery that all the leading stocks are the most strong movers over 1 year. They always appear on the lists. Why? Because there is a great demand and they are making continuously new all-time highs.

Strongest mover from 52 week low

Another method I use is to look at the strongest movers from their 52 week low. The reason is simple: Good performing momentum stocks hold their acceleration. That means that the distance between the current price and the 52 week low will be the same or getting bigger.

In Finviz you can sort all stocks by their distance from the 52 week low. I normally use a minimum of 70%. That means all stocks should be at minimum 70% away from their 52 week low.

Unusual or high relative volume

I want to find stocks that not only show momentum but strong volume, too. My biggest winners all started with a huge volume. Sometimes 5 or 10 times the average volume.

Here are two ways to find strong volume movers:

• Unsual volume: That is a signal filter in Finviz. It shows you all stocks where the volume is strongly above average. Sometimes here you can find interesting candidates for a watchlist.
• Strong relative volume: This is almost the same, but you can choose your own setting. I run a Finviz filter multiple times per trading session. For my filter I use the value 1.5, which means that I want to see only stocks with at least 1.5 above average volume.

Keep it simple to find good momentum setups

Yes, I run also more complex screeners. But they all come down to two things: Movement and volume. In all screeners I combine different filters. You can do it in Finviz, too.

I sometimes think about to give up my complex screeners and switch to the simpler ones. The more simple the better you can follow your routines.

The upper filters and screeners are good to start with. Especially for beginers. You must find a simple routine and follow it. If you did it for a while, you build up trust and you know what you are looking for.

Filters and screeners help you to focus more on price- and volume-behavior. They are not a trading system, they are just a tool to make the process easier for you.

Although I have multiple screeners running, I went through hundreds of charts per day! In a week I maybe see 2500 or more charts. Some of them I see every day. If I had no routine, screener or filter, I would not be able to do this.

Recommended books

Here is a small list of recommended trading books about this topic.

[amazon box=”0996307923″]

[amazon box=”0071807225,0071614133″]

Der Beitrag 3 easy ways to find momentum stocks with Finviz erschien zuerst auf Trading Blog - Julian Komar.