Finding a Hot Stock Pick
Jim Cramer's stock picks have become world-renowned and world-reviled'depending upon who you talk to'as CNBC's 'Mad Money' TV show has grown in popularity.
But the truth is, you can find your own hot stock picks without Cramer, if you want to. It just takes a little more work than propping your feet up in front of the TV and watching Cramer rant and rave to the audience's delight. True, you may miss out on some of the hysterics, but a fat trading account balance can go a long way towards making up for the lost entertainment value.
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Your first stop for hot stock picks is to the IBD 100 list that is published in every Monday edition of IBD. IBD ranks its top 100 stocks according to a variety of criteria, the most important of which are earnings and relative price strength readings.
No strong earnings, no stock pick. Earnings and especially a track record for earnings growth is what powers stocks higher. Many people buy into a stock's story, but even 'story stocks' must report their earnings 4 times a year, and the last thing in the world you want is an unpleasant surprise!
Relative strength also tells you a thing or two about a stock'namely, is its price action holding its own against the market's other stocks? A ranking of 80 in either of these categories means a stock is performing better than 80% of all other listed stocks. You want at least an 80 ranking, if not significantly higher in both earnings and relative price strength.
You also want a stock in a strong industry, and here again, IBD gives you a readout as to whether the stock is in an A+ rated industry or a D- one. A stock pick's 'Accumulation' ranking tells you whether the institutions that drive stocks higher are onboard your stock or passing it by.
Want to get really good at picking stocks? Start finding those stocks that are forming one of a small handful of stock charts that a stock forms just before making an explosive more. Using these chart patterns in your stock pick selection process is one of the best ways of ascertaining the all-important when to buy a top-rated stock, and believe me, these stocks really pour on the volume when they break out!
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