Stocks Below $1: Often called penny stocks, stocks that have drifted down from higher levels to become members of this group become subject to delisting. I will not comment on these, or on stocks trading on the bulletin boards or pink sheets because they are so volatile, illiquid or hard to research, if not all three.
My Keys to Trading
Fundamental Screens: I calculate a fair value for every stock, which is the price at which the stock would trade at in a perfect world. Fair value is not a price target. Fair value is based on the stock's past data and projections for the future. Fair value is based on the trailing 12-month EPS, the forward 12-month estimated EPS and the yield on the 30-year Treasury. These data points are weighted on the basis of a historical analysis of the stock's price history, and 17 other variables influence the calculation, according to the stock's sector and industry group.
Weekly Chart Profile: A stock with a positive profile has a weekly close above its five-week modified moving average with a rising 12x3 weekly slow stochastic, which is a measure of momentum on a scale of zero to 100. A reading below 20 is oversold, while a reading above 80 is overbought.
Value Levels, Risky Levels and Pivots: A value level is a price at which buyers should emerge on share-price weakness. A risky level is a price at which sellers should reduce holdings on share-price gains. A pivot is a value or risky level that was violated in its time horizon and that acts as a magnet during the remainder of that time horizon. These levels are calculated in weekly, monthly, quarterly, semiannual and annual time horizons, on the basis of the past nine closes in each time horizon. My theory is that the closes over a nine-year period are the summation of all bullish and bearish events for that market or specific stock.
Please note that due to factors including low market capitalization and/or insufficient public float, we consider Ditech Communications, Tut Systems, Westell Tech and Entrust to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.