Aggressive Stock-Picking, Week 4: How to Trade Off of Unusual Activity

But before you invest your hard-earned money using this trading strategy, here is your assignment: Pick the best stock trade on the basis of unusual activity.

Step 1. Review the stocks on Stockpickr's Top Stock Buybacks List and two stocks from the Latest Activist Situations List. Read the "Reason for picking" box for each stock to see why it made the list, and pick two names from each list that you are interested in.

Step 2. On Stockpickr, create a portfolio of your four initial stocks, called "Unusual Activity Analysis: [Your Stockpickr Username]".

Make sure to turn the "Portfolio Tracking" feature on, so you can monitor stock prices over time.

(To create a portfolio on Stockpickr, you'll need to first log in. If you're currently not a Stockpickr member, you can register at www.stockpickr.com/register.) Turn the Porfolio Tracking feature on, so you can monitor stock prices over time.

Step 3. For each of the four stocks that you selected in Step 2, review the latest company news and analyses by searching for the most current articles and videos on TheStreet.com (use the "Search Articles" or "Get a Quote" boxes) and other financial news sources.

So what should you look for? You want to find out why the company is buying back its stock or why the activist investors are increasing their stake.

Step 4. Take a fundamental look at all four companies, paying special attention to their balance sheets and whether their respective business cycles are on the way up or down (hint: up is better). As you gather this information, write your observations in the "Reason for picking" boxes in your Stockpickr portfolio.