Aggressive Stock-Picking, Week 6: How to Blast Off With Rocket Stocks

Editor's note: The Aggressive Stock-Picking Training Program is a series of six weekly assignments. To start with Week 1, click here. Each assignment is based on one of James Altucher's strategies in his book, Trade Like a Hedge Fund. To get a copy of the book, click here.

The sixth and final aggressive stock-picking assignment, we will go inside Stockpickr's James Altucher's head to understand how he makes his selections. However, there's no one surefire method. Altucher uses a combination of the techniques that have been covered in this program, and then he integrates his many years of Wall Street and money management experience.

The past five assignments, covered several different ways to spot stocks ready to take off, including 52-week lows, 52-week highs, unusual volume and special situations such as insider buys or short squeezes.

The ultimate goal is to find those stocks poised to increase in price in the shortest period of time. Altucher calls these "rocket stocks." Each week, he writes about and creates a portfolio of his top rocket stocks. He also writes a midweek update, if some rocket stocks need to be sold quickly.

Cepheid (CPHD Quote), a stock Altucher highlighted as a rocket stock for the week of September 4, is a great example of gathering more than one piece of sometimes contradictory data to identify a rocket stock. Cepheid is a clinical diagnostics company with a large, 19% short position, trading near its 52-week high -- two great reasons to call it a rocket stock. Even though Cepheid is hardly an analyst favorite -- most recently, UBS downgraded Cepheid -- Altucher still stuck to his rocket stock position.

His persistence paid off. In his September 5 midweek update, Altucher recommended selling Cepheid because it rocketed up 7% since his initial recommendation. Jim Cramer, incidentally, also likes Cepheid, calling it "the next Dendreon (DNDN Quote)."