NEW YORK (TheStreet) -- Within investing success lies a fine line between buying overbought shares and catching the next move higher.
Get it wrong and you can watch an entire year's gains (or more) go right down the drain. Get it right and not only do you reap the monetary rewards, but don't be surprised when your neighbor stops by for the second time in a week asking about investments.
I am like a hedge fund; I will short a stock just as easily as I buy one. That means I look for stocks that are trading higher and are overextended. I've found in this process of screening that many stocks that are trading higher, but that are not overextended, continue higher, offering an opportunity to buy.
Interestingly, stocks often make the biggest and most powerful gains at the end of a move. This common market reaction provides a strong incentive to find trending companies, even when prices appear "too high".I have spent countless hours studying data on companies that are able to reach new trading levels and those that fail to continue higher. While I haven't found a Magic 8 Ball that works, I have found that stocks with certain characteristics tend to have higher performance ability than others. The result is a narrow selection that is near or creating 52-week highs, and have the most favorable investor risk-to-reward ratio.
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