Each week, prior to the open on Monday, I post a "Stock of the Week." Overall, the results have been quite good with about a 2-to-1 win ratio. If you follow the adage about cutting losses quickly and letting winners run, it was possible to generate some very attractive returns with these picks.
There have been some very big winners, such as Celator Pharmaceuticals (CPXX) . That company was picked on May 16 at $14.16 and was taken over within 10 days for around $30, netting a return of 112%.
There have also been some big losers, such as Global Blood Therapeutics (GBT) , which quickly dropped 15% in the first week as the market failed to appreciate its drug research results.
I thought it would be instructive to show how some of the better picks looked when these stocks initially were chosen and how each has developed subsequently. It is a good illustration of how winning stocks should act and how you can enhance returns with patience.
Acacia Communications (ACIA) has been a super-momentum stock since being picked on May 23. As you can see, there was nothing very special about the chart at first, but the key was that it made a higher high over that $31 level. Once that occurred, it was off to the races with one brief pause along the way. Extremely good earnings estimates helped get this one moving, which highlights the importance of considering some fundamental factors in addition to the chart. (All charts courtesy of TCNet.)
Yirendai (YRD) was forming a very solid base when I picked it on April 25 and then again on May 9. The Chinese company's stock failed to gain any good momentum at first, but once it moved over the key resistance around $12.50, the uptrend kicked in and it has been running nicely since then.
Evolent Health (EVH) might have looked a bit extended when I picked it on May 31, but it had an interesting story and was knocking at the door of some key resistance. It upticked steadily for weeks, with no major pullback before vaulting higher in July.
What stands out about all three of these situations is that patience was required. If you used sound money management and simply waited for the trades to develop, each of these stocks produced outstanding returns. Also, in all three cases, it helped to know something about the fundamentals. While each could be traded purely on a chart basis, having some knowledge of the fundamentals can greatly enhance confidence in a trade.
The most important thing of all is always to be looking for the next trade.
