Watch Lists - Milking a Good Daily

A common question on most trading blogs is “How did you find that stock?” or “How do you develop your watch list?” I have invested a lot of time into developing real-time scans that highlight potential trading candidates during the day. And, most days the scans turn up a FEW good trades, mixed with many weak-to-mediocre setups.

I do not want to go into the details of real-time scanning. Instead, I want point out the effectiveness of maintaining a watch list of GOOD daily charts and milking those stocks as solid setups appear.

In a recent post (June 17), I mentioned that when filtering through scanner hits, it helps to focus on the best daily charts. I traded HK that day and noted that it had a great daily chart. Did I forget about HK after that day? No. Instead I added HK to my watch list. When going through my watch list this weekend, I noticed that HK had a nice IB setup on the daily.

This morning it gapped above my trendline connecting the previous 3 days highs, pulled back and consolidated briefly on a small time frame (1-3 mins), then trended higher throughout the morning. Following the B&B action mid-day, it had a strong move into the close. That makes two range expansion trend days in one week from a single stock. So, when you see a good daily chart, add it to your watch list. Chances are that you can milk that chart/stock for multiple range expansion days and/or multiple intraday trades.

By the way, this is essentially what Jamie is doing with his core watch list (WL). Although his WL selection criterion considers much more than just the daily chart/trend (sector analysis is an example), most of his WL stocks have demonstrated the ability to produce good intraday moves. If they continue to provide good trades from time-to-time, they stay and get milked. If not, they eventually get replaced.