How to Find the Best Stocks to Trade for Gains

It’s been a rough few weeks for investors…

But I want you to push the market correction out of your mind.

Today, we’re going back to basics by focusing on our core trading system and how it has helped us bank consistent, repeatable profits.

First, it’s important to understand that we focus our efforts on two specific types of trades. Long-term trades are the core of our strategy. These are the plays we plan to hold for many months to capture gains from the market’s biggest trends.

Typically, I will select an appropriate ETF or a dominant sector leader for our longer-term plays. For instance, if we’re bullish on the growth of e-commerce, we simply buy Amazon shares. After all, it’s the no-brainer market leader that dominates its category. No other company comes close…

Then we have our short-term trades. These are the positions we’ll plan to hold for just a few weeks (or occasionally a bit longer) to capture a quick burst of momentum. Sometimes, our short-term plays are even related to our longer-term trades and the bigger market themes we’re following.

I’m going to cover the nuts and bolts of our long-term strategy today.

Finding a Solid Long-term Play in 2 Simple Steps

That the best way to book consistent gains in the market is to keep it simple. That’s how I approach the search for all my longer-term trades.

The very first thing you want in a long-term trade is performance. We want to capture the meat of a big move higher. That means we want stability and a solid uptrend.

Let’s say you’ve read about a stock on a financial news site and you’re bullish on its prospects. Take 30 seconds and pull up a simple long-term chart going back at least two years. If the stock is moving “bottom left to top right,” you’re on the right track. No fancy technical analysis required.

Capturing the Meat

Once you’ve found a play you like that’s locked in a strong uptrend, you’re ready to put it on watch. Step two in our trading process is learning when to pull the trigger. After all, buying is the most important part of this whole process.

Many investors default to the ol’ “buy the dip” mantra. But you shouldn’t blindly throw money at a play just because it finishes the day in the red. Instead, you should wait for the right bounce to come along before scooping up shares.

Here’s how you do it:

First, you need to get an idea of where your stock should bounce. How do you figure that out? You can draw a line or use a moving average that fits the play’s uptrend — whatever works best.

Then you should wait until the stock moves higher after visiting the line.

Buyable Bounce

If the stock fails to bounce in the neighborhood of your support line, then don’t buy. It’s as simple as that.

Take a look at the above chart one more time. Notice how you don’t have to wait for perfection. Sometimes, the stock will bounce nicely off your support line or moving averages. Other times, it will “trick” weak hands into selling by briefly breaking through support before quickly recovering.

Finally, it’s best to wait for your potential long-term play to close higher than it opened on the day. That way, you’ll know you’re buying a dip heading into an authentic bounce — instead of a potentially hazardous breakdown.

Of course, this isn’t an exact science. It works well with some stocks better than others. You can’t get too hung up on making the perfect move. The key is to watch and wait. You take what the market gives you…

Sincerely,

Greg Guenthner

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Greg Guenthner

Greg Guenthner, CMT, is the editor of Opening Bell Fortunes and Seven Figure Signals. He has been with Agora Financial/Seven Figure Publishing since 2005. In 2019, the average position in Greg’s Sunrise Fortunes portfolio outperformed the S&P 500 by 1.65x.

View More By Greg Guenthner