My Process: Long $VRNT

On 12/6/13 I bought some VRNT. Here’s the quick process of what got me to that decision (the charts and numbers will reflect today, but you’ll get the point).

I found this stock by using my screens in Finviz. I usually look at these screens at least once a week. I start by creating screens or using my saved screens and then scanning through the MONTHLY charts of the results. I like to start with monthly charts because it gives me a good perspective of the long term picture and it filters out a lot of the short term BS that people get caught up in when investing. I also think the best setups are ones that line up on many timeframes and monthly is a good place to start. Stocks that show up on the screens and have a good monthly look go on a list for further research. Check the monthly charts below. If you don’t see why this made the list of further research you shouldn’t be using charts. Uptrend, breakout, volume, ect – all good to me. Check.

Screen Shot 2013-12-21 at 11.22.40 AMScreen Shot 2013-12-21 at 11.11.01 AM

After that list is created I look through weekly charts and look into what industries the companies fall in (are they in ‘hot’ sectors?). If a stock passes on both, it moves on for further research. for VRNT:

Screen Shot 2013-12-21 at 11.26.10 AM

When I was researching this stock that breakout bar at the beginning of December had just taken place. Weekly chart: good (great). Check.

Sector: Business Software and Services. Tons of good companies and strong performers in this sector recently. Numbers for VRNT already confirmed as good because of my initial screen. Check.

Next step – research specific company. I usually visit the company’s website, scan through the last month or so of the Stocktwits stream for the company, and read any articles that seem relevant. This is just to give me a feel for the company and to find out if there are any important events that have happened or will be happening. I don’t remember what I specifically read, but I remember two things that kept my interest going: 1) very few followers on Stocktwits. I have no proof that this matters, but I like trying to find potentially strong companies before they become ‘hot’. 2) The company falls into a few trends that I think are strong right now: software, big data, and (not sure exactly what to call this one) ‘security’? – NSA, tracking, fear… So everything was good here. Check.

Next step: research setup and potential entry. First I look at a shorter term chart (daily for this one) to see what a logical entry and stop price would be. This was early December and soon after the breakout above $38. I decided 37.45 was a good stop price for this scenario.

Screen Shot 2013-12-21 at 11.41.39 AM

Then I set up a trade like any trader would: amount of portfolio I risk, buy price, stop price, ect. I use a simple spreadsheet for this:

Screen Shot 2013-12-21 at 11.39.42 AM

Then it’s time to pull the trigger and see if the work pays off. So far the stock has acted very well. Held it’s breakout, never got below $40, and moved up with volume on a big day for the overall market (12/20).

So that’s a look into what I do before I buy a stock. Let me know what you think.

 

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One comment

  1. tradervancouver · February 16, 2014

    Solid work. Especially like your spreadsheet, and your awareness towards risk management – that already puts you far and away ahead of so many other traders. Well done, keep it up!

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