• Investing
  • Stock
Round Table Thoughts
  • Economy
  • Editor’s Pick
Home Stock Hidden Gems: A Simplified Method to Find the Best Stocks
Stock

Hidden Gems: A Simplified Method to Find the Best Stocks

by July 19, 2023
by July 19, 2023 0 comment
Share
0
FacebookTwitterPinterestWhatsapp

When broad equity indexes move higher and higher and you don’t actively add stocks or ETFs to your portfolio, it’s natural for you to think that you may have missed the ride, as some of the stocks you really wanted may now be priced too high. This may tempt you to look for cheaper stocks, which can get tricky. There’s nothing wrong with buying cheap stocks; you just need to adopt a smart approach.

In How to Trade In Stocks, one important point Jesse Livermore mentions is that, when you select securities to trade, you should “stay with the powerful healthy Industry Groups.” This is very helpful advice, but how do you find bargain stocks within healthy industry groups? The best way—perform a top down analysis.

Start With the Leading Sectors

Each day presents a different story, so, when looking at the bigger picture, it’s best to look at a longer-term time frame when identifying the strong sectors. Let’s examine a hypothetical situation, although it’s not far removed from what the stock market is going through in the second half of 2023.

Looking at the StockCharts Sector Summary tool, you can see that, in the last three months, the Technology sector was the clear leader. The three-month daily chart of the Technology Select Sector SPDR Fund (XLK) below shows that the ETF started outperforming the S&P 500 index ($SPX) in April 2023.

CHART 1: TECHNOLOGY SELECT SECTOR SPDR FUND (XLK). The Technology sector was the top-performing sector in the last three months, which is reflected in the chart of XLK.Chart source: StockCharts.com (click chart for live version). For educational purposes.

XLK has traded above its 20-day simple moving average (SMA) since early May. The ETF bounced off the 20-day SMA a couple of times. As long as XLK continues rising, stocks within this sector should continue to perform well. But that doesn’t necessarily mean every stock within the sector will perform well.

Again, the Sector Summary tool can help you narrow your stock search. Click on Technology Sector Fund in the name column. This will display:

CHART 2: SEMICONDUCTORS ARE THE LEADING SUBINDUSTRY. If you click on “Semiconductors” you’ll see a list of stocks and ETFs that make up this sub-industry.Chart source: StockCharts.com. For educational purposes.

How To Use the Sector Summary Tool

From Your Dashboard or Charts & Tools, under Summary Pages, click on Sector Summary.Select time period for analysis from the Period dropdown menu (in this case, Three Month).Click on the name of the ETF. This displays a summary for the selected sector.Click on the leading industry name, which in this case is Semiconductors.Sort the stocks in the Semiconductor industry by any column. If you sort based on SCTR Universe (U), with large caps listed first, you can scroll down the list of stocks.

Zeroing In on Stocks or ETFs

Say NVIDIA Corp. (NVDA) is on top of the list. But its price may be a bit rich. So you look at the next stock, Marvell Technology Inc. (MRVL). The stock price is more attractive, but, when you hover your mouse over the stock symbol and view the thumbnail chart of MRVL, you may find it doesn’t meet your criteria. So you move on to the next one. This is a quick way to look through the charts on the list and do a first pass.

The next hurdle is to figure out which stocks to trade. This is when you put on your analyst hat and dive deeper into the promising charts. Click on the company name or select an option from the menu on the left. If a chart looks interesting, add your favorite technical indicators and overlays and analyze away. This will narrow your focus to a few stocks, which you can add to one of your ChartLists. 

One of the charts that appealed to you is ON Semiconductor Corp. (ON). The daily chart shows the stock is trending higher (see below). Its Relative Strength Index (RSI) is below 70, and relative strength against the S&P 500 index ($SPX) is weakening. Overall, the stock is showing strength, but it looks like it may be pulling back.

CHART 3: IS ON SEMICONDUCTOR READY FOR A PULLBACK? A pullback will present a buying opportunity if the stock continues its uptrend after a pullback. The first support level would be the $100 level, which was an area where the stock paused a few days ago. If the stock fell lower, it could reach the 25-day moving average.Chart source: StockCharts.com (click chart for live version). For educational purposes.

How much lower could ON stock go before it turns around and continues its uptrend? If you look back at the chart, price has bounced off its 25-day SMA during the last significant pullbacks. If the stock pulls back to the 25-day SMA, it could present a buying opportunity. But the stock is a ways away from the 25-day MA. Before that, the stock may find support at the $100 level, since there was a pause with relatively wide-ranging price bars. If the stock pulls back to around $100, look for signs of a bounce back up on strong volume. If it doesn’t reverse there, then look for the stock to go lower, toward its 25-day SMA.

Keep an eye on the RSI as well. If RSI remains between 50 and 70 during the pullback, there’s a chance the stock could reverse and move back up.

It also helps to add an indicator that looks at the buying or selling pressure, such as the Accumulation/Distribution Line (ADL). In the daily chart of ON above, the ADL is overlaid on the price chart (pink line). During the upward move from May, the ADL showed strong buying pressure. As long as the buying pressure continues to dominate, the probability of an uptrend is high. In short, there’s a good chance the stock may move even higher.

The Bottom Line

ON Semiconductor reached its all-time highs on Tuesday, so there’s no upper resistance level. Keep an eye on support levels during a pullback. If there’s enough momentum to push the stock higher, this could be a worthwhile stock to add to your portfolio.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

You Might Also Like
  • QQEW Divergence vs. QQQ Shows Weak Liquidity
  • Safer Stock Picks for an Uncertain Market (High Yield + Growth)
  • What’s the Downside Risk for QQQ?
  • Chesapeake Energy: A Stock That Could Pump Much More
Share
0
FacebookTwitterPinterestWhatsapp

previous post
Iowa Gov. Kim Reynolds plans to appeal block on state’s new abortion law
next post
The Wisdom of Jesse Livermore, Part 10

You may also like

MEM TV: S&P 500 Puts in a Bottom!

April 1, 2023

Unlocking Growth: The Importance of Market Pullbacks

January 6, 2024

Breadth Analysis Suggests Pullback From S&P 4600

November 23, 2023

Sell in July and Go Away? Calendar Range Reset

July 6, 2023

Art and Science: 3 Key Ratios in the Markets

March 24, 2023

GNG TV: Examining MAJOR Pullbacks within Secular “Go” Trends

September 1, 2023

4 MACD Patterns That Will Give You an Edge

August 28, 2024

DP Trading Room: Intermediate-Term View of the Magnificent 7

April 29, 2024

Santa May Be Warming Up His Sled; What’s Next? Watch...

November 6, 2023

Who Let the DOG Out?

August 4, 2024

    Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • Krispy Kreme stock plunges after doughnut chain pauses McDonald’s rollout, pulls outlook

      May 8, 2025
    • Don’t Buy Robinhood Stock… Until You See This Chart Setup

      May 8, 2025
    • UnitedHealthcare sued by shareholders over reaction to CEO’s killing

      May 8, 2025
    • The Unpredictable Stock Market: How to Make Sense of It

      May 8, 2025
    • AMD CEO calls China a ‘large opportunity’ and warns against strict U.S. chip controls

      May 7, 2025

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be...

      June 27, 2024 2,632 views
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as...

      August 9, 2024 2,339 views
    • 3

      Biden appointee played key role in recruiting Chinese...

      June 25, 2024 2,320 views
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful...

      July 10, 2024 2,302 views
    • 5

      Harris VP pick spent years promoting research facility...

      August 29, 2024 2,186 views

    Categories

    • Economy (7,009)
    • Editor's Pick (2,066)
    • Investing (538)
    • Stock (2,530)

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be revived under new House GOP bill

      June 27, 2024
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as Harris camp blasts ‘lying’ critics

      August 9, 2024
    • 3

      Biden appointee played key role in recruiting Chinese businesses to Delaware: ‘Longtime friends’

      June 25, 2024
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful of Chinese spy threats

      July 10, 2024
    • 5

      Harris VP pick spent years promoting research facility that collaborated with ‘Chinese military company’

      August 29, 2024

    Latest News

    • Krispy Kreme stock plunges after doughnut chain pauses McDonald’s rollout,...

      May 8, 2025
    • Don’t Buy Robinhood Stock… Until You See This Chart Setup

      May 8, 2025
    • UnitedHealthcare sued by shareholders over reaction to CEO’s killing

      May 8, 2025

    Categories

    • Economy (7,009)
    • Editor's Pick (2,066)
    • Investing (538)
    • Stock (2,530)

    Disclaimer: RoundTableThoughts.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2024 RoundTableThoughts.com. All Rights Reserved.

    Round Table Thoughts
    • Investing
    • Stock
    Round Table Thoughts
    • Economy
    • Editor’s Pick

    Read alsox

    Are The Financials Sending Us A...

    April 14, 2024

    Top Five Charts of 2023 #4:...

    December 22, 2023

    What The HECK?! Can an Inverted...

    July 14, 2023
    Sign In

    Keep me signed in until I sign out

    Forgot your password?

    Password Recovery

    A new password will be emailed to you.

    Have received a new password? Login here