Greetings, fellow Pro-fundity team members -
2-18-00 Page Background music:

This Week's Guidepost

1. We exchanged ideas with an interested investor this week, answering his questions about the Pro-fundity web site offering. Since this is a recurring theme, we thought our subscribers and other interested parties might benefit.


The original question:

“I'm new to the stock market and currently trying to find a stock that is rolling. I found a stock symbol (ZMAX) that I believe is rolling but not sure. I don't have a lot of extra time so your service may be of value. Do you have any recent picks that showed a profit? Can you provide a percent of buy/sell recommendations that have been successful on some recent picks?”
2. Our response:
   "Good questions, welcome to rolling stocks.
   1. Our service provides 10 rolling stock picks each week, priced between $1 and $30. These picks have all passed tight screens with regards to fundamental analysis (they are solid companies with good prospects for future growth). Additionally, they have passed technical analysis screens, telling us the timing is right, that they are near-term buy prospects. Finally, they have passed a “news” screen, no bad news in the press regarding that stock, an issue that can cause the best of stocks to take a tumble for seemingly no reason.
   2. Additionally, we provide five "Quick Picks," tickers that look technically ready, below about $6, without the tight fundamentals screen.
   3. On Friday, December 10, 1999, we offered the following picks: BELM, BIAC, CACI, FLOW, FRAG, HOEN, KNSY, LECO, PSFT, and SBIB. Quick picks offered on that day were GW, KEG, PETD, SESI and TMAR. This is far enough back for you to assess the result.
   4. What percent were successful? If all you wanted was consistent, reliable rollers to put on auto-pilot, with automatic buy and sell signals, so you could go sit on the porch, probably none. Point: Rolling stocks do not continue to roll. When a stock moves into that "trading range," it is usually a period of indecision, not knowing which way to go. This period may last only two rolls, but rarely more than say five. They will often move to a new price level and roll a bit more. But their nature is continually changing. Successful trading with rollers requires time and effort. It just takes commitment.
   5. Let's examine the performance of these picks: Good rollers in the group included FLOW, KNSY and PETD. SESI looked like a good roller, we made some money, but where will it go next? In the same pattern, GW rolled as expected but is now moving up to a new level. HOEN slid from $9.75 to as low as $9.00 where it rested for over two months, but finally jumped to $10.00 last Friday. Might it recover? FRAG dropped below what we might have set as a stop loss, then recovered nicely. LECO gave us a whisper of hope, then fell where it is waiting... Both BELM and CACI responded to their sound fundamental base and provided rich gains, if we held on and didn't have automatic sell signals at what we might have said was enough. LOD fell down and out of bed, probably without the fundamental base that minimizes this risk on the main picks. KEG provided a nice gain, but where should we have put a sell trigger? SBIB turned a 7% increase in two days, then fell sharply. It would have taken a quick and attentive trader to have caught that small increase (which would have been over 800% APR). Occasionally, we will include picks that look technically like breakout candidates, not rollers. PSFT was such an example, which didn't look much like a roller, but gave us a nice return on the breakout. We are not averse to making money on our picks via other techniques (other than rollers).
   6. If we were strictly into "Buy and Hold," the performance of the 10 main picks would have been 7 winners and 3 losers, with an aggregate gain of 17.63% as of Friday 2/18 (ten weeks). That equates to 91.9% APR. On the five quick picks we had 4 winners and 1 loser, with a gain of 30.6% (159% APR). These figures required nothing on your part so far as buy and sell levels. However, had we carefully followed the charts, we could have made money on two of the losers in the main 10 and money on the one quick pick loser. The figures in this paragraph do not include commissions and other costs, all of which depends upon the commission rate and how much you invest.
   7. So, it depends on you. If you are interested in making some good profit with the challenge of being involved with charts, ready to pull the trigger when opportunity rears its attractive head, this may be for you. You cannot do this successfully without spending some time. On our part, we go out into the acres and acres of used auto lots (thousands of companies), line up ten stocks of what we consider great prospects, give you the keys to test drive (via paper trades), look under the hood, kick the tires, and eventually pick one (or more) to do your own thing on. But no one will pull the trigger for you. It is ultimately your decision. Our picks are not recommendations with canned buy-sell targets.
   8. Your example ZMAX appears to be a roller. It looks like about three rolls before it is changing its character. This company is in the NASDAQ small cap issues and difficult to get sound fundamentals on. Its capitalization is $38 million. Its' rolls in October to December were difficult to play, that is, the uptick occurs in the matter of only a day or two. This gives little statistical data like stochastics or RSI to help flag the pending increase. However, you may make some money on this one.
   9. I recommend you order the book on our site, "The Provident Investor," to help you become proficient in this exciting venue. The primary intent of our site is education. We provide tutorials to help you make sound investment decisions on your own. Rolling stocks is not "day trading," nor is it "buy and hold." We hope to serve you in the future."

3. In last week's Guidepost we went through several features of the Pro-fundity web site, explaining their nature and value. We are often asked about our “buy and sell trigger points,” as listed in the Rolling Analysis section on the Pro-fundity page. As explained in the response letter above, these are not recommended buy and sell points but historical data points that give us insight as to the nature of the stock in question.
4. Recently (12/28/99), eminent stock market chartist and guru Don Worden (founder of TC2000) made the following comment: “Every stock has a personality. You should study a stock's personality before you attempt to come to conclusions about its technical strength or weakness... “

   To Worden’s observation we add a hearty hurrah! That is the purpose of the Rolling Analysis section. It is not to fix buy and sell triggers. It is to help us understand the personality of tickers we are considering to be rollers. This is but one unique and proprietary feature of Pro-fundity that sets it apart from other rolling stock web sites. Properly utilized, this will provide a market sense and understanding of the nature of what we call “rolling stocks,” increasing their successful use to fatten our wallets.

TC-2000 tutorials are available on the home page.