Prop Training Section 1 Stock in Play Checklist

STOCKS IN PLAY CHECKLIST

This checklist will help you find stocks in play. Scan the news stories on SMB Scanner and pay special attention to news items that match the list below. The more matches the more likely the stock will be in play. What most interests us is news that was UNEXPECTEDLY positive or negative. The Street is surprised about the news. The news is better or worse than the Street’s previous consensus. The Street did not anticipate the news and/or how positive or negative it would be. Positive news that signals higher growth for the stock is most interesting. Beating the street consensus attracts buyers. You are only as good as your stocks. Learning how to find the stocks in play will give you an advantage.

The things for which we are searching:

1.      Beats revenue or going to beat and higher than the street consensus.

2.      Earnings higher of going to be higher than the street consensus.

3.      Heavily shorted stock (more than 20 percent).

4.      Sold off a lot lately.

5.      Ready to make a new high.

6.      Ready to break through a high for a significant period of time.

7.      New product to sell that is unexpected.

8.      Gaining market share.

9.      Good news on drug testing of biotech stocks- Phase II and III, Phase III is most important.

10.    Upgrade from a well known analyst or reputable firm. Tier I firms such as Goldman and Morgan Stanley and Citigroup are more important than Tier II and Tier III banks.

11.    More than one upgrade in a stock. Pay special attention to the price targets given in the upgrade and where the stock is trading at the moment.

12.    Above 20 dollars. The cheaper the stock the less it moves.

13.    Going forward revenues higher than consensus (next quarter and the year).

14.    Going forward earnings better than the street consensus (next quarter and for the year).

15.    High volume before the open.

16.    Fits a pattern that can be identified. Ex: Stocks up on the open just go higher during a particular earnings season.

17.    More than 1 million shares of volume on average daily.

18.    News that made it go down confirmed exaggerated or untrue. Tier I bank defends the stock.

19.    Beaten down stock starting to move back up.

20.    Potential takeover candidates. Rumor circulating that a company is soon to be acquired. Look for other stocks in the sector of this company.

21.    Stock reported yesterday after the close and trading higher in the premarket than in yesterday’s afterhours.

22.    Margins increase above consensus.

23.    Government investigation. Be careful on the long side.

After finding a few stocks with multiple matches, see our stocks in play sheet. Compile the information on this sheet. Find the two best stocks that fit your trading style. Set alerts for others that do not make the cut, but are still interesting. Prepare properly for the open.

Summary

·        What is the street expecting?

·        Unusual news

·        Consensus?

·        Full year before quarter

·        The Street loves improved margins and market share gains.

·        New product, new drug, new business