Richard Moglen, stock trader, educator and co-founder of TraderLion, and Ross Haber, co-founder and chief market strategist for TraderLion discussed advanced and alternative entry tactics at the 2022 FinTwit Conference hosted by Benzinga and Lupton Capital last week.
Identify Market Trend: Haber said the most important thing traders should understand before looking for an entry setup is determining the general direction of the overall market. He said it doesn't matter how good your stock picking abilities are if you buy when the market is in a downtrend because 75% of stocks simply follow the general market trend.
"If the overall trend is not in your favor, it's just a matter of time before you run into trouble fighting the trend," Haber said.
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For now, he said the market is in a downtrend, so traders buying stocks are playing a dangerous game.
"What we're waiting for, and this is super important, we're going to be looking for a follow-through day, which would be a potential signal that the market has put in a bottom and is following through. That is our quantitative sign to start looking for our qualitative signs, which would be the health and breadth of the market, the leadership," Haber said.
Universe Of Potential Stocks: After an uptrend has been confirmed, Moglen said the next step in the process is picking the right batch of stocks to trade.
"We look for the superior sector and group performance, excellent earnings and revenue growth and estimates … and we also want to see new and disruptive products and services. Basically, we want the company to be able to change how we work, live and play," Moglen said.
TraderLion also uses a handful of technical criteria for selecting stocks that signal a stock is being accumulated by institutions and has upside potential.
"These are price and volume characteristics such as huge volume spikes to the upside, tight price action, strong uptrends, all these pointing us towards this stock is under accumulation," Moglen said.
He said they select stocks that have superior relating strength within a group that is also demonstrating relative strength in the market.
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