In practical stock market investment, the method of using company fundamentals to select stocks is mainly suitable for professional investors. For small and medium-sized investors as well as stock traders who use their spare time to trade stocks, there are certain difficulties in terms of time, energy, required knowledge, and mastery of information. Therefore, the application of this method among small and medium-sized stock traders is limited. Technical analysis for stock selection, due to its lack of specialized knowledge, direct consideration of issues, close connection with the market, and relatively easy access to technical data such as prices and trading volumes, as well as the widespread use of technical analysis tools such as computers and Qianlong software, has made the application of this method increasingly common. The technical analysis method generally combines stock selection with buying organically, and the stock selection process is also the process of determining the timing of buying.
1、 Find the true bottom and capture potential dark horses
Using MACD indicator to select stocks
Choosing individual stocks that have experienced a deep decline in stock price and long-term sideways trend, accompanied by extreme decline in trading volume, the stock price of Jier has begun to rise slightly, and the MACD indicator has crossed the zero axis. At this point, it is not yet the time to intervene. We should patiently wait for the stock price to rebound, wait for the MACD indicator to return below the zero axis, and then observe whether the stock price has hit a new low. On the premise that the stock price does not hit a new low, when the stock price rises again and the MACD indicator crosses the zero axis again, the stock is selected as the best buying opportunity. The stock market analysis function can quickly determine the trend, the bull/bear line analysis can directly determine whether it is operable, and the working capital and horizontal statistics can judge the overall trend of the market funds. Only by combining the three can we better grasp the trend.
Stock selection principle:
(1) Deep retracement: The stock price has fallen from its previous historical high by about 30% for high-quality stocks; For general individual stocks, the stock price is halved; For low-quality stocks, a two-thirds cut in their stock price can be considered a deep decline. It is necessary to combine the study of stock texture here. For example, for high growth performance stocks, a drop of one-third is not easy, while for a ST stock that is at risk of delisting, a drop of two-thirds is normal. There is no absolute standard here. Therefore, it is necessary to dialectically view the decline of a certain stock. When investors cannot grasp this, it is recommended to focus on stocks whose stock prices have fallen by 2/3.
(2) Long term volume contraction sideways: Generally speaking, after the controlling institution completes the shipment process, if the stock price does not have a deep correction, it is difficult to have room for another upward trend, which of course cannot attract new investors to enter. Only through the long-term sideways trend of stock prices, such as the 60 day, 80 day, and 120 day moving averages, can the downward trend of stock prices be basically flattened, that is, the downward trend of stock prices has changed, and the average holding cost of medium - and long-term investors has become consistent. At this point, the stock price becomes attractive to new bulls. Long term sideways trading should be accompanied by an extreme decline in trading volume. If the trading volume remains high, it indicates that the short selling energy is still strong and the upward momentum is insufficient.
(3) When MACD crosses the zero axis for the first time, it remains stationary: After a significant drop in stock price, the first wave of market trend is highly likely to be the unwinding trend of the trapped institution. Even for new long positions, in the vast majority of cases there is still a relatively brutal process of liquidation. Therefore, the first time the MACD indicator crosses the zero axis is not the optimal buying point.
(4) The stock price no longer sets a new low: From a trend perspective, the sequential downward movement of the high and low points of the stock price means that the entire downward trend has not ended. Finding a bottom in a downward trend is an extremely unwise behavior. Therefore, not setting a new low in the stock price is an important principle to ensure that investors only operate in an upward trend. On this basis, with the rise of stock prices, MACD has once again crossed the zero axis, and another wave of upward momentum has emerged, which can preliminarily confirm that it is a good opportunity to build positions in the middle line.
After selecting and buying potential stocks based on the above principles, if the stock price does not rise but falls, and the MACD returns below the zero axis again, close attention should be paid to the trend of the stock price. Once the stock price reaches a new low, it indicates that the downward trend has not stopped, and it is necessary to firmly stop losses and exit the market. Otherwise, it should be regarded as a repeated bottoming out behavior.
2、 Looking for strong stocks starting from the bottom
1. Using the ROC indicator to select stocks that have experienced long-term volume contraction and sideways trading, the stock price has accelerated for the first time after entering an upward trend, causing the ROC indicator to show a phenomenon of crossing three antennas above the zero axis for the first time under normal conditions, indicating that the stock has a strong dark horse phase and can intervene during a pullback.
Key to stock selection:
(1) Bottom region activation: Firstly, based on the previous context, it is determined that the stock price is in the bottom region. (ROC takes the normal value)
(2) Rapid rise in stock price: One important function of the rate of change (ROC) is its good performance in measuring extreme market conditions. With the rapid rise of stock prices in the early stages of the uptrend, the ROC index has continuously crossed three antennas, indicating that institutions are showing signs of building high positions. And emphasizing that this situation needs to occur for the first time is to ensure that the stock price remains near the bottom area.
(3) Scope of application: This method is not applicable to super large cap stocks and newly listed stocks. The ROC indicator has gone through three antennas, and the general stock price has already risen by more than 50%. For super large cap stocks, it already carries great risks, and there is not much room for growth. However, the market positioning of newly listed stocks has not yet been tested by time, and the use of this indicator lacks rationality.
The so-called ROC indicator in the previous text refers to not enlarging or shrinking the boot interface in Qianlong Dynamic under normal conditions, in order to avoid causing changes in the third antenna value and unable to obtain a unified standard.
2. Using volume price relationship to select stocks
Stocks that have been shrinking at the bottom of the stock market for a long time have suddenly seen an increase in trading volume, causing the stock price to rise sharply and continue to rise significantly. After the first surge, the stock price correction does not fall below half of the increase, and the trading volume has been reduced to about 1/10 of the highest daily trading volume in the previous period. At this point, the best buying point has been reached.
Key to stock selection:
(1) Sudden increase in stock price and sharp increase in trading volume: Unlike the performance of the stock price startup at the bottom stage mentioned earlier, without any warning, the stock price suddenly rises and the trading volume sharply increases. Indicating that there may be significant changes in the fundamentals of individual stocks, leading to a rapid increase in position building behavior.
(2) The retracement range does not exceed 1/2: However, this situation also often occurs in the self rescue market of the trapped main force in the early stage, which is manifested as a rapid rise in stock price followed by a rapid decline. Therefore, we must emphasize that the stock price retracement rate cannot fall below half of the increase.
(3) The significant decline in trading volume indicates that the pressure to follow the trend and unwind has been basically released, and the locking of chips is good. The washing process is coming to an end, and the stock price will regain its upward momentum.
