Entering the market for near-term profit

For near-term profit, share trader may keep their shares for a few weeks or a few months. We call near-term-profit-pursuing share trader speculator. Speculation is exciting. People like it for its quick profit. But it also mean quick loss if you are not experienced enough. Most of the speculators are individual share traders. Speculator usually do it for a living and they trade more frequently.

They lose money sometimes and they win sometimes. They can do it for a living is because they can win more than 50% of the time which make them good share traders. In the long run, they make money. And sometimes they make good easy money.



In addition to the fundamental analysis, they pay more attention to the technical analysis. They analyze individual stock price or index movement and trading volume in terms of time. They also watch out for the economy, business trend and government policies which can affect the general market direction.

They enter the market when they see profitable critical points. In technical analysis, all breakout points are critical points. However, some critical points are not breakout points.

Although good speculator can make money either in bearish or bullish market. If you are not a good speculator you should not enter the market if the general market direction is not favorable. The more favorable market is when the market is bullish.

You should keep an eye on the movement of the major composite index to find out if a bullish market exist. The major index to follow are Dow Jones Industrial Average, Dow Jones Transportation Average, Dow Jones Utility Average, Nasdaq Composite Index and Standard & Poor 500.

If a bull market do exist, you should follow the various industrial indexes to see if any profitable critical points exist. The industrial indexes I usually follow are AMEX Biotech, AMEX Pharmaceutical, PHLX Semiconductor, Nasdaq Computer, AMEX Energy and Ludlow Alternative Energy.

I follow other indexes on Automobile and Part, Bank, Basic Resources, Chemical, Construction and Material, Financial Services, Food and Beverage, Healthcare, Industrial Good, Insurance, Media, Oil and Gas, Personal and Household, Real Estate, Retail, Technology, Travel and Leisure, and Telecommunication too.

The following graphs show the common critical points. Some critical points are more profitable than the others. The first three critical points are more profitable.







Short-term movement of the index can be influenced and made by big speculators such as institution investor. Some critical points may be purposely made by them. These critical points are ‘false’ critical points. The upswing movement of the index can not last long and the index return move. Be careful not to fall into the ‘trap’. Watch out for the big buyer. Notice the trading volume.

From the many industrial indexes, you may find more than one critical point. If you want to speculate only one. You may find a more profitable one. For example, the critical point in the upper graph is more profitable than the one in the lower graph. Notice the upper one has a longer flag. The index will go up faster if the flag is longer.




Also take into consideration of the industry. Some industrial index may go up faster than the other. The article “Fundamental technique for bigger profit” may help you in the selection. Once you decide the critical point of a particular industry, pick the leader of the industry. Run a fundamental analysis check of the company. Please refer to the article “Picking a profitable company”. Usually the company is qualified. What make the company as a leader is its qualification. Since you are not going to keep the stock for long, fundamental analysis is not as important. The important thing is to double check the company index to make sure the existence of a profitable critical point. Sometimes the index of an individual stock may not go the same way as the industrial index. If you are not satisfied with its critical point. Check the other leaders. There usually are more than one leader in the industry.

If the index has been rising for quite some time without sizable correction, the critical point usually is not as profitable as the critical point formed after a sizable correction in a bullish market. That critical point may not be a good critical point for near-term profit. Same thing if the economic or business environment seem not supporting the current uptrend.

In searching of the stock for critical point, concentrate on the stocks that are most active. You can go to www.nasdaq.com, www.nyse.com and www.otcbb.com to find them.

After you think you have a good profitable critical point for near-term profit, you should enter the market as soon as possible if you want to maximize your profit.