The Active-Investor trading system is the result of years of development and trading experience. Based on a collection of technical analysis tools, the multi-step system brings together a unique Top-Down/Bottom-Up strategy, which is market neutral, meaning that it is designed to benefit traders and investors in all market conditions. Whether the market goes up, down, or sideways, the system offers research information and features that can help generate profitable results.
Because one of the primary influences on stock prices is the direction of the overall markets themselves, the first key to successful trading is having a sense of where the market is likely to head. Granted, establishing such a forecast is more difficult than it looks. Our research helps investors to develop an awareness of market conditions in two ways. The first is through the Market Commentary, which is posted periodically as market events demand. When the author is not racing along some libelous tangent against perceived offenses by Wall Street and Washington, the Commentary includes a rundown of the technical status of the markets. That status is reported in a table each week on the Indexes page, which covers the major indices in the U.S., as well as several international markets.
Each Index table includes a technical indicator regarding the momentum for each index. This is the weekly momentum, a swing indicator that often cycles over a period of 5-8 weeks. The value of the indicator is either positive or negative, showing which part of the momentum cycle that the market indexes are in that week. The momentum is useful for an intermediate-term trading horizon. If an index is above its 5-week moving average, it is listed as positive, meaning that that market measure is presenting lower risk to investors at that point. An index below this trend line is listed as negative, meaning that downside risk to prices is considerably higher.
Studies have shown that another major factor in the performance of an individual stock is the sector or industry group to which it belongs. The value of this trading tool is probably underappreciated by most investors, but at Active-Investor, it is a key component of the system's strategy. It is often said here that "We would rather own a bad stock in a good sector than a good stock in a bad sector." Even novice investors can understand the wisdom of this statement by casually observing the day-to-day fluctuations in the markets, as reported by any publication or news outlet. Stocks tend to rise or fall with their peers, as they are often all painted with a broad brush of good news or bad news. The Active-Investor system addresses this phenomenon by making it a major part of the weekly stock selection process. Every week a screen is run on thirty-three industry sectors, as represented by the corresponding Fidelity Select sector fund. Each sector is given a rating of Positive Momentum or Negative Momentum. This information is then tabulated and made available to subscribers on the Sectors page.
Our research into the direction of the markets and sectors constitutes the Top-Down portion of the Active-Investor System.
Once the health of the markets and the sectors has been evaluated, the Active-Investor System embarks on the Bottom-Up aspect of the research. Each week thousands of stocks are screened for the strongest bullish and bearish technical signals, which indicate the likely direction of a stock over a period of 4-8 weeks. The most bullish stocks are compared to the sector screen, and only those that are in bullish sectors are given a further pass to the final screen. The opposite applies to the bearish stocks. Once is each list is distilled through the sector screen, the remaining stock charts are reviewed. A list is then generated of the 10-12 most promising bullish stocks (buys) and the three most promising bearish stocks (sells). These featured stocks are then posted on the weekly research tables for Bullish and Bearish stocks, respectively.
The Active-Investor investment strategies are based on proprietary research and years of practical trading experience. To help
you decide what type of investing is most suitable for you, consult your personal investment
advisor. For additional background on technical analysis and other trading tactics, you may also want to browse through the online Bookstore.
OUR INVITATION TO YOU
If you think our investment research would be valuable to your overall trading strategy, please accept our invitation to review Active-Investor.com for free. If you profit from using this research, consider supporting the site to keep it free.
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