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Investing in Earnings Potential

Investing in earnings potential is an effective means of investing in stock. When picking stocks an investor looks for a number of factors. Does the stock pay dividends? Does the company have non performing assets that can act as a margin of safety in case of an economic downturn? Is the company in a sector that is likely to grow over time and do the company’s products compete well in that sector? Does the company have a strong product development division and is it able to market its products effectively?

Dividend stocks provide a steady source of income to the investor. The ability to pay dividends over an extended period is a measure of the financial well being of the company, a reassurance in long term investing. The presence of assets that can be sold if the company gets into trouble can be an attractive feature when buying stock but will be more attractive if the company sells the assets in order to pass dividends on to its shareholders.

Product development, marketing, and sales all have to do with earnings in the present and future earnings. When investing in earnings potential this is where to look. Intrinsic stock value is based upon a rational expectation that a company will generate increasing amounts of income into the distant future. The ideal situation for a long term investor is to do fundamental analysis and find stocks that are underpriced when compared to their intrinsic stock value. These overlooked stocks will have some feature that makes the market either ignore them or discount them.

A common way to search for undervalued stocks is to screen for a low price to earnings ratio or low price to sales ratio. In addition, looking for stock price volatility and analyzing with Candlestick analysis can be rewarding. No matter what the fundamentals say the wise investor will want a clear image of what stock prices will do next. Using technical analysis tools such as Candlestick pattern formations the investor as well as the day trader can get a clear picture of whether market trends will continue or if a market reversal is around the corner. Investing in earnings potential starts with the fundamentals but making the most advantageous purchases and sales of stock often comes from using Candlestick trading tactics when picking best time to buy stocks or sell stocks.

For successful investing in earnings potential it is important to understand the work of the company whose stock you own. There are any number of profitable companies selling legacy products. These products are commonly parts for older machines. Over time there will be less and need for the company’s products as its clients buy new equipment. For successful investing in earnings potential there needs to be the prospect of continuing earnings into the distant future. The other side of the coin might be a bio tech company who products only exist as ideas in the R&D department. Although the next wonder drug may be a multibillion dollar a year product, getting it past the FDA and onto the market can be difficult in a world where one bad side effect can torpedo a promising drug. For both of these examples the better choice may well be trading with a shorter time horizon with the help of Candlestick patterns. By watching market sentiment take a stock price up and down wise traders can profit from the speculations of others in all stocks and all markets.


Market Direction: To utilize the phrase "observe the obvious" can produce very high profits when using candlestick signals and patterns. Market conditions have tendencies that consistency appear to work when conditions are appropriate. Big profits have been made in the last few weeks from what patterns have been generating. The Fry Pan Bottom pattern has been producing inordinate returns. This has been a direct result of the overall market conditions. The Fry pan bottom pattern requires the lack of severe investor sentiment change as they pattern  is developing. As can be seen in this market trend, the uptrend has been slow but persistent. This is allowed for the complete development of patterns and their expected results.

As witnessed in the TPC chart, the SOHU chart, the MIPS chart and the IDCC chart, there is an expected result coming out of the completion of a fry pan bottom. This knowledge provides a huge advantage for the candlestick investor. The market has been moving slowly but steadily in an upward direction. There are numerous stocks that have had very slow positive gains. Candlestick analysis provides the visual search capabilities to find upward moving stock prices that produce much bigger gains than what the average stock will produce.

TPC

SOHU

MIPS

IDCC

If market conditions allows you to participate in price moves that produce 20%, 30%, or 40% returns, common sense dictates searching for the same pattern set up. The same price moves will probably occur in the next price set up as long as the overall market conditions have not changed. The longer the market indexes continue in their existing trends, the better the probabilities become the next trade set up will produce good results.

VHC

The VHC chart shows the same Fry Pan Bottom breakout potential as an the of the other charts. This becomes a very viable candidate upon seeing strong buying. It does not take very long to produce huge portfolio profits if hitting 20% to 40% gainers one right after another. Keep in mind, the point of investing is to try to maximize your profit potential while minimizing risk. Please do not ignore the information built into candlestick signals and patterns. They allow an investor to dramatically outperform the market in spite of the market direction.

Tuesday night - November 2 - a mini training session will be presented on how to find your entry strategies and exit strategies for maintaining high profit positioning as well as profit-taking strategies that minimize your emotional detriments. These concentrated boot camp mini sessions allows investors minds to gain vital information and use that information for profitable trading before getting mentally overloaded on the next facet of profitable candlestick trading techniques. Come join us, the price is cheap! We will have the TVs on for watching election results but should be finished well before the final results. Click here to sign up.

Chat session tonight at 8 PM ET.

Good Investing,

The Candlestick Forum Team


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