According to our technical stock analysis, we pick stocks at the end of every trading week. The following are the stocks picked on Feb 19, 2017. The stocks are to be purchased in the following week at a price near the closing price on the stock picking date. The holding period for our picks is a six month horizon. You can also check the performance of our historical technical picks below. Interested in knowing more about our technical picks? Click here.
At Amigobulls, we largely focus on fundamental stock analysis. However, for the technicians we also have a very effective technical stock analysis strategy. Why do we say it is effective? Our technical analysis strategy, tuned for a time period of six months, has beaten the S&P 500 index by an average of 8.7% over the last decade. The outperformance of our technical picks has been fuelled by the likes of Apple which was picked up more than 80 times between 2004-2012, a time period which saw the stock gain an astounding 5000%. Out of the 81 times Apple stock got picked, it beat the S&P 500 73% of the times, averaging 24% returns in six months. So what exactly is stock market technical analysis, and our strategy to churn out top technical picks?
The core of technical analysis is future stock price prediction based on analyzing the past stock price and volume movements. Technical analysis can help investors determine which way a stock is trending. This type of analysis makes uses of a wide variety of charts which shows price as a function of time. It must be noted that price may refer to any combination of open, high, low, close commonly referred to as OHLC for a given time frame. The time frame could be intraday (1 minute intervals, 5 minute intervals etc.) or could be a historical time frame like 1 week or 1 month or 1 year or even 10 years.
Technical analysis involves a lot of chart and chart patterns based on technical indicators or mathematical calculations, study of moving averages, and observing patterns like lines of support, resistance etc. Examples of technical indicators include moving average, relative index, bollinger bands, MACD etc. An entry point for buying a stock is assessed by checking the following:
Strength of the current trend.
What stage the current trend is in.
Assessing the reward to risk ratio at the current stage.
Assessing the right entry point.
Technical analysis is widely used by traders, more specifically day traders, and other financial professionals. The main advantage of technical analysis lies in the fact that technicians focus on price movement which implies that they focus on the future. Also there is a lot of data to be gleaned from chart patterns. However, like with any analysis there are some drawbacks. Any chart is open to interpretation and no two chartists will look at the same chart and draw the same conclusions. Also, it is not always possible to judge the right entry point, and most often the technician entry level becomes a tad late.
We at Amigobulls have developed, in collaboration with one of the most accomplished of academicians and experts in the finance domain, a modified version of relative strength index to identify technically strong stocks. We call it the modified Relative Strength Index. Our technical picks are optimized to best perform over a holding period of 6 months, and is not for the day trader. You can read, in greater detail, our approach to technical
stock analysis. Our strategy has outperformed the S&P 500 by up to 79% in a time period of 6 months.