The 10 Hottest Stocks under $10

by Darrin Donnelly on January 25, 2011

I rarely trade a stock that is priced under $15.  I’ve found that cheap stocks are usually cheap for a reason.

However, I’m not so stubborn in my ways that I refuse to acknowledge that lower-priced stocks can (and do) make traders a tremendous amount of money.  When lower-priced stocks do surge higher, they normally excel at a much faster rate than higher-priced stocks.

A trader CAN do very well with stocks priced $10 and lower. 

But before jumping into these low-priced stocks, you need to recognize the added risk involved.  [click to continue…]

How to Protect Your Money in Any Market Environment

by Darrin Donnelly on January 24, 2011

Successful Darvas trading comes down to one essential principle: cut your losses short and let your profits run.  Sounds simple enough, but it’s easier said than done.

In order to cut your losses and protect the money you already have, you need to ALWAYS have an initial stop-loss in mind before entering any new trade.  This initial stop is the point that you will sell your stock if the trade goes against you. 

This initial stop needs to be close enough to your buy point to keep your losses small, but far enough away from your buy point to avoid getting stopped out on a “normal” pullback.

Where should your initial stop go in order to avoid a worst-case drop?  [click to continue…]

The 9 Darvas Stocks You Should Be Trading

by Darrin Donnelly on January 20, 2011

These past two days have been rough on the stock market in general.

However, corrections like these are bound to occur and they help us separate the true stock market leaders from all the pretenders.

Often times, it’s not so easy to distinguish between these two groups of stocks.  Leaders can certainly sell off in dramatic fashion and this can spook many traders out of their positions.

But there are clear signs that tell us which stocks we should hold onto and which ones we should get rid of.

Right now, I see 9 top stocks that you should be trading. [click to continue…]

The 3 Things We WANT to See During a Market Pullback

by Darrin Donnelly on January 19, 2011

Click on chart to enlarge.

Click on chart to enlarge.

Pullbacks happen.

Contrary to what we all might wish for, even the very best stocks don’t go straight up for months on end with no corrections.

The same goes for the stock market as a whole.  Even during the strongest bull moves, painful corrections occur. 

These corrections often last days, but sometimes they last weeks and still don’t disrupt the overall uptrend.

The dirty little secret that amateur traders fail to understand is that pullbacks are a good thing…IF they’re “constructive” in nature. [click to continue…]

How to Buy a Darvas Stock Breakout Before Volume Confirms It

by Darrin Donnelly on January 18, 2011

When a Darvas stock hits its buy point, we need to see heavy volume accompany the surge in order to CONFIRM the breakout. 

Vast studies have shown that a breakout has a much higher success rate if the price move is powered by volume that is at least 50% above the average daily volume for the stock.  This type of increased volume tells us that large buyers are behind the stock’s surge and the breakout is therefore more likely to be the start of a continued trend upward and not just an erratic one-day move.

This volume requirement raises a common question for traders: how should one handle a stock that hits its buy point, but hasn’t yet achieved the required volume?  For example, if our Darvas stock hits its buy point at 10 a.m. on volume of 200,000 shares, but we want to see volume of at least 500,000 shares to confirm the breakout, what should a trader do?

There are basically three ways to handle this dilemma – depending on how active you prefer to trade.  [click to continue…]

Click on chart to enlarge.

Click on chart to enlarge.

The stock market is in the midst of a strong uptrend and we’re seeing LOTS of stocks break out of good-looking bases and surge to new heights.  Every day, new growth stocks are breaking out and rising 3%, 5%, 10%, or more. 

Hey, this Darvas trading stuff is easy, right?  All you have to do is look for a stock with strong earnings, look for a Darvas Box or some other proven chart pattern, and then buy when the stock breaks into new highs on good volume. 

That’s all there is to it, right?

Well, not exactly.

In fact, at times like these, you need to be EXTREMELY selective about the stocks you buy into.  [click to continue…]