A Safe Investment Strategy - Part II

In the previous article, we mentioned the first investment strategy we implemented. Although the strategy gives hit like GIGM, it also results in bust like SIRI for Satellite Radio stocks.

This time we try a different direction by analyzing the technical trend of a stock by picking the stock before they began to fly high. The High Return Stock investment strategy, combining three bull technical signals gives hit like FNSR with return of 130% in five months and PMTR with return of 80% in five months. The pick is also not limited to larger market cap stock like Continental Airlines(CAL) which has gained 15%. However this strategy still involves risk as some stocks like VTSS dropped on unexpected events.

Some investors belive to get exponential returns you want to get the penny stock - the stock trading around $1 per share before the big buyers noticed. If you are lucky enough you may find big blockbuster hit like NTRI, going from less than a dollar per share in late 2003 to $68 today or NTES, going from less than a dollor in April of 2002 to as much as $97 in March before the 4:1 split which brings the stock back to $23.3 today or $93.2 of pre-split price. However investing the penny stock involves a lot more risk as most of the time you end up in bankrupt company like CURE which is now trading only at only 5 cents per share as its symbol has changed to CUREQ.PK indicating the company is bankrupted. To minimize the risk of investing in penny stock, the Penny Stock investment strategy uses a rating system to rate a stock based on market potential, news buzz, technical trend, insider trading and financials. With the rating in place we were able to find stock like DVW which have gained 80% in 4 months.

This time what we would like to find is a stock with less risk but still growing. So instead of going for high return this time we go for stock with steady moderate return and financially stable. These should be the stock where you buy and can just forget about it for a lont time. These kind of stocks are actually easy to spot by simply looking at the stock chart. A perfect example of this kind of stock is Titanium Metals Corp. (TIE), the Dallas, Texas based company making titanium melted and mill products. Let's take a look at the one year chart with 50 day and 200 day moving averages to see why we pick the stock.

The chart shows the following characteristics of a steady return stocks:

• both 50 day and 200 day moving average have to go up.
• both 50 day and 200 day moving average have to be rising at similar angle.
• the stock price should stay close to 50 day moving average. So if the stock rises to quickly like in early December or recently, you may want to wait for the stock to dropped a little bit before you buy the stock.

This steady growing stock for the past 52 weeks have split twice in September of last year and February of this year, each a 2 for 1 split. And the stock has just split again today. If you bought the stock last May at $42 per share, after counting in the split which is equivalent to $300 per share today, you will be getting a return of 618% in just one year. Even better looking at the five year chart and you will see the stock hasn't dropped below 200 day moving average since mid 2003. Wow. What a stock with steady but high growth.

In addition looking at the financial statement and you will see that the company has been getting continuous revenue and net income growth for the past few years. So just relax, buy the stock and take a vacation.

Steady Return Stock Rating(1 ~ 5, 5 means highest):
1. Market Potential (Metal - Titanium): 5
2. Technical: 5
3. Financial: 5
Overall Rating: A+