The first thing I want to know when I log into my trading platform is which direction the MAIN market is currently moving.
You’ll do this by looking at the month’s price action of a chart.
So with shares, you’ll look at the direction of the trend the main index is moving.
In South Africa, you’ll look at the JSE ALSI 40 (The index with the 40 of the highest weighted shares on the JSE).
Look at the JSE-ALSI 40 and tell me.
Which direction is the JSE-ALSI40 index moving?
If you said up, well done! The JSE ALSI is clearly going up.
Unbelievable: I found a guy who successfully built a multi-million rand empire and asked him to be my mentor
And it’s been going up for over a month.
So what direction is it more likely to head?
Up – In the direction of the trend.
Checklist item #2: Go through your watch list
Now you know which direction the main market is moving, the second thing you need to do is go through your watch list.
If you don’t know, a watch list is a list of stocks you’ll go through to pick a trade.
So if you’re looking at the ALSI 40, your watch list should be easy to list.
You’ll basically go through all the stocks that are listed on the ALSI 40 index.
I’ll give you a link you can click on to access these 40 stocks at the end.
You can phone your broker and ask how to add stocks onto your watch list, as each trading platform is slightly different.
As a sneak peak here’s what my watch list looks like…
Right, next we’re ready to move on to what stocks to buy or sell…
Checklist item #3: Know what to buy or sell certain stocks
You know which direction the main market is moving. You also know which stocks to go through in your watch list. Now it’s time to pick the right apple out of the bunch to profit from.
What you’ll do is simply this.
Go through your watch list and see if the stock is moving in the direction of the main index. So with the ALSI 40 index, you’ll look at buying stocks which are also moving up.
I personally would only look at buying companies that are moving up rather than coming down.
The next bunch of charts you’ll see will have ticks and crosses.
Tick means – Looks good for upside and good to buy.
Cross means – Moving down and so will not look at buying the stock.
With the above charts, there are two moving up and two moving down.
This means, before I even set my trading levels I know more or less what to buy and what to disregard.
In this case, I would disregard Famous Brands and Telkom as potential trades as they are moving down while the JSE ALSI 40 is moving up.
On the other hand, I would look at buying Standard Bank and Anglo American as they are both moving up – like the JSE ALSI 40.
Where do I buy, sell and set my levels?
P.S: Here’s the list of the top 40 stocks listed on the ALSI40 Index as promised. Click here.