• Skip to primary navigation
  • Skip to main content
  • Skip to footer

866-878-9209

support@topdogtrading.com

  • Facebook
  • Twitter
  • YouTube
Top Dog Trading

Top Dog Trading

Learn Day Trading and Forex Trading

  • HOME
  • ABOUT
    • TOP DOG TRADING REVIEWS
  • RESULTS
  • PRODUCTS
    • COURSES & SOFTWARE
    • FREE TRADE STRATEGY
    • SECRETS
    • BEST STUFF
  • BLOG
CONTACT US

Finding the Next Hot Stock for Trend Trading the Stock Market

You are here: Home / Investing / Finding the Next Hot Stock for Trend Trading the Stock Market

February 20, 2010 by Barry

There are always opportunities in the stock market for catching a major move and trend trading that market for years.

Just as there is always a raging bull or bear market somewhere, there is also always a wildly hot stock that dramatically outperforms the market indexes for years and years.

Although I’m primarily a technical analyst, I do use some fundamental data from time to time as well.

One of my favorite ways of finding the next “hot stock” is to look for a company that is becoming part of the culture, similar to an approach used by Peter Lynch.

What I mean by that is a company that provides a product or service that is not only popular and liked and sells well, but it actually becomes ingrained into our culture itself.

Examples:

  • Remember when fast food first began to surface? Soon we had a McDonald’s in every city … and then we started seeing McDonald’s every mile in the city!
  • The same thing happened with Starbucks, except to an even greater extent in some areas where you would have more than one Starbucks coffee houses within a block or two!
  • Of course we all know about the ever-present i-pod from Apple.
  • And hardly anyone today logs onto the Internet without using Google in one way or another.
  • Oh, and remember when eBay swept the nation … and world?

Of course hindsight is 20/20 and everyone can look back at those companies and wish they were on board with them early.

But here’s the great thing about looking for these types of companies that become part of our culture: You don’t have to buy them early before anyone else does. When a company becomes part of our culture, it often has long-term staying power for years and years.

Of course all investing and trading is risky. There are no guarantees. Some companies may release a product that the culture clings to, but then fall out of favor due to negative news, faulty manufacturing, law suites, etc.

Also along the way, even those that enjoy long term success have their ups and downs like any other.

Of course all good things must come to an end. Competition enters, technology and tastes change, and what was so central to the culture in the past can seem old fashioned in the not so distant future.

Therefore even with this approach, it’s critical to learn how to read charts so you can understand what is going on in any stock and how the market participants are treating it.

Below are some examples of stocks with products that became part of our culture. These charts are percentage change charts over the last 5 years. I’ve also plotted the S&P 500 on the chart (the black line) so you can see if the stock outperformed the index.

——-

McDonalds (MCD) has been a major part of the American culture for a long time, and they have spread internationally as well. Here is a stock that continues to out perform the S&P even after all these years. It has shown a lot of staying power!

McDonalds Chart Outperforms S&P

——-

Google (GOOG) is one of the most influential and powerful companies in the world. As the Internet has emerged to dominate our lives, Google has emerged to dominate the Internet.

Google outperforms the S&P

——-

Apple (AAPL) has shown amazing staying power and creativity. While they did not fair well in the battle of the operating systems against Microsoft, they came back aggressively with the i-Pod and i-Phone that have taken the US by storm … and it’s stock has taken the market by storm.

Apple Outperforms S&P 500

——-

Starbucks (SBUX) is everywhere! This omnipresence of Starbucks is so well-known that it is often the brunt of jokes on TV and in movies that show 2 Starbucks on the same block or directly across the street from each other. While this is definitely a company that has become part of our culture, its 5-year track record has not been as impressive as the 3 previous companies.

Starbucks doesn't outperform S&P

E-Bay (EBAY) was a cultural phenomena that changed the way people operated online, bought products, and made money for themselves. It was a Wall Street darling for a long time. I still remember the day that turned (yes, it was one day) and it never fully regained it’s luster with investors. This is a reminder that even stocks that become part of our very culture, can still take big hits (trading and investing is very risky) and that we need to always use protective strategies in our investing.

——-

Ebay underperforms S&P 500

——-

(these relative strength charts measure percent move
in the last 5 years – the relative strength of these
stocks to the S&P looks dramatically different
when measured over different times)

——-

So here’s the big question:

“How do we find the next “hot stock” that will become part of our culture?

There is no sure-fire way to do that, but here are some things to consider:

  • Look around the environment. Is there a company that is buying up real estate and establishing a dominant physical presence that is just starting to become obvious, like McDonalds and Starbucks did?
  • Read magazines and newspapers that publish cultural trends.
  • Ask your teenager! He or she will probably know what is hot before you do!

Remember, you don’t need to catch these companies before they are successful and visible. The trends of these companies can last a long, long time. On the other hand, I still like to use hedging strategies to protect myself.

The way I use the relative strength charts above and also the techniques I use to hedge my positions are detailed in my Swing Trading Course.

Now let’s have some fun …

What do you think of this as one possible approach to investing? Post your comment and let us know!

Investing,  Stocks,  Trends buying stocks,  Investing,  stock market,  stock market research,  stock market trend,  trend trading

FREE TRADE STRATEGY!

You'll receive one of my favorite setups for E-mini trading, Forex day trading and stock market trading: "The Rubber Band Trade."You'll receive it on day 4 of my FREE 5-Day Video Mini-Course: "Make Money by Breaking Every DayTrading Rule You Ever Learned!"To get the setup for "The Rubber Band Trade," your subscription to my newsletter, special promotions from me and my valued trading associates, and the 5-Day Video Stock, Emini and Forex Training, simply fill out the form below.You'll instantly receive an email with the link to your first video lesson TODAY.

GET IT NOW

Footer

Top Dog Trading

866-878-9209

support@topdogtrading.com

15030 Ventura Blvd, #618
Sherman Oaks, CA 91403

Sitemap

  • Home
  • About
  • Best Stuff
  • BLOG
  • Contact Us

company

  • Terms of Service Page
  • Privacy Policy
  • Risk Disclosure
  • FREE SUBSCRIPTION
  • COURSE REVIEW

This site makes use of cookies which may contain tracking information about visitors. By continuing to browse this site you agree to our use of cookies. CLICK HERE to learn more. Testimonials appearing on this website may not be representative of other clients or customers and is not a guarantee of future performance or success.

 

RISK DISCLOSURE

 

These results are based on simulated or hypothetical performance results that have certain inherent limitations. Unlike the results shown in an actual performance record, these results do not represent actual trading. Also, because these trades have not actually been executed, these results may have under-or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated or hypothetical trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to these being shown.

 

IF YOU DO NOT AGREE WITH THE TERMS OF THIS DISCLAIMER, PLEASE EXIT THIS SITE IMMEDIATELY. PLEASE BE ADVISED THAT YOUR CONTINUED USE OF THIS SITE OR THE INFORMATION PROVIDED HEREIN SHALL INDICATE YOUR CONSENT AND AGREEMENT TO THESE TERMS.

 

The information contained on this site is for informational and educational purposes only. We are not registered as a securities broker-dealer or as investment advisers, either with the U.S. Securities and Exchange Commission or with any state securities regulatory authority. We are neither licensed nor qualified to provide investment advice. Trading and investing involves substantial risk. Financial loss, even above the amount invested, is possible and common. Seek the services of a competent professional person before investing or trading with money.

 

Neither the information contained on this site, nor in any other place, is provided to any particular individual with a view toward their individual circumstances and nothing on this site should be construed as investment or trading advice. Each individual should assume that all information contained on this site is not trustworthy unless verified by their own independent research. There is a substantial risk for loss when trading securities as they are highly susceptible to the risks and uncertainties of certain economic conditions. For all these reasons and others, your use of the information provided on this site, or any other products or services, should be based upon your own due diligence and judgment of how best to use the information, and subsequently independently verified by a licensed broker, investment advisor or financial planner.

 

Any statements and/or examples of earnings or income, including hypothetical or simulated performance results, are solely for illustrative purposes and are not to be considered as average earnings. Prior successes and past performance with regards to earnings and income are not an indication of potential future success or performance. There can be no assurances of future success or performance and we will not be responsible for the success or failure of any individual or entity which implements information received from this site.

 

WE DO NOT IMPLY, PREDICT, OR GUARANTEE THAT YOU WILL BE SUCCESSFUL IN EARNING ANY MONEY WHATSOEVER. IF YOU RELY UPON ANY FIGURES OR INFORMATION ON THIS SITE, YOU MUST ACCEPT THE RISK OF SUBSTANTIAL TRADING LOSSES.

 

Past results of any individual trader are not indicative of future returns by that trader, and are not indicative of future returns which may be realized by you. Neither the author nor publisher assume responsibility or liability for your trading and investment results. This site and all information therein is provided for informational and educational purposes only and should not be construed as investment advice. The author and/or publisher may hold positions in the stocks, futures or industries discussed here. You should not rely solely on this Information in making any investment. You need to do your own independent research in order to allow you to form your own opinion regarding investments and trading strategies.

 

It should not be assumed that the information in this web site will result in you being a profitable trader or that it will not result in losses. Past results are not necessarily indicative of future results. You should never trade with money you cannot afford to lose.

 

The information in this site is for educational purposes only and in no way a solicitation of any order to buy or sell. The author and publisher assume no responsibility for your trading results. There is an extremely high risk in trading. This information is provided “AS IS,” without any implied or express warranty as to its performance or to the results that may be obtained by using the information. Factual statements in this site are made as of the date the information was created and are subject to change without notice.

 

HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.

 

  • Facebook
  • Twitter
  • YouTube

Copyright © 2023 Top Dog Trading. All rights reserved. Return to top