Kinetic Trader

Stock Assault 2.0 Review – Part 2

In my last post about Stock Assault I mentioned I would be tracking how the program performed, especially in this volatile market over the last month. Since Mid-December the performance is:

Nasdaq = down 2.4%

Stock assault =  down 1.6%

I used Nasdaq simply because it has more volatility and more technology stocks. Keep in mind that I have over 50% cash holding over the 1-2 weeks in my test account that I am using with stock assault so if fully invested my performance would be worse.

For the $30,000 test account I allocated $2,000 to each trade which became fully invested quite quickly with the number of stock assault recommendations each day, even after sorting through what I felt were the best choices.

I know the program’s sales page says it uses Artificial Intelligence but essentially it looks like a stock scanning program that uses its own algorithms and emphasizes finding short term oversold stocks and sometimes it will pick stocks hitting new highs on volume. Over the years using charts and trying to use the plethora of stock chart indicators,etc…..I found myself always going back to basic indicators and realizing that price and volume are the most important.

A quick sample chart from stockcharts.com (its free version) below is that basic settings I would use to screen through Stock Assault picks

Source: www.stockcharts.com

Yes, that is it….using a RSI with 5 as a setting and Full Stochastics will give you a good idea of how oversold/overbought a stock is in the short term. The default setting for RSI that most people use is 14 but I find that a setting of 5 is good for short term indicator (some use 3 for setting but I find that too volatile and not as good of a predictor. is RSI 5 is under 20 it’s oversold and under 10 is even better for chance that stock will move higher vs. lower.

THE REASON I POSTED THE CHART ABOVE IS THAT IT WAS ONE OF THE PICKS TO BUY FROM STOCK ASSAULT THE DAY AFTER THAT HUGE GAP DOWN(Feb 1st). So if you a new investor you might just buy it because it shows very oversold but if you have looked at charts for a while you would realize that the risk/reward on that chart still isn’t good when a stock knifes through all its support and moving averages on huge volume. Even if the stock bounced it would probably be minimal and many times a chart will go lower the next day when people enter in their sell orders at the opening next day after seeing the prior days move.

CHART TIP: When a stock shows no strength gapping down that hard like above with no intraday bounce then you are buying into a chart that has huge overhead resistance of people who want to sell because they bought higher. Sometimes a chart might gap lower to support on lower volume. If a stock gaps down to support, is still in an uptrend and volume is lighter then it probably will bounce vs. move lower because it is usually just “weaker” shareholders selling and not the big money like mutuals funds that are selling.

So my recommendation for the stock assault picks you get just enter them into a chart like above and find stocks that are very oversold and near support and ideally still above the 50 day moving average. Once you find the best stocks among the picks that night then look at a longer term chart of those picks to see if the chart has been in an uptrend and not just flopping around with no trend. Honestly, if a stock hasn’t moved up much with the massive rally over the last year then it’s probably worth just avoiding. You have to look at a stock longer term to see where it had been.

So back to Stock Assault 2.0. With the market moving down this month I have noticed that Stock Assault has been good about recommending less stocks to buy even if  the market showed “oversold” with the big down days but I would say the only concern is that it hasn’t recommended selling some picks quickly that have not moved higher after the initial oversold readings. It seems like the program might be more effective when the market is trending up better but right now it is pretty dicey and tough to tell.

I think you can be more effective with the program if you keep an eye on your holdings and check them every night after the market closes to see if there are warning signs like stock moving lower on volume,etc….and sell some before Stock Assault says to.

Hope this has helped.

- www.kinetictrader.com

ps- if you want a stock picking service that will teach you about how a pro trader reads charts and has a free email service that you can at least see how they analyze the indexes then check out www.breakpointtrades.com and just sign up for their free newsletter (they do use a ton of chart indicators which can be overwhelming but you will get a good idea what to watch for )