All-Time High Stocks: How I Use the All-Time High Lists

The goal of picking stocks is to make money, which requires both information and action. Stock screens like the all-time high lists that I post here are sources of information that are only useful if the information is combined with a method for converting information into action. Although I don't claim to have the best system in place I thought I would share a little about my approach for taking information and making it actionable.

Make a Watchlist
Looking over the all-time high lists once a week is a good way to stay in tune with some of the best stocks, but the stocks on the list have often just finished making a major move and are not at great buy points. For this reason I keep a watchlist that I check every day, patiently watching and waiting for them to form a pattern where I can buy with a defined risk level. For example, waiting for a darvas-box to form and then buying on a breakout. Or, waiting for a bounce off the 50 day moving average.

In my opinion a stock watchlist is only useful if it is a manageable size. By which I mean something you can realistically scan through every day. As a starting point I suggest limiting it to your 30 best stock ideas. Each weekend I aim to pick 5 of the best stocks from the all-time high lists and add them to my watchlist. Some of them might already be in the list; and I might need to eliminate some of the other names in my list to make room for the new additions.

Use Alerts
For every stock in my watchlist I set an alert with my broker that notifies me when any of the stocks reach a certain price or have unusually high volume. For breakout-type stocks I only have an upside alert that lets me know if it is on the verge of breaking out of a range or darvas box. For stocks that tend to grind higher and don't usually have powerful breakouts I might set an alert near the 20 or 50 day moving average. The advantage of alerts is that I will know almost immediately when a stock on my list reaches an "action point". The rest of the time I can ignore the noise of price fluctuations.

If I am working at a computer and an alert is triggered then I can check the intraday price action (usually the 15-minute timeframe) and decide whether to buy. Otherwise, if I know I will be away from the computer for the day I would use a Buy on Stop order.

I also set alerts at action points for my holdings, and use Buy on Stop and Sell on Stop orders. However, my preference is to enter buy and sell orders manually whenever my alerts tell me to. For more on why I prefer to do this manually, read this post by Chris Perunna. He also has some good points in this article, including:

"Market makers can see this entered stop loss and play the market in order to wipe out your shares and pick them up at cheaper prices. They can bid down the price to $44.50 or so and grab your shares and then bid up the price back to the $50 range - all in one day. I have personally seen intraday manipulation of stocks being bid down, only to close for minor losses or slight gains."

"I use a predetermined mental stop loss that is only implemented after the market is closed for the day. I take a look at each holding and determine if it should be sold at the market or intraday the next trading day. I predetermined my sell level when I bought the stock, so most emotions are already taken out of the equation."

In summary, a watchlist and automated alerts are two essentials that I use to convert information from a stock list into action.

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