Build a Winning Watch List

08/30/2011 3:30 pm EST

Focus: STOCKS

Chris Gessel

Executive Editor, Investor's Business Daily

A good watch list of equities can help traders act quickly and decisively when a set-up is presented, while ensuring they stay safely on the sidelines when risk is high, says Chris Gessel.

Chris Gessel is my guest, and Chris, you’re with Investors Business Daily, the executive editor and chief strategy officer, and you look at a watch list. First, what is a watch list, and second, how do you build it?

Well we’ve got a lot of tools within Investors Business Daily to build a watch list. A watch list is the stocks you’re looking at and waiting to break out, and when they break out, you’re there with a buy order and purchasing at just the right moment. 

The thing is there are many times where you shouldn’t be buying stocks, you should just be watching the market. This is one of those times right now, and so we have tools like the IBD50 that comes out once a week; Stock Spotlight, which is in every edition of Investors Business Daily, and these are where all the big leaders show up before they begin their big price moves.

Can you give me some ideas of stocks that are in there now?

Well right now a lot of the stocks on the list have been running for a while, but we still have some good names that are early in their runs. One is Lululemon (LULU), a company that makes workout apparel for women, is still doing very well. 

Then there is a new company that’s kind of popped up on our screens recently called Solarwinds (SWI), actually based in Texas. 

A networking company just started to move, although in this market it probably will maybe just make another consolidation, but these are names that we would be looking at right now. 

How do you advise traders and investors that this is not a time to be in the market, particularly for those that feel compelled to always be in it?

Well, there are certain times to be in the market and many times to be on the sidelines. Right now, if you’re going to be doing anything, I’d be looking more on the short side of the market, although we’re still early in the decline and a lot of the big leaders have not broken wide open, but there could be some opportunities within the next weeks and months.

Do you ever look at any of the ETFs that you can buy that short the market or even some of the leveraged ETFs?

Yes, we have daily ETF coverage and we rank ETFs by their relative strength, so you can always see which are the best-performing ETFs; we break them into leveraged and non-leveraged ETFs. You definitely can take our market analysis and apply it to ETFs.

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