If you are a subscriber to our free newsletter service, our March issue describes how to develop a checklist when evaluating a stock. This will help take some of the confusion out of decision making.

I suggest using the checklist below to systematically analyze each stock before making the decision to invest. Of course, you may want to customize my suggested list with your own questions and favourite indicators.

The system that follows is designed to catch stocks that are in an established up trend. I want to buy into the trend and sell when the trend begins to reverse. I'm usually not interested in short-selling stocks, because that requires a margin account. Of the 17,000 tickers in North America, there are always plenty of stocks that are in an uptrend and worth buying. You could use these same indicators, however, to develop a system that would take advantage of down-trending stocks.

Stock Check List - Trending checklist
Stock: MSO	BUY/SELL Rating: -9	Date: March 06, 2005
Indicator	Confirming	Negating
Trending Indicators
Trendlines		breaks resistance
20, 50, 100 day SMA's	above 100 day	20 and 50 day breaks
MACD		Divergence, Zero line cross
ADX/DMI	+DI above -DI ADX still above 30
Volume Indicators
Volume	High volume spike	High volume spike
OBV		Divergence, downtrend
PVT		Divergence, downtrend
Patterns
Support/Resistance Breakout		Resistance Breakout
Candles		Bearish Engulfing Pattern
__________________________________________________________________________
Points:	3 positive	12 negative

Based on our checklist, there is an upcoming trend change. According to my conservative system, I would qualify this as a sell. However, for longer term traders, the price has not yet moved much and it may reverse after a short fall. A stop-loss at around $29.50 (never set stops on round numbers - see Rhino Theory) would be a safe play.