Watchlist for February 24, 2014

I went over some basics as to how I build my watchlist in this post, however, I have found that people learn best through example. Reading pump emails is simple enough, but using scanners to find plays seems to be the area where most people need guidance. I'm going to pretend that I don't have any OTC stocks on my radar for Monday and start a watchlist completely from scratch, walking you through my step-by-step process. Future watchlists will not be this complicated. I just want to detail the process as best I can so others can learn to do this for themselves.

I know many readers of this blog use "Stocks to Trade," so I will run my scan on that platform. However, keep in mind that Equityfeed is a very similar platform, and you can set up nearly the same parameters. You will notice some differences in this scan from what I've previously discussed. There are a couple of reasons for this:

     1. I run this scan when the market is closed.
     2. I'm constantly learning and refining my strategies.

Here are the basic criteria I begin with:

• Only OTCBB or Pinksheet Stocks

I don't want this scan to include listed securities, so I specify that I only want to scan this sector of the market.

• Price > $.01

I normally don't trade subpenny stocks, so I exclude them from my scan

• $ Volume > $500,000

I want to only trade stocks with good volume and good liquidity. This is the figure that I choose to use.

• Trades > 200

This is a new criteria I use for my nightly scans only. Higher priced stocks can trade $500,000 of volume easily on just a few trades, giving the false impression of liquidity. I've put in a trade minimum to ensure these stocks get excluded from my list.

• Normal Securities, Q stocks, D stocks, E stocks only

You may have noticed that some OTC stocks have five letters in their ticker instead of four. Tickers with five letters have special designations, most of which you can see in the image below:

Above you can see the only options I choose to scan for are check-marked. "Stocks to Trade" and "Equityfeed" are nice because they allow you to leave out the rest. Most scanners don't allow you to cut out the other options. If I were using one of those scanners, I would just make a mental note to ignore all other five-letter tickers.

Once I have set these parameters, I run my scan. Below, you can see the full list of tickers that meet all my desired criteria:

Once I have this list, I begin pulling up the daily charts of all of these stocks and decide which charts have patterns that I'm the most comfortable with. If I like the chart, it makes my watchlist. I will often break my watchlist into two categories, "Main Watches" and "Keeping on Radar." Here is my list of charts from the above watchlist that catch my eye before prioritizing them:

PAWS
EKSO
MRNA
XXII
NVLX
VEND
FNMA
ELTP
WPWR
FITX

The stocks that are my "Main Watches" are the stocks that I believe are most likely to offer a clear-cut trading opportuity the following day. If I have quite a few "Main Watches," I will prioritize based on which ones I think will be most playable immediately at the market open. Stocks that I'm "Keeping on Radar" are stocks that are nearing a key price point that I believe would offer a play but may not get there the following day. I will often check the "Keeping on Radar" plays at least a few times a day, just in case one shapes up to offer the opportunity I'm looking for.

Now that you understand my process, let me show you my prioritized watchlist for Monday, complete with daily charts:

Main Watches:

NVLX - I'm long 85,000 shares from .294ish heading into Monday. The daily chart is overextending - but there was a speedup in price action on Friday, volume almost doubled, and it closed very strong. A gap up is very likely in my opinion, I would short a large spike or g/r move in the morning, but if the stock holds green this could really start to go crazy. I won't get overly biased one way or the other, and look to trade sharp, volatile moves.

XXII - Four up days in a row without going red, and chart is starting to overextend. Volume is lighter so executions will be tougher, but I want to short either a large morning spike or a g/r snap.

VEND - Hard-mailer promotion still going strong. This probably needs a few days to parabolic before shorting for the massive collapse, but I will consider any g/r snap or fast spike for a short sell scalp. As you can see on the daily chart, the stock has gone g/r multiple days, yet recovered each time.

EKSO - Overextending chart, I will take my typical approach with this and look to short either a large morning spike or a g/r move if it opens weak.

PAWS - Still a little too cheap to short with ECN fees... but Friday was a big up move so I'd be more likely to short a large morning spike than a g/r move.

Keeping on Radar:

FNMA - Would like to wait for the $3.50ish breakout before taking any sort of meaningful position, until then I might scalp fast, excessive moves but that would be all.

FITX - I really like how this is consolidating near its high, no play for me until $.115 breakout but I'll likely take a swing position if/when we get it.

WPWR - Stocktips promotion, $.45 breakout would be my main interest, as their past picks have had very successful breakouts. Not sure I can overnight this though as it's a blatant pump and SEC halts scare me.

ELTP - Another OTC with sold volume consolidating near its high, $.455 breakout buy is the only play I'd be interested in though.

MRNA - Start of a nice breakout on Friday. I'm hoping this can get overextended in the next day or two and set up for a textbook short. Just watching for now.

Some of you may choose different stocks or have different plans for them than I do, and that is absolutely okay! The goal of this post is to help some of you learn how to prepare. Whatever scans you choose to run or setups you choose to focus on is completely up to you!

Also, keep in mind that I will run variations of this scan throughout the trading day on Monday. If any tickers that I left off of my watchlist show sudden activity, I will be ready to add them to my list and I'll develop a plan for them on the fly.

I hope this gives everyone a better idea of how I prepare for the following trading day! The whole process is entirely chart-based and usually doesn't take me more than 15-20 minutes. Please feel free to reach out if you have any questions. Thanks for reading everyone!

Disclosure: Long 85,000 shares of NVLX from .294ish