The Honor Roll strategy

The Honor Roll is generated from an algorithm that I previously used to trade gold.  The algorithm, which was named Emeritus by a student, is basically a trend algorithm.  So when Emeritus highlights a stock and places it on the Honor Roll, there is a good possibility that the stock could be ready to trend.

The database for Emeritus is the same database used to generate the Member’s Watch List.  In other words, the algorithm only looks at stocks that were submitted by subscribers. 

I’m a big believer in trading stocks that you feel comfortable owning.  And so when Emeritus highlights a stock that you submitted, you might want to take a closer look.

The way I trade Honor Roll stocks is by watching to see how they open the following morning after being highlighted.  Because the algorithm is designed to identify stocks that are entering a trend mode, I want to see them moving up… showing me that the trend is continuing.

If they don’t move up, something could be wrong. 

I usually purchase stocks from the Honor Roll by using Buy Stops. I do this in two ways.  The first is by waiting for the first 15-minute bar to print.  Then once I know the high of this bar, I place a Buy Stop one tick above the high of the first 15 min bar.   The second way I trade them is by placing a Buy Stop one tick above the previous day’s high.  In other words, I’m looking for signs that the trend is continuing.

And as with all of the other criteria in the Professor’s Methodology, before a stock is considered for purchase, it needs to satisfy all of criteria of the SIGN. The SIGN is just what it says: a sign. It is a decision aid and consists of three things:

First of all, the stock must be on the Member’s Watch List.  Then it should have a Pattern.  We always need to see a Pattern.  The Pattern is the vehicle that will propel the stock higher.  No Pattern, NO trade.  And finally, all of the PT indicators must turn positive. 

In the beginning, I suggest that you actually make a SIGN with all three of the above conditions and paste it to your trading screen.   That way you will get in the habit of using a disciplined approach to your stock selection.  Remember what I always say in Class: Discipline is the key to successful trading.  No discipline = loses.

Also, Honor Roll stocks are always candidates for Position Trades on the shorter-term bars.   Many times I will take a small position when the indicators first turn positive on the 5s, 15s, or 60s. and then add to the position once the issue starts to move into the trend mode, or above my Buy Stop on the Daily Charts.  This enables me to step into a position, and reduce overall risk.

After being highlighted and placed on the Honor Roll, the issue is usually removed the next day.  However this does not mean that it is not a Buy candidate. Many times after a stock is identified, it takes several days before it starts to move up.  What happens is that the algorithm is triggered by the early move, but on the day it is considered for purchase, the stock pulls back to rest. 

So if the Buy is not triggered that day, I just wait and place another Buy order the next day just above the high of the previous day’s high.  I might have to do this for 3-4 days before the Buy order is triggered.   I continue to do this as long as all of the PT indicators remain positive OR for a maximum of 5 days after the stock was highlighted.

Also, you might want to pay attention IF you see a stock making repeated appearances on the Honor Roll. Something could be brewing.

Once the stock is purchased, I manage it on the Daily Charts using the PT indicators, and the Money Management techniques of the Professor’s Methodology.  If the PT indicators turn negative, I sell the stock.