Stock Technical Analysis to select winning stocks

Many times brokers, investment consultants or bank relationship managers pursue the investors for changes in the portfolio citing various reasons. Some times these advices might be good and some times they might be coming out of vested interests. An investor who does not have the basic knowledge of selecting a stock, has a clear disadvantage and will have to follow heavily on these external advices. The aim of this book is to equip a common investor with knowledge and understanding of stock technical analysis and provide the ability to pick up the right stocks independently.

Start making independent investment decisions

Very aptly the first chapter provides the details about possible issues in the relationship between a broker and investor. Though this is not directly related to the main topic of this book, this chapter provides awareness about possible problems in this area and provides a compelling reason to become knowledgeable in this area. Even if you may not invest independently, this knowledge is helpful in cross verifying external advices from brokers and other people.

This book largely focuses on stock technical analysis but there is a small section which describes the basics of fundamental analysis. Instead of filling this book with large amounts of data, the author takes a different approach. In each chapter or topic, Pistolese explains the concepts first, give examples and then provides practical search exercises to the reader for exploring in yahoo finance site which is free. This approach, apart from keeping the book simple, helped to add a practical and experimental perspective to the learning.

Use technical analysis to find winning stocks

Though a general overview of technical indicators is provided, this book focuses mainly on selecting stocks using moving average crossovers. Various price patterns around moving averages are explained so that even a novice can identify and select the trends in the stock market.

Balance and diversify your portfolio

This book is not just about technical analysis. Three chapters are devoted on various topics about how to balance your portfolio using closed-end funds, real estate investment trusts, diversifying into index funds as well as bonds and gold and metals. The author gives various suggestions across the book on how to reduce risk in investing by following various approaches.

Identify winning stocks

In the chapter on picking winners in the stock market, the author by various examples, explains how to select stocks in growth phase, along with a list of potential winners for short term and intermediate term. There is a follow up chapter on this explaining how to identify stocks to buy and hold.

Beware of risks and be cautious

Very useful and informative chapter is about 'pitfalls to avoid' where a comprehensive list of cautions are provided in order to avoid normal risks and dangers associated with investing in stock market.

Towards the end, a brief chapter provides suggestions on how to become a self directed investor and reap the rewards.

I found the last chapter extremely useful - the review exercise. The author gave 22 questions, each question involving analysis and comparison of two graphs and arriving at a decision (like which scenario is better for investment for higher growth). Each question also carries the answer on the back of the same page. This chapter, while providing a review of various concepts discussed in this book, is highly thought provoking and provides various practical situations for understanding about different investment scenarios.

Appendices include sample stock portfolio, glossary of investment terms, helpful websites and bibliography, and add additional value to the book.

This book is invaluable for investors who need a simple way to identify winning stocks and to drive risk free through the stock market.

However:

- this book is not for day traders. This book is for investors who want to learn and use technical analysis for identifying winning stocks.

- this book does not contain comprehensive and complex technical anaysis. This book provides a foundation of technical analysis and then uses moving averages as a tool to identify winning stocks and the focus is to provide a comprehensive investment strategy to optimize growth and to reduce risks in stock market.