Questions about the TSM Methodology ..... Dalton B.

Hi Ric,
Is there somewhere else on the TSM site I’ve missed that explains in complete details the TSM approach? I think I’ve read everything I’ve found on the website but am still not clear on how you structure the half positions & when they are sold. I’m obviously talking here about the Stock of the Day portion.

Thanks,

Dalton B

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Dalton,

Details of the TSM approach:

TSM stocks are identified as those that: (1) hold membership in at least two of my 28 fundamental's based screens; (2) averaged trading at least 150k shares daily over the past 20 trading days; (3) closed above $10; (4) have two year PEG ratios less than 1.50; (5) hold a current Zacks ranking of less than 3, but if 3 have a market cap >$25 billion. I generate this screen each Sunday and use it for the next week.

Each evening, I look for at least one of these TSM stocks that has pulled back to a major level of support (20-, 50- or 200-day moving average or prior low or prior high) to forcast a long trade for the next day. I usually suggest a price that one buys below, but if the market is very bullish I could suggest a price to buy above. Sometimes I'll suggest both type entries for a position, and one could buy half a position utilizing each or buy a full position utilizing the first entry criteria that hits.

I then specify stop loss targets for half positions. When these are hit, I sell each half position at a loss. This methodology has produced ~70% winners, but when a loss occurs, the key is to keep it small (~30% of the time, this will happen).

As to taking profit, I suggest a price range where one should sell. I typically sell half the position near the lower half of the range and the second half at a higher price. I continue to hold or sell based on what I see the market doing. I guarantee that my sell price will fall within this range, but I cannot tell you exactly where as I make my own decision while the market is open.

Having said all that, I feel it's my job (1) to identify quality stocks with value left that are ready to be traded and (2) to identify (in stone) stop loss points. It's up to you to identify where to take profits. This methodology has produced ~70% winners through good times and bad. For $25 monthly (and ~20 picks), I don't think you could ask more.

Additionally, most evenings I'll scan all the current TSM stock's option positions and identify those Puts that offer premium that equates to an 18% or better annualized return with some degree of downside protection (5-15%).

Hope this helps,

ric