3 Proven Stocks Setting Up For The Perfect Entry

Establishing high-probability assets is the essence of sound investing. 

We do this through a proven analysis process and, ideally, one that is simple to follow and execute around your busy lifestyle. 

Unless you are paid to do analysis, in which case you are an analyst, I will assume that you, the reader, are a busy everyday person trying to put together and maintain a portfolio that performs without giving up any aspect of your lifestyle. 

With the technology available today, this is 100% possible. 

An Argument For Simple Investing: Technical analysis, or in other words, looking at charts to make your investment decisions, ticks ALL the boxes for an approach that comes with no compromises. It has a proven history that goes back to the dawn of the financial markets, is simple to learn and requires minutes a week of screen time to build and manage a portfolio. 

The trap that most fall into and why they fail to see success is that they are day trading or looking at intraday timeframes — 1 second, 15 minutes, 1 hour — to make their decisions. Quack educators have been getting away with selling day trading as the sexy way to quick riches since the creation of the internet. Buying into this is why so many fall short of their investment goals. 

If you move your analysis onto the higher timeframes — the monthly, weekly and daily — you adopt a more investment style approach and where your fortunes will change dramatically. I like to start with the monthly timeframe to do my analysis as this timeframe gives a macro view of a stock's past performance and how it is likely to perform going forward. 

The perfect set-up to look for to buy a stock meets these criteria:

• It has trended well in the past.
• Price action is trading above the high of last year.
• Volume is over 1 million.
• The price is breaking out from a long-term area of consolidation.

Below is the monthly timeframe for Deere & Company DE.

Deere & Co. Technical Levels: This stock has been in my portfolio since August 2020, when the price met the above criteria. The beauty of catching a stock breaking out from a long-term consolidation area is that it acts as a base for a trend to develop. Much like solid roots allow a sizeable tree to grow, a consolidation base will allow for a solid trend to develop. The trend from August 2020 to May 2021 went from $180 to $400, a move of 125%. 

The eagle-eyed among you will notice that this month's price action has broken out from an 11-month consolidation period. Are we seeing early signs of the next trend up to $500 and beyond? I will be adding compounds as the trend develops. 

3 Stock Ideas: Below I have the monthly timeframe for three additional stocks that meet the criteria detailed above. I am monitoring these closely for now, and I will add them to the portfolio once I have more confidence that we are indeed in an overall bull market. As I have explained in previous articles, I look to the S&P 500 to determine market conditions. 

1. Cincinnati Financial Corporation CINF 

2. DTE Energy Co DTE

3. FMC Corp FMC

As the saying goes, the longer the consolidation, the bigger the breakout. In optimal market conditions, catching trends at the base of a breakout from consolidation is arguably the most profitable way to invest. 

On average, trend followers regularly appear at the top of performance tables, whereas value investors are mid-table at best.