Bull vs. Bear

In order to narrow down the market into this manageable list of excellent stocks, Stephen Cooper has developed a set of rules called The Trade Candidate Filter.  

You will need to have a copy of the Investors Business Daily newspaper, and several of the Trade Candidate Filter worksheets, which can be found in the back of the OnlineOption Trader Manual.  

Alternatively, if you are an Advanced Member of OnlineOption.com, we’ll do the work for you and screen the IBD each market day and send you any Watch List candidates. 

One of the criteria for our filter is that the stock reaches a New High during that market day.  A common question during down markets is; 

Does the Trade Candidate Filter work in both Bear and Bull markets?    

During a bear market, why don’t we choose stocks that are making new lows instead of new highs? 

There are a few market tendencies that are important to consider as we screen the market for our watch list candidates.

Sector rotation is the tendency of companies within a given sector to see their share price move in harmony with overall sector.  So one energy stock will be influenced by all other energy stocks.  Sectors that were at the top will at some point rotate toward the other extreme, pulling down companies that were once high flyers. 

Similarly, we see a tendency for Market rotation; like sector rotation, stocks within the market tend to see their share price moved in harmony with the overall market.  Stocks that were booming during a bull market will tend to reverse during a bear market.

Because of this sector and market rotation, stocks that we screened in bull market, as they were making new highs, often offer excellent put opportunities a bear market.  They are still proven, strong companies that passed our rigorous screening previously, and can now give excellent trade signals during a bear market as they give back some of that profit.

We have used this screening technique in both the strongest Bull market and one of the longest and most violent Bear markets and this method is still currently viable.