The seventh key to winning swing trading is to read the S.E.C. filings. Companies often put out news releases but leave out key components that can give you keys to what a company is up to and how their business is doing. Check the quarterly earnings reports closely for positive things like increasing backlogs and debt draw downs. Being that the officers usually hold stock, most companies will brag the positives in any form of press that the company releases. The main thing you are looking for is warning signs. Things like one time gains and cost cutting can artificially inflate the earnings per share number and growth stats. A company that reports a twenty percent increase in earnings per share and has a flat revenue base and cuts costs by twenty percent is not really growing, it's only improving its own inefficiencies. Be conscious of proxy filings also. These will often describe what is to be voted on during the next shareholder meeting. New officers to be elected and proposed mergers are often spelled out in these filings. The one red flag that you want to be sure to check for is for a vote about dilution. A good acquisition can often excuse a reasonable amount of dilution, but be careful when companies are selling shares just to stay afloat because their business model is failing.
The eighth key to your swing trade stems from your research in the filings. After you have read the filings you will no doubt have some things that you may not understand or questions that were not answered. The first step to find these things out is to listen to the most recent conference call replay or web cast. The analysts on these calls may bring up issues that you came across and bring up others you may not have caught in your own research. Normally a question and answer session will give you a good idea of what the street things about the stock, just by their tone and general attitude towards the company officials. If after listening to the conference call you still have questions, call the company! You can usually find a phone number or at least an email address on the company's website or on Yahoo Finance pages. Most companies have people dedicated to fielding investor questions and will be more than happy to do what they can to help you out.
Mr. Jenkins is a full time daytrader and author at : http://www.equitychallenge.com
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