Each letter stands for a criterion I use in stock selection.
"O" stands for observation. Speculation is largely observation--pure and simple. First, I've observed that higher-priced stocks make larger moves on a daily basis than lower-priced stocks. As a short-term trader, I'm not interested in percentage moves but in point moves. A 5% move in a 100 rs stock is much bigger then 10% move in 20 rs stock.
Second, look for situations in which you can put pieces together, whether multiple signals or recognizing how a long-term pattern has combined with a short-term pattern to create a higher-than-average likelihood for trend continuation.
One of the most important criteria in assembling a hit list is to observe which stocks outperform the rest --which stocks have high relative strength over the intermediate term.
Two shorter-term relative strength methods I developed for identifying the right stocks to trade are intra-day relative strength and day-over-day relative stren…