Java J

Zacks extends a well-deserved congratulations to Jay Groot (aka: Java J) for claiming first prize in the Zacks 3rd Quarter Stock Challenge contest. Over the past three months, this astute momentum player watched his $100,000 Simulator portfolio more than double as he finished the game with nearly $285,000.

For his impressive performance, Jay can look forward to lifetime subscriptions of Zacks Advisor and Research Wizard.

Jay is no stranger to the Simulator leader board. Zacks interviewed the successful investor in late May when he held fourth place in the 2nd Quarter Challenge. Zacks caught up Jay again in mid-July when his portfolio was once again competing among the top players.

Impressed with such top-notch stock picking, we checked out the contestant’s transaction history. Some of his winning trades included positions in Acorda Therapeutics, Inc. (ACOR - Analyst Report), BE Aerospace Inc. (BEAV - Snapshot Report), Research In Motion Ltd. (RIMM - Analyst Report), Optimal Group Inc. (OPMR - Snapshot Report) and Medifast Inc. (MED - Snapshot Report). Check out this participant’s complete trading history by Clicking Here.

How did he win it all?

This contender did it with short-term momentum trading. Jay commented, “I trade based primarily upon short-term, intra-day technical chart patterns. I rely heavily on analysis of price/volume chart patterns. I use 5-minute and 1-minute intra-day bar charts almost exclusively for short-term trading. I strongly believe that the future direction of the price of any given stock is highly influenced by the recent price/volume activity on short-term intra-day bar charts.”

Were there specific holdings that may have catapulted the portfolio to the top?

While the savvy trader did cite some names that delivered healthy profits, such as Hi-Shear Technology Corp. (HSR), Key Tronic Corp. (KTCC) and Leading Brands Inc. (LBIX), he explained that momentum was the real fuel for his portfolio. “I constantly tell myself to not get ‘too comfortable’ with the same ticker symbols. I am a conservative guy in my personal life, but when trading stocks it is important to always be looking for the next big momentum movers, the goal is to be a ‘promiscuous stock picker’,” said Jay.

What kind of tactics did he employ?

The stock picker does a lot of screening. He noted, “I rely heavily on stock screeners I have developed with parameters I feel will show me the most recent up/down momentum stocks. Screeners can be accessed by any trader/investor that has Internet access and a brokerage account or is a Zacks website client. These screeners display a dynamic ‘trading pick list’ of stocks that I may trade at any point during the day. I scan the list constantly to find stocks with attractive price/volume data. I then evaluate and analyze the intra-day charts of these stocks and then decide which ones I will add to my real-time quote/charting screen and probably trade at any point during the day.”

Jay continued, “In short-term trading and to some degree in longer-term trading I have found that it saves considerable time and effort to let computers do the high-volume screening and then only focus on the screened stocks for the day. This technique is much more efficient and encourages me to focus on a few active momentum stocks. This technique also has the benefit of keeping me from getting stuck in a rut trading the same stocks every day.”

Can you describe what characteristics you seek in a stock?

This trader seeks stocks having a chart pattern that is “fairly tight with a “bid/ask spread should not be excessive relative to the volatility and the average trading volume.” Jay further explained, “This is a subjective conclusion that each trader/investor has to determine for themselves. I ignore low volume, wide spread stocks. I like stocks that will incur spikes of price/volume activity with subsequent periods of slow-down in activity. I emphasize the price/volume spikes could be either up or down, both represent potential profitable trades.”

How does the Simulator compare to real-world investing?

Jay explained that while he employed a short-term momentum strategy for Simulator purposes, his trades are based on longer horizons when it comes to real money. As with most contestants, this market enthusiast was able to take away some lessons from the game. One thing the Simulator competition has thought him is to set tighter stop loss prices in the real market.

Any words of wisdom for the 4th quarter competitors?

The chart-plotting trader suggested focusing on stocks with up or down momentum. He mentioned that players should look for opportunities to short stocks on reversals or heavy volume breakdowns. Jay added that, “volume during any time frame is important, a decline to relatively low volume many times will signal impending reversals, breakouts or breakdowns.”

In conclusion, this Simulator champion reminded everyone to be proactive and decisive in their trading. The Simulator is a terrific strategy testing lab and if a player’s trade misses, he or she will still benefit by learning from it. It’s not as if real money is being lost.