3 Stock Selection Strategies for Short Term Investments

1. Moving Averages Based Strategy
For example on the stock chart, if the 50 DMA line crosses the 200 DMA line from below, it would mean a time to ‘Buy’ the stock as there is more potential upside to the stock.
2. On the Basis of Business Cycles
This is a more fundamental approach to stock selection for short term trading. Each company which specializes in a seasonal product sees a definite cycle in its business. For example in India, paint companies see an uptrend in the festive season – around Diwali as it is a time for cleaning and decorating houses, the weather is suitable for undertaking a painting work and also the wedding season follows the festive season.

Thus, paint companies see an upswing in their sales around October- November- December. This kind of analysis based on a company’s business cycle, its sales, profits etc. can be used as stock selection criteria for short term analysis.
3. Following the Trend Strategy
Many stocks listed in the market are known to follow the trend of the stock market. These can also be used for short term investment when the markets seem poised for a bull run. This can be the time right after the markets have seen a downtrend and fundamentally, there has not been a major change in the markets. In such cases, choosing the stock which replicates the index can be a good strategy to earn profits.