I can remember a time many years ago watching a fellow tearing around the office at a frantic pace completely beside himself. This gentleman had the distinction of having scored one of the highest marks when he took the Canadian Securities Course and had many years of experience in the capital markets so I had to know what had gotten under his skin. When I asked what had gotten him into such a state he said, “I don't have any ideas. I have nothing to talk to my clients about!”

At that moment it all became clear. Ideas, both good and bad, are the currency of the capital markets. Idea generation is one of the greatest motivators for most of the readers of globeinvestor.com, but let's be clear the other part of the exercise is testing the idea to see if it has merit.

The first thing that I do when I come upon an idea is to look at the charts to determine if the stock is actually worth spending time doing all the work that will be required to make an investment decision.

I thought that it would be worth looking through some of the “Hot Tech Stocks For 2010” articles that were published in December, 2009 or early January, 2010 and find the best three charts out of the 30 stocks that I screened.

The first is VMware Inc. VMW-N, which is a story that got my attention back in late summer 2007 when it was announced that parent company EMC Corp. EMC-N would be spinning out 10 per cent of the company in an initial public offering. VMware is a leader in virtualization which allows multiple platforms to run on one server, shaving energy costs and computing time.

The three-year chart has all you might be looking for in a potential investment. VMware has a strong trend line supporting the advance, a golden cross in place since May, 2009, and repeated tests of support along the 50-day moving average. If you look to the advance since the end of the 2009 when it was recommended as a tech stock for 2010, VMware has produced a 30-per-cent return. A good recommendation and a good series of technical signals made this a winner in the first quarter of the year. What about the balance of 2010?

The six-month chart suggests that we could get a pull back from these levels as VMware has met resistance at $55 (U.S.) and the moving average convergence/divergence (MACD) signalled a shift to a downward bias while the relative strength index (RSI) indicated that the stock was overbought from late February to mid-March. I think that some selling pressure has to be expected after the generous first-quarter performance. Look for support at the 50-day moving average to confirm that the long-term trend is still intact and look to channel trade this one. Channel trading is when you trade between support and resistance – the trend can be flat, up, or down.

The second chart that caught my eye was SanDisk Corp. SNDK-Q, which makes all those flash memory cards that store data generated by electronic devices such as digital cameras and the MP3 players.

SanDisk was recommended in early January and has provided a 20-per-cent return in the ensuing period. The three-year chart for the stock has a number of similarities as the chart for VMware.

Once again we can see the long-term trend line supporting the advance from the lows, a golden cross that surfaces in May, 2009 and repeated tests of support along the 50-day moving average.

The six-month chart does suggest that SanDisk has hit a bit of resistance at $36 and that it may pull back from these levels. However, the long-term trend is still in place, which implies that there is still something left in the tank for the investor who wants to channel trade the trend.

Finally, the last of the lot that made it to the top three is Tibco Software Inc. TIBX-Q, which specializes in turning reams of data into useful information that is quickly available to decision makers. In this case, the chart isn't quite as attractive as those for VMware and SanDisk.

The trend line was broken in late summer 2009 and the stock was range bound with resistance at $10 and support at $9 till mid-March. Tibco just broke above resistance and its first-quarter return from an early January recommendation is about 12 per cent.

The MACD on the six-month chart generated a nice buy signal from the February lows of $9, which at Tuesday's close of $10.98 generated a 22-per-cent return in the last six weeks. Not too shabby.

The point of the exercise is that you need ideas to make money. When you find an idea, put the stock through a filter that will help you find the best opportunity to book a profit. If you like a story make sure the picture tells the same tale.

Happy Capitalism!