Hey there, Fools. I've summoned our Motley Fool CAPS community once again to highlight a few of Monday's biggest winners among the stocks with top ratings of four or five stars.

Without further ado:


Yesterday's % Gain

Electro-Optical Sciences (NASDAQ:MELA)


AgFeed Industries




Permian Basin Royalty Trust


Patriot Coal (NYSE:PCX)


There's a reason why I selected those notable gainers as opposed to other winners making noise on Monday, like low-rated AMD (NYSE:AMD): Stocks go up all the time, but unless you were able to predict the pop, what does it matter?

Our community of more than 135,000 CAPS Fools considers its high-star stocks the most likely to outperform the market.

Written in the (five) stars?
For example, 97% of the 124 members who've rated Electro-Optical have a bullish opinion of the stock. Just last month, one of those Fools, tenmiles, explained why the skin-cancer detector looked like a one-of-a-kind find:

Expect FDA's expedited review to result in approval for MelaFind in late 2009, as it has met all primary end points. This is highly speculative, but a device that would allow dermatologists to scan for melanomas could be huge. This stock could easily be a multiple bagger, for those with some room for a speculative holding and 2-3 year holding period.

Shares of Electro-Optical are already up 38% since that call. In fact, yesterday's surge came after a Barron's story said the stock could rise 50% if the FDA indeed approves its MelaFind cancer-screening device -- consistent with tenmiles' bull call.

The bullish lesson?
Know when to break the rules. Technology stocks are notoriously fraught with risk, but by buying into young, dynamic companies with genuine game-changing prospects, you can reduce your downside substantially. Once that potential translates into "visible" earnings growth, the company's following (and stock price) will likely get a massive boost, too.

And now for the losers ...
Of course, winning isn't everything in the stock market. Here are five of Monday's biggest decliners with one- or two-star ratings:


Yesterday's % Loss

Sulphco (NYSE:SUF)




Best Buy (NYSE:BBY)


Ford Motor (NYSE:F)


Toll Brothers


While yesterday's plunge in highly rated American Capital (NASDAQ:ACAS) may have caught our community off-guard, low-ranked stocks are fully expected to fall hard.

Did CAPS call the fall?
Two weeks ago, for instance, CAPS All-Star tyro00 showed skepticism over Sulphco's recent price run:

Read the commentaries here going back to 2006 and you will see they are "under new management": "completing a few minor tests": and "will shortly go into contract for its product". They drove the price of [Sulphco] stock up to $9/share once without revenue or technology that works. Can they do it again?

After yesterday's drop, shares of the crude oil upgrading company are already down 24.5% since that warning.

The bearish takeaway?
Never confuse an improving price for improving prospects. As long as a company's financial situation continues to deteriorate, short-term, speculation-driven run-ups can only be sustained for so long. As Warren Buffett reminds us, "For some reason, people take their cues from price action rather than from values. ... The dumbest reason in the world to buy a stock is because it's going up."

The final Foolish move
Investors often focus strictly on stock price movements, without realizing that developing a proper stock-picking process counts most.

Over at Motley Fool CAPS, thousands of investors are Foolishly sharing insightful investment tips to help, above all else, identify tomorrow's big movers. Over time, consistently reverse-engineering winning -- and losing -- stocks will help you become a more Foolish investor.

Log in to CAPS today and start participating. It's absolutely free -- and a lot of fun!