Wednesday, February 14, 2018

Follow  Thru  Day


This is how you  "TIME"  the market.  We have had 4 days of rally in the market as of the close today.  We have a  'Follow Thru'  day in the market now.  This is a signal for investors to start deploying their  CASH  and making new stock purchases.  Mr. William J. O'Neil (founder of the Investors Business Daily) has said:

"You should always buy something during the  Follow Thru  day".  

This is the time to start testing the waters and get back in the market.  It's best to start out with a smaller position and scale into in with later buys as the stock that you purchased starts making you profits.  You want to average up during this time.  Most Growth Stocks break out and make their run soon after on a follow thru day.  This is when most retail investors are afraid to trade and invest in stocks when they see their portfolio plummet over 10%  in the last 2 weeks.  Indexes have already gained back  +5%  in the last 4 trading days.   $QQQ  is the leading index right now and it is just less than  5%  below its all time high achieved on January 26th.  It is also the only major index of the 3 ($SPY, $DJI, $QQQ)  that has closed above the 21 day ema(exponential moving average).  That's a very healthy sign that the technology names are outperforming now.  This is the ideal time to get back in the market.  


Trade  of  the  Day  

I had cautioned my readers and followers to have a ready stock watch list prepared just in case we have a follow thru day.  These days come real quick and unless you are engaged with the market on a daily basis with your routine, you could miss an opportunity to get into the stock at its ideal buy point.  Stocks move up rapidly within days and you may never get a chance to catch these stocks again.

$ABMD  is a stock that may present such an opportunity at this time.  I would recommend that you do a Virtual Trade (a trade without actually deploying money and placing this trade on a virtual account most brokers offer on their platform) on it to help you develop and sharpen your skills of trading and investing.

Ideal buy point would be at the resistance line plus 10 cents which is $255.52.
It broke out in volume that was 3 times the daily average volume.
Early buy point could be exercised at $245 to give you a more breathing room, should the market falter.

Buy:  $245 to 255.52
Loss Exit: 232.70 to 242.74
Profit Exit: 269.50 to 281.07 (10% initial exit from your buy point)

Earnings was reported on Feb 1st and the stock gained +7.66% and began to consolidate for the next 8 days.  Next earnings is scheduled to be reported 1st week of May.  You have next 8 weeks available to be in the trade to make your initial profit target. 


Happy Trading!

Amin

Sunday, February 11, 2018

Timing  The  Market


We all faced a train wreck in the market last week.  My analysis of the market 3 weeks ago led me to conclude that it was time to seriously consider reducing the exposure in the market.  It was hard to imagine and accept that the  $DJI  could retrace a 1,000 points.  The headline of my blog that weekend  (January 21st)   was:

Dow Drops 1,000 points!


$DJI  had gained 1,300 points (+6%) during the first 3 weeks in January.  That was an unsustainable performance for January when on an average the month has returned  +1.12%   for the  $SPY  over the last 50 years.  Last Friday I concluded that the Market is in Correction.   I made that call in my blog on Feb 4th.  Some found my call questionable.  Poring over the data and analyzing the  $VIX  and the Bollinger bands on the  3  major indexes - $SPY, $QQQ  and  $DJI,  convinced me to make that call.  We had also piled up  5  distribution days  during the week prior as well.  We had already dropped 1,300 points on the  $DJI (gave up half of the gains we had made in January) and I suggested to my readers and followers to start raising  CASH.  If you procrastinated last week and did not raise your trailing stops on the winning position and did not close out the laggards, you would be facing the  $DJI  dropping another 1,126  points.  That would be giving up all the gains that we had made in January and some.   Heeding my call saved me from losing only half as much on the  $DJI, $SPY  and $QQQ.  IBD (Investors Business Daily)  did change the market pulse to  "Market in Correction"  when we had another  distribution day    on Thursday Feb 8th.


Market  Status 


We are not facing any recession right now and the unemployment rate is only 4.1%.  We have over 75% of the  $SPY  components already reported earnings and for the most part they have reported increased earnings and increased sales with increasing margins.  The economy is healthy and companies are giving out bonuses to their employees.  What we have witnessed in the last 2 weeks is a re tracement to the mean.  Market is still exhibiting a bullish status when you analyze the monthly charts of the major indexes.  There is always a counter trend in any bullish trend.  Currently, the performance of the 3 major indexes from its all time high attained 2 weeks ago is:
  • $QQQ ... - 8.69%
  • $SPY  ... - 8.77%
  • $DJI   ... - 9.11% 
We had a very healthy bounce on the indexes on Friday February 9th but the indexes are still hovering around the 100 day sma(simple moving average).  We need 3 more days of similar rally in higher volume to convince me that bulls are really in charge and we are heading back to the highs we made 2 weeks ago.

Stocks  to  Monitor 


The market has made a very violent downtrend moves in the last 2 weeks and it could just as well make a a very similar counter trend move to reclaim the highs we made 2 weeks ago.  This is the critical week to build up an actionable Stock Watch List.  Here are some stocks to look at and monitor this week:

$AMZN
$NFLX
$NOW
$EBAY
$ANET
$ADBE
$CME
$IBKR
$AMTD
$LPLA
$CMA
$EW
$ABBV
$ABMD
$TSS
$MA
$BA
$NOC


Mentoring  Program


Were you stunned last 2 weeks when the market dropped  2,426  points on the $DJI?  Do you know what preventive actions you should have taken 2 weeks ago to mitigate losses to your portfolio?  If you are feeling sick to your stomach with the train wreck we faced last week, than you need to make a commitment this year to learn:

  • How to  TIME  the Market?
  • How to find the  Winning Growth Stocks?
  • How to  Buy the Stocks Right?
  • How to  Plan your Trade for Profit, Loss and Time in the trade?
  • How to  Sell your Stock Right?

I shall be opening up a very limited number of slots for mentoring in February.  Schedule a FREE 30 minutes of  "Discovery Call"   with us and see how best we can help you become a consistent and a profitable trader and an investor in 2018.  Don't procrastinate and pass up the opportunity of making a difference in your portfolio.  Start out the new year with a resolution to invest in your education.

Contact us at:

investorspotlight@gmail.com 


Happy Trading!

Amin 

  



Monday, February 5, 2018

Market  is  in  Correction


It was a very ugly day in the market on  Monday Feb 5th.  The wave of selling started when the market opened in Japan, while the fans in Philadelphia were celebrating the victory of their home team.  That celebration was short lived.  It's 8.30 pm on Monday night here as I am writing this post and the Japanese Nikkei is down  - 4.75%  already in the first hour of trading.  I often make the remark when I give talks to the investment groups

"When the US stock market sneezes, the rest of the world catches a cold"   


All the 3 major indexes - $DJI, $SPY and $QQQ gapped down when the market opened and plummeted past below the  50 day sma(simple moving average) by the close of the day.  Currently they are all hovering at 100 day sma.  This sort of move usually takes a couple of days but this time around it happened within a day.  Trading volume on the $DJI was the highest we have witnessed in the last 9 years.  All the gains we had made in January was given up within a couple of days this month.  Some of the leading Growth Stocks did even worse.   


Timing  the  Market


I posted a blog on Saturday Feb 3rd (I have never posted a blog on Saturday) because I was concerned from what I saw on the charts of the major indexes and all the major sectors of US market.  A correction of  -5%  to  10%   was having a higher probability of occurrence.  $VIX  would certainly spike in the process as well.  All the gains that we had made in the 3 major indexes in January was given up within 3 days in February.  This sort of loss in a portfolio had to be anticipated.  $VIX spiking  +50%  was also a higher probability.  As a matter of fact,  $VIX did spike to  +115%  today instead.  For those followers and readers of my post that protected their portfolio with trading options on $VIX, probably profited handsomely today. 


One of the tools I utilize is the  "Distribution Days"  count of the $SPY  and the  $NASDAQ.   2 weeks ago we had only  3 distribution days.  Today it has spiked to  11 and they have piled up in a cluster of a couple of days.  That is a signal and a sign from the institutions that they are bailing out.  It clearly shows up as a spike in the volume of trading that results in indexes moving lower.  Another tool that I utilize is the $VIX.  It had been creeping higher as well from  $11.08  to  $14.79  within the first 2 days of last week.  The 3 indexes had already started drifting lower after trading between 10 to 14 days at the upper bollinger bands.  It was getting into a situation where the indexes would snap back to the mean.  It most certainly did that within the last 2 days.      


Lessons  Learnt  This  Week 


If you suffered a severe draw downs to your portfolio this week, there are some important lessons to take away from what we have experienced in the market.  The last time we had a trading volume in the $DJI like the one we saw on Monday was in March 2008.  Within days after that, the market took a bullish turn with a follow thru day in mid March of 2008.  Lots of stocks began breaking out and new Growth Stock leaders appeared that doubled over the next year.  These are some of the lessons to take away this week:

  • Stay engaged with the market consistently and always develop a Stock Watch List every week.
  • Lots of holidays and celebrations occur throughout the year but be disciplined to have your finger on the pulse of the market every day.  Have a routine.
  • Always prepare a detailed Trade Plan for any position you take. Review the stock charts and make appropriate notations of reasons why you chose to take that position.  This comes handy when you do your post mortem of all your trades.
  • Plan an appropriate trailing stop once the stock position becomes profitable.  Be in tune and in step with the market conditions.  Adjust the trailing stops with changing market conditions.
  • Stay disciplined with your Buy rules and Sell rules.


STAY  IN  CASH  NOW


Happy Trading!

Amin

DISCLAIMER



Do not take a position unless you are prepared to sustain a TOTAL LOSS. Your loss could include the money you invested as well as commissions and transaction charges.


The Information I provide is for education and informational purposes only. The Information provided is not intended to be and does not constitute financial advice, investment advice, trading advice or any other advice. The Information provided is general in nature and is not specific to you or anyone else.


YOU SHOULD NOT MAKE ANY DECISION, FINANCIAL, INVESTMENTS, TRADING OR OTHERWISE, BASED ON ANY OF THE INFORMATION PRESENTED WITHOUT UNDERTAKING INDEPENDENT DUE DILIGENCE AND CONSULTATION WITH A LICENSED PROFESSIONAL. You understand that you are using this Information AT YOUR OWN RISK.