Wednesday, April 29, 2015

How You Could Have Avoided Losing On $CLDN

Wrapping Up Our Theme

All month I've been discussing my method for funneling stocks on to my watch list.  In this last iteration, we'll wrap up the discussion by examining a recent real world example.

Must Haves

On April 13th one of my readers sent me an email to ask for my opinion of $CLDN.  He saw that the stock was trading in the $18 range but the last option call was at $7.80 and he couldn't understand why things were so out of whack on it. This stock wasn't on my radar when he emailed so I had to check it out before I could reply back with my thoughts. 

I did a Stock Checkup on IBD® and, instantly saw why it wasn't on my watch list.  Basically, it hadn't established itself as a growth stock yet and here's why:
  1. EPS rating was 4 and, for me, it's got to be 90+ to even be considered.
  2. The RS rating is 89 and I've got to be 90+ there too.
  3. Acc / Dist is an E and I need a B or higher
  4. This was a thin stock, unable to break $100M a day in volume
So to answer his question, institutions didn't believe in this stock which is why things weren't making sense on it yet.   


Just 2 days after sharing my thoughts on the risk involved with this stock I published a blog post that discussed the variables section of my funnel.  One of the specific examples I gave had to do with a bio-tech that "looked good" but had enough baggage that it could be weeded out of consideration.

Obviously I wasn't going to get involved with this stock at this point, however, it was at the back of my mind over the next few weeks. Then this article popped into my Twitter feed just yesterday. $CLDN has lost more than 80% of its value because of negative test results for their new drug...ouch!  

I may look prophetic here but it really just boils down to my personal system for selecting stocks.  When I follow my own rules, I'm able to limit my risk.  When I limit my risk, I'm able to avoid the financial ruin that can come with being involved in these types of stocks.  

My Stocks & My Trade Plans

I'm using my $CLDN conversation as the example in this case but I get asked about these types of stocks all the time.  I've decided to branch out and start offering premium services to help fill what appears to be a significant need out there.  Here's a summary of what I'll be offering:

  • Virtual Trade Plans: For every stock on my radar, I create a trade plan.  Subscribers to my weekly trade plan service will receive a PDF every Monday morning for each stock that has made it to the bottom of my funnel.  Each plan will include basic details on the stock, market condition overview, entry conditions, and exit conditions.
  • Premium Blog Subscription:  Until now, I've offered my Monday Market Spotlight posts for free but that will change starting on May 4th 2015.  Subscribers to my premium blog will receive my market outlook as well as my full watch list which is updated every weekend. 
  • Group Mentoring Service: Want to learn my system in depth?  I'm now offering mentoring for groups of up to 3 people at a time.  Mentoring sessions will include a 4 Webinars per month with 30 minutes of live education followed by 10 minutes of Q&A per participant.  Sessions will be recorded and available on-demand after the fact.
  • 1 On 1 Mentoring: Want a session that is more focused on you?  My 1 on 1 mentoring offers you a more personal and interactive experience that is designed around your particulars.  Sessions will be recorded and available on-demand after the fact.

If you've got questions about any of these services, just shoot me an email at

If you'd like to purchase, you can sign up below:

Premium Services

Next Month's Theme

During the month of May we're going to dive into the importance of back testing your own trading system.  I'll give you examples of how I use options trades to both replicate my success and learn from my losses.  We'll also take a closer look at the weakness of the current bull market to shed some light why back testing is more critical than ever.

As always, keep your questions and comments rolling!

Happy Trading!

Monday, April 27, 2015

$UTLA and $ORLY: Monday Market Spotlight

Preparing For Take Off 

After watching the market swing in double digits on a regular basis for the past 3 months, it was great to get some confirmation of a bullish stance last week. For the past 3 weeks, $SPY has been trading above the 8 day exponential moving average line with the exception of 1 day of market reversal on the 17th. The 17th was the day when all April stock options expired so institutions were obviously covering their hedged positions. 

There was a massive sell off in every sector except for Health Care (XLV).  Institutions came roaring in last week in heavy volume though. Currently the condition of the market is
“Confirmed Uptrend” according to IBD®.  This is a good time to be establish a position in a cream of the crop growth stock if you've got one lined up.

Where Are The Leaders This Week?

Once I sat down to analyze the 9 sector ETF's this weekend, something became really apparent to me. Consumer Discretionary and Health Care continue to lead the pack so that's where I'm focusing my attention this week. Markets in Asia have also been outperforming US markets for the past six weeks. Institutions have certainly noticed and are putting money into Asia as a result.  They're also showing a high degree of caution by dumping cash into "thin" stocks which is uncharacteristic behavior.  My major concern right now is that we still have 11 distribution days between $SPY and $QQQ.  We are also in the midst of earnings season this week and I eliminate this variable during my stock selection process.

Rock Star Stocks of the Week

This week, 30 of the IBD® 50 are thin stocks (stocks trading under $100M/Day) so I eliminate them as a part of my process.  Several of the stocks are reporting earnings in the next 10 days so they get eliminated too. After applying my strict filters, there are only 2 stocks worthy of planning a trade for:


I've prepared a free sample of a trade plan for $ULTA this week which you can download here.  I think the $ORLY is still a bit on the risky side and getting involved right this moment could be a chase.  It is never a good idea to chase a stock if it has surpassed its goldilocks buy point zone.  Don't fear, history suggests that 40% of the good quality growth stocks often retrace to their buy point zone so you'll get another opportunity if it's the real McCoy.  

Happy trading!

Amin Hemani

Friday, April 24, 2015

This Week: Investing Is a Contact Sport

Don't Fly Solo

Anyone that knows me personally knows that I'm a high energy individual who loves to meet new people.  Investing can be a lonely affair but I've learned that I don't have to go it alone.  Just yesterday I "met" Bryan Kelly online and as a result I was introduced to an interesting Content as as Service (CaaS) product, Nimble Quotes, which I was able to start using instantly and for free. 

We exchanged details and subscribed to each others blogs and now we each have access to each others insights moving forward.  My take away here is that even though I'm insulated from other investors in my daily research routine, if I lift my head and look around I find others like me everywhere!

With that said, if you're on FaceBook, Twitter, or G+ please like and follow me! 

Microsoft & McDonalds In The News

The financial woes of McDonalds have been well documented the last few years and now that they've decided to raise pay by 10% for as many as 90,000 workers, they will have added pressure to right the ship.  There's been a lot of discussion in the media about McDonalds' plan to increase automation.  The jury is still out on the exact reasoning behind MCDs offering these new kiosks but several reasons have been suggested.  

Some say it's part of their plan to attract the digitally oriented youth of the world.  Some say it's a natural progression given the success of the Ziosk system at Chili's.  Politics have also been inserted into the discussion with pundits claiming the move was motived by $15/hour mandated wages in some states.  I have a feeling it's a mix of all of these but until I see data that proves one approach is working better than another, I'll remain on the fence regarding these business decisions.

Microsoft was also surprisingly in the news this week with a glowing earnings report.  Financial institutions will undoubtedly pull profits from some of their existing positions and push them into Microsoft to take advantage of the surge.  It will be interesting to see how that move will affect growth stocks but I'm even more interested to see how Microsoft plans to utilize the cash injection.   

$HAR and $ULTA 

On Monday I highlighted $HAR and $ULTA as part of my market outlook and just yesterday they moved into their goldilocks buy point zone.  I'm waiting on market confirmation before taking a position, though.  If the gains from this week continue continue we'll have uptrend resumed which is my green light to get into new positions.  The $SPY needs to be above 2130 and DOW over 18,300 for me to feel comfortable again.  The $QQQ is already above 5050 which is a good sign in my opinion.

A Free Gift To My Subscribers

I've decided that next week I'm going to start offering sample trade plans! Each trade plan will include both entry and exit conditions as well as the metrics I use to track the health of a stock.  As a part of this roll out I will be offering 1 free plan to anyone that has subscribed to my mailing list so if you'd like access now's your chance to sign up:

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Wednesday, April 22, 2015

Perfecting Your Watch List - Compare & Contrast!


Last week I released the 3rd part of my 5 part series on building a better watch list.  In the last installment we started to examine the lower portion of my stock funnel which includes my list of variables to any further action.  This week we'll move further down the funnel so that we can explore a sample watch list I've put together.  If you would like a copy of the watch list just email me at and I'll send one over for you.

Tracking The Right Criteria

Over the last several weeks I have laid out a specific list of 9 criteria that make up my "must haves" for any stock.  To help you visualize these criteria, I've put together a graphic that you can download for your own personal use.  

Sticking to these core criteria means that only the strongest growth stocks should make it to the lower stages of your process.  It's possible even with the high level of filtration we're applying that multiple stocks will survive all the way to your watch list stage.  At this point, it's important to track the health of each candidate before moving on.

Track Your Candidates In One Place

Staying organized is critical to success when you're involved in the stock market.  Unfortunately, this can be difficult if you're using multiple tools in your research process.  For example, I use a physical copy of IBD in addition to tools that are delivered digitally so staying organized requires an element of discipline on my part!  

When I first started investing in the early 90's I found myself having to compile my data into spiral notebooks with my watch list stocks going on to 3x5 note cards.  If a critical component to a stock changed, I had to shuffle through my materials and resort to white-out to make my changes.  Thankfully, modern technology has provided us with effective alternatives so those days are long gone.

No matter which tools you employ in your process, track your actionable data in one place and keep it up to date.  If you need a starting point, I'm happy to help!

Perform Side By Side Comparisons

It's rare that you'll only have 1 candidate on your watch and it can be tough to run an apples to apples comparison given all the moving parts involved.  For that very reason, I put together a spreadsheet that lets me track up to 5 stocks at once.  With this, I can conveniently track all of my important criteria and perform a side by side comparison to determine the best possible opportunity for myself.

The exact values of these criteria can change several times between when it goes on my list and when I take a position so having a document like this lets me easily keep things updated as new data comes in.  As I mentioned earlier, If you would like a copy of the watch list just email me at and I'll send one over for you.  

In the final installment of this series next week, we'll go through the last phase of my funnel - planning a trade!  I should even have some sample trade plans available so make sure to subscribe to my mailing list!

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Monday, April 20, 2015

$HAR $MNST $ULTA - Market Spotlight: April 20th 2015

Dangerous Times For The "Little Guy" 

Institutions are playing mind games with the market. Just 10 days ago, it seemed like they were going to deploy their cash reserves back into some of the leading sectors. The 8 day, 21 day and 34 day exponential moving averages (EMA) of the three major indices  (SPY/QQQ/DJX) that I track daily were kissing each other yet on Friday, institutions ended the party and parked their cash in a lagging sector ($XLE) where it would be safe.  They  demonstrated their intentions by taking positions in the energy sector as a whole.

Can They Hide All That Cash?

I recently outlined how important it is to examine the behavior of institutions.  With the size of the positions they take, it's hard for them to hide their intentions. My analysis of the 9 sector ETF’s allows me to sniff out their plans. I have noticed that the energy sector, which has been lagging for months, is beginning to turn the corner from its all time low. Currently 90% of the stocks in that sector are trading above their 50 day simple moving average!

Could there be some sort of a sector rotation going on? Health Care ($XLV) and Consumer Discretionary ($XLY) were 2 sectors that institutions heavily supported for the past several weeks. It's quite possible that they're taking profits from these sectors and deploying them into energy related businesses where they can exercise a high level of control right now.

What Does IBD® Show?

The current market outlook according to IBD® is “Uptrend Under Pressure”.  Market conditions are not great right now I'm taking a very low risk approach.  We still have 13 distribution days and I consider that to be high. This requires extra caution so I'm looking for just 1 true rock star of a stock to give me the best chance of success. My funnel process has put 3 stocks on my radar this week:


It's not enough to pick a great stock if the market timing isn't right.  These 3 have been trading very tightly around 8 day EMA for quite a while now but I would feel a whole lot better if the volume kicks in 40%, or above, their average daily volume and past their resistance lines. It would be even better if the SPY punches through its resistance of 213 and QQQ to punches through 109 in high volume as well.

Happy trading!

Friday, April 17, 2015

5 Lessons Every Stock Trader Must Learn

Lesson 1: Penny Stocks Will Ruin You

Yesterday I came across an article that I thought was quite insightful and well written.  What really jumped out at me was Scott's opinion of penny stocks because it's one that I share.  There are lots of ways to make money investing but I am convinced that penny stocks will never get me to my financial goals.  I prefer to manage my risk by working only with true growth stocks.  The sooner you learn to steer clear of penny stocks the better as far as I'm concerned!

Lesson 2: Know Your Trading Personality

In my role as a Meetup coordinator for IBD® I am constantly exposed to people who employ all kinds of different investing methods.  For the last 20 years I've thought of myself as an investor but recently it occurred to me that I've actually become a trader.  If you're wondering what the difference is, it really boils down to the goals and methods being used.

I simply don't have the stomach to sustain the types of double digit losses that investors might see over the life of their positions.  Also, I don't have the patience to sit in a position for more than 8 weeks at a time so long term involvement doesn't really interest me.  Knowing that, I've committed myself to planning all of my positions from the perspective of a trader instead of as an investor.

Lesson 3: Have A Process

My trading process has been methodically put together through years of classroom training as well as trial and error.  Earlier this week I released a video that describes the structure of my process:

Building A Watch List & Planning A Trade from Amin Hemani on Vimeo.

No matter what process you decide to use, it's only going to work if you stick with it.  The moment you start to stray or take liberties, you've increased your risk along with your chances of losing money.

Lesson 4: Have The Right Tools

In that video we discussed the most important tools in my process.  If you have the same trading personality as me then the core tools I use should prove effective.  Here are just a few that have returned on the investment for me!

Investors Business Daily - Pay no attention to the dated website, IBD is perhaps the best data company in the business.  If you work with growth stocks in any capacity whatsoever, they are a must have.  

Tom Gentile - Tom is one of the few people in the investment industry that I would consider a mentor.  I first met Tom when he was with Optionetics and I was instantly impressed with his market knowledge.  What impressed me even more was how he put his knowledge into an actionable process.  Switching from analysis to action is perhaps one of the most important lessons I learned from him.  You can also follow Tom on Twitter to get a closer look.

ValueLine - I look to Value Line to help me get beyond what the charts are showing me.  Typically I keep my process as data centric as possible so that I can stop my emotions from influencing me.  Once I get to the bottom of my funnel and I'm doing side by side comparison's of the greatest growth stocks out there - I've got to dig deeper on their fundamentals.  Value Line gives me the objective analysis I need to verify the under currents.    

Lesson 5: Remain Disciplined And Organized

This lesson is easily overlooked which is why I think it's so important to mention it.  There's a common denominator among masters of a profession.  Whether you consider; athletes, business people, artists, crane operators, journalists, or any other profession for that matter, the best performers always bring a high level of commitment to the table.  At this point in my career, trading stocks is my profession so I make every effort to produce with an equal level of commitment.

In an effort to help others stay organized, I put together a handy little spreadsheet that includes formulas for my core criteria. It can be easily updated as the health of a stock changes too.  If you would like a copy, just email me at and I'll send one over for you ASAP.

Also, make sure you're subscribed to our mailing list to get access to my post Monday where I'll give you a break down of market conditions along with a handful of stocks that meet my personal criteria;  You can sign up below!

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Wednesday, April 15, 2015

Addition By Subtraction: Building Your Watch List


Last week I released the 2nd part of my 5 part series on building a better watch list.  Based on the emails I've gotten so far, it seems like this theme of addition by subtraction is really resonating with people. 

So I decided to expand on this with my guest blogger posts on MyTradingBuddy where I introduced my "funnel" based method of watch list building.  In this week's iteration, I'm going to explore the lower portion of the funnel, where we begin stripping out stocks by the variables tied to them.

I view variables on a stock as physical barriers that get in the way of further action (i.e. placing it on my watch list).  Here's a break down of some the riskiest variables I like to avoid, along with some background on each.

Are Institutions Maxed Out?

I use institutions throughout my process and I offered some thoughts on why in a previous post.  It's rare that institutions will come into a position in full and all at once because it creates volatility and artificially inflates value, which ultimately has an impact on their potential profits.  Instead, they prefer a measured transition which is easy to spot if you know what to look for.  

However, some times institutional activity in a position begins to slow down.  It's hard to say why, exactly.  Perhaps there are other stocks that have caught their attention, or perhaps they're maxing out.  Either way, this is going to have an effect on the momentum of the stock and it's more likely to move sideways than upwards.


Some people have made their living trading around earnings but it's too risky an endeavor for my taste.  The reason I see earnings as a variable is because I can't predict how institutions will react to the information in a report.  When a normal person like me looks at a glowing earnings report, I may think to myself, With these numbers, this thing is about to break out!

I have no idea if that's the case, because unfortunately, I don't have access to what institutions are seeing.  They may be looking at multiple companies simultaneously and if the one I'm looking at is the 3rd best earnings performer in their eyes, then taking a position on my target exposes me to additional risk.

This is why I like to wait at least 3 sessions after earnings before taking any kind of action.  If the stock is solid, I'm good to go.  if not, my capital is safe!

Passing The Buy Point

I'm sure that every reader of IBD® has run into this at one point or another.  When a stock has solid fundamentals but has passed its buy point it's easy to assume that it's safe to chase.  I can't stress enough how bad an idea this is!  Sooner or later this approach will come back to haunt you.  If the stock is really a winner then it's going to offer you another buy point or it's going to retrace and you can get involved then.

Government Involvement

This one probably seems like a no-brainer but I've still got to mention it.  The only thing more impactful than the behavior of institutions is the behavior of the government!  When I'm looking at a bio-tech company that's got solid fundamentals, I want to know if there are any approvals pending with the FDA or anything like that.  If I've got 10 stocks that have made it this far down the funnel but 2 have government involvement swirling around them?  I'm down to 8!

8 Week Hold Rule

This one circles back to the idea that Institutions can max out.  When IBD® shows that a stock is on the 8 week hold rule, what they're really saying is that you need to wait for 8 weeks for institutions to fully digest their existing position.  Remember, when institutions are sitting things out, the price of a stock is more likely to move sideways.  That's just one more variable I eliminate from my trading equation.  

Growth Stocks Should Survive

You can make money investing in all sorts of ways.  Some people live and die by IPO's.  Some work penny stocks while others rehab and flip real estate.  There's no "best" way to make money investing but I prefer to work with growth stocks.  By using the variables I laid out here, I'm able to better pin point the true growth stocks.

At this point in my process, I've usually got somewhere between 3 and 5 stocks that have made it through my funnel and on to my watch list.  In the 4th part of this series we're going to look more closely at how I structure my watch list and how I rate stocks in a side by side comparison.

As always, keep the comments and emails rolling!


Monday, April 13, 2015

$MNK $PANW $CCL Moving Up - Is The Market Storm Over?

Has The Storm Passed?

After the pain and volatility at the end of March, it was great to see a positive trend in the market last week. The three major indices that I track every day ($SPY $QQQ and $DJX) showed some positive price movements in a very tight and disciplined way. The 8 day, 21day, and 34 day exponential moving averages (EMA) have been kissing each other since early last Monday. All of these three EMA’s have merged and are slowly but methodically moving up.  

The last piece of the puzzle is volume from the institutions.  To propel these indices through a major resistance ceiling, it's going to take an influx in volume from the big dogs. If $SPY, $QQQ and $DJX continue on the path from last week and institutions come in huge volume, it will be time to establish bullish stock positions.  This is why it's important to close out a losing position and harvest profits on your winners.  If you're trading like me then you've kept your powder dry for the last 2 weeks and have capital available for this opportunity. 

Use Institutions To Your Advantage!

I often mention that traders and investors alike should always pay close attention to the behavior of institutions.  There are many reasons to do this but here are just a few  

  • Institutions hedge their positions and control tremendous resources
  • Their success depends on them being right so they use their resources to gather up the best minds and data available
  • Given the size of the positions they take, it's hard for them to hide the moves they make.  There will always be a trail of bread crumbs even on their most subtle moves.
  • They will rotate in and out of the different ETF sectors and you can actually detect this behavior on charts, if you know what to look for.
As a growth stock trader, everything I listed above has an impact on my trade planning so I like I take my lead from institutions.  In particular, I work in the sectors they're focused on so that I can keep the odds in my favor.

Which Sectors Are Up?

With that being said, institutions seem to be focused on Health Care ($XLV) and Consumer Discretionary ($XLY) right now. I am only looking at stocks which are trading close to their 8 day EMA.  Earnings are also a variable I like to remove from the equation so I eliminate stocks that have their earnings reports due in the next couple of weeks. Here are 3 stocks that meet my strict criteria:


My low risk approach means that I am looking for the $SPY to punch through major ceiling of 213, with QQQ punching through 109. It is best if these resistance lines make their move in high volume. I'm waiting to make a move until the market presents itself with these conditions!

Happy trading!


Friday, April 10, 2015

This Week: Spring Is In Full Swing

Some Signs Of Life

It appears that the $DOW is poised to break 18,000 and the $SPY is flirting with 2,100. Both are great signs state-side but I'm still paying close attention to what's happening internationally.  China's $FXI is showing some strong momentum and Japanese dividend growth has actually out paced the US recently.

There's a quite a bit of instability in the Middle East at the moment and it's affecting the price of oil along with global supply levels.  In fact, US oil stockpiles hit an 80 year high this week and with a proxy war going on in Yemen, it's quite likely the Saudi's will continue to keep production levels high to keep pressure on the Iranian regime.

Also, the Eurozone is facing a new wrinkle vis a vis Greece that could have near term economic impact.  The IMF will have some more tough choices ahead and it will be interesting to see if there are additional developments in the coming weeks.

A New Opportunity

This week I started my role as a contributing author for the blog at My Trading Buddy which is incredibly exciting for me!  I highly recommend subscribing for their free updates.  A number of the other contributors are putting out some wonderful content too.  Here are a few in particular you'll want to bookmark:

Paul Bratby
Mercedes Van Essen
Easy Forex
Dr Stoxx

I'm planning to contribute at least 1 post a week as long as I can up with fresh and interesting content and that's where you come in!  Please keep your comments and ideas coming as they get my creative juices flowing.  

A Tradition Unlike Any Other

You know that Spring has arrived when you hear the lilting voice of Jim Nantz and see the rolling green fairways at Augusta National.  Wednesday kicked off the annual festivities of the Masters Golf Tournament and it couldn't have come sooner.  Many of my friends in the north east just went through one of the most miserable winters in recent memory so a few days dedicated to the glorification of a spring tradition is not a bad thing at all.  

Make sure you carve out some time this weekend doing something out of your normal routine.  I've always found that changing up my energy for a day or two can help to clear out the cobwebs.  Come Monday morning, I want to be fresh and ready to tackle new challenges and this is one way I manage to make that a reality.

Happy trading!


Wednesday, April 8, 2015

It's Time For a Watch List Tune Up

Last week I offered up the first part in a 5 part series on building a watch list. In this installment we'll take a deeper look at the earliest stage in the process.

Let Data Drive You

Are you tempted when Jim Cramer is singing the praises of Tesla on CNBC? Or perhaps your friends brother-in-law knows a guy who works at GM? When it comes to watch list building, only focus on the data that you can verify. 

There will always be a fair amount of noise out there so you've got to learn which information you can tune out, and what you should actually be paying attention to.  I like to keep things simple and with as few moving parts as I can.  It helps keep me from getting dragged into the dreaded cycle of analysis paralysis that every stock trader fears.

Examine Market Conditions

I like to start by taking a look at the chart action of the 3 major indices, $DOW, $SPY and $QQQ. Once I've got a clearer picture of the general market I then like to hone in on the 9 major sector ETF's to see which is showing the most life. If you aren't familiar with the sectors, they are:

  1. XLK = Technology
  2. XLV = Health care
  3. XLI = Industrials
  4. XLB = Materials
  5. XLE = Energy
  6. XLF = Financials
  7. XLU = Utilities
  8. XLY = Discretionary
  9. XLP = Staples

Now that I've got the best performing sector in hand, I want to look at just the top stocks in that sector. This is how I get an idea of where the momentum lies. For me, the Relative Strength is the key component in this stage of the process.

Have The Right Tools

Adding a stock to your watch list is only the first step, now comes the real work!  There are countless tools out there but since I focus only on growth stocks, my tool kit begins and ends with Investors Business Daily.  The true value of IBD® is the quality of the data they provide.  In addition to their full break down in the IBD 50 and the Big Cap 20, their editorial section sheds light on the news of the day as it relates to the markets.

The reason IBD® is so critical for me is because they've combined the science of fundamentals and technical analysis with esoteric elements like momentum.  They've done all the leg work for me and I trust their proprietary ratings so it's a no-brainer as far as I'm concerned.  

I also like to cross reference my research with some other industry sources like Schaeffer's, Barron's, and Value Line.  My Twitter feed is actually configured to instantly publish new content from these trusted sources throughout the day so have a look if you'd like a consolidated stream.  

This should give you a fair idea on getting through your initial prep work and building out your watch list with the lowest hanging fruit.  Watch for part 3 of this series next Wednesday where we will examine what I see as barriers to taking a position.  

If you're interested in taking a closer look at my methods I have a few openings left for a free Webinar this Friday April 10th from 3 to 4 PM EST.  Email me ASAP if you would like to take part as space is limited!

Monday, April 6, 2015

Easter Is Over: Monday Market Spotlight

Ever Wonder What Determines Stock Prices?

Traders and investors alike need to be aware that over 70% of the volume in the US stock market is driven by institutions. One interesting thing about institutions is that rarely do they take a position in full all at once.  Instead, they prefer to build their position over a few weeks. However, when they decide to take profits and exit their positions, it's sudden and has the same effect as a guillotine. 
This is the scenario we watched unfold last week. 

It's difficult to know what caused institutions to behave the way they did. Perhaps the jobs report wasn't to their liking? Did the GDP report spook them? Or maybe the recent comments from the Fed were the real catalyst. Could it even be the pending deal with Iran?  All I know is that they reacted by dumping their weak stock positions in high volume. The result? All major indices are trading below the 50 day simple moving averages (SMA).

What's Coming This Week?

Earnings season starts this week with companies reporting their Q1 performances.  First quarter GDP is unlikely to impress anyone it's tough to predict how institutions might react to this new round of reports. Surprisingly, some sectors such as; energy (XLE), industrials (XLI) and the materials (XLB) are already trading below the 200 day SMA. With the transport sector (DJT or IYT) trading below the 200 day SMA as well, it's not looking pretty for the health of the over all manufacturing zone of our economy.  You can be sure that institutions are keenly aware of all of this.

Institutions Are Flush With Cash.  Where Will They Send It?

IBD® is calling the market as “Uptrend under Pressure" and last week we added some more distribution days on the SPY and NASDAQ. For those that don't know what a distribution day is, IBD® has a great break down available here.

We've faced a total of 18 distribution days this quarter - 4 coming just last week. That is pretty alarming to me so I'm inclined not to take any new positions right now.  Instead, I'm conserving my capital so that I can deploy it when the market isn't as volatile. 

For bolder traders, take your lead from institutions.  They have maintained some of their core positions in the retail sector. Under current market conditions, look only at stocks that are in the sectors institutions favor. I also check to see if a stock is trading above the 21 day EMA. Here are 3 stocks that meet such strict criteria:


I'm sticking with a low risk approach in order to conserve capital. I'll feel more at ease when institutions get back into the fold. The road sign in my opinion is when the SPY breaks above 213 long term resistance in high volume for at least 2 days in a row.  
I want to do everything I can to get the odds in my favor and I sleep a lot better when I know that institutions are participating in the stocks I like.

Watch for my next post on Wednesday where I'll dig into the 2nd part of my 5 part series on how I build my watch list. 

Happy trading!


Friday, April 3, 2015

Now Hear This! My Week & My Gift To You

Nuke Deals, Indiana, and Market Volatility - Oh my!

News cycles this week were heavily centered on the long awaited deal with Iran over its nuclear program.  Make no mistake, this agreement is going to have a major impact on energy trading throughout next week.  Don't be surprised if the $EURO is affected as a result too.  

In the sports world, March Madness has grabbed up a lot of attention.  With the Final 4 coming to Indianapolis, local businesses have been prepping for a swarm of rabid fans.  However, a new law in the state of Indiana has thrown a wrench in the works for pro-growth advocates and has pulled attention away from this popular annual sporting event.  Once the dust settles, it will be interesting to see if Indiana's long term business health has been jeopardized as a result of the law.   

On the market side, the volatility of this first quarter has been pretty frustrating but if you're trading like me then you managed to grab some profits and you stopped out before seeing any real damage to your portfolio. 

My Week On Twitter

Twitter has increasingly become a resource in my research, I'm really starting to understand why the platform has become such a powerful force in recent years.  This week I came across a number of interesting people which I've started organizing into Twitter lists. 

You can check out my lists here but make sure to check out Floren Cabrera and Russel Barbour in particular.

My Gift To You

In my post this Wednesday I mentioned that I would provide a document to help people build their watch lists the same way I do it.  As promised, here's a copy of that document!  When I find a stock that I might be interested in taking a position on, I pull this up and check off each item in order as I work through my research.  I'd love to hear your thoughts on how it fits into your process!

What's On Deck

If you're in the Tampa Bay area, our Westchase and Tampa Meetup groups are getting together on April 14th.  If you're interested in attending, make sure to RSVP and please spread to word to your friends and family.  One of the biggest reasons we host the event is to meet others like us, share stories of our success, and learn from each others mistakes.  The more active and vibrant a group we have, the more we all can get from it!

I've also got some exciting new opportunities lining up in terms of expanding the reach of my message.  I'm also planning to roll out a series of new services based on feedback I've been getting from my readers so watch my blog next week for more news on that front!

In closing, I want to remind everyone that the markets are closed in the US today but elsewhere they're still open so make sure to limit your exposure if the charts aren't in your favor right now. 

Happy trading!



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.