Sunday, August 28, 2016

Virtual Trade


What is a  "Virtual Trade"  I am asked this question every time I mention it to my audience and my followers.  It is a trade that you execute without putting any of your real money in the trade.  Sometimes it is called a  "Paper Trade"   Most brokers offer this on their platform.  They will fund it for you with virtual currency for you to practice trading without using any of your real money in your account.  Most seasoned traders utilize this venue to practice trading or to test out new trading ideas.  It is a   Risk Free  way to sharpen your trading skills.  Personally I use this tool every week.  As a retail trader, I build my  Stock Watch List  every weekend.  I may have just enough capital to execute just one or two stock trades or option trades on the stocks the following week.   I would also place some trades on the virtual account from stocks on my  Watch List  to sharpen my trading skills and to keep me in tune with the markets.  It takes some work to do this but one has to stay disciplined enough to treat each of these virtual trades as if there was real money at risk in the market.  Plan these trades just as you would any other actual trades and journal it to learn from it.


Lessons Learnt From Last Week


There were 3 stock trades that some of my students that I mentor placed on their virtual accounts last week to practice their trading skills.  Two of those trades they got stopped out for -4% loss and the other one is just hovering around the price where it was purchased.  Some very important lessons were learnt with these virtual trades and it was documented in the trade journal for each of these stock trades.  Here are the results of those trades and lessons learnt documented:

  1. $LN trade placed on Monday Aug 22 at $46 entry for  +10%  Profit Exit  at $50.60 and Loss Exit for  -5%  at $43.70  Wednesday Aug 24 we had a distribution day and the stock met its Loss Target.
  2. $VIPS trade placed on Monday Aug 22 at $15.60 entry for  +10%  Profit Exit  at $16.85 and Loss Exit for  -5%  at $14.97  Wednesday Aug 24 we had a distribution day and the stock met its Loss Target
Lesson on $LN ... This is a thin stock trading less than $50 million daily volume.  We prefer to trade only those Growth Stocks that trade more than $100 million daily volume under current market conditions.   Thin stocks are more volatile and it gets harder to hold on to during distribution days.  $LN is also a recent IPO (Initial Public Offering) with only 7 weeks of trading history. 

Lesson on $VIPS ... This stock is very liquid and trades over 7 million shares daily.  It trades over $100 million daily volume.  Stock had surged 53% in the 8 weeks prior to placing the trade but once again, distribution day on Wednesday Aug 24 led the stock to meet its Loss Target.  Ideal entry for this stock was at $15.13  If We had entered the trade at just maximum of 1% past its buy point ($15.28 Entry)  We would still be in the trade in spite of the distribution day on Wednesday.  During summer months of June/July/August/Sept,  We prefer not to go beyond 1% past the ideal buy point.   $VIPS had an RS ratings of 84 and We prefer to look at only those stocks that have an RS ratings above 90

In our mentoring and coaching program, We have certain rules to trading. The two stocks above violated some of those rules.  We developed these rules of trading from experience over the years.  These rules were designed to get the probabilities of winning trades on our side.  


Mentoring Service


We are filling our classes for  September  sessions and there are just a handful of slots left.  If you would like to schedule a FREE 30 minutes of  "Discovery Call"    to explore our mentoring service, please contact us at:

investorspotlight@gmail.com

Market does best between October and May.  This is an ideal time to get into our mentoring program and learn to make profitable trades.  Reserve your slot now before they are all gone.

Happy Trading!

Amin


Sunday, August 21, 2016

Bulls and Bears Stand Off


In my post last week, I had highlighted my studies on  $QQQ  index.  I indicated that after the index makes a 15% gain in 6 weeks, it trends sideways to digest the gains.  $QQQ  is still the leading index of the 3 that I monitor  ($DJX, $SPY, $QQQ)   Currently the market is at a stand still and not making much progress.  Market is still in a  "Confirmed uptrend "   We have how ever,  accumulated 10  distribution days  between the S&P 500 and Nasdaq.  That is something of a concern.  Bulls and the bears are facing off each other in the current market.  $SPY  and  $DJX  have been trading side ways for the past 5 weeks in a very tight and orderly manner.   $QQQ  on the other hand has been trading sideways even more tightly and orderly between 117-118   This is a bullish sign for the market.   Bears could however just as fast, claw the market as it did in June of this year.  All the three indexes sliced down past 50 day sma (simple moving average) all the way down to  200 day sma  within just a few sessions. 


Sector Rotation is Occuring

Institutions are very good at holding their cards close to their chest.  It takes some analyses of the sector etf's to determine where they are deploying their profits.  As a retail investor, We want to follow their lead because ultimately, they are the ones that account for 80% of the market moves on any given day.  In the month of August  (last 3 weeks)  $XLE (Energy)  has outperformed the general market by +4.5%  while the 3 indexes have been trending sideways.  $XLI  (Industrial)  + 1.69%  and  $XLF  (Financial)  +1.5% are the next in line.  

Stocks on My Watch List

Earnings is pretty much out of the way with a few retail, restaurants and some tech names due to report earnings this week.  The only headwinds facing the market is Janet Yellen with her colleagues at the Jackson Hole meeting in Wyoming later this week.  Financial sector will be facing some risks of uncertainty since no one knows what they will decide or say.  I have the following list of stocks for my followers to review.  I took the liberty of highlighting what their performance has been since August 1st:

  1. $PE      +19.2%
  2. $WMB  +15.5%
  3. $USO   +16.0%
  4. $EOG   +12.3%
  5. $PXD   +12.3%
  6. $CLR   +10.6%
  7. $CXO   +7.9%
  8. $HAL    +7.3%
  9. $COP   +6.1%
  10. $FANG +2.3%

Virtual Trades

Some of the students that I mentor, came up with the following stock trades that they placed as virtual trades to practice their trading skills.  Please follow along with them and learn from their trade ideas.

  1.  $EW Buy  @ $114.89 10% profit and -5% loss target (8/15/16)
  2.  $VIPS Buy @ 15.60 8% profit and -4% loss target (8/22/16)
  3.  $LN Buy   @ 46.00 10% profit and -5% loss target (8/22/16) 

Mentoring Service

If you would like to schedule a FREE 30 minutes of  'Discovery Call'  to explore our mentoring service, please contact us at:

investorspotlight@gmail.com

We are in the process of opening up limited slots for  September 
sessions.  Reserve them before they are gone.

Happy Trading!

Amin

Sunday, August 14, 2016

All 3 Major Indexes Hit All Time High


In the past 4 weeks I have been approached by a lot of my followers on tweeter, linkdin, subscribers to my weekly blog and students in my mentoring program.  They indicated to me that that they missed the clues on July 1st when IBD  (Investors Business Daily)  called  "Market in Confirmed Uptrend"  Most traders were stunned by June 27th when the $SPY had dropped -5% within 2 days in trading volume 300% above average daily volume.  All the 3 indexes that I monitor - $DJX, $QQQ and $SPY - were trading below 200 day sma  (simple moving average)  We had distribution days where the institutions were taking their profits and taking risk off the market.  We were all concerned about the effects of Brexit at that time of course.  Most retail traders were in a very defensive posture. Disciplined traders ought to have been in CASH at that time and lot of my followers just did that.

Most of us were preparing for the July 4th long weekend when the market had tumbled on Monday June 27th.  All the 3 indexes surged the next 3 days after that and gapped up for 4 sessions in a row. This was a very powerful move in the market.  Every trader should have had a ready Watch List of stocks to trade when this occurs.   Most growth stocks will make their initial move as soon as the market exhibits strength.  Institutions were taking large positions after having harvested their profits earlier.  It takes them several weeks to accumulate their full positions.  Retail traders are nimble and one should have just followed what the trend was indicating and the trend was very bullish and very strong.  Institutions were signaling to us that they were ready to commit major $ to stocks.  


Will Market Continue Trending Higher ?


This weekend I did a thorough analyses of the market to see where we have been in the past and where are we likely to be headed in the near term.  Market is all about human behaviour and quite often the past performance of the market gives us clues as to what the future might look like.  Currently  $XLK (Technology) has been the leading sector since the June 27th lows (+13.71%)  I did a study on $QQQ index and here is what I noticed:

  • $QQQ surged 15% in 6 wks from Oct  2014 Low
  • $QQQ surged 15% in 6 wks from Sept 2015 Low
  • $QQQ surged 15% in 6 wks from Feb  2016 Low
  • $QQQ surged 15% in 6 wks from June 2016 Low

Does History Repeat?

After such a move, the market trended sideways to digest the gains and eventually retraced back down to the 50 day sma.   Could this happen again?  Time will tell.  I would however trade the trend and the trend is bullish right now.  Market just doesn't go up forever.  Even in a bullish trend, there is a counter trend and stocks do retrace.  Disciplined traders ought to have trailing stops on their winning positions and cut the losses short as soon as it meets the predefined loss exit conditions. 


Stocks on My Watch List


Currently there are quite a few stocks that are leaders in the market but they have earnings due in the next 2 weeks.  It is best to avoid them since earnings surprise could be a positive or a negative for the stock performance.  It is a risk that one should avoid.  We also have major retailers like $TJX, $ROST, $DKS, $TGT, $WMT, $LOW, $HD, $FL, $LB, $GPS reporting earnings this week.  Most brick and mortar retailers have not done well during back to school season although $M, $JWN and $JCP surprised us and they surged after the earnings report.  These retail stocks will influence the market this coming week.  They are a component of Consumer Discretionary Sector ($XLY) which has been up +9.67% since the June 27th Lows and is one of the 4 leading sector.  

Following are the stocks I have on my watch list:

  1. $AMZN
  2. $GOOGL
  3. $LMT
  4. $FB
  5. $EW
  6. $AYI
  7. $BABA
These stocks are fundamentally very sound and they are showing technical strength.  They are accumulated by the institutions in the last 30 days.  Once again, I prefer to focus only on those stocks that exhibit RS ratings above 90

Mentoring Service


If you would like to schedule a FREE 30 minutes of discovery call to explore our mentoring service, please contact us at:

investorspotlight@gmail.com

We just have a few spots left for August.  Reserve them before they are gone.


Happy Trading!

Amin


 






Sunday, August 7, 2016

Market Performance


Historically, June and July are the worst performing months in the market.  Trading Volume during the summer months is low too. Brexit occured on June 23rd and the market plummeted 5% within 2 days with volume 2 times the daily average.  I quickly changed my sentiments of the market towards a bearish stance since all the 3 major indexes that I monitor - $DJX, $SPY and $QQQ -  had dropped below the 50 dma (daily moving average)  That is an appropriate thing to do when the market makes such a dramatic move.  One needs to preserve the capital and it is prudent for retail traders to raise CASH.  Monday morning June 27th, the bears were still in charge.  Tuesday morning the market brushed off the Brexit risk and the 3 major indexes gapped up the following 3 days.  Market was up 5% within 3 days from June 27th lows and IBD called "Market in Confirmed Uptrend"  According to IBD rules, one must buy something and dip their toes in the market to test out the new trend.  This requires a trader to have a ready Watch List of Stocks at a moments notice.

Current Market Outlook


Currently the market is still grinding higher.  We have surged past the highs we had in May 2015.  Institutions are harvesting their profits from gold mining, utilities and dividend paying stocks and investing in technology, health care, material, financial and consumer discretionary stocks.  There is a distinct sector rotation occurring right now.  As a retail trader, we also must start harvesting our profits from defensive stocks and deploy them into sectors that institutions are rotating into.  Last week of July we had the tech titans $AAPL, $GOOGL, $FB and $AMZN, report earnings. They account for over 25% of the NASDAQ index.  In my July 24th post, I had highlighted $QQQ to reach 119 as a near term target.  We are just 2% away from that target now.  I still have a bullish outlook for the coming week.

My Stock Watch List

  1. $PE
  2. $EBAY
  3. $ISRG
  4. $SPGI
  5. $AMZN
  6. $MHK
  7. $MBLY
These stocks are currently accumulated by the institutions and most of them have an RS rating above 86.  I prefer only the ones that are above 90  Some of them are however good candidates for an option trade.  Earnings surprise is out of the way since they have all reported their 2nd quarter results.


Trade of the week

If you would like to follow along with me on one of my Credit Spread Option Trades on $QQQ to learn and practice with a simulated  "Virtual Trade"  than here are the details of the trade:

$QQQ August Credit Option Trade Buy 115 put and Sell 116.5 put for total Credit $41:$109 Risk per contract

Manage the trade to harvest profits @ 80% of targeted Credit or if the index trades above 118  Conversly, close out the trade for a loss of $55 or if the index trades below 115

This will be just 2 weeks in the trade. Good Luck.



Mentoring Service


If you would like to schedule a FREE 30 minutes discovery call to explore our mentoring service, please contact us at:

investorspotlight@gmail.com

We have just a few spots left for August.  Reserve them before they are gone.


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.