Sunday, January 29, 2017

DOW 20,000 !

DOW 20,000 !

DOW 20,000 !

That is all I have been hearing since Friday December 9th when I went on a cruise to South America for 3 weeks.   Beginning of this year when ever I gave talks to a group of investors or ran into some of my colleagues and friends, Dow hitting 20,000 was the topic of discussion.   Every time you turned on the financial networks on tv, that is all that the anchors were focused on.   I could have cared less for the Dow approaching this round number.   I considered all this talk to be  noise  and a  hype.    Granted that   $DJI   performed   +14.57%   in 2016 and beat the   $SPY   and   $NASDAQ.    I am a Growth Stock investor and a trader and as such I was more focused on the   $QQQ.    It was already   +4%     the first 3 weeks of January.   It has been   +2.07%   during the fourth week of January.   I had alerted my readers to focus on the   Technology Sector   last week.   That is where I was seeing the institutions deploying their profits from the big   DOW   companies and the   Financial Sector.

Results of Stocks on My Watch List

There were 8 stocks that I was monitoring last week.   I had taken a position on some of them and I tweeted some of my positions for my readers to track.   This was for educational purpose and not a recommendation.   Here are the results of the stocks that I had posted in my post last week:

  1. $AVGO   + 7.66% (up $14.63)
  2. $NVDA   +7.46%  (up $7.76)
  3. $NTES   +4.35%  (up $10.55)
  4. $CFG     +3.27%  (up $1.17)
  5. $NFLX    +2.78%  (up $3.85)
  6. $SCHW  +2.42%  (up $1.0)
  7. $HQY     -0.65%   (down $0.30)
  8. $UAL      -0.82%   (down $1.09)

My Sentiments and Stocks on My Watch List

This is another very busy week with the earnings.   The  TITANS   of   Technology Sector,   $AAPL,  $FB  and  $AMZN    are reporting their earnings.   These 3 companies account for over   +14%   of the    $NASDAQ.    We also have big oil companies  $XOM,  $COP  and   $APC   slated to report earnings as well.   We also have  Janet Yellen   in the picture this week.   Most of all,  be sure to tune out the noise of the market and the politics of Washington.   Stock charts will tell you everything you need to know to trade successfully and profitably.   Stocks that I shall be monitoring this week are:

  1. $THO
  2. $CMA
  3. $EXP
  4. $ETFC
  5. $AMTD
  6. $ZION

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Sunday, January 22, 2017

My Market Outlook for the week of January 23rd 2017

Mr. "Tweeting Trump"  is finally in office and we have over 70 of the S&P 500 companies reporting earnings this week.   It will be a very volatile week.   Major airlines    $AAL,  $JBLU  &   $HA   and defense companies   $LMT,  $NOC,  $RTN  &   $GD,   plus mammoth technology companies like   $GOOGL   and   $QCOM   are slated to enter the earnings confessional booths.   Institutions will either react positively or negatively to the earnings report and that will determine the direction of the market this week.   I have learnt to tune out the noise from the media as well as the  "Tweeting Trump".   Case in point ... $BA   is  +21%   in the last 16 weeks and the stock is just consolidating the gains last 6 weeks.   It is best to let the stock charts paint the picture for you.   It is ultimately the institutions that determine the the price of the stock.   I just got the news flash as I am writing this post Sunday night that   $UAL   is grounding all domestic flights because of computer problems.   This stock was setting up a buy point of   $76.90   after consolidating for the last 6 weeks.   I would suggest that we all wait to see how the market reacts to this news flash.

We have been 3 weeks into the New Year and the   Financial Sector   has been consolidating the   +20%   gains for the last 6 weeks.   $DJI   has pretty much stalled.   $QQQ   on the other hand has done a remarkable performance of  +4%   Technology Sector   is where the institutions are deploying their cash now.   They are harvesting their profits from the   Financial Sector   and the big  DOW   companies.

Stocks on My Watch List

Currently we have earnings in the way and stocks could move up or down depending on how the institutions view the earnings report.   Lot of stocks do break out during the earnings cycle so it is best to be prepared to take a position on stocks on your watch list.   We do have a high   distribution days   count of   13   between the   $SPY   and   $NASDAQ    This is a very high count and should be a signal to use caution with your stock position.   Here are some stocks that I shall be monitoring this week:
  1. $NFLX
  2. $AVGO
  3. $NVDA
  4. $HQY
  5. $CFG
  6. $NTES
  7. $SCHW
  8. $UAL

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Monday, January 16, 2017

8 Weeks Hold Rule

I am a   "Rules Based"   investor and since I only trade Growth Stocks,  I follow the trading rules based on  IBD  (Investors Business Daily)   principles.    One of the trading rules that the IBD has is the   8 Weeks Hold Rule.   The rule simply states:

If your stock surges at least 20% within 3 weeks of breaking out from a proper buy point, you should hold the stock for at least 8 weeks.   

This is a very simple rule but a lot of seasoned traders overlook the importance of this rule.   Mr. William O'Neil (founder of IBD)   found that when a stock makes such a dramatic move, it often goes on to make an even higher return after the stock goes through a brief consolidation period.   The fact that the stock surges   +20%   or more within  3 weeks  or less is a sign that the big institutions have decided to accumulate shares of this stock.   It takes them several weeks to accumulate all the shares that they want and as such they hold off buying more, once the stock surges 20% or more within a short time.   They usually come back within 8 weeks to buy more when the stock begins to consolidate or retrace a bit.   It is not unusual for such a stock to make an  additional  +20%  to  +30%  gain after consolidating for a few weeks.   Great winners exhibit this personality and as investors we have to be very cognizant of this rule. 

$PRI and the 8 Weeks Hold Rule

On Wednesday November 9th - the day after the elections - We had a   "Follow Thru"   day and the market just took off.    $SPY  (the leading indicator for the largest 500 US companies)  surged over  +6%  within  5 weeks.    IBD    types of leading Growth Stocks tend to do  2  to  3  times better than what the general market does.   $PRI   surged  +20%  within just 4 sessions.   During those 4 sessions, the daily trading volume exceeded  +10  times the daily average volume.   The stock surged past its proper buy point of   $58.91   to  $72.50  for a gain of  +23%   Most seasoned traders would lighten up on their positions and harvest the profits.  Others may choose to have a trailing stop to protect their profits.  There may be others who would have this stock on their Watch List and take a position during the 8 weeks consolidation period.

Follow up Trade on $PRI

$PRI  surged on November 9th and within 4 sessions it made over +23%  invoking an   8 weeks hold rule   For a trader who did not have a position on this stock prior to November 9th,  one could take a position within the 8 weeks hold period when the stock was consolidating.   Here is a Trade that you can follow along and test out this rule for yourself.   On January 10th ( the last day of the 8 week hold rule)  following trade was established:

Entry:  $70.80
Profit target:  $77.88 (+10% initial profit target)
Loss target :  $67.97 (-4% loss target)
Time target :  February 8th (prior to earnings reports)

The stock has already made  +5.36%   in the last 4 sessions.

Happy Trading!


Sunday, January 8, 2017

Lessons Learnt From 2016

2016 was a very profitable year for me but there were a lot of challenges along the way.   Market had topped out in May of 2015 and it trended sideways for a year until July 1st 2016. There were minor rallies along the way but they fizzled out within a few days or weeks.   It was very hard to make a   +20%   gains in Growth Stocks and one had to lower the expectations to   +6%   to   +8%   profits in trading such stocks.   It was a very frustrating time for a lot of traders and investors who spent the time building a    Stock Watch List    every week and not be able to execute a very profitable trade on those stocks.   I had to constantly remind myself    "Don't argue the tape"    In the process, I learnt some very valuable lessons to help me become a more profitable trader/investor in 2017.   I would like to share just two very important lessons with you in my post today to help you become a better and a profitable investor in the coming year. 

1.   Don't follow the self proclaimed   'GURUS'   of the market.   I am a disciple of Mr. William O'Neil - founder of IBD (Investor's Business Daily)   I follow his principles of   CANSLIM   methodology to trade Growth Stocks and Options on those stocks.   I also follow Mr. Jesse Livermoore's methodology of   Risk Management.   Both of these mentors of mine located their trading offices far away from the    Wall Street.   They did this so that they can be far away from the   noise   of the market.   I am an  Indian   but my only   GURU   is the   'Stock Charts'  with the   'Price and Volume'   information on it.   I do watch CNBC, FOX and Bloomberg financial channels but it is always on  mute.   I prefer to look at the facts on the stock charts over the weekend when the market is closed.   It says everything I need to know to help me make my decisions without any market noise. 

2.   Always buy something from your watch list on follow thru days.   We had several   'Follow Thru'    days in 2016 when IBD called    'Market in Confirmed Uptrend'.   That is a proprietary signal of IBD which indicates that conditions in the market are favourable in executing a bullish stock position or options on stocks.   The odds are in your  favour that the stock will perform bullishly at this time.   Most of the gains in the market in 2016 were made during three     'Follow Thru'    days sequence of   Feb 16th  ($SPY was +10.71% in 8 weeks),  July 1st  ($SPY was  +4.59% in 6 weeks after Brexit vote) and  Nov 9th  ($SPY was  +5.26% in 5 weeks after US elections)   Most of the 2016 gains of  +11.45%  in  $SPY   came during these   3 'Follow Thru" days.   

My Market Outlook

I have a very bullish bias outlook towards the market right now.   When I look at the monthly charts of the 3 major indexes   ($SPY, $QQQ and $DJX )   that I follow,  I notice that the   20/30/50 dma (daily moving average)   are all running parallel to each other since October of 2011.   Market has maintained its bullish run with counter trend running all along to digest the gains.   For the   last 4 weeks,   all these three indexes are trading tightly and just waiting for an earnings catalyst to propel them higher.   We are heading into the   4th quarter earnings report   in the coming week with   $JPM, $WFC  and   $BAC   reporting later in the week.   Most of the major banks are consolidating their gains and trading in a tight pattern for the last 4 weeks.   Institutions will decide as to how favourable they consider these earnings report.   We as retail traders need to take a clue from them and deploy our harvested profits into the financial sector, if they break out in high volume.

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Monday, January 2, 2017

2016 Was a Very Profitable Year

It was nice to have a 3 day weekend with the New Year falling on a Sunday.   It gave me one extra day to review my past trades done for the year.   This weekend I was very motivated to study all of my past trades.   I was gone to South America for 3 weeks in December and I had the occassion to read 2 of my best books on investing and trading.   Both the books that I read, made a point of the importance of making detailed notes on your trades in a   Trade Journal    and to do a    Post Mortem   of all your trades done for the year.   I have always done that every year and it is an arduos process.   This year however, I have enjoyed doing it.   One of the reasons is because it has been a very profitable year for me and I owe my thanks to having identified   $NVDA   as my   Super Stock   of the year.

In my post on July 17th  -  "Low Risk Trades On $NVDA"   I had highlighted 5 Credit Option Trades that were done in May, June and July.   In each one of those trades, there was never more than  $350  at  risk  and we managed to harvest over  90%  of the credits in a trade.   Since   $NVDA   trades over 16 million shares daily, it is a very liquid stock and they have weekly options available on them with very tight bid/ask prices.   As the stock continued trading along the    8 day ema (exponential moving average),    it presented plenty of opportunities every month to continue rolling up the conservative low risk Credit Option Trades for the rest of the year.   

Bullish Option Trades on   $NVDA

We had a  Follow Thru  day on July 1st, 2016 and   $NVDA   began to get institutional support.   The stock maintained an RS ratings above 98, RS line was reaching all time hi and the stock consistently appeared in the top 10 groups.   The stock was also trading along the   8 day ema     This were the ideal conditions for executing an aggressive bullish option trades on the stock.   To take advantage of such a bullish move of the stock, here are some of those trades done during the last 6 months of the year.   For illustrative purposes, I shall use no more than   $1000   at risk in any given trade.   Following is the summary of 4 such trades:

  1. July 22 2016 ... Aug (Week 1) 55 Buy Call (in trade 7 days)     Risk $856:$2130 Profit
  2. Aug 26 2016 ... Oct Buy 65 Call/Sell 70 Call i(n trade 35 days)   Risk $1017:$1323 Profit
  3. Nov 8 2016  ... Nov Buy 71.50 Call (in trade 9 days)    Risk $975:$5544 Profit 
  4. Dec 14 2016 ... Jan 17 Buy 100 Call (in trade 14 days)   Risk $924:$4515 Profit

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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.