Sunday, May 14, 2017

Double Your Portfolio - One Stock at a Time

Every Sunday night, I write a post for my followers and I share   "My Market Outlook"   for the week.   I also share   "My Stock Watch List"   every week.   It is never meant to be a recommendation.   Some of my followers have been asking me as to what should be the minimum number of stocks that they ought to have in their portfolio.   My simplest answer is   "As many as you can remember"    Most financial advisors tell their clients that they should diversify their portfolio to lower risk.   My approach is contrary to conventional thinking.   As a Retail trader and an investor, you should instead concentrate your portfolio with just a few stocks.   Your risk is smaller because your exposure in the market is in just a few stocks.   It also means that you should know everything about that stock and learn all the nuances and the behaviour of that stock.   Before you take the position in the stock, make sure you have a trade plan in place for your profit, loss and time in the trade target.

In my post this week, I will share with you just one typical trade in a stock and how I managed the trade to have an  +85%  annualized return.   Choosing the right growth stock is the easy part.   Constructing an appropriate Trade Plan and managing the risk in the trade is what will enable you to double your portfolio with just a few stocks in your portfolio.   You are focusing your attention on just a few stocks instead of getting overwhelmed with 10 or more stocks that are not the leading stocks in the leading sector.   

$IDXX  +14.79%  Return in 9 Weeks (+85% annualized)

Since January of this year,  $QQQ has been the leading index with a return of  +17%   year to date  (+40.75% annualized)   You would double your portfolio in two years by passively investing in this leading index.   I have been highlighting in my post that the leading sector is  $XLK(Technology)  and I had mentioned this stock a couple of times as being one of the stocks on My Watch List.   Here are some of the steps I took to manage the trade by adjusting my trade plan along the way to gain  +50%  more returns than the  +10%   profit that I had originally planned for when I took the trade.     

  1. Stock popped +16%  during earnings on Feb 2nd in volume that was 4 times the normal average daily volume.   This confirmed that institutions were supporting this stock.  The stock had acted in a very similar manner during earning on Aug 8th of 2016.   It took 3 weeks of tight trade with the stock hovering around 140 to 142 to digest the gains from earnings.
  2. Trade Plan: Entry at  $140  for  10%  profit Exit at  $156.20  and loss exit for  -4%  at  $136.32
  3. Stock was trading along the  8 day ema(exponential moving average) and its RS rating was in the high 90's and RS line was pointing up in a very bullish manner.   We had a distribution day on March 21st but the stock did not get any jitters and continued to trend along the  8 day ema while the  $QQQ  dropped down below the 21 day ema to touch the 34 day ema.   
  4. March 31st had a trailing stop at  $150  to protect the profits in the trade while the stock continued to track along the 8 day ema.
  5. April 20 had a trailing stop at  $152  to protect the profits in the trade while the stock continued to track higher along the 8 day ema.
  6. April 27 closed out the trade at  $163  to avoid risking profits in the trade with earnings report due the next day.
  7. Original Trade Plan was for  +10%  profit target and I managed to squeeze out  +4.79%  more by staying in the trade 3 more weeks since the stock was behaving in a bullish manner along with the market being in a confirmed uptrend.
  8. On Monday morning May 15th will reinitiate a trade since the stock is continuing to trend along the 8 day ema and RS ratings is still in the 90's and RS line is still pointing up.
Trade Plan: Entry $163 to $163.50 for  +10%  profit target and a loss of  -4%   I fully expect the stock to retrace and that is why I have planned for a loss exit.   $QQQ  is still the leading index and the leading sector is still the  $XLK(Technology)  that has done  +6.09%  in the last 4 weeks.

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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.