Sunday, August 27, 2017

How  I  Outperform  The  Market

I am a Growth Stock Investor and I follow Mr. William O'Neil's (founder of Investors Business Daily) methodology of trading Growth Stocks.    Studies by IBD has shown that Growth Stocks tend to perform  2 to 2.5 times   better than the average performance of the market, as measured by the performance of  $SPY.   My strategy involves:  

  1. Buy  "High and Sell Higher"
  2. Do not   "Buy and Hold"
  3. Do not  "Buy Cheap Stocks"
  4. Buy "Right and Sell Right"
  5. "Harvest Profits"  as the stock moves higher
  6. Use "Trailing Stops" to protect profits and mitigate losses

That is exactly what I did with the leading Growth Stocks that I had brought to the attention of my readers and followers through my blog posts and my daily tweets.   The two major Indexex and my 28 stocks had the following performance for the last 2 weeks: 
  • $QQQ ...    -0.09%
  • $SPY  ...    +0.18%
  • 28 Stocks  +0.87% (Out Performed the Market by 4.83 times)

Performance  of  My  28  Stocks

9  of the  28  stocks retraced from the  8 day ema (exponential moving average)  but did not trigger the trailing stops.   They are still in the profit zone from their initial buys.   Rest of the  18  stocks continued to move higher or were consolidating along the  8 day ema  while the market was correcting.   I have indicated in parenthesis, how much was the loss and how much was the gain for the last two weeks from  8/14 to 8/25

  • $ALL      (-$1.93)
  • $ABMD   (-$3.70)
  • $ALGN   (-$1.01)
  • $GRUB    (-$0.31)
  • $FB        (-$1.76)
  • $LMT      (-$0.95)
  • $RTN      (-$1.32)
  • $MRCY   (-$0.16)
  • $NVR      (-$11.59)
  • $HDB      ($2.30)
  • $MA       ($4.20)
  • $V          ($2.45)
  • $PGR     ($1.17)
  • $PYPL    ($1.93)
  • $CBOE  ($3.54)
  • $CI        ($4.92)
  • $CNC    ($3.76)
  • $ANET   ($8.04)
  • $IPGP    ($3.47)
  • $MNST   ($1.40)
  • $RACE   ($6.42)
  • $CDNS   ($1.06)
  • $ASML   ($3.03)
  • $BABA   ($20.04)
  • $RCL     ($3.22)
  • $CCL     ($0.69)
  • $NCLH   ($0.95)
  • $BA       ($1.01)

Mentoring  Service

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Sunday, August 20, 2017

Should  You  Bail  Out  Of  The  Market

We had a market correction on Thursday August 10th with a  "distribution day"  but it bounced back for the next 4 days only to follow with another  "distribution day"   on Thursday August 17th.   Lot of my readers and followers were expressing  concerns and  feelings  that the market had topped.   They wondered if they should not be in the market at this time.   They kept saying that August is typically a bad month in the market.   I do agree with them since August performance has been   +0.10%   looking over the average performance over the last 50 years.   I also reminded them that  August of 2014  however was a stellar month with over  +4.00%  performance for the month.   How often do you get that kind of a performance during the summer months?   I sensed that kind of a question in their minds because the data I presented was just brushed off by them.   July of 2015 and 2016 were equally stellar months too according to the data.   You have to be data driven in the market and not your  "feelings"   That is why I spend Saturdays and Sundays to study the market and scrutinize the stock and index charts for clues.

Market  Conditions

Currently we have 14  "distribution days"   according to IBD(Investors Business Daily)   They identify market pulse as  "Market Under Pressure"   This should be a signal to the retail investors to start selling into strength and accumulate CASH.   If one has to take a position in a stock, it should be done with a very small position and only in the top performing leading stocks.   Personally I would go a step further and limit my losses and capture the profits with a trailing stop on all existing positions. 

In my post last week, I had mentioned that our bull market is still intact.   We are continuing to see higher highs and higher lows on the 3 major indexes.   What we are witnessing right now is the retracement and a counter trend in the overall uptrend.   Here is the data for   $QQQ   for the last 3 significant major distribution days we have witnessed during the last 3 months:  
  1. 5/17 ...  -2.54%
  2. 6/9   ...  -2.54%
  3. 8/10 ... - 2.14%
I still heard from my readers  "Oh but this time it is different".   My analysis shows that we had a cluster of  "distribution days"    in June/July/August  when the   $QQQ   dropped significantly as shown below:
  1. 6/8  to 7/13 (17 sessions) ...  -5.14%
  2. 7/26 to 8/18 (23 sessions) ...  -2.57% 
$QQQ   would have to drop another  -2.57%  down to  $139.40 to match the performance we had between  6/8 to 7/13.   Market suddenly doesn't look so bad when you start looking at the data and keep your emotions at bay.

My  Performance  As  A  Hedge Fund

No ... I am not a hedge fund.   Last Monday, I listed 34 leading growth stocks (hedge funds would have that many stocks in their portfolio) on twitter and suggested to my readers to be defensive and have trailing stops on those stocks.   Here are the results of the performance of those stocks for the week.   6 of the 34 stocks were stopped out with the trailing stops to mitigate the losses.   They r listed first, followed by 28 stocks that have continued to go higher or have traded lower but not stopped out yet.   Trailing stops have been adjusted up wards for next week, should the market retrace some more.   I have indicated in parenthesis, how much was the loss and how much was the gain for the week of 8/14 to 8/18 
  • $AMP   (-$0.36)
  • $AON   (-$0.39)
  • $AGO   (-$0.07)
  • $UNH   ($1.02)  
  • $PETS  ($2.76)
  • $VRTX  ($2.78)   
  • $HDB   ($0.73)
  • $MA     ($2.59)
  • $V        ($2.42)
  • $PGR   ($1.42)
  • $PYPL  ($1.40)
  • $CBOE  ($0.07)
  • $ALL    (-$1.03) 
  • $ABMD ($0.77)
  • $ALGN  (-$4.95)
  • $CI       ($2.65)
  • $CNC   ($1.35)
  • $GRUB (-$0.59)
  • $ANET (+$6.32)
  • $IPGP  ($1.97)
  • $MNST ($0.23)
  • $RACE ($3.95)
  • $CDNS ($0.61)
  • $ASML ($1.07)
  • $FB      (-$0.67)
  • $BABA ($15.80)
  • $RCL   ($1.59)
  • $CCL   (-$0.02)
  • $NCLH (-$0.99)
  • $LMT  (-$4.55)
  • $RTN  (-$2.45)
  • $BA     ($0.89)
  • $MRCY ($0.89)
  • $NVR   ($-22.15)
If I was a hedge fund manager and i had all these leading stocks in my portfolio, my performance overall would be just  -0.6%  for last week when we had piled on 5 more  "distribution days"   That is a pretty impressive performance if I must say so. 

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Sunday, August 13, 2017

Is  The  Rally  Over?

There is so much talk about North Korea in the media.   Everyone is screaming   "Sky is Falling".   Market took a tumble on Thursday August 10th and lot of my readers were asking me if they should bail out of the market.   They were concerned about what was going to transpire with Mr. Trumps comments    "Fire and Fury like the world has never seen before".   Let me just remind everyone that while the 500,000 US and allied troops had gathered to drive our Saddam Hussein out of Kuwait, people were just as concerned than that the market would tumble.   On the contrary, We had a  "Follow thru"  day instead and the market just took off.   All the rhetoric that we hear from both sides of the conflict is simply noise in my view.   It is a distraction and we should instead use that time to build a Stock Watch List and a Trade Plan to execute.   I like to be data driven in my decisions about the market.   How I feel about the market is irrelevant.   Lets look at the data of the market and see what we can learn from it. 

Market  Data

Currently we have 10   "distribution days"   according to the  IBD(Investors Business Daily).   That should give us a pause for caution in the market.   It is a risky condition right now to take on  any new position.   Any stock position that you may have now, should be maintained with a trailing stop in place.   This is the time to be selling defensively.   Looking at the long term charts of the 3 indexes  -  $DJI, $SPY  and  $QQQ,   I find that the bullish market is still intact.   What I am seeing is that these 3 indexes are continuing to attain higher highs and higher lows since the elections on November 8th.   There are brief one day periods of market corrections along the way.   Here are the results of the brief one day major correction in high selling volume we had since March of this year:
  1. 3/21 ... $SPY -1.28%   $QQQ - 1.52%
  2. 5/17 ... $SPY - 1.77%  $QQQ - 2.54%
  3. 8/10 ... $SPY -1.40%   $QQQ - 2.14% 
Market recovered the next day after these one day corrections.   If you had trailing stops on your positions, you would have been protected on Thursday.   We had an extended correction for a month between  6/8  and  7/6  but  $SPY was only  -1.33%  and  $QQQ was  -5.14%   during that month.   Monday August 14th is a new day and a new week.   Have the trailing stops in place and be prepared to sell defensively, should the market go into an extended correction like it did in June.

Stock  Watch  List

We are approaching the tail end of our earnings reports for the second quarter.   We have a lot of retailers like $WMT, $TGT, $URBN, $LB, $GPS $TJX, $ROST, $AAP as well as $BABA and $HD slated to report earnings starting out on Tuesday.   Retailers have not done very well and that theme will once again play out this week.   That will put some pressures on the market this week.  

$XLK(Technology Sector)   has been the leading sector this year.   It had been consolidating for the past 3 weeks until Thursday Aug 10th when it crossed below the  34 day ema(exponential moving average).   $XLU(Utilities Sector)  has been the leading sector for the past 2 weeks.   Institutions are parking their profits into dividend paying stocks.   Lets monitor our stock watch list and see where the institutions are deploying their cash. 

Here are some stocks I shall be monitoring this week:
  • $AMP
  • $V
  • $MA
  • $PGR
  • $VRTX
  • $RCL
  • $IPGP
  • $PETS
  • $ANET
  • $ABMD
  • $MNST
  • $RACE
  • $ASML
  • $PYPL
  • $ALGN
  • $FB
  • $BABA
  • $GRUB
  • $CDNS
  • $CBOE  

Mentoring  Program

If you would like to learn:

How I Select Winning Stocks.

How I Trade them to Outperform the Market.

Enroll in out  "Mentoring Program"

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Happy Trading!




Sunday, August 6, 2017

August  Will  Be  A  Challenging  Month

We are nearing the end of the 2nd quarter earnings season, with over  80%  of the  S@P 500 companies already having reported their earnings.   Increased sales and increased earnings is what drives the price of the Growth Stocks up.   Month of July was a stellar month for the Growth Stocks.   If you had stayed engaged with the market during one of the worst months of the year, you were able to walk away with a sizable gain to your portfolio in July.  

Why am I than cautioning my readers about the month of August?   Lets look at the data and let that drive our decision making process in the market.   Market took off soon after the elections on  Nov 9th 2016  and most of the traders were completely taken by surprise.   They missed the initial rally.   We may have a very similar situation occur in August.   I would like my readers to be able to take the advantage of the opportunity to profit if that does happen again.   Here are the results of the performance of the 3 major indexes since the   Nov 8th  "follow thru"  day: 

  1. $SPY  ... + 15.55% (+18.66% annualized)
  2. $DJI   ...  + 20.51% (+24.6%  annualized)
  3. $QQQ ... + 26.54% (+31.85% annualized)
August is also one of our poorest performing months and last year the market consolidated for 5 weeks.   We could face a very similar situation this year.   There is also the possibility that the market could correct  -5%   and  $DJI   could drop a 1,000 points.   This is in the realm of the possibilities.   $QQQ   did drop  -5%   between  6/8  and  7/6  of this year.    Utilizing trailing stops on your winning position would be the prudent thing to do this month.

Current  Market  Conditions 

There is a lot of noise in the market right now with the political rhetoric of building the wall south of our border and having a major reshuffle of the white house staff.   We r not getting any of the Presidents major agendas through the congress.   There is debt ceiling to be concerned with and who knows when Janet Yellen will start  YELLING   raise the rates ... raise the rates ... raise the rates.   All I know is data.   $DJI  keeps going up a 1,000 points every other month since the end of October  2016.   Mexican stock market is roaring and is  +28%   and  the Indian stock market is  +30%   year to date.   Price of oil is staying within  +  or  -  10%  of  $45,  depending on what happens to the price of the US dollar.   Oil is priced in US dollar.   $UUP (proxy for the price of US dollar)  is  -8.60%  for the year.   For the past 13 sessions,  $SPY,  $QQQ  and the leading Technology Sector  $XLK  has been trading tightly in a sideways pattern.   They are like coiled springs and they could pop either up or down.   The following 6 Growth Stocks (small and mid cap) etf's are also trading tightly for the past 13 sessions:

  1. $EEM
  2. $IVW
  3. $EWB
  4. $VUG
  5. $IWF
  6. $VGT
Small and mid caps have to participate in the market in order to sustain this rally.   It would worth watching these etf's and the major indexes to see where the institutions are going to be participating with their purchases.   Look over my Twitter @spotlightamin first thing on Monday morning August 7th,  for a list 22 stocks that I shall be monitoring at market open.   Some of them have surpassed their ideal buy point and may be good candidates for a conservative short term Credit Spread Option Trade.

Mentoring  Program

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How I Identify Winning Stocks Consistently and How I Trade to Outperform the Market

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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.