Market  Conditions

We had a  'Follow Thru'  day just 6 sessions ago on valentines day.  Market had rallied for 4 days after the  3 indexes - $DJI, $QQQ and $SPY - had sliced through the 50 day sma (simple moving average) as well as the 100 day sma.  That was down right ugly and we were looking at the possibilty of the market correcting all the way to the 200 day sma.  I had called  "Market in Correction"  4 days earlier than the standards of IBD (Investors Business Daily) that I generally abide by.  In hind sight, its a good thing that I did because it enabled me to initiate defensive selling and reduce my exposure in the market by raising  CASH.

Here are the results of the 3 major indexes performance over the last 2 weeks when the market began its rally:

• $DJI    ... +4.63%
• $SPY  ... +5.05%
• $QQQ ... +7.73%

Market paused after the 4th day of the rally and began consolidating for the last 6 sessions.  It was concerning that these indexes were hugging the 50 day sma and it seemed that the  'Follow Thru'  day would fail.  We had a good performance on Friday that helped the 3 indexes close above the 50 day sma.  That's what we would like to see for a continuation of a  'Follow Thru'  day.

Building  A  Stock  Watch  List

Process of building a stock watch list is something that ought to be done as a weekly routine.  They have to be fine tuned everyday and monitored for ideal entry conditions.  Lot of stocks broke out during the 4 days of market rally and soon after the  'Follow Thru'  day.  This is one reason why a retail investor should take several stock positions from their list of the Stock Watch List and enter the market with a small position.  This is how you test the market and get the confirmation of which stocks on your watch list are leaders and which ones are laggards.  Leaders will immediately start showing strength because you will see shares trading above the average daily volume with increasing prices.  This is the most obvious foot prints that the institution leave behind when they commit their $$$ to the stock.

Most leading stocks have already passed their ideal buy area and are now extended.  One of the criteria that I utilize for building a strong watch list now would be:

1. Identify stocks that did not go all the way down to the 50 day sma on a brutal distribution day we had on Friday Feb 5th.  This is a sign that the institutions are not bailing out of these stocks while the market was correcting.  These stocks may be extended and are building a new base now since the 3 indexes have been consolidating the gains for the last 6 sessions.
2. Look for RS ratings rising and RS line pointing up and rising faster that the rise in the price of the stock.

Here are 14 stocks that you might want to monitor:

• $NFLX
• $NOW
• $AMZN
• $ABBV
• $ADBE
• $WB
• $IBKR
• $LPLA
• $TSS
• $PANW
• $EBAY
• $ATHM
• $MSFT
• $BOFI

Mentoring  Program

Were you stunned when the market corrected over  - 10%  over 2 weeks ago?  It took 3 weeks in January to make an unprecedented gains only to give it all back and some within 6 days.  Do you know what preventive actions you should have taken 3 weeks ago to mitigate losses to your portfolio?  If you are feeling sick to your stomach with the train wreck we had faced, than you need to make a commitment  NOW  to learn:

• How to  TIME  the Market?
• How to find the  Winning Growth Stocks?
• How to  Buy the Stocks Right?
• How to  Plan your Trade for Profit, Loss and Time in the trade?
• How to  Sell your Stock Right?

I shall be opening up a very limited number of slots for mentoring in March.  Schedule a FREE 30 minutes of  "Discovery Call"   with us and see how best we can help you become a consistent and a profitable trader and an investor in 2018.  Don't procrastinate and pass up the opportunity of making a difference in your portfolio.  Start out the new year with a resolution to invest in your education.

Contact us at:

investorspotlight@gmail.com 

Happy Trading!

Amin 

   

$ABMD  Trade  Made  +9.29%  in  3  days

Last Sunday night Feb 11th, I had identified 18 stocks that were on  'My Watch List'  and I shared them in my blog post.  I was preparing my readers to be vigilant and here is the quote from that post just before I listed stocks on  'My Watch List' :

"The market has made a very violent downtrend moves in the last 2 weeks and it could just as well make a a very similar counter trend move to reclaim the highs we made 2 weeks ago.  This is the critical week to build up an actionable Stock Watch List."

I had listed a Trade on $ABMD that was filled on Wednesday Feb 14th at an early buy point of  $245  for a gain of  + 9.29%  within 3 days.  One could have the trade filled also the very next day on Thursday Feb 15th at its buy point of  $255.42  as identified in the Trade Plan for a  +4.82%  gain within 2 days.  This would have been a follow up second position to initiate on the stock since we got the confirmation of a  'Follow Thru'  day that day.     

Successful and profitable traders follow a routine of building a stock  'Watch List'  every week.  The market did make a violent bullish move just as it did during the  'Follow Thru'   day in  Feb 2016, June 2016  and  Nov 2016.  This is why as a trader and an investor, you want to have your decisions based on data and disregard your emotions about how you feel about the market.  Chances are, you were feeling pretty lousy and gloomy when the 3 major major indexes - $SPY,  $QQQ  and  $DJI - had dropped over  10%    and were all trading below the  50 day sma(simple moving average).  Wednesday Feb 14th (valentines day), the market gave plenty of signals very early by 10 am when there was an above average volume trading on $ABMD.  We already had 3 days of market rally.  'Follow Thru'    days often appear anywhere from the 4th day thru the 10th day.  Taking a small initial position  to test the market is what traders should do on a  'Follow Thru'  day.  Most stocks break out on such days and it makes sense to start out several small positions on stocks.  Once there is a confirmation of the rally with increasing price of the indexes in above average daily volume, you can start getting rid of your laggards and use that money to scale into the one that is a true leader.

Leaders  and  Laggards

As a retail investor and a trader, you want to outperform the market.  If you are a growth stock investor, you must measure your performance against the leading index.  Here is what the 3 indexes did from its lows attained 6 sessions ago:

• $DJI    ... + 5.70%
• $SPY  ... + 6.00%
• $QQQ ... + 7.50% (Leading Index)

I analyzed the 18 stocks that were on my  'Watch List'  to isolate the Leaders and the Laggards.  If you had purchased these stocks at the market open price on Monday Feb 12th, it is showing the following profits on those stocks:

Leaders:

1. $ABMD ... +15.33%  
2. $NFLX  ...  + 9.91%
3. $IBKR ...    + 7.57%
4. $ADBE   ... + 6.65% 
5. $NOC  ...    + 6.40%
6. $CMA   ...   + 6.11%

Laggards:

1. $BA       ...  + 5.49%
2. $EW       ... + 5.49%
3. $ABBV   ... + 5.36%
4. $MA       ... + 5.31%
5. $NOW    ... + 4.80%
6. $AMZN   ... + 4.51%
7. $TSS    ...   + 3.69%
8. $EBAY   ...  + 3.31%
9. $CME    ...  + 3.21%
10. $ANET   ... + 2.30%
11. $AMTD   ... + 2.12%
12. $LPLA    ...  + 1.77%

Laggards are profitable but they are under performing the the 3 indexes and ought to be closed out and use the money to buy more shares of the leaders.  That is how you consistently out perform the market. 

Mentoring  Program

Were you stunned when the market corrected over  - 10%  6 days ago?  It took 3 weeks in January to make an unprecedented gains only to give it all back and some within 6 days.  Do you know what preventive actions you should have taken 3 weeks ago to mitigate losses to your portfolio?  If you are feeling sick to your stomach with the train wreck we faced, than you need to make a commitment  NOW  to learn:

• How to  TIME  the Market?
• How to find the  Winning Growth Stocks?
• How to  Buy the Stocks Right?
• How to  Plan your Trade for Profit, Loss and Time in the trade?
• How to  Sell your Stock Right?

I shall be opening up a very limited number of slots for mentoring in February.  Schedule a FREE 30 minutes of  "Discovery Call"   with us and see how best we can help you become a consistent and a profitable trader and an investor in 2018.  Don't procrastinate and pass up the opportunity of making a difference in your portfolio.  Start out the new year with a resolution to invest in your education.

Contact us at:

investorspotlight@gmail.com 

Happy Trading!

Amin 

Follow  Thru  Day

This is how you  "TIME"  the market.  We have had 4 days of rally in the market as of the close today.  We have a  'Follow Thru'  day in the market now.  This is a signal for investors to start deploying their  CASH  and making new stock purchases.  Mr. William J. O'Neil (founder of the Investors Business Daily) has said:

"You should always buy something during the  Follow Thru  day".  

This is the time to start testing the waters and get back in the market.  It's best to start out with a smaller position and scale into in with later buys as the stock that you purchased starts making you profits.  You want to average up during this time.  Most Growth Stocks break out and make their run soon after on a follow thru day.  This is when most retail investors are afraid to trade and invest in stocks when they see their portfolio plummet over 10%  in the last 2 weeks.  Indexes have already gained back  +5%  in the last 4 trading days.   $QQQ  is the leading index right now and it is just less than  5%  below its all time high achieved on January 26th.  It is also the only major index of the 3 ($SPY, $DJI, $QQQ)  that has closed above the 21 day ema(exponential moving average).  That's a very healthy sign that the technology names are outperforming now.  This is the ideal time to get back in the market.  

Trade  of  the  Day  

I had cautioned my readers and followers to have a ready stock watch list prepared just in case we have a follow thru day.  These days come real quick and unless you are engaged with the market on a daily basis with your routine, you could miss an opportunity to get into the stock at its ideal buy point.  Stocks move up rapidly within days and you may never get a chance to catch these stocks again.

$ABMD  is a stock that may present such an opportunity at this time.  I would recommend that you do a Virtual Trade (a trade without actually deploying money and placing this trade on a virtual account most brokers offer on their platform) on it to help you develop and sharpen your skills of trading and investing.

Ideal buy point would be at the resistance line plus 10 cents which is $255.52.

It broke out in volume that was 3 times the daily average volume.

Early buy point could be exercised at $245 to give you a more breathing room, should the market falter.

Buy:  $245 to 255.52

Loss Exit: 232.70 to 242.74

Profit Exit: 269.50 to 281.07 (10% initial exit from your buy point)

Earnings was reported on Feb 1st and the stock gained +7.66% and began to consolidate for the next 8 days.  Next earnings is scheduled to be reported 1st week of May.  You have next 8 weeks available to be in the trade to make your initial profit target. 

Happy Trading!

Amin

Timing  The  Market

We all faced a train wreck in the market last week.  My analysis of the market 3 weeks ago led me to conclude that it was time to seriously consider reducing the exposure in the market.  It was hard to imagine and accept that the  $DJI  could retrace a 1,000 points.  The headline of my blog that weekend  (January 21st)   was:

Dow Drops 1,000 points!

$DJI  had gained 1,300 points (+6%) during the first 3 weeks in January.  That was an unsustainable performance for January when on an average the month has returned  +1.12%   for the  $SPY  over the last 50 years.  Last Friday I concluded that the Market is in Correction.   I made that call in my blog on Feb 4th.  Some found my call questionable.  Poring over the data and analyzing the  $VIX  and the Bollinger bands on the  3  major indexes - $SPY, $QQQ  and  $DJI,  convinced me to make that call.  We had also piled up  5  distribution days  during the week prior as well.  We had already dropped 1,300 points on the  $DJI (gave up half of the gains we had made in January) and I suggested to my readers and followers to start raising  CASH.  If you procrastinated last week and did not raise your trailing stops on the winning position and did not close out the laggards, you would be facing the  $DJI  dropping another 1,126  points.  That would be giving up all the gains that we had made in January and some.   Heeding my call saved me from losing only half as much on the  $DJI, $SPY  and $QQQ.  IBD (Investors Business Daily)  did change the market pulse to  "Market in Correction"  when we had another  distribution day    on Thursday Feb 8th.

Market  Status 

We are not facing any recession right now and the unemployment rate is only 4.1%.  We have over 75% of the  $SPY  components already reported earnings and for the most part they have reported increased earnings and increased sales with increasing margins.  The economy is healthy and companies are giving out bonuses to their employees.  What we have witnessed in the last 2 weeks is a re tracement to the mean.  Market is still exhibiting a bullish status when you analyze the monthly charts of the major indexes.  There is always a counter trend in any bullish trend.  Currently, the performance of the 3 major indexes from its all time high attained 2 weeks ago is:

• $QQQ ... - 8.69%
• $SPY  ... - 8.77%
• $DJI   ... - 9.11% 

We had a very healthy bounce on the indexes on Friday February 9th but the indexes are still hovering around the 100 day sma(simple moving average).  We need 3 more days of similar rally in higher volume to convince me that bulls are really in charge and we are heading back to the highs we made 2 weeks ago.

Stocks  to  Monitor 

The market has made a very violent downtrend moves in the last 2 weeks and it could just as well make a a very similar counter trend move to reclaim the highs we made 2 weeks ago.  This is the critical week to build up an actionable Stock Watch List.  Here are some stocks to look at and monitor this week:

$AMZN
$NFLX
$NOW
$EBAY
$ANET
$ADBE
$CME
$IBKR
$AMTD
$LPLA
$CMA
$EW
$ABBV
$ABMD
$TSS
$MA
$BA
$NOC

Mentoring  Program

Were you stunned last 2 weeks when the market dropped  2,426  points on the $DJI?  Do you know what preventive actions you should have taken 2 weeks ago to mitigate losses to your portfolio?  If you are feeling sick to your stomach with the train wreck we faced last week, than you need to make a commitment this year to learn:

• How to  TIME  the Market?
• How to find the  Winning Growth Stocks?
• How to  Buy the Stocks Right?
• How to  Plan your Trade for Profit, Loss and Time in the trade?
• How to  Sell your Stock Right?

I shall be opening up a very limited number of slots for mentoring in February.  Schedule a FREE 30 minutes of  "Discovery Call"   with us and see how best we can help you become a consistent and a profitable trader and an investor in 2018.  Don't procrastinate and pass up the opportunity of making a difference in your portfolio.  Start out the new year with a resolution to invest in your education.

Contact us at:

investorspotlight@gmail.com 

Happy Trading!

Amin 

  

Market  is  in  Correction

It was a very ugly day in the market on  Monday Feb 5th.  The wave of selling started when the market opened in Japan, while the fans in Philadelphia were celebrating the victory of their home team.  That celebration was short lived.  It's 8.30 pm on Monday night here as I am writing this post and the Japanese Nikkei is down  - 4.75%  already in the first hour of trading.  I often make the remark when I give talks to the investment groups

"When the US stock market sneezes, the rest of the world catches a cold"   

All the 3 major indexes - $DJI, $SPY and $QQQ gapped down when the market opened and plummeted past below the  50 day sma(simple moving average) by the close of the day.  Currently they are all hovering at 100 day sma.  This sort of move usually takes a couple of days but this time around it happened within a day.  Trading volume on the $DJI was the highest we have witnessed in the last 9 years.  All the gains we had made in January was given up within a couple of days this month.  Some of the leading Growth Stocks did even worse.   

Timing  the  Market

I posted a blog on Saturday Feb 3rd (I have never posted a blog on Saturday) because I was concerned from what I saw on the charts of the major indexes and all the major sectors of US market.  A correction of  -5%  to  10%   was having a higher probability of occurrence.  $VIX  would certainly spike in the process as well.  All the gains that we had made in the 3 major indexes in January was given up within 3 days in February.  This sort of loss in a portfolio had to be anticipated.  $VIX spiking  +50%  was also a higher probability.  As a matter of fact,  $VIX did spike to  +115%  today instead.  For those followers and readers of my post that protected their portfolio with trading options on $VIX, probably profited handsomely today. 

One of the tools I utilize is the  "Distribution Days"  count of the $SPY  and the  $NASDAQ.   2 weeks ago we had only  3 distribution days.  Today it has spiked to  11 and they have piled up in a cluster of a couple of days.  That is a signal and a sign from the institutions that they are bailing out.  It clearly shows up as a spike in the volume of trading that results in indexes moving lower.  Another tool that I utilize is the $VIX.  It had been creeping higher as well from  $11.08  to  $14.79  within the first 2 days of last week.  The 3 indexes had already started drifting lower after trading between 10 to 14 days at the upper bollinger bands.  It was getting into a situation where the indexes would snap back to the mean.  It most certainly did that within the last 2 days.      

Lessons  Learnt  This  Week 

If you suffered a severe draw downs to your portfolio this week, there are some important lessons to take away from what we have experienced in the market.  The last time we had a trading volume in the $DJI like the one we saw on Monday was in March 2008.  Within days after that, the market took a bullish turn with a follow thru day in mid March of 2008.  Lots of stocks began breaking out and new Growth Stock leaders appeared that doubled over the next year.  These are some of the lessons to take away this week:

• Stay engaged with the market consistently and always develop a Stock Watch List every week.
• Lots of holidays and celebrations occur throughout the year but be disciplined to have your finger on the pulse of the market every day.  Have a routine.
• Always prepare a detailed Trade Plan for any position you take. Review the stock charts and make appropriate notations of reasons why you chose to take that position.  This comes handy when you do your post mortem of all your trades.
• Plan an appropriate trailing stop once the stock position becomes profitable.  Be in tune and in step with the market conditions.  Adjust the trailing stops with changing market conditions.
• Stay disciplined with your Buy rules and Sell rules.

STAY  IN  CASH  NOW

Happy Trading!

Amin

Can  You  'TIME'  The  Market?

Absolutely ... Positively ... YES  YEs  Yes 

I have often expressed my sentiments about the power of institutions in the stock market.  Institutions are the hedge funds, mutual funds and pension funds.  They have several hundred $Billions of assets under their management.  They account for over  75%  to  80%  of the total  $  amount of trading volume every day in the US stock market.  When they choose to exit a stock position and start harvesting profits, it shows up as a spike in volume of the stock with the stock price plummeting.  There just aren't enough other institutional buyers out there to buy the dips and it shows up as a   distribution day  on the major indexes.  We had only 2  distribution days   between the  $SPY  and  $NASDAQ   2 weeks ago.  Last week we added a cluster of   5  distribution days  resulting in  9 total  distribution days  at the end of the trading session last Friday.  That has thrown off the pulse of the market to  "Market Under Pressure"


I wrote a special midweek blog post on Wednesday January 3rd to give everyone a heads up to look for ways to protect the portfolio with the use of options on  $VIX  when it was trading at  $9.20.  I also indicated that one should look out if the indexes trade at upper bollinger bands between  10 to 14  days because they tend to revert to the mean when they do that.  That is exactly what happened by Friday January 26th.  Monday morning on January 29th, it was time to change your thinking cap and get into a defensive mode immediately.  Stocks that were the laggards in your portfolio should have been the first ones to close out and raise  CASH  immediately.  That was the time to start lightening up on your stock positions.

Market  Outlook

Historically, February traditionally has been one of the worst months of the year in the stock market.  $SPY  has a return of  -0.01%   on an average over the last 50 years.  Last week a lot of damage was done to the leading Growth Stocks.  The  3  major indexex - $DJI,  $SPY  and  $QQQ  are all trading at the 34 day ema (exponential moving average).  Every major sector was taken down along with the indexes except the $XLF (Financial Sector).  It is hovering around the  21 day ema.  Lower bollinger bands on all the  3  major indexes is currently at the  50 day sma (simple moving average).  The last correction of less than  -3%  that we had in mid August of 2017, the 3 major indexes did drop below the  50 day sma.  If this were to happen next week, we would be adding some more  distribution days  to the count and market pulse could easily change to  "Market in Correction".  That would mean that we would have to be a  100%  in CASH  if that were to occur.   

Institutions look at the 50 day sma as a support for the positions that they hold.  I am not suggesting that the overall market has turned bearish for the long term.  What we are witnessing is a counter trend in the established bullish trend.  Caution is to be exercised this week.  This is the week that one must exercise the use of trailing stops to mitigate losses.  This is the time to be raising  CASH  and only hold the stocks that are trading above the 21 day ema.  These are the stocks that are withstanding the carnage we are going though with the indexex.  

My lower target established for the 3 major indexes is:

• $SPY   ... 271
• $QQQ  ...160
• $DJI     ... 25,000

If the above indexes do trade below the  50 day sma, you can expect the  $VIX  to spike  +50%  and trade at  $26.72.  That's what happened during the correction the first few days in November 2016. 

Mentoring  Program

Were you stunned last week when the market dropped  1,096  points on the $DJI?  Do you know what preventive actions you should have taken before last week to mitigate losses to your portfolio?  If you are feeling sick to your stomach with the carnage we faced last week, than you need to make a commitment this year to learn:

• How to  TIME  the Market?
• How to find the  Winning Growth Stocks?
• How to  Buy the Stocks Right?
• How to  Plan your Trade for Profit, Loss and Time in the trade?
• How to  Sell your Stock Right?

I shall be opening up a very limited number of slots for mentoring in February.  Schedule a FREE 30 minutes of  "Discovery Call"   with us and see how best we can help you become a consistent and a profitable trader and an investor in 2018.  Don't pass up the opportunity of making a difference in your portfolio.  Start out the new year with a resolution to invest in your education.

Contact us at:

investorspotlight@gmail.com 

Happy Trading!

Amin 

  

DOW  Drops  1,000  Points

Do you have a plan in place if the major indexes correct in the next 2 weeks?  This may seem to be a hypothetical scenario but in actuality it is not.  In  2017  the market had corrected less than -3%  and a mild correction of  -3%  to  -5%  is quite normal in a bullish market.  When I analyze the charts of the   $DJI,   it appears that the index trades at the upper bollinger bands from 9 to 14  days before it begins to consolidate.  $DJI  is currently hovering for  10 days  at the upper bollinger bands and it could snap back to the mean.  Currently We have only 2  distribution days  between the  $SPY  and  the  $NADAQ.  There will have to be an elevated count of distribution days before panic begins to set in the market.

On Wednesday Jan 3rd, I had alerted my readers and followers to seek portfolio protection with the use of option trades on  $VIX.  Some of you followed up on it and now have profited handsomely.  $VIX  closed at  $9.15  that day and now after 3 weeks, it is up a whopping  +23%.  WOW!  WOW!  WOW!   This is highly unusual because  $DJI  is also  +5.47%  in the same period.  How often do you get an opportunity to profit in the index as well as the  $VIX ?

Above 2 paragraphs were the opening part of my blog post that was posted on Sunday January 21st

Above is an excerpt from my blog post published just 2 weeks ago when the  $DJI  was at 26,616.  On Friday Feb 2nd,  the  $DJI  was down by 1,096  points for the week.  We have not had more than  -3%  correction in the last several months.  The trend is till bullish but even in a bullish trend, one can expect the market to correct  -3%  to -5%.  Last week it corrected almost  -4%.  

$VIX  was at  $9.15  2 weeks ago when I wrote this post and on Friday Feb 2nd, it spiked to  $17.3.  Thats a whopping  +89%  spike in the volatility  within 2 weeks.  I was suggesting using an option trade to protect the portfolio.  The indexes trading at the upper bollinger bands for 14 days have snapped back to the mean and that is exactly what happened last week.

I felt that my readers and followers should make a note of this post and prepare for what may unfold with the market on the day after the Super Ball festivities.  

Enjoy the festivities of the  Super Ball  party Sunday afternoon

Happy Trading!

Amin