Market  Performance

Last weekend I was preparing my readers to initiate a defensive posture with their stock positions by adjusting their trailing stops.  We had a  "Follow Thru"  day on valentines day and it was beginning to look like the rally was going to fizzle.  Last week was brutal.  The major indexes - $DJI, $SPY and $QQQ all tumbled past the 50 day sma(simple moving average) and all the way past the 100 sma.  No one should have allowed their stock position that was in profit of  +10%  or more to end up with a loss last week.  That is the reason why having trailing stops makes sense.  Discipline with the stocks starts out with a detailed well thought out Trade Plan for Profit, Loss and Time in the trade targets spelled out.  

IBD (Investors Business Daily) has called for  "Market Under Pressure".  This is not a good time to initiate or add to any of your stock positions.  One should be doing defensive selling with trailing stops and start raising  CASH  instead.  It's also a good time to be searching for those stocks that have withstood this correction.  They would be the ones that will end up leading the market once this selling by the institutions is done. 

Market  Analysis

We had a cluster of distribution days last week.  Currently we have a total of 14 distribution days between the  $NASDAQ  and $SPY.  8 of those distribution were piled up last week.  That is considered very heavy selling by the institutions by my standards.  I am treating this as  "Market in Correction".  It took just under 2 weeks for the the 3 indexes - $DJI, $SPY  and  $QQQ  to slice down to the 100 day sma from its all time high attained on Jan 26th.  The market began to rally soon after that.  We have experienced a very similar move with the indexes in the last two weeks.  Could this be the end of the institutional selling?  We will just have to wait till Monday to see how the market unfolds.  Asian markets have already begun to show signs of stress as I compose this post on Sunday night.  Japan's Nikkei is down more than  -0.35%  in the first 120 minutes of trading.  Utilizing trailing stops to protect profits and building a Stock Watch List is the prudent thing to do at this time.  

Stocks  That  Withstood  Correction

During market correction,  75%  of the leading stocks will be in tune with the market and correct as well.  The true leaders that withstand the deep correction are usually the ones that tend to  lead the market when it resumes its bullish stance with a   "Follow Thru"  day.  These stocks may also offer a follow up buying opportunity, once the market goes thru a consolidation period.  Following is the list of stocks worth monitoring:

1. $ABMD (Trade mentioned on Feb 14th blog post)
2. $ADBE
3. $AMZN
4. $BZUN
5. $CLR
6. $DK
7. $ETSY
8. $FND
9. $GRUB
10. $HQY
11. $IAC
12. $LITE
13. $MSCI
14. $MU
15. $NOW
16. $NFLX
17. $NKTR
18. $PAGS
19. $PANW
20. $PAYC
21. $PGR
22. $RHT
23. $SCCO
24. $SEDG
25. $SPLK
26. $SQ
27. $TAL
28. $THC

Mentoring  Program

Were you panicking last week when the market faced a train wreck and was correcting?  Did you know how you could have mitigated the loss to your portfolio?

Do you know how to scan for growth stocks that will lead the market on a  "Follow Thru"  day.

If you are feeling sick to your stomach with the train wreck we had last week, 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 April.  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 this year with a resolution to invest in your education.

Contact us at:

investorspotlight@gmail.com 

Happy Trading!

Amin 

   

Trade Plan

  Last year I had written a post on the subject of  "Trade Plan"  and for the benefit of my readers and followers, I felt that this subject should be brought back to attention.   Here is the post from last year that is still applicable for our current market environment:  

Every trader looks like a genius when the market supports all of their positions but for me, the smartest traders are those that come up with a system that eliminates their risk variables.  

All too often, traders will focus only on their profit target and overlook properly setting up a contingency plan for when things start moving in the wrong direction.  I believe any trader can benefit from a refresh on the basics so today, we're going to look at some core elements of a good exit plan.  

Work off of the  $1 loss  to  $3 profit  ratio

One of the worst mistakes you can make is to think of the profit to loss ratio only from the profit side.  Let's use our imaginary friend, Terry The Trader, to highlight an example.

Terry feels really good about taking a position on a particular stock.  All of the charts look solid and the profit target is clearly defined.  The overall market has been soaring for weeks. To top it off, recently all of Terry's moves have benefitted from the Midas touch so what's to lose?  Time to pull the trigger and start looking for the next golden goose, right?

Wrong!  

What Terry couldn't anticipate was the upcoming 60 Minutes expose about that company's CEO getting indicted!  By mid week, options are limited and Terry is left scrambling.  

Situations like this have confronted every trader out there but they're completely avoidable if you take the extra steps needed to plan out a loss threshold.  

Stop second guessing your plan

Any time you take a position, you need to place an order for a contingent stop loss right afterwards.  Don't put this off for any amount of time - act immediately before your emotions and biases can enter into the mix.  Just make this a part of your routine for every single position you take.  By the 3rd time, you will have formed a new habit!

It's also important to monitor your position after you've taken it.  In my experience, the   34 day EMA (exponential moving average)   can be an early indicator that a stock is going against your profit plan.  If you see a sudden increase in the selling side of Volume, that's a danger sign as well.  

Focus on emerging opportunities

You can spend days spinning your wheels in analysis paralysis after a position goes against you.  Unfortunately, throwing a pity party sucks up all of your energy and leads to missing the boat on new opportunities.  

When a position goes against you it's important to have your watch list on hand.  In the process of building a  Stock Watch List, lets examine the best way to build it. You need to make sure that you at least:

• Look at stocks in the same industry group as your profitable positions.
• Avoid stocks that have surpassed their buy point.
• For an early indicator of a stocks momentum, review the 21 day exponential moving average and the relative strength line.  

If you aren't already aware, relative strength is your best indication of a stocks value against all of the other stocks in that particular industry group.  That's a key metric that you don't want to overlook!

Keep in mind that IBD® is a tremendous resource when you're putting together a watch list.  If your list creation process is solid, you might even be able to identify stocks before they crack the IBD® 50.  The earlier you can identify an opportunity, the more prepared you can be to pounce when a buy point hits. 

I hope this information helps you get into the habit of establishing a proper loss threshold for a position.  

As always, keep the comments and emails coming!


Happy Trading!

Amin Hemani
investorspotlight@gmail.com

How  To  Out  Perform  The  Market

The rules are very simple. 

IBD (Investors Business Daily) has shown that growth stocks tend to perform 2 to 2 and 1/2 times better than the overall performance of the market using  $SPY  as a barometer of the market performance.  If you follow their system of CANSLIM trading, it will consistently help you outperform and profit in the market.  The system may seem counter intuitive to conventional wisdom that the hedge funds and money mangers preach on wall street.  IBD system says:

1. Buy  "High and Sell Higher."
2. Do not fall into the trap of  "Buying the Dips."
3. Buy only the  "Best of the Best Stocks in the Leading Sector."
4. Stay in tune with the market and buy stocks during  "Confirmed Uptrend"
5. Always buy something on a  "Follow Thru"  day. 

We had a  "Follow Thru"  day on Feb 14th (Valentines Day).  I had identified  $ABMD  as a good growth stock candidate.  It appeared on my scans while I was going through my weekend routine of building  My Stock Watch List  for that week.  Market was in correction at that time and that is the time to be diligent with your weekly routine.   

Details  of  $ABMD  Trade

Market was in correction on Thursday Feb 8th and  $SPY, $QQQ  and  $DJI  had all sliced down below the 50 day sma(simple moving average) and all the way down to the 100 day sma.  $ABMD on the other hand was still trading at the 21 day ema(exponential moving average).  This was a confirmation signal that the institutions were not willing to give up on this stock.  My analysis showed that this was one of the leading stocks in the leading sector.  Market began to rally for 3 days in a row and valentines day was the 4th day of the rally.  $ABMD  was being accumulated by the institutions just as soon as the market opened.  $QQQ, the leading index also began to surge as well.  All signs indicated that we would have a  "Follow Thru"  day if this momentum kept up and it certainly did.  Lots of technology stocks were also breaking out on this day too.  Following is a brief scenario of how this stock was handled:   

• $ABMD  surged  +300%  in volume on valentines day.  That's a confirmation of a successful break out.
• My Trade Plan for initial profit exit and loss exit was highlighted in my blog post on valentines day when we had a  "Follow Thru"  day.
• Initial position was filled at  $245  during the first hour of trading on the 4th day of the rally.  This was an early buy point ( 4%  below the ideal buy point).
• Follow up position was added the very next day at open at precisely the resistance line of  $255.42.
• Resistance was at  $255.42   and an ideal buy point according to IBD rules would be  $255.52  - 10 cents above the resistance. 
• Both the positions were filled precisely according to My Trade Plan.  This allowed me plenty of cushion should the market falter.  
• While the market was retracing last week,  $ABMD  kept up its momentum and began trading closer to the 8 day ema.  It was performing better than the overall market.

Currently, both the positions are are showing the following profits:

1. First position at  $245 (early buy point) is  +20%  in 3 weeks.

2. Second position bought the very next day at open  at  $255.42  is  +15%  in 3 weeks.

3. Both positions combined  is  + 17.5%  on average in 3 weeks.

4. $QQQ  which is the leading index is  +6.44%   in the same time period.  

$ABMD  has performed  +2.72  times the leading index.  All this was possible because I followed the IBD principles of investing.

Mentoring  Program

Were you panicking last week when the market was correcting?  Do you know how you can  Time the market?
 Did you have a strong watch list to select stocks to buy when the market indicated a  "Follow Thru"  day. 
If you are feeling sick to your stomach with the train wreck we had faced in January, 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 

Market  Under  Pressure

You all might be asking yourself the question:

"What happened to the Follow Thru day we had on Valentines Day?"

The answer is very simple if you base your decisions only on the data that the market presents.  The data shows that we had a cluster of 6 distribution days last week between the $SPY and the $NASDAQ.  Institutions were disposing of their stock holdings and harvesting their profits accumulated during the market rally for 11 market sessions starting Feb 9th.  There was heavier volume than average daily volume during these distribution days.  This is the week where we all have to start defensive selling of our stock positions to be in tune with the market.  75% of the stocks will follow the trend and what we are experiencing is a counter trend that is normally seen in a general bullish trend.  If the stocks you own are at a  -5%  or  -6%  loss from when u initially purchased it, you ought to consider selling them to protect your portfolio.   

Performance  of  My  14  Stocks  on  Watch  List  Compared  to  $SPY 

Here are the results of the 3 major indexes performance as well as the leading Technology Sector ($XLK)  etf last week when the market tone changed to  "Market Under Pressure".   I have also listed the price gain or loss for each of the 14 stocks that were on My Watch List last week with total gain or loss for all those stocks listed under the totals: 

Indexes:

• $QQQ   ... - 1.30%
• $SPY     ... - 2.05%  
• $DJI       ... - 3.05%
• $XLK      ...  -0.88%

Watch List Stocks:

1. $ABBV   -3.71
2. $ADBE   +0.05
3. $AMZN   +0.25
4. $ATHM   -3.85
5. $BOFI     +0.03
6. $EBAY    -0.73
7. $IBKR     -1.41
8. $LPLA     -2.02
9. $MSFT    -1.01
10. $NFLX    +15.12
11. $NOW     +6.27
12. $PANW   +11.23
13. $TSS      -1.25
14. $WB        -9.19

TOTAL ... +9.78 (+0.32%)

Conclusion:

This was a very strong watch list.  This is why I spend my weekends looking over several hundred stocks, indexes n etf's to come up with what I consider to be the "Rock Stars" of the growth stocks.  My stocks performed +0.32% (+16.64% annualized gains) during the week that the market took a tumble with a loss of  -772  points on the $DJI for the week.  These stocks are also all trading above the 21 day ema(exponential moving average) while the $SPY and $DJI are hovering at 100 day sma(simple moving average). 

One should always compare the performance of any stocks that is on your watch list and the stocks that you own against the leading index and the leading sector etf's.  The above 14 stocks were all technology related since that has been the leading sector this year.  As a growth stock investor and a trader, one must select the leading stocks in the leading sector. 

Mentoring  Program

Were you stunned last week when the market corrected for 3 days with a drop of  -3.05% (-772 points drop on the $DJI).  Do you know what preventive actions you should take to mitigate losses to your portfolio?  Did you have a strong watch list to select stocks to buy when the market indicated a  "Follow Thru"  day.  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