Lessons  Learnt  Trading  $XLNX

"It's necessary for us to learn from other's mistakes. You will not live long enough to make them all yourself."

By Hyman Rickover, US Navy Admiral

Investing and trading Growth Stocks is all about making profits in the market.  One of the main reasons for trading IBD (Investors Business Daily) style of stocks is the  GREED  factor.  Data shows that such stocks tend to do 2 to 2 1/2 better than the what the general market does using  $SPY  as a measure of the stock market performance.  $XLNX  was one of such stocks that came up when one scans for stocks that gaps up in volume several times the normal average trading volume.  This is a sure sign displayed by the institutions that they want to accumulate these shares.  Retail investors such as ourselves ought to pick up on this signal and take a position in the stock to ride the wave of accumulation exhibited by the institutions. 

One of the biggest risk factor to consider with any stock holdings or purchases is the earnings report date.  One never knows how the institutions are going to react to the earnings report.  $XLNX  had surged  +10%  to  +20%   within days of earnings report in July 2018, Oct 2018 and Jan 2019.  Trading volume on these 3 earnings report was 4 to 10 times the daily average trading volume.  That is a sure sign of institutional interest.  GREED factor sets in once you acquire this stock.  One would have the feeling that this stock would continue to behave that way during the earnings on April 24th after the market close.  A good rule of thumb to follow is to reduce the size of your position to satisfy your  GREED  of making a huge gains during earnings.  This way you are not exposing your entire position to the risk of a nasty earnings surprise.  $XLNX  had already attained a profit of  +29.77%  prior to the earnings announcement.  

$XLNX  reported earnings on April 24th after the market close.  They posted a  +30%  gain in revenue and  +34%  gain in earnings.  This would be considered good earnings and sales report but the institutions were not thrilled with these numbers.  The next day on April 25th, the stock gapped down and plummeted   -17%   in volume that was 12 times the daily average trading volume.  Institutions were done with this stock as well as other chip stocks that belonged to the same group as  $XLNX.  Having a trailing stop would not have helped mitigate the losses since the stock had gapped down. 

As indicated in my last 2 posts where I highlighted the synopsis of the trade and 5 possible trade plans to put in place on April 22nd, it makes sense to close out and harvest profits of  +29.77%  prior to the day of earnings release.  To satisfy the  GREED  factor and taking advantage of the stock possibly making a  +10%  to  +20%  gain that the stock had made during previous earnings report, one could have left a small half a position initiated at  $131.41  on April 11th.  This half position is designed to minimize the risk but also to take the advantage of higher profits just in case the stock behaved the way it had done during the last 3 previous earnings reports.  Your loss would have been only  -12.09%  for the half position (effectively -6.05% for a full position).  You would have still come out with a profit of  +23.72%  combining both the positions.   

Happy Trading!

Amin   

Trade  Plan  For  $XLNX

Passion:

"If our work does not feel like play, then we should ask our selves whether we are in the right job"

By Desmond Morris (zoologist)

Trading and investing in Growth Stocks is my passion.  Every Saturday and Sunday I look forward to getting my financial papers delivered at the front door.  I start out early before 6.00 am and pore over the data voraciously while I am having my breakfast and sipping my coffee.  It's the most fun time I have on weekend mornings, reading and scanning the financial papers and making all kinds of notes.  Markets are closed and there is nothing to distract my attention. 

In my post last Sunday April 14th, I presented a synopsis of how the break away gap on $XLNX during its earnings on January 23rd was traded for +27% profit within 8 weeks by Friday April 12th.  I had posed a question at the end of the post: 

• What should one do with $XLNX when the market opens on Monday morning April 15th?

There are several possible strategies to use when trading stocks such as $XLNX.  I shall highlight a few below, observing some of the IBD (Investors Business Daily) rules:

1. Close out the entire position.  According to IBD methodology, one should start harvesting profits once the stock attains a gain of +20% to +25% from its proper buy point.  The stock was already +27% before Monday morning.    
2. Close out 1/2 the position.  $XLNX had attained a profit of +20% within 3 weeks from its buy point of $95.28.  This prompted an  "8 Week Hold Rule".  Stocks that surge this fast and furious should be held for 8 weeks because they tend to get higher within that time.  Friday April 12th was the end of the 8 week period.  Stock had already attained a gain of +41.07% from its proper buy point of $95.28.  Stock is pretty extended now and there is the risk of stock retracing.  Keeping 1/2 a position allows the stock some breathing room to retrace and allow it the possibility to make the higher run after that.
3. Add another small position and scale up.  Stock has been trading tightly for 3 weeks from Mar 21st to Apr 10th.  Its been consolidating around $130 in a very orderly fashion with low volume of trading.  It broke out on Wednesday April 10th in volume that was +25% higher than normal average daily volume.  This was the institutions grabbing more shares.  On Thursday April 11th, second position could have been initiated at market open for $131.41.  Currently this position is +2.69% already.  $AVGO and $IPHI are also in the same group of chip stocks and they are acting in a similar manner as well.  When institutions buy a stock, they tend to buy other leading stocks in the same group.
4. Hold out for earnings.  $XLNX reports earnings on Wednesday April 24th.  Stock has surged +10% to +20% within days after reporting earnings the last 3 times.  Trading volume has been 4 to 6 times the daily average trading volume during the last 3 earnings report.  Institutions have been accumulating these shares when they were trading at $68 in July of 2018.  Some of those institutions have made over +90% since July 2018.  There is no guarantee that the stock would surge this time around though.  Technically there is no overhead resistance.  It has surpassed the highs of $96 that it had attained during the dot com bubble.  50 day sma(simple moving average) is holding tightly close to the 20 day sma.  The stock is acting well right now.    
5. Harvest 1/2 position and let the other half ride out the earnings report.  It's always risky to hold stocks during earnings.  It's prudent to minimize risk during earnings.  Locking in profits for the 1/2 position avoids being exposed to earnings in case the stock plummets. 

Please feel free to comment on the 5 scenarios that I have presented in this post.  I would like to encourage you to think of some other strategies that could be employed to attain a higher profit on this leading growth stock in the leading chip sector.  You can also address your questions and suggestions to me directly for detailed explanation on any one of these scenarios that I  have highlighted above.

investorspotlight@gmail.com

If there is a success story with a growth stock that you invested in, please highlight them for me.  I will gladly share it with my audience with my blog post. 

Happy Trading!

Amin  

   

Buy  High  Sell  Higher

"Remember, keep it simple. Investing is hard enough. Stick to the basic rules of  CAN SLIM  and don't complicate it by getting super - tricky."

William J. O'Neil (Founder of Investors Business Daily)

We are always looking for a deal when buying a house or a car or clothes and furniture.  Everyone loves a good sale and a bargain.  We have been accustomed to thinking that one should  "Buy Low and Sell High".  Growth Stock investing and trading however requires for one to think a bit differently.  It took me a while to fully understand this concept when I was first introduced to IBD(Investors Business Daily) very early on in my stock trading career.  Now it seems clear as a day to me after trading all these years and analyzing 150 to 250 leading Growth Stock charts every week for years. 

One very easy rule to follow is  "Buying the leading stocks with a breakaway gap."  It's one of the most profitable endeavor with Growth Stock Investing.  If the stock gaps up past the +5% proper buy point that IBD identifies, its quite OK to go ahead and institute a stock position as close as possible to the opening price of the stock the next day.  This may sound counter intuitive to ones's conventional thinking of buying low and selling high.  The more powerful the surge in price with equally powerful surge in daily trading volume of that stock, higher the stock will go in price with the passage of time.  It takes several weeks for the institutions to accumulate the position.  They will continue to accumulate the position over the next several weeks.  All we have to do as retail investors is follow the lead of the institutions and hold onto this stock.  

$XLNX  +27%  in  8  Weeks

Here is the synopsis of how the breakaway gap worked with  $XLNX in the last 8 weeks:

• Dec 3rd stock attained an all time high of  $95.18.  IBD(Investors Business Daily) identified  $95.28 (10 cents above the all time high) as an ideal buy point.  
• IBD rule suggests that one should not chase the stock when it's +5% beyond the buy point.  
• January 24th (Thursday) the stock gapped up after the earnings report and surged +18.43% to close at $106.06.  It surged past the +5% buy zone of $100.04.
• Trading volume during the earnings report was 6 times the normal average trading volume.  Institutions were grabbing every available share of the stock and were bidding up the price of the stock in the open market.
• January 25th (Friday), stock position to be initiated at market open price of $105.92 (+11.17% past the ideal entry).
• February 11th (Monday), the stock had attained +20.59% from its ideal buy point of $95.28.  Such a surge also invoked the  "8 Week Hold Rule".  This rule suggests that when the stock surges +20% from its ideal buy point within 3 weeks, it ought to be held for the next 8 weeks.  Stocks tend to go higher when there is such a powerful rally on the stock. 
• April 12th (Friday), the stock has attained the end of 8 weeks.  Currently its +27% from the day the stock was initiated the day after the powerful gap up.  It's also +41.07% from its ideal buy point of $95.28.
• IBD rule also suggests that one should consider harvesting some profits once the stocks attains a gain of +20 to +25%.
• IBD rule also suggests that one should evaluate the stock at the end of the 8 week hold period.

What should one do with $XLNX when the market opens on Monday morning April 15th?

There are several possible strategies one can utilize after attaining such a powerful gain of +27% within 8 weeks (+175% annualized gain).  I shall highlight a couple of strategies in my post next week how best one could lock in profits, hold part of the position for more gains or possibly adding more shares last week when the market was continuing to trend higher.  Stock has been hovering between $125 - $130 range during the last 3 weeks.  It has formed a  "3 weeks tight"  base.  Earnings for the 1st quarter is scheduled to be reported on Wednesday April 24th. 

Mentoring  Program

We had a  "Follow Thru"  day on January 7th.  $QQQ  the leading Growth Stock index has performed +18.71% in the 14 weeks since that day.  That's an annualized return of +70%.  Market continues to act well right now.  April is traditionally the best performing month of the year when you look over the average results for the past 50 years.  We have already attained +3.43% for  $QQQ  for the first 2 weeks of April.  We still have 2 more weeks to go.  

• Do you feel like you have missed out on the opportunities in the market this year ?
• Would you like to learn How to Outperform the market with Growth Stocks investing?

My schedule has been full for the last 2 months but if you are really interested in enrolling in our mentoring program, I will be glad to open up some slots for you.

Schedule a FREE 30 minutes of  "Discovery Call"  with us and learn my profitable system of trading and investing in Growth Stocks.

Contact us at:

investorspotlight@gmail.com

Happy Trading!

Amin