Follow   the   Institutions

"Wanting too much, too fast - without doing the necessary preparation, learning the soundest methods, or acquiring the essential skills and discipline - can be your downfall."

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

I have quite often mentioned that the institutions - hedge funds, pension funds and the mutual funds - are the ones that account for over 75% of the daily trading volume that occurs in the stock market.  They are the ones that ultimately determine the price of the stock.  We as retail investors have to learn to read the clues that the institutions leave behind by studying stock charts.  It's hard for them to hide their intentions when they are investing several hundred million dollars over a period of several weeks to acquire the size of a position in a stock of their choice.  It's equally hard for them to hide their intentions when they start to dispose of a stock that is out of favour with them.

In my post last week I had compared the performance of 2 retail stocks - $JCP  and  $AMZN.  Market has been correcting for the past 3 weeks because the institutions are harvesting profits.  Last week the leading Growth Stock Index  $QQQ  corrected  - 2.67%  but  $AMZN  corrected  - 2.45% (less than the index did).  $JCP  on the other hand corrected  - 18.42%.  It had already corrected  -98.69%  since the highs achieved in Feb of 2007.  $JCP  is now trading at  93 cents  while  $AMZN   is hovering at  $1823.00.

Ouch !  ouch !  ouch ! 

Buying LOW and selling HIGH certainly didn't work with  $JCP.

Buying HIGH and selling HIGHER certainly did work with  $AMZN. 

Institutions usually take several weeks to accumulate the full size position in a stock of their choice.  That is why the price of stock gradually keeps getting higher over a period of several weeks.  This is one reason why buying the stock at correct buy point as identified by IBD is the prudent thing to do.

Game  Plan  for  This  Week

I hope everyone enjoyed celebrating the 3 day  Memorial Day  weekend.  Market is in correction right now but we have already experienced 3 days of rally attempt in the market since May 14th.  No one knows what the market will do in the coming weeks.  We could just as easily have a  "Follow Thru"  day if the   $QQQ  or the  $SPY  moves up  + 2%  in above average volume in the coming days.  Don't fall into the trap with the common perception in the stock market that says  "Sell in May and Go Away".  In 2018 we infact had a  "Follow Thru"  day on May 4th, July 6th(right after the July 4th celebrations) and  August 7th.

The 3 major indexes - $DJI,  $SPY  and  $QQQ - are all hovering above the 50 day sma(simple moving average).  We had 3 days of attempted rally after attaining the lows on May 13th but the indexes were dragged down back to those lows by Friday May 24th.  There were however some Growth Stocks that did not retrace as much as the 3 indexes did.  Some of these stocks are still above the 20 day sma.  That indicates a clear preferance from the institutions for those stocks.  Some of these leading stocks that are trading above the 20 day sma and indicating a high RS ratings by IBD (Investors Business Daily) are:

1. $CYBR   ... $129.74
2. $LULU    ... $174.64
3. $MA        ... $249.85
4. $MNST   ... $  59.69
5. $NOW     ... $269.27
6. $OLLI     ...  $  99.42
7. $PAYC   ...  $203.20
8. $PYPL   ...  $108.54
9. $TEAM    ... $125.31
10. $TWLO    ... $133.32
11. $V            ... $163.03
12. $VEEV     ... $139.75
13. $VMW     ... $200.13
14. $ZS         ... $  70.90

I have indicated the resistance points next to the stock symbol.  They will change as the market progresses this coming week.  Consolidating for the coming week would be a good thing for these stocks.  It may provide a better entry for an initial small purchase or to add to the position you may already have when we do get a  "Follow Thru"  day.

Mentoring  Program

I shall be opening up a few slots over the summer months in my Mentoring Program.  June thru September are slow months usually in the market.  Historically our best quarter is from October thru Dec.  Now is an ideal time to learn to trade and invest utilizing growth stock strategies of IBD(Investors Business Daily).

Schedule a  FREE  30 minutes of  "Discovery Call"  with us and learn the basics of reading the Stock Charts:

• How to find the winning Growth Stocks?
• How to Buy the Stocks Right?
• How to Sell the stocks Right?
• How to TIME the market?
• How to protect and harvest your profits? 

Contact us at:

investorspotlight@gmail.com

Happy Trading!

Amin

Follow  the  Institutions

The hard - to - believe Great Paradox in the stock market is: 

"What seems too high and risky to the majority usually goes higher eventually, and what seems low and cheap usually goes lower."

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

Institutions like hedge funds, mutual funds and pension funds are the power houses in the stock market.  They are the ones that account for over 75% of the daily trading volume in the stock market.  When they decide to bail out of the stock, we as retail investors better listen to what the stock charts show and just get out of the way before we incur massive losses that makes it hard for us to recuperate from.  In the same manner when institutions decide to accumulate the shares of a stock of their choice, you better learn to read the clues they send out like increasing volume and increasing price of the stock.  One very clear case to highlight this concept is to look at the price performance of 2 well known retail stocks - $JCP and $AMZN.  Looking at the weekly chart of these stocks, you find that $JCP was peaking at $87 on Feb 19th  2007 while the upstart $AMZN was barely trading at $42.

Fast forward to May 3rd when $QQQ the leading growth stock index that I monitor was peaking at $191.25.  It corrected -4.30% in the last 2 weeks and currently is being supported by the institutions at the 50 day sma(simple moving average).  $AMZN retraced -4.74% in the same time period and is trading between the 20 day sma and 50 day sma.  $JCP on the other hand retraced -15% in the same time period and has been trading under the 200 day sma ever since May of 2012.  Currently it's trading at $1.14 with no institutional support. 

Ouch!    ouch!    ouch! 

That is a very clear sign that the institutions prefer to own the shares of $AMZN instead of $JCP.  We as retail investors of growth stocks ought to do the same ... follow the institutions lead in the market. 

There is one more story that the stock charts of these two retail stocks is telling us.  While $JCP has been dying a slow death since May of 2012 when it sliced n plummeted below the 200 day sma, it has continued to hit lower highs and lower lows with no end in sight.  The stock has plummeted -98.69% since it's all time high of Feb 19th 2007.  $AMZN on the other hand continues to post higher highs and higher lows except when the market corrected over -20% from Oct 2018 to Dec 2018.  The stock has gained +4450% in the same time period as of Feb 19th 2007.  That is the power of institutions and a very clear message to us as retail investors that we should pay attention to. 

Learn  to  Read  the  Stock  Charts

Mentoring  Program

I shall be opening up a few slots over the summer months in my Mentoring Program.  June thru September are slow months usually in the market.  Historically our best quarter is from October thru Dec.  Now is an ideal time to learn to trade and invest utilizing growth stock strategies of IBD(Investors Business Daily).

Schedule a  FREE  30 minutes of  "Discovery Call"  with us and learn the basics of reading the Stock Charts:

• How to find the winning Growth Stocks?
• How to Buy the Stocks Right?
• How to Sell the stocks Right?
• How to TIME the market?
• How to protect and harvest your profits? 

Contact us at:

investorspotlight@gmail.com

Happy Trading!

Amin

Gap  Ups  R  Quick  Winners

Successful investing doesn't require sophistication and complexity; all that's necessary is a healthy dose of common sense."

By John Bogle, Vanguard funds founder

Last Sunday night when I was composing my post, I had absolutely no inkling that the market would take a turn for the worse during the week.  No one can predict what the market will do on any given day.  On Friday May 3rd, a position was initiated on $DMRC at the market open for $47.51.  The stock had gapped up +44.8%  after earnings report on May 2nd with volume that was 14 times the average trading volume of 135,000 shares per day.  Institutions are the ones that determine how fast and how high the stock will make a move during earnings.  This is a very thin stock with the market cap of only $700 million.  They have a very limited number of shares.  Within a week, the stock has climbed another +22.67%.  The stock is  +76%  within 8 days of trading.  This is why one ought to initiate a stock position on a stock that shows such powerful gap ups  during earnings report.  

Currently we have 10 distribution days between the  $SPY  and $QQQ.  IBD(Investors Business Daily) has changed the market pulse to  "Market Under Pressure".  This is the time to conserve your capital and harvest profits.  We are getting towards the end of the earnings cycle with over 90% of the  $SPY  already gone through the earnings confession.  The performance of the 3 major indexes last week was:

1. $SPY    ...  - 2.02%

2. $DJI      ...  -2.12%

3. $QQQ   ...  - 3.20%

$SPY  and the  $QQQ are still getting support at the 50 day sma(simple moving average).  We as retail investors ought not to allow our stocks to plummet past below the 50 day sma.  If the institutions support the stocks at the 50 day sma and the stocks trades in higher volume, one might consider adding more shares and scale up in stock position. 

4  Stocks  that  Gapped  up  

On Friday May 3rd, there were 4 stocks that had gapped up from earnings report.  Here is the performance of those 4 stocks once a position was initiated at the market open on Monday May 6th:

1. $OLED     ... - 0.14%

2. $MELI      ... - 1.37%

3. $LPLA      ... + 1.09%

4. $MNST    ... + 1.53%

Average performance for all the 4 stocks was + 1.11% for the week while the $SPY had corrected - 2.02% and the $QQQ had corrected  -2.12%.  

These 4 stocks are trading above the 20 day sma while the $SPY (proxy for general market performance) as well as $QQQ (proxy for growth stock performance) are below the 20 day sma and hovering around the 50 day sma.  Institutions are not giving up on these stocks while the general market is going through correction right now.  This is why identifying growth stocks that gap up during earnings announcement can help retail investors profit handsomely in the market.

Happy Trading!

Amin

Learn  to  Read  Stock  Charts

Successful investing doesn't require sophistication and complexity; all that's necessary is a healthy dose of common sense."

By John Bogle, Vanguard funds founder

I have been highlighting the  $QQQ  performance in my blog posts as the index that is the best indicator of the performance of the growth stocks.  That is the index to use to compare the performance of one's portfolio as a growth stock trader.  We had one of the most successful  "Follow Thru"  days on January 7th that I have witnessed in a very long time.  Currently the performance of the the 3 major indexes since that day are:

• $DJI     ...  + 12.91%
• $SPY    ... + 16.36%
• $QQQ   ... + 22.08%

Were you aware that on the day after the Christmas holiday celebrations, the market was staging a very powerful rally on December 26th?  I am accustomed to reading over 150 stock charts every weekend and just as many during the week.  What I saw was that the institutions were coming in droves the very next day on December 26th.  $QQQ  surged  +6.24%  and  $SPY  surged  +5.05%  on that day while we were all shopping and enjoying our families.  Volume on both those indexes that day was more than 2 and a 1/2 times as much as the normal daily volume of trading.  That is a very clear sign of institutions taking huge positions in the leading stocks.  Lots of leading stocks were breaking out from a sound base with equally powerful surge in the daily volume on shares traded.  

Barron's magazine publication of May 6th has the following quote from Mr. Jack Bogle:

"Our emotions cause us to plunge into stocks at euphoric highs, and to bail out as they reach depressing lows - precisely the opposite of what the cool logic of common sense would prescribe"

Gap  Ups

We are winding down with the earnings report by the end of this week with over 75% of the  $SPY  components finished with their  earnings and sales confession.  Institutions can't hide their intentions when they begin accumulating shares of a company.  Ultimately they are the ones who decide if the earnings report is good enough for them to start taking huge positions in the stock of their choice.  It takes them several weeks to accumulate the entire position.  Quite often they will bid up the price against each other to acquire their full position.  This is what causes a  "Gap Up"  in the opening price of a stock just as soon as the earnings are announced.  It's prudent for us as retail investors of growth stocks to isolate stocks that gap up and be prepared to take a position as close to the opening price of the gap up if that is possible.

Following are 2 stocks ($DMRC and $TWTR) worth studying.  They both gapped up during their earnings confessions.  One is a very thinly traded stock and extremely volatile while the other one is a very liquid stock with a lot of shares trading daily.  I shall do a follow up post on some other stocks that had gapped up on Friday May 3rd after the earnings report announcement.  I will highlight some of the strategies to consider when taking a position on such stocks after the gap up. 

1. $MRCY ... Earnings reported on May 2nd.  It gapped up + 44.8% with trading volume that was 14 times the daily average trading volume of only 135,00 shares.  It's a very thin stock with a very limited number of shares available for purchase.
2. $TWTR ... Earnings reported on April 23rd.  It gapped up + 15.64%  with trading volume that was 7 times the daily average trading volume of 15 million shares.  It's a a very liquid stock with lots of shares available for purchase. 

Happy Trading!

Amin