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