How  to  Outperform  The  Market

I am a Growth Stock Investor and I follow Mr. William O'Neil's (founder of Investors Business Daily) methodology of trading Growth Stocks.    Studies by IBD has shown that Growth Stocks tend to perform  2 to 2.5 times   better than the average performance of the market, as measured by the performance of the $SPY.   My strategy involves:  

1. Buy  "High and Sell Higher".
2. Do not   "Buy and Hold".
3. Do not  "Buy Cheap Stocks".
4. Buy  "Right and Sell Right".
5. "Harvest Profits"  as the stock moves higher.  Sell into strength.
6. Use  "Trailing Stops"  to protect profits and mitigate losses.

Studies of IBD has shown that most growth stocks that are fundamentally and technically sound, tend to rise  +20%  to +25%  and than form another base.  Stocks will move sideways for a while to digest these gains before they start making another run higher.  This is the behaviour of the institutions on display.  They have to accumulate a large position in the stock of their choice and it takes them several weeks to accumulate their entire position.  For retail investors, it's quite OK to take these profits and and use the proceeds to invest in other growth stock. 

One of the emotions that we as retail investors have to constantly deal with is the GREED factor.  It's a euphoric feeling when the stock attains a profit of  +20%  to  +25%  within a couple of weeks or less.  Just accept the fact that as a retail investor, you will never sell your stock at the very top or for that matter buy it at the very bottom.  Learning to sell your stock into strength takes a lot of discipline.  Market will be volatile in 2019 and I just have to remind my readers that one of the biggest risk in 2019 is TIME.  The longer you have your stock position with profits in the market, greater the risk you are exposed to of the market retracing n giving up the profits on your stock.   

Market  Condition  

The  "Follow Thru"  day we had on June 7th is working out vey well for now.  We have only 1  "Distribution Day"   so far.  For now the institutions have chosen to continue to participate as buyers in the market.  For the month of May,  $SPY had retraced  -6.60%  and the  $QQQ  had retraced  - 8.81%.  We have made up all of those losses in the first 3 weeks of June so far.  June traditionally performs very poorly with just  +0.02%  gain  - looking over the average performance of  $SPY  over the last 50 years.  Thats is why I have often mentioned in my blogs not to listen to the tv or print media when they say  "Sell in May and go away".  Let the stock charts tell you the story instead.  In our  FREE  and an  OPEN  market system, laws of supply and demand work out very efficiently.

Market has done very well so far for 2019.  $SPY  is  +16.35%  and  $QQQ  is  + 20.46%  year to date.  4th quarter is one of the best quarters traditionally.  No one can predict where the market will be by year end.  At the current rate, it's quite possible that we may end the year with:

• $SPY at 3300
• $QQQ at 220

The market just doesn't go straight up of course.  There will be retracement of  -10%  to  -20%  along the way just as we did  from October to Dec of 2018 and more recently in May of 2019.  Lots of leading Growth Stocks have already attained the profits of +20%  to  +25%.  This might be a good time to start harvesting partial profits in stocks that have done very well for you.  Earnings season can bring back the volatility in the market.  We have a slight reprieve for the next 2 weeks before some of the banks start the reporting their earning. 

Happy Trading!

Amin