Chart    Reading    Skills

"I always check my charts and the moving averages prior to taking a position"

By Marty Schwartz (Wall street trader and winner of US investing championship in 1984)

"To capture the biggest gains, it's important that you use both the daily and weekly charts, since they offer different views on stock. You will get more exact timing indications from the dailies and the big picture from the weeklies"

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

Quite often I hear from traders some of the indicators they use to do their technical analysis on a stock.  Quite common ones are the candle sticks, MACD, Stochastics, RSI, ADX, Bollinger bands, DMI, Williams R%, CCI, money flows, Elliot waves, fibonacci retracement  and countless others.  Most of these indicators are lagging indicators.  Some of the best indicators and very simple ones that I find to be useful are:

• Simple moving averages.
• Exponential moving averages.

They sound like such simple indicators and yet very few traders quite know how to interpret them along with the price and volume of a stock movement.  These indicators will make your trading a very simple process.  Sometimes we as traders and investors make it a lot more complicated than it really is.  I shall do several posts in the next few weeks to explain in details what some of these moving averages mean and how best to utilize them with your trading.

We will use the 4 stocks that I had highlighted as a small test position taken at market open last week when we had a  "Follow Thru"  day on Wednesday August 14th.  Currently these 4 stocks - $MTH, $PCTY, $PAYC, SBUX - are  +3.57%  while the Growth Stock Index  $QQQ  got slammed  -1.75%  in the last 8 trading sessions.  All the 4 stocks are currently hugging the 10 day simple moving average while the  $QQQ  has plummeted below the 50 day sma and heading towards the 200 day sma.  Study these 4 stocks and plot the 10 day sma as well as 50 day sma on your brokers platform.  Institutions are supporting these stocks while the  $QQQ  is headed towards the 200 sma.  How we manage these 4 leading stocks utilizing the moving averages while the   "Market is Under Pressure"  will be something that I will cover in the follow up posts.  

Happy Trading!

Amin

Follow  Thru  Day  Worked  For  Me

Tuesday August 13th, we had a powerful 4th day of market rally.  $SPY staged a  +1.5%  gain while the leading Growth Stock index  $QQQ rallied  +2%.  Trading volume was higher than the average trading volume for both the indexes.  IBD(Investors Business Daily)  changed the market pulse to  "Market in Confirmed Uptrend".   This is how you time the market.  I was mentioning to my IBD Investors Meetup group on Tuesday night that effective Wednesday August 14th, one should start dipping their toes back in the market with a small test position.  I had once again emphasized to the Meetup members that:   

1. Don't buy  CHEAP  stocks.  They are cheap because institutions do not want them.
2. Buy  HIGH  and sell  HIGER.  Institutions drive the price of the stock higher because they are accumulating a position in that stock.
3. Buy the  LEADING  stocks that are in the leading industry groups.  You only want the best of the best merchandize out there.
4. Look for stocks that are trading above the  20 day sma(simple moving average).  That indicates that the institutions are supporting them while the Indexes are still hovering around the  50 day sma. 
5. Look for stocks that are showing a rising  RS  line with a ratings above 94.  These are the stocks that are outshining the rest of the stocks in the stock market. 

There were 4 positions initiated at the market open on Wednesday.  They were:

1. $MTH     ... (55.81)    $62.00
2. $PCTY   ... (103.71)  $102.12
3. $PAYC   ... (239.33)  $238.42
4. $SBUX   ... (95.21)    $95.91

I have indicated the resistance points for each of these stocks in parenthesis.  Follow along with me and check the performance of these positions this coming week.  

Currently, all these stocks are trading above the 20 day sma(simple moving average).  They have gained  +1.12%  in 3 days last week while the  $SPY is  +0.27%  and  $QQQ is  +0.09%.  These 4 stocks are leading the market and the institutions are supporting it by propping them up and increasing their size of the positions in them.  This happened inspite of the fact that we had a major market reversal on Wednesday.  IBD changed the market pulse to  "Market Under Pressure"  the very next day.   

Mentoring  Program

I shall be opening up a few slots in September in my Mentoring Program.  June, July and August training slots were very quickly snapped up and these months provided lots of opportunities to profit in the market.  I will make just a few slots available in September if you are serious about speeding up your learning curve.  We have already attained  +20%  gain with the leading growth stock index $QQQ year to date.  Historically our best quarter is from October thru Dec.  It's quite possible that we could have an additional  +10%  gain in the next 4 months.  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 investigate how our program can help you 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

Market   Fools   the   Majority

The most recent sentiment survey done by the American Association of Individual Investors last Wednesday indicates that the smaller US investors (retail investors), were the most pessimistic about the stock market.  48.2% were bearish but only 21.7% were bullish.  The gap of over 26.5% in favour of the bearish sentiments is the 10th time we have noticed such a huge gap since July of 2009.  Historically  $SPY has performed an average gain of +9.8% during the next 3 months after such an extreme bearish sentiments.  Interesting data that no one in the media talks about.  The most recent times that we had such a divergence was in mid Feb 16 and Dec 24th (Christmas eve) of 2018. 

We had a  "Follow Thru"  day on Friday Jan 4th 2018.  $SPY  gained  +16.50%  while the growth stock index  $QQQ gained  +22% within 4 months.  IBD (Investors Business Daily) style growth stocks tend to perform 1 and 1/2 times better than the $QQQ.  Data suggests that with such extreme bearish sentiments in the market, we could see  $SPY  gain on an average  +9.8%  in the next 3 months.  Its quite possible that one could expect the year end results to be:

• $SPY   ... 3,200
• $QQQ  ... 205

Just a cautionary word about the predictions of the market.  No one can predict what the market will do.  There are dangers when you extrapolate the data.  Market just doesn't go straight up in a linear fashion.  It zigs and zags with stomach churning volatility.  We just witnessed that in the last 2 weeks.  We have already had 3 good days of rally in the market last week.  We may be just one day away from changing the market pulse back to  "Market in Confirmed uptrend".  Patience is the key right now.  Building an actionable Stock Watch List is prudent right now.  Every retail investor should have done the home work over the last 2 weekends to scan for Growth Stocks that will be the next leaders in the market.

New  Leaders

It's quite common to see new leadership stocks emerge with the next  "Follow Thru"  day.  We are getting to the tail end of the earnings reports for the 2nd quarter.  Some of the characteristics of new leaders would be:

• Stocks that gapped up +5% or more with volume 3 to 5 times greater than the average daily volume.
• Stocks that held up above the 34 day ema(exponential average) while the market was correcting over the last two weeks.
• Stocks that are showing RS ratings above 94 and the RS line on IBD stock charts at all time high before the stock makes a new high.
• Look for stocks that are breaking out in the next couple of days as we head into a possible  "Follow Thru"  day.
• Stocks that are bouncing off the 50 day sma (simple moving average) or 200 day sma in volume that is decidedly higher than the average daily volume.

Mentoring  Program

I shall be opening up a few slots in September in my Mentoring Program.  June and July training slots were very quickly snapped up and both of these months provided lots of opportunities for some quick profits in the market.  I will make a spot or two available in August if you are serious about speeding up your learning curve.  We have already attained  +25%  gain with the leading growth stock index $QQQ year to date.  Historically our best quarter is from October thru Dec.  It's quite possible that we could have an additional  +13%  gain in the next 5 months.  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 investigate how our program can help you 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

Did you hear that noise when the market crashed last week?

It took the market two months from the  "Follow Thru"  day in early June to gain  +13%  with the leading Growth Stock index  $QQQ.  They were the best two months in the last 20 years.  We gave up  -4%  back within a week last week. 

Ouch !  Ouch!  Ouch!

That  was  a  Train  Wreck

Do you have a plan in place when such things happen in the market?

Last week I had received a lot of messages on my tweeter account as well as Linkedin n facebook pages.  Everyone wanted to know what I thought about the market.  On Thursday IBD(Investors Business Daily) had updated the market pulse to  "Market Under Pressure".  The very next day it changed to  "Market in Correction".  This is a very serious damage done to the market within a week.  We had a cluster of 6   "distribution days"   between the  $SPY(broad market index) and $QQQ(leading growth stock index).  $DJI has dropped almost a 1,000 points within a week.  I felt like a lot of my followers were feeling like a deer in the headlights.

I  Heard  the  Sound  of  Market  Crashing  ... Loud  n  Clear 

The easiest thing to do in the stock market is to buy a stock.  It takes just a mouse click.  How you manage that risk is ultimately what makes you a profitable trader and an investor or someone who loses money in the market.  One should have started down scaling the positions as of Wednesday and started the process of conserving  CASH  by harvesting profits.  This is the time to be very defensive with your positions.  No one can predict what the market will do this coming week.  Looking over the data, we know $QQQ  had corrected  -10%  in May.  In October of 2018, we had a similar action with  $QQQ and it plummeted down with a  -20% correction.  

Hope  and  Prayers  is  not  a  Good Strategy

Currently  $QQQ  as well as the  $SPY  are at 50 day sma(simple moving average).  Next stop would be at 200 day sma.  That would be a correction of over  -10%.  We have been in a sideways trend for the last 18 months now.  The last time we had such a scenario was in 1955 to 1957 when the market moved sideways for 18 months.  It plummeted over  -20%  after that.  This is not a prediction but that's what the data shows.  It s not an opinion because we all know that market could care less about our opinions or our religious and political beliefs.  Market has sent us a very clear signal from the way the institutions have behaved.  On Friday, the trading volume on both - $QQQ  as well as  $SPY  had twice the normal daily average volume of shares traded.  It was mostly selling volume and institutions were just reducing their exposure to the market.

Follow   the   Institutions

• Reduce exposure in the market.
• Harvest partial profits and start scaling down stock positions.
• Don't allow losses to exceed 6 % or more.
• Watch stocks as they begin to plummet below the 50 day sma and take defensive action.
• Monitor stocks that are bucking the trend ($CMG as one such stock).

These are some of the actions that professional traders take to mitigate risk.  As retail traders, we all must take the lead from what the institutions do.  75%  of the stocks will follow what the institutions do.  Market has sent us a very clear message.  

Happy Trading!

Amin