8   Weeks   Hold   Rule

Institutions account for over 70% of daily trading volume that occurs in the stock market everyday.  They have the power of the money to move the market.  It usually takes the institutions several weeks to accumulate the entire position in a stock that they are showing an interest in.  You can see the rapid rise in the price of a stock with trading volume that usually exceeds the daily average trading volume in that stock.  They show up as sky scrappers on the volume bars in a stock chart.  As a retail trader, one has to learn to read and decipher these stock charts of increasing price with increasing trading volume.

Here is an explanation of that rule as illustrated by IBD (Investors Business Daily).

The  8-Week  Hold  Rule

An Exception to Taking Profits at 20%-25%

If your stock gains over 20% from the ideal buy point within 3 weeks of a proper breakout, hold it for at least 8 weeks. (The week of the breakout counts as Week No. 1.) If a stock has the power to jump over 20% very quickly out of a proper base, it could have what it takes to become a huge market winner. The 8-week hold rule helps you identify such stocks, and helps you sit tight so you can reap potential rewards.This rule should be applied to true market leaders, not just any old stock. The company should have strong fundamentals and other CAN SLIM^® traits, including quality institutional sponsorship.

Sitting Tight Through a Sell-Off

When a stock quickly rises more than 20% in just a couple of weeks, it's likely some investors will take their profits off the table — that can cause the stock to pull back, sometimes sharply.

So understand that stocks that trigger the 8-week hold rule often sell off fairly hard, sometimes during the holding period. This rule helps you sit through that and avoid selling too soon.

The 8-Week Hold Rule in Action

Learn more about IBD's selling rules with a free 4-week trial to IBD Digital. Take a free 4-week trial now.After Holding 8 Weeks, Should You Sell Or Hold?Once the 8 weeks from the original buy point have passed, you can sell to lock in your gains or continue to hold. If you have a solid gain, and the chart action and general market are still strong, you may want to sit tight and see how the story plays out. It could be a stock that goes on to even bigger gains.

 Licensing

Have a look at the stock charts of the following stocks.  These are the stocks that institutions are exhibiting an interest in accumulating them:

1. $AMKR
2. $AMRN
3. $CRUS
4. $DXCM
5. $FTNT
6. $INMD
7. $LRCX
8. $RH

Use the stock charts of these stocks to sharpen up your skills at reading stock charts with the price and volume bars.  

Happy Trading!

Amin

Do   Not   DIVERSIFY

"Diversification is a protection against ignorance"

"We think diversification as practiced generally makes very little sense for anyone that knows what they are doing"

"We like to put a lot of money in stocks we strongly feel about"

By. Mr. Warren E. Buffett (CEO of Berkshire Hathaway)

https://youtu.be/H3Q8a9imiFs

Barron's magazine just published an article in their November 18th issue (page 18).  I am not surprised that they indicated that:

"Nearly all of the top 20 actively managed equity mutual funds in the US., as ranked by assets, are behind the S&P 500 indexe's 23.2% return through October.  All but three, that is"

On closer scrutiny, I found that the average performance of the top 20 actively managed equity mutual funds was a mere +19.72%.  That does not include the fees that these mutual funds charge you.  $QQQ (Growth Stock Index) on the other hand produced +31.54% year to date.  That is +37% better than the average performance of the actively managed mutual funds.

Fire  Your  Mutual  Funds  and  Financial  Advisors
Take Control of Your Financial Decisions

Learn  to  Invest  in  Growth  Stocks

Concentrate  Your  Portfolio

Diversifying exposes you to greater risks in fact.  It's best to concentrate your portfolio with a few leading stocks only.  If one has a portfolio of $250,000 to $500,000, IBD(Investors Business Daily) suggests that one should have no more than 6 to 8 stocks in their portfolio.  As a Growth Stock investor and a trader, laggards should be removed and use the proceeds from it to increase the position size in the leading stocks.  Here is a case study of $RH - a leading stock in the retail industry group:

1. Friday June 7th we had a "Follow Thru" day with the Market in a Confirmed Uptrend.  On Thursday June 13th, the stock gapped up +16% during earnings announcement with trading volume that was 9 times the average daily trading volume.  This is an indication of institutional interest in the stock.  Position was initiated the next day at $109.82 at market open.
2. On Sept 9th - a day prior to the earnings announcement, 1/2 a position was closed out at market open for $152.89.  The stock had already made +39.22% within 13 weeks between earnings announcement.
3. On Sept 10th, stock jumped up +20% within days, triggering the  "8 Week Hold Rule".  Institutions came in with trading volume that was 3 to 5 times the daily average trading volume for 4 days in a row.  1/2 position that was left was already +58.01%
4. On Friday Oct 4th, another position was initiated at $170.  It's a leading stock that continues to be supported by the institutions.  They ultimately are responsible for the movement in the stock.  
5. On Nov 15th, the stock once again gapped up +7.56% in trading volume that was 3.5 times the average trading volume.  That is once again a confirmation of the institutional interest in the stock.  Original position in the stock is now +71.62% within 26 weeks.  The second position that was initiated on Oct 4th is now +10.78% within 6 weeks. 

Concentrating my portfolio with the leading stock $RH enabled me to make a sizeable difference to my portfolio.  Retail investors are much more nimble as compared to the mutual funds who have a large $ investments to make in a stock.  It takes them several weeks to get in and out of the stock.  They have to have all of their monies invested all the time, even when the pulse of the market changes to  "Market in Correction".  Retail investors like ourselves can get in and out of the market with just one mouse click.

Happy Trading!

Amin

You   SNOOZE  ...  You   LOOSE

"The majority of the leading stocks are usually in leading industries. Studies show that 37% of a stock's price movement is directly tied to the performance of the industry group the stock is in."

By William J. 0'Neil (Founder of Investors Business Daily)

While some traders are glued to the financial news tv networks listening to all the doom and gloom in the market, all sorts of stocks in different industries are breaking out and reaching all time highs.  We have been experiencing a broad based rally in the market in the last several weeks now.  This ought to be a wake up call to all of us not to listen to all the noise in the market.  Stock charts ultimately tells us a story of what the market is really doing.  The leading Growth Stock Index  $QQQ  as well as the broad market stock index  $SPY is attaining all time high now and is heading higher.  Currently, here is what the performance of both these indexes are:

• $SPY    ... + 23.62%  year to date
• $QQQ   ... + 30.45%  year to date 

There is so much chatter in the media that we are over 10 years in this bull market and it could end very badly any day.  We are constantly bombarded with news of brexit or inverted yield curve or tariff wars and the risk of Iran and North Korea acquiring nuclear weapons.  Most retail traders are nervous with one foot already out the door. 

Utter    Nonsense ! 

 

Here is the actual data though.  We are in reality possibly heading into another cycle of bullish trend for the next 8 to 9 years.  We saw this happen with a 19 year rally from 1953 to 1975 (caused by the consumption demand of the Bob Hope generation born in 1920's to 1930's).  We also had an 18 year rally from 1981 to 2000 (caused by the consumption demand of the baby boomers born after the the end of the 2nd world war in 1945).  There are over 100 million millenials that are going to be reaching their peak earning years in the next 10 years.  They will be the ones responsible for buying homes, cars, investing in their retirement funds and setting up college funds for their kids.

Here is what the data shows with the performance of the two indexes since the market went on to rally 3 years ago, right after election on Nov 8th  "Follow Thru"  day:

• $SPY     ... + 43% (broad market rally)
• $QQQ    ... + 71% (growth stock rally)

This includes the bear market correction we had of almost  -19%  for the 3 months of October to December 2018.  This is phenomenal.  You can double your portfolio within 3 years by merely investing in the leading  Growth Stock index  $QQQ.

Mentoring  Program

Question you should all be asking of yourself is:

Is your portfolio mirroring the performance of  $QQQ?

If you have a hedge fund or a mutual fund managing your portfolio and you are paying them a fee for it, have they outperformed the  $QQQ  in the last 3 years?  

Chances are, they have probably underperformed for you.  If you have been managing your own portfolio, chances are you too have been underperforming the leading growth stock index  $QQQ. 

How long will you continue to do what you are doing and not take advantage of beefing up your portfolio during this market rally that we are experiencing? 

 Take action now and commit to enrolling in our  "Mentoring Program".  I shall open a few slots for anyone that wants to commit to learning our system.  Its a very busy season for the next 3 months and we could possibly add another  +10%  to the  $QQQ  from where it is today.

Contact us at:

investorspotlight@gmail.com

Happy Trading!

Amin

  

 

Institutional   Behaviour

What I believe about global economic/fundamental factors affecting price:

• Dominant factor theory (DFT) - there are only one or two major drivers of price during any multi-year period (all other fundamental factors are noise-makers)
• Conventional wisdom (what most investors and talking heads think and what most financial media report on) completely miss the fundamental factor.
• By the time the marketplace figures out what the dominant factor has been, a new dominant factor is silently emerging as the new driver of place.
• A very small subset of trading operators (perhaps less than 1%) will understand in real time the factors driving price.
• I have a better chance identifying the dominant fundamental factor by looking at charts with imagination than by monitoring financial/social media.

By Peter L. Brandt

I came across a tweet on my tweeter account @spotlightamin last week with the above quote from Mr Peter L. Brandt, a 40 year trading veteran.  I found this to be so appropriate at this time when we constantly hear the print and broadcast media spouting gloom and doom in the market.  We constantly hear the talking heads and self proclaimed GURUS on CNBC, Bloomberg tv and other media about the trade wars, brexit, inverted yield curve, pending recession fears,impeachment hearings.  Its all noise in the market while the market just keeps tugging along.  Market data on the other hand reflects something quite different.  I have often said that one should let the data drive our decisions as a trader and investor instead.

Looking over the data for 2019, here are the empirical facts:

1. $SPY - the proxy for General Market Performance is  + 22.50%  year to date.
2. $QQQ - the proxy for Growth Stock Performance is + 29.92%  year to date. 

Wow!    wow!    wow!

That's a phenomenal performance.  It's the institutions that actually drive the market since they have the power of huge amount of $$$ that they invest daily in the market.  That is why it is so critical to understand the stock chart behaviour reflected on price and volume on the charts.  Institutions can't hide their behaviour when they start accumulating shares of a stock they are interested in.  Once you learn to recognize the fine details of the stock charts with skyscraper volume (surge in trading volume that is 3 or 4 times the daily average trading volume) or the gap up in price of a stock, you quickly learn to take appropriate action of initiating a stock position in stocks that the institutions are showing an interest in accumulating.

Stocks Institutions are showing an Interest 

Here is a list of stocks that have either gapped up in price or the stock has risen 20% or more within 3 weeks and they are trending along the 10 day sma(simple moving average) in the last 2 weeks.  These are the stocks that no one hears about on the daily chatter in the news media.  That is why it's best to look at the  stock charts and the data instead.

1. $ALGT
2. $AMKR
3. $ATKR
4. $BLD
5. $BRKR
6. $CRUS
7. $FTNT
8. $IPHI
9. $LRCX
10. $MKSI
11. $MKS
12. $OLED
13. $ORLY
14. $QRVO
15. $RNG
16. $SPXC
17. $TPX
18. $UCTT
19. $UFPI
20. $ROCK

Please look over these stock charts and make a note of their price behaviour.  I shall discuss some rules for ideal inititial entry points and an additional entry point as the stock continues to trend higher in the price from institutional interest.

Happy Trading!

Amin

https://youtu.be/UW_EUo0Zrz4