TRADE  PLAN

Trade Plan

In 2017,  I had written a post on the subject of  "Trade Plan"  and for the benefit of my readers and followers, I felt that this subject should be brought back to attention.  No one expected anything like  "Coronavirus"  to suddenly appear and strike at the market like it did last week.  We had a  "distribution day"  on Friday  January 17th.  All the 3 major indexes - $DJI, $SPY and $QQQ  have retraced to the 20 day simple moving average. 

 Here is the post from the year 2017 that is still applicable for our current market environment:   

Every trader looks like a genius when the market supports all of their positions but for me, the smartest traders are those that come up with a system that eliminates their risk variables.  

All too often, traders will focus only on their profit target and overlook properly setting up a contingency plan for when things start moving in the wrong direction.  I believe any trader can benefit from a refresh on the basics so today, we're going to look at some core elements of a good exit plan.  

Work off of the  $1 loss  to  $3 profit  ratio

One of the worst mistakes you can make is to think of the profit to loss ratio only from the profit side.  Let's use our imaginary friend, Terry The Trader, to highlight an example.

Terry feels really good about taking a position on a particular stock.  All of the charts look solid and the profit target is clearly defined.  The overall market has been soaring for weeks. To top it off, recently all of Terry's moves have benefitted from the Midas touch so what's to lose?  Time to pull the trigger and start looking for the next golden goose, right?

Wrong!  

What Terry couldn't anticipate was the upcoming 60 Minutes expose about that company's CEO getting indicted!  By mid week, options are limited and Terry is left scrambling.  

Situations like this have confronted every trader out there but they're completely avoidable if you take the extra steps needed to plan out a loss threshold.  

Stop second guessing your plan

Any time you take a position, you need to place an order for a contingent stop loss right afterwards.  Don't put this off for any amount of time - act immediately before your emotions and biases can enter into the mix.  Just make this a part of your routine for every single position you take.  By the 3rd time, you will have formed a new habit!

It's also important to monitor your position after you've taken it.  In my experience, the   34 day EMA (exponential moving average)   can be an early indicator that a stock is going against your profit plan.  If you see a sudden increase in the selling side of Volume, that's a danger sign as well.  

Focus on emerging opportunities

You can spend days spinning your wheels in analysis paralysis after a position goes against you.  Unfortunately, throwing a pity party sucks up all of your energy and leads to missing the boat on new opportunities.  

When a position goes against you it's important to have your watch list on hand.  In the process of building a  Stock Watch List, let's examine the best way to build it. You need to make sure that you at least:

• Look at stocks in the same industry group as your profitable positions.
• Avoid stocks that have surpassed their buy point.
• For an early indicator of a stocks momentum, review the 21 day exponential moving average and the relative strength line.  

If you aren't already aware, relative strength is your best indication of a stocks value against all of the other stocks in that particular industry group.  That's a key metric that you don't want to overlook!

Keep in mind that IBD® is a tremendous resource when you're putting together a watch list.  If your list creation process is solid, you might even be able to identify stocks before they crack the IBD® 50.  The earlier you can identify an opportunity, the more prepared you can be to pounce when a buy point hits. 

I hope this information helps you get into the habit of establishing a proper loss threshold for a position.  

As always, keep the comments and emails coming!


Happy Trading!

Amin Hemani
investorspotlight@gmail.com

Why  I  Scan  for  GAP  ups

We are heading into the 3rd quarter earnings report with 10% of the $SPY components slated to come to the earnings confessional booth this week.  Stocks exhibit volatility and surprises during the earnings report.  Quite often, the leading stocks of high institutional quality will gap up in price and attain an all time high overnight.  Institutions like hedge funds, pension funds, mutual funds and other professional money mangers are the reason for these gap ups in price overnight.  They have the strength of $$$ power to propel these stocks higher.  Quite often some of the leading stocks will attain a gain of  +20%  or higher within days and start consolidating the gains for the next several days or weeks.  Most of the high flying stocks that we know of today - $FB, $GOOGL, $NFLX, $AAPL, $CMG, $BABA, $MSFT, $QCOM - started their initial move in a similar manner from their infacy period of new IPO (Initial Public Offering).

IBD (Investors Business Daily) has an  '8 Weeks Hold Rule'  for stocks that show strong institutional demand.  The rule suggests that if the stock attains a  +20%  gain or higher from its proper buy point in less than 3 weeks, one should hold it for 8 weeks and evaluate the stock at that point.  Mr. William J. O'Neil (founder of IBD) found that quite often such stocks continue to make higher gains after attaining the explosive gains of over  +20%  within a short period of time.  Demand from the institutions is so great that the stock gets propelled higher from the sheer size of the demand from the institutions.  Institutions often curb their enthusiasm for the stock after attaining high price so quickly just so as not to exhibit their intentions of wanting to acquire more of the stock.  

$CDLX   Story

Institutions quite often will take a position in several leading stocks in the same group.  It's their way of exploiting the profit potential that the leading stocks in a leading group (top 5 out of the 33 groups IBD has grouped the stocks in their data base) presents.  Retail investors that have learnt and acquired the skills of reading and deciphering the stock charts, can easily identify the intentions of the institutions by looking over the price and volume movements in a stock.  Following is a quick synopsis of How I view the stock chart of $CDLX - a new IPO - that is a leading growth stock.  It is amongst a company of very successful stocks such as $PCTY (+300%), $PAYC (+300%), $SHOP (+350%), $COUP (+400%) gains in the past 2 years.  $CDLX has gained  +494%  in the last 8 months since May 9th 2019.  

• Stock attained a resistance of $19.64 trading less than 200,000 shares daily on Mar 4th 2019.  It's considered a very thin stock at this time, trading less than $1 million (share price x volume shares traded daily).
• Stock breaks out from earnings report from $19.64 resistance point on May 10th in volume that was 6 times the daily average volume.  This is the first early sign of institutional interest in this stock.  It attained a gain of  +20%  within 4 weeks.  Stock chart exhibited a very bullish technical setup when the 10 day sma (simple moving average) and the 20 day sma crossed over the slower 50 day sma.
• July 3 rd, the stock is trading close to $30 with over 300,000 shares changing hands daily.  This is 9 times the daily dollar volume compared to just 4 months ago.  This is another confirmation of institutional interest in the stock.  It is still considered too thin a stock for retail growth stock investors that follow IBD principles.
• August 8th, the stock gaps up  +20%  from the earnings report and punches through the resistance at $30.38 in volume that is 4 times the average daily volume.  Stock is no longer considered thin.  The stock continues to move higher and gains  +20%  from the buy point of $30.48.  This invokes the  '8 Weeks Hold Rule'.  This stock should be held until mid October and reevaluated at that time.  
• November 12th, the stock once again gaps up  +43%  from the earnings report in volume that is 12 times the daily average trading volume.  This is a massive volume and clearly a sign of tremendous institutional demand for the limited number of shares available in the market.  It punches through the buy point of  $42.17 and once again invokes the  '8 Weeks Hold Rule'.  
• Stock begins to consolidate because the institutions are taking a little break and they try not bid up the stock too much.  10 day faster moving sma and the 20 day slower moving sma began moving in tandem for the last 3 weeks in December in a very tight and an orderly manner.  This is a very bullish technical signal for an additional entry in a stock.
• December 30th, a stock position was initiated at the market open for $64.88.  There are only less than 15 million shares available for this stock and institutions continue to exhibit the demand for this stock.  The stock once again gapped up +25%  on January 13th.  

Making  +25%  gain in a stock within 2 weeks was accomplished by stalking the stock that gaps up during earnings and patiently waiting for the stock to attain a volume strength. 

Mentoring  Program

Our  Mentoring Program  is  FULL  for the month of February.  If you are interested in learning our System and enrolling in our program, please contact us at:

investorspotlight@gmail.com

We will do all we can to get you on board if you are serious about learning our profitable and successful way of becoming a seasoned trader and an investor of Growth Stocks.  2019 was the 3rd year of our bullish trend that started in February of 2016.  2020 will be another profitable year.  4th year of the Presidential election year has a history of being a bullish year.  

Do not procrastinate

Take control of your portfolio

Contact us and don't be left behind

Happy Trading!

Amin 

My Bullish Sentiments expressed January 7th 2018 Blog Post

Bullish Beginning For 2018

December is one of the best performing months in the market and we usually have a rally during the last two weeks of December. That did not occur in 2017. The 3 major indexes - $SPY, QQQ and $DJI stalled and traded in a sideways pattern for the last 2 weeks of December. In my blog on December 3rd, I had highlighted my projections for where I thought the major indexes were heading to end the year. They fell a hair short however. While the nation was gripped with the cold front (it actually snowed in tropical Florida in Tallahassee last week), the market was fully heated and came roaring out of the gate as soon as the market opened on Tuesday morning. My year end projections were surpassed within 2 days of trading in the New Year. I was elated because all my stocks and option positions were roaring as well. I had a list of stocks on My Watch List that were breaking out as soon as the market opened on Tuesday morning. Its a good thing that I stayed disciplined and took the time over the holidays to firm up my watch list. I wrote a post immediately on Tuesday morning to alert my readers on 17 leading stocks that were breaking out.

Performance of My Leading Stocks

Here are the results of the performance of the 3 major indexes as well as the 17 stocks that I highlighted in my Tuesday blog.

Major indexes:
$DJI ... +2.33%
$SPY ... +2.46%
$QQQ ... +3.96%

My 17 Stocks:

$OLED ... +3.85% ( added to my position with 8 wk hold rule)
$YY ... +13.30% (added to my position with 8 wk hold rule)
$HFC ... +0.06% (added to my position with 8 wk hold rule)
$TEAM ... +13.95% (added to my position with 8 wk hold rule)
$HTHT ... +6.29%
$FIVE ... +9.12%
$THO ... +2.75%
$NVDA ...+11.32%
$NVR ... +1.68%
$KBH ... +4.54%
$LEN ... +6.85%
$DHI ... +2.78%
$VALE ...+7.03%
$NFLX ... +9.39%
$TREE ... +7.23%
$WLK ... +4.00%
$URI ... -0.31%

Average performance for the 17 stocks (including the one losing position) was +6.11%. That is 2.48 times better than the $SPY performance. Performance of the 4 stocks that I took an additional position on was +7.79%. That is 3.17 times better than the performance of the $SPY. Market has gotten off to a very good start for 2018 in just 4 days of trading instead of the 5 trading sessions during the normal week.

Mentoring Program

Did your portfolio increase by +40% to +50% in 2016?

If it did not than you need to start asking questions about what it is that you are doing wrong! 2016 was an unprecedented bullish year and we have already started 2018 with unprecedented +2.46% with $SPY in just 4 days. You had better make a commitment this year to learn:

How to find the winning Growth Stocks?
How to Buy the Stocks Right?
How to Plan your Trade for Profit, Loss and Time in the trade?
How to Sell your Stock Right?
How to TIME the market?

I shall be opening up a very limited number of slots for mentoring this month. Schedule a FREE 30 minutes of "Discovery Call" with us and see how best we can help you become a consistent and a profitable trader and an investor in 2018. Don't pass up the opportunity of making a difference in your portfolio. Start out the new year with a resolution to invest in your education.

Contact us at:

investorspotlight@gmail.com

Happy Trading!

Amin

Happy  New  Year  ...  2020

I took the last 3 weeks off and disengaged with social media and the markets.  It was my annual pilgrimage I take to analyse and review all my past trades and the notes I took with annotated charts of my trades for 2019.  This is something I learnt from reading the books on Jesse Livermore (the greatest stock trader of our times).  Every year he locked himself up in the vault of his bank with a cot to sleep on for the weekend to review all his trades he did for the year.  After reviewing his trades, he stuffed his pockets with all the CASH from his vault.  It was his way of spending some of his winnings in the stock market.

Doing a post mortem of all your trades is something that seasoned and disciplined traders and investors do every year.  It's a way to decipher without emotions, what trades worked for you and which trades you lost money on.  The idea is to polish up your skills and continue to do what trades worked for you.  It's a great way to learn from your mistakes.  The key is to keep doing what seems to work for you and mitigate losses by discontinuing what doesn't work for you.  The way to become profitable with trading and investing is to mitigate losses - first and foremost.  Keeping accurate notes of your trades is critical and something everyone should take the time to do it with pertinent details. 

2019 was a very profitable year in the market.  Last year at this time I was walking in my neighbourhood and wishing everyone I came across a  "Happy New Year".  I am passionate about the markets and I am always glad to discuss and share my market sentiments with anyone I engage with on conversations about the stock markets.  I walk in my neighbourhood everyday and most of them know that I deal with the stock markets.  They were all upset that the market had corrected almost 20%  in 2018 and they were just afraid to put any capital to work for them.  January 4th 2019 we had a  "Follow Thru"  day and I was preaching the IBD(Investors Business Daily) rule that Mr. William J O'Neil always mentioned:

Always buy Something on a  Follow Thru Day  

Unfortunately my sentiments were just brushed off by my neighbours.  They had a recency bias of the market crash of 2007/2008 that they had just witnessed.  They had their portfolios just take a hit of -60% at that time and were barely even by the beginning of early Dec 2018.  They just witnessed another hit of -20% by Christmas eve of 2018 and were expecting the sky to fall now.  This year I reminded them today when I once again was wishing them a  "Happy New Year"  that $SPY did +30.2% where as the leading growth stock index $QQQ that I monitor was +40.8% for 2019.  Unfortunately they told me that they had their monies invested in mutual funds and with professional money managers who once again underperformed the general markets as measured by the $SPY.  They all subscribe to my blog post.  I have consistently reflected my sentiments of the markets that the market is bullish and we have entered another cycle of bullish uptrend as of February of 2016.  

Some People Never Learn

Just for the record ... 

• $SPY   is +72.8% since Feb 2016
• $QQQ  is +118.6% since Feb 2016

2015 was a year of market consolidation.  All one heard in the media all year long on tv and print media by the self proclaimed financial GURUS was ... "Market is maxed out and due for a correction".  The stock and index charts were telling us that we were getting a  "Follow Thru"  day in mid February of 2016.  That was the time to actually start dipping your toes in the market.  Those that knew and took the time to learn to read the stock charts with volume and price action, have now doubled their portfolios in less than 4 years.  Bravo to those that followed the IBD style of investing in Growth Stocks. 

I am dedicating this wonderful piece of music that I was listening to yesterday.  It's from one of my favourite artist ... Jesse Cook.  I never miss his concert when he comes to town.  It's going to be at Capitol Theatre in Clearwater on Thursday January 23rd.  Enjoy the soothing music.

https://youtu.be/x8IN6XOWa4k

Happy Trading!

Amin

JESSE COOK "Into the Dark"