FOCUS  ...  Be  Patient  and  Stay  Calm

"Obstacles are those frightful things you see when you take your eyes off your goal."

Henry Ford, car producer

There is a lot of noise and fear out there in the market.  Listening to the news media and watching tv all day long is not going to stop the pandemic.  Do the right thing and just stay home.  Don't engage in conversations on social media about the pandemic or the stock markets.  It's going to depress you and compromise your immune system.  Use your time wisely and instead:

• Get a good night sleep.  You now have an opportunity to catch up on your sleep.
• Start your day performing stretches and light exercises.  You always wanted to get in shape and now you can actually follow your New Year's resolution.
• Eat a healthy breakfast to start your day.  It will help you kick start your day without the pressures of having to run out the door to your job.
• Get dressed up as if you are going to work or school.  Now is a perfect time to polish up your trading skills and look over your weaknesses.  
• Take an online class on trading and investment.  Watch some utube videos of some of the professional money mangers.  Learn what traits and discipline they possess that makes them successful.  
• Communicate with friends, relatives and acquaintances that motivate you and keep you energized.
• Learn to read stock charts and back test your system of trading and investing.
• Polish your system of trading and write it down.  Identify your rules of when you will buy stocks, when you will sell them for a profit or a loss and how long will you hold on to that stock.  This will be your system of rules that will help you develop a Trade Plan for every stock you initiate a position on.
• Prepare and update your stock watch list everyday.  Do lots of  "Virtual Trades"   (utilizing your brokers platform on your virtual account) and back test your system.

Market   Condition

Market has been attempting to rally for the last 2 weeks. It has not undercut the bottom we had reached on  $QQQ  on March 16th or the  $SPY  on March 23rd.  $XLK(technology sector)  is the leading sector during this bear market and it too reached the bottom on March 23rd.  Institutional buying volume has not exceeded the selling volume we had that led us to the bear market.  That is a big negative with this attempted rally.  We could experience a  "Follow Thru"  day if the above 2 indexes continues to head higher and not undercut the lows of March 23rd.  

Market skipped a beat on Feb 24th and Feb 25th.  It's beginning to recover slowly.  Big negative is that both the  $SPY  and  $QQQ  are trading below the 200 day sma(simple moving average).  If we do get a  "Follow Thru"  day, it's likely that it might fail.  The technical damage done to the market is very severe.  I have not witnessed this sort of a damage in my life time.  There is sheer panic.  It's also quite possible that we might test the lows of Dec 24th 2018 with the  $QQQ  and the lows of Nov 4th of 2016 with the  $SPY.  That will take us down to  -50%  correction from the all time highs we reached less than 5 weeks ago.  It's best to head into the next week with an open mind.  Let the market tell you when it's ideal time to get in the market and keep emotions and ego in check.  It's better to spend the time to prepare a stock watch list instead of being consumed by the pandemic and market chatter in the media. 

Stock   Watch   List

Here are some of the stocks that I consider to be the next leaders when we get a  "Follow Thru"  day.  They are all above the 50 day sma and showing a high relative strength of  95  and above.  Some of them are already extended.  Such extended stocks may provide an opportunity if they retrace to the 50 day sma and continue exhibiting an RS ratings  above  95.  I have highlighted  the price in parenthesis that I am monitoring.  These are not to be construed as buying points.  This is my list for you to use as a guide to help you learn to develop your own watch list with an appropriate entry point.  

1. $AMZN   (1954.51)
2. $AMD      (   49.25)
3. $CHWY   (   34.90)
4. $DOCU   (   92.65)
5. $DXCM   ( 275.90)
6. $GSX      (   42.07)
7. $MSCI     ( 296.40)
8. $NEM     (   45.71)
9. $NFLX    ( 359.85)
10. $NVDA   ( 259.50)
11. $PLMR    (  55.67)
12. $RNG     ( 252.30)
13. $TEAM   ( 156.22)
14. $ZM       ( 137.25)   
15. $XLRN    (  92.38)
16. $KPTI     (  22.00)
17. $MRNA   (  26.55)
18. $MNTA    ( 31.90)
19. $RCUS    ( 12.06)

Stay Safe

Stay healthy in body, mind and spirits.

This pandemic and the bear market will come to pass.

Trust and believe in yourself.

Good days are ahead of us to recapture what we have lost in the market.

Happy Trading!

Amin 

C A S H     is     K I N G

Realities of a trader

1. Losing money makes us feel inadequate.

2. Making money (but never enough) makes us feel inadequate.

3. Being on the sidelines makes us feel inadequate.

A purpose of the market is to make us feel inadequate.

Welcome to the life I've lived for 45 years

By. Peter Brandt (Trader of classical charting principles since 1980)

These are very difficult times in the market.  I have been through the market crash of 1987 as well as 2000 dot com bubble and  finally the 2008/2009 real estate market bubble.  It's always a gut wrenching experience.  It feels like there is never an end in sight.  You experience portfolio erosion and worst of all your confidence as well.  I have not witnessed the devastation of the  $SPY  (down -32%) and  $QQQ (down -29%) within 4 weeks from an all time high attained on February 19th.  There is no end in sight and the selling by the institutions (hedge funds, pension funds, mutual funds) is relentless.  This drop into the bear market territory has been fast and furious.  There is sheer panic in the market.  As I have mentioned in some of my posts, you might as well throw out all your books on fundamental, technical and value investing out the door with sort of carnage in the market.

I have my Growth Stock trading process in place and I often mention the 50 day sma(simple moving average).  When either of the two indexes - $SPY (general market performance) and/or the $QQQ (growth stock performance) trade below or close at that level, it's time to get defensive immediately.  Utilizing 34 day ema (exponential moving average) for individual stock for scaling down the position and raising  CASH  is also a good signal to follow.  CASH  should be considered as a position too.  It's the ammunition in your portfolio to deploy when the market resumes it's uptrend.

February 25th, both of the above 2 indexes were trading below the 50 day sma.  If one had gotten out of the market at that point, one would have suffered just a  -5%  loss and not a depressing  -29% loss.  CASH  would have been preserved and the portfolio would not have suffered such a depressing erosion.  If this institutional selling continues this week, it's quite possible these two indexes could drop down another  -11%.  Next support level for  $SPY  is at around 210.  It's a wait and see situation.  Allow the market to tell you when to start nibbling and start deploying your  CASH  back in the market.  In the mean time, stay engaged with the markets and continue to build your stock watch list.

Strategies   for   the   coming   Week

We are all going through some very difficult times right now in the market.  Lot of us are scared and anxious.  We have an unknown component in the market as well as in our personal lives that we have not faced before.  It feels like the sky is falling.  Our older generations had faced the 1929 depression and the second world war.  My generation dealt with the lines at the gas station from the Arab oil embargo in the 70's and high unemployment and inflation rates in the 80's.  It's hard to believe that we had mortgage rates of  12%   at that time.  Inflation was so high that we had  a  "Wage and Price"  controls in our  FREE capitalistic society.  We did survive the terrorist attacks on 9/11.  This pandemic too will come to pass and we will all come out stronger and better because of that.  Market will always be there for us.  Few things I suggest we all do this coming week is: 

• Stay calm and don't panic.  It's not the end of the world.
• Don't focus too much attention on all the postings you get in social media.  It will depress you.  It's not important to know everything in the market or every details of the pandemic storm.
• Take the time to read some good books and enjoy the company of your family and your pets.
• Watch some movies and educational TV shows to sharpen your knowledge.
• Go out for a walk in your neighbourhood with your children and loved ones.  Being out in the sun and taking in the sights and sounds of spring will rejuvenate you.
• Slow down and smell the roses.  Live in the moment because that's all we have.
• Pursue some of your hobbies.
• Take an online course and watch some utube videos to sharpen your trading skills.
• Universe is teaching us all a very important lesson right now.
• Don't hoard your knowledge or your expertise.  Share it.

https://www.realvision.com/shows/the-interview/videos/the-psychology-of-high-performers

The Interview · Featuring Dr. Gio Valiante

Published on: March 2nd, 2020 • Duration: 44 minutes

Watch this interview by Real Vision with Dr. Gio Valiante

"Psychology of High Performers"

It's a 44 minute interview.  I have watched it several times already and have it archived in my library. 

Enjoy 

Happy Trading!

Amin

Lessons  Learnt  With  Market  Correction

"On some level, our goal as traders is to make as much money as possible when it's EASY to make money, so that we can stay on the sidelines when it's HARD to make money"

By Yvan Byeajee - Trader

Market topped out on Feb 19th after having made a consistent slow and a steady run for 18 weeks along the 10 day sma (simple moving average).  All hell broke loose on Feb 20th.  $SPY and $QQQ  just sliced through the 50 day sma within 3 sessions.  Lot of retail traders were just stunned into inaction.  In the following  4 trading days, both the indexes plunged down vertically to the 200 day sma.

Ouch !   Ouch!   Ouch!

I had gone away for two weeks in February to Mexico and I too was caught off guard with this sudden move.  The indexes were telling us a very clear story with 8  "Distribution Days"  piled up within a week between the  $SPY  and the  $QQQ.  I have been leading 3 of the IBD (Investors Business Daily)  monthly Meetup groups in the Tampa Bay area for the last 6 years where I share my observations of the markets during our monthly meetings.  Some of the lessons that I have shared with them when market rolls over into a correction territory are:

1. It usually takes just 3 to 5 trading sessions to bring the  $SPY  and the  $QQQ  from its top all the way down to the 50 day sma.  Monitor daily what these 2 indexes are doing. 
2. Growth Stocks tend to move down 2 to 3 times faster than the general market does when it goes into correction.
3. Utilize the 34 day ema (exponential moving average) as a line in the sand to mitigate losses from market correction.
4. Always have a Trade Plan in place before executing any stock position.  Plan for a loss of no more than  6%  to 7%  from original entry.  Have a plan in place to harvest some profits when it reaches  +20%  to  +25% from entry.
5. Keep your mind focused on the stock and Index charts and not the news or how you feel about the market.  Market is designed to fool you.  
6. Be neutral in your thinking and observe what the market is doing.  It's not important to know why.  Leave it for the self proclaimed market GURUS that write columns and show up on tv shows.  They are not here to teach you and make you money.    

Market   Performance

In took 18 weeks for the  $QQQ (leading growth stock index) to gain  +24%.  All that was given up within 16 days of the market correction.  It's critical that we all learn a lesson from this and never give back all the gains made in the market during it's bullish run.  The last time we had such a correction was last year right around the Christmas holidays.  There comes a point when the institutions stop liquidation and recognize the beaten down stocks.  Their strength of $ volume of their buys creates the strength in the market.  We had such a day last Friday when both the indexes jumped up  +8.5%  in price.  The only negative was that the volume did not exceed the selling volume from the day before.  We need for the  $SPY  and the  $QQQ  to continue to move up in price with volume strength.  We could have a  "Follow Thru"  day  if we get a total of 4 days of attempted rally in the market in the next 10 days.

Currently  the  $SPY  is  13%  below the 200 day sma but the  $QQQ  is only  5%  below the 200 sma.  Leading sector  $XLK (technology sector) is only  1.23%  below the 200 day sma.  That is where one ought to be looking for opportunities when we get a   "Follow Thru"   day.  Market has exhibited stomach churning volatility in the last 3 weeks.  Both these indexes have been moving up or down by  8%  to  9%.  It's prudent that the retail investors start out with a very small position - maybe 15% to 20%   of the full position  -  to test out the market when the market goes back into a confirmed uptrend.  This will help one mitigate losses, should the market turn against you from the extreme volatility.  It's likely that the first couple of  "Follow Thru"  days may fail.  There is a lot of technical damage done to the stocks and it will take a while for some of the leading stocks to build a proper base.

Good luck this week and Happy Trading!

Amin

Stock   Watch   List

It was a very ugly day in the market today.  In just 13 trading days (2 weeks and 3 days), $SPY has dropped  -18.95%  and the Growth Stock Index  $QQQ  has dropped  -16.43%.  IBD Investor's Business Daily) called  'Market in Correction'  on February 25th.  $QQQ  was hovering below the 50 day sma (simple moving average) and the $SPY was below the 100 day sma at that time.  Every retail trader ought to have have been scaling down gradually, once the stock reached the 34 day ema (exponential moving average).  There was absolutely no reason for any Growth Stock investor and a trader to have faced such losses as what the above 2 indexes have experienced.  It's all about following the IBD rules of mitigating losses at no more than  -7%  to  -8% from when the stock position was initiated or scaled into.

Currently the  $QQQ  had breached the 200 day sma but the institutions came in late in the day and helped prop it up right around the 200 day sma.  $SPY  on the other hand has plummeted to the 600 day sma.  Both these indexes are hanging onto the thread at these levels.  It's quite likely that they may breach these levels and drop down even further to lead us into the bear market territory.  It could just as well bounce back up like it did last Monday Mar 2nd.  It's prudent to stay calm and be patient at this time.  There is outright panic in the market.  You might as well throw away all your books on technical analysis out the door.  Stay calm and focused on reading stock charts with price and volume action.  Scrutinize the charts and only have the best of the best leading Growth Stocks on your list.  

I am focusing my attention for the next week or two on constantly building a Stock Watch List.  There is a lot of technical damage done across the board on all leading stocks currently.  I am raising my standards and only looking at stocks that meet my criteria that I mentioned in details in my blog post of yesterday (Sunday March 8th).  I have identified the price levels in parenthesis.  These prices will change as the market progresses.  They are not to be considered as buy points.  We all need to give time for these stocks to build proper bases after the sellers have all capitulated.  We are going to have an opportunity of a lifetime to make substantial gains when we finally get a successful  'Follow Thru'  day. 

My current list:

1. $DXCM (275.90)
2. $MNTA  ( 31.90)
3. $MRNA ( 26.55)
4. $NVDA (248.55)
5. $NVRO (134.61)
6. $RCUS  ( 12.06)
7. $RNG    (200.00)
8. $TREX  ( 99.64)
9. $VRTX  (239.40)
10. $VVNT  ( 17.50)
11. $XLRN  ( 92.38)
12. $ZTS    (138.60)

Always get a good night sleep and start your day with a very healthy breakfast.  Listen to music to calm your nerves.  Go out for a walk in your neighbourhood and enjoy the sights and the sounds and the smell of nature.  Do some stretches before you take a shower in the morning.  Stay around people that motivate you and the ones that are not focused on the news media.  You will be amazed at how all these habits will improve your trading.  It most certainly has improved mine.   

Happy Trading

Amin

Don't   Panic  ...  Have   Patience

"The desire for constant action irrespective of underlying conditions is responsible for many losses in Wall Street even among the professionals, who feel that they must take home some money every day, as though they were working for regular wages."

By Jesse Livermore - the greatest stock trader of our times.

"You can't become a big winner in the stock market until you learn to be a good seller as well as a good buyer."

By William J. O'Neil - Founder of Investor's Business Daily

Market took a sudden down turn right after the Valentine's Day.  We had a  "Follow Thru"  day in mid October.  It was a very successful event because the market kept a slow and steady uptrend for 18 weeks.  Most of the Growth Stocks were extended by mid February.  As a Growth Stock investor and trader, one looks for the market to correct and consolidate for a while.  It helps stocks take a breather and digest the gains of 20% to 25%.  Stocks often consolidate and set up a new base after making substantial gains.  It helps us as retail traders to lock in some partial gains and reduce the size of the holdings.

$SPY and the $NASDAQ have been swinging + or - 3% to 4% several times in the last 3 weeks.  We almost had a  "Follow Thru"  day on Wednesday with the two major indexes mentioned, making an attempted rally.  We needed volume behind the rally and that was the only thing lacking.  This is why one needs to not jump in early with the hopes of getting a better price.  Patience is the key.  We will have to observe and see what the institutions do this week in the market.  We as retail investors and traders, take our cues from them since they are the ones that ultimately decide where the market will be heading.  This is the time to keep our emotions in check and exercise patience.  Just allow the next week or two for the volatility to subside.  There is an outright panic in the market with all the news coverage of the politics and disease and plummeting commodity prices.  Just let the stock charts tell you what is happening with the price and volume.   

Game Plan Heading into Next Week

Retail investors should have started scaling back slowly in the last 3 weeks.  How long will the market take to stabilize and how deep the market will correct is any ones guess.  During market correction, everyone should have done the home work to:

• Identify the weak and underperforming stocks.  Trim them from the portfolio to mitigate further losses and raise CASH.
• Identify strong leading stocks that continue to resist the down turn in the market.
• Trim the positions of stocks that have made gains of over 20% to 25% to reduce exposure in the market and lock in some gains.
• Build your watch list of stocks.  Look for stocks that are trading above the 34 day ema (exponential moving average) and exhibiting an RS ratings and composite ratings above 95.  These can be found on the IBD (Investor's Business Daily) website.
• Make a list of stocks that had surged 20% and invoked the  "8 Week Hold Rule"   in the last 2 months.  
• Make a list of stocks that the institutions had exhibited an interest in.  These are the stocks that gapped up on the favourable news or during a pleasant earnings surprise from the company.

Don't panic and keep a cool head during these times.  It's quite OK to stay on the sidelines at this time and be mostly in CASH.  Wait for ideal setups after the stocks have built a sound base.  We will have a  "Follow Thru"  day.  Don't be tempted to buy the dips.  It's better to give up some profits by not getting in early.  It's best to get a confirmation from the institutions with a surge in the price of the stock along with the increased volume.

I shall be posting some of the stocks that are on my Watch List sometime tomorrow.  I shall list them with price in parenthesis that I consider to be the resistance/support levels.  Those prices will change as the stock consolidates further and builds a next base in the following days.  It's designed to help guide you with the skills of deciphering stock chart reading skills.

Happy Trading!

Amin

Follow    Thru    Days

"Things take longer to happen than you think they will, but then they happen much faster than you think they could."

By Al Gore, former vice president

$DOW dropped almost  4,000  points as of last Friday February 29th from a high of  29,406.75  attained just 11 trading days ago on February 12th.  That's a decline of  -13.59%  

Ouch !  ouch!  ouch!

We had a very successful  'Follow Thru'  day on October 14th.  That was the  TIMING  signal for retail investors to start dipping their toes back in the market.  It signifies the day that the market has reached the bottom and institutional investors (professional money managers like hedge funds, pension funds n mutual funds) are accumulating stock positions of their choice.  We as retail Growth stock investors take notice of this day and start accumulating stock positions.  We mimic the institutional behaviour and follow those stocks that are going up in price with increase in average daily volume of shares traded.

How successful (last 18 weeks) was the last  'Follow Thru'  day of October 14th?

$QQQ - Growth Stock Index was  +24.20%

$SPY  - General Stock Market Performance Index was  +14.33%

$XLK - Technology Sector was  +26.14%

Most of these gains were given back in less than 2 weeks.  There was absolutely no reason for any retail Growth Stock investor to have not taken any action to mitigate losses.  A week ago on Monday Feb 24th, all 3 major indexes - $DJI, SPY and $QQQ all gapped down and sliced below the 50 day simple moving average like a knife through butter.  As a Growth Stock investor, one ought to monitor stock positions everyday and start scaling back when the  'distribution days'  begins to pile up.  We had a cluster of 6 such days last week.  One of the key indicators to utilize is the 34 day ema (exponential moving average).  This gives you an early signal to start scaling down your stock positions before you face the kind of vertical drop that the market suffered in the last 2 weeks. 

CORONA  Virus  and  the  Market 

Last week I received lots of emails and questions about what investors should do with the fears of the virus.  I had a very simple answer:

Stop  drinking  CORONA  beer  and  Travel

I headed to Mexico end of January for 2 weeks when the virus news spread in the media faster than the spread of the virus itself.  I was enjoying visiting the annual migration of the Monarch butterflies to the Michoacan state.  Millions of these butterflies migrate from Canada and great lake states every year from January to March.  They settle in the central highlands that are at the elevations of over 8,000 feet.  It was an exhausting climb and I was running out of breath - just like the way the  $QQQ  index had climbed  +24.2%  in 18 weeks and it finally ran out of breath too.  Getting down that high altitude was a breeze and I wasn't running out of breath any more.  I only got down 2,000 ft in altitude and it felt like I was ready to do it again.

Friday Feb 29th, the market began to rally during the last half hour and the  $QQQ  bounced off the 200 sma (simple moving average).  Volume was the highest I have seen in the last 5 years.  Only positive thing to happen on Friday was that the index did close above the 200 sma.  Is it possible that the market could snap back and make a V shaped rally for 16 weeks - just the way like it did from January 4th 2019 to May 3rd 2019?  That's a possibilty.  We could have the snap back rally this week.  It is not a prediction but anything in the market is possible.  One should have knuckled down and scrutinized the Growth Stocks this weekend like I did.

'Follow Thru'    days occur when we least expect it.  I can still remember when our nation was focused on fighting Iraq when Saddam Hussein had annexed Kuwait.  We had almost 1/2 a million troops in the Persian gulf and the media was hyper focused on analysis and the video coverage of the war.  We had the market rally and some of the leading Growth Stocks went on to make huge gains within weeks when IBD (Investors Business Daily) declared a  'Follow Thru'  day.  Retail investors that did their homework and deciphered the stock charts, ended up attaining substantial gains in the market.  

I shall part with some words of wisdom about the market and what one should do as a trader and an investor. 

• Have patience and don't despair.  
• Most of all, protect your capital and learn to mitigate your losses.
• Minimize your trading and don't be buying dips.  We may have the market slide down further.
• Learn to identify stocks that are exhibiting a strong relative strength and are holding up better than the  $QQQ  or the  $SPY.
• Have an actionable stock watch list prepared and be ready to start out with a small test position as soon as the market rallies and we have a  'Follow Thru'  day.

Happy Trading!

Amin