$MRNA  +53.92%   Since  Follow  Thru  Day

"The first step in learning to pick market winners is for you to examine leading winners of the past to learn all the characteristics of the most successful stocks."

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

"Recurring patterns occur over and over because stocks are driven by humans and human nature never changes."

By Jesse Livermore (Greatest stock trader of our times)

https://youtu.be/KOVEzCIGAyA

I am posting a video of Mr. William J. O'Neil (Founder of Investors Business Daily).  He takes the time to explain the skills required for reading and understanding the stock charts.  The stock charts express the human behaviour of the institutions (hedge funds, mutual funds, pension funds) who control  70%  to  80%  of the daily trading volume that occurs in the stock market.  Most retail traders are focused on the news media about the pandemic and unemployment numbers of 22 million people that are filing for unemployment.  Last week we heard in the media about the breakdown of oil prices.  Some of the Growth Stocks have been breaking out during the last 3 weeks since April 2nd when we had a  "Follow Thru"  day.  It's best to social distance from the print and tv media coverage.  It's better to be data driven and let the stock charts tell you the story instead.

Past history of the stock market suggests that when we get a successful  "Follow Thru"  day, leading stocks tend to gain  +20%  to  +30%  or more within 2 to 3 weeks of such days.  In my post on Sunday March 29th, while the market was still under correction, I had published a list of 19 stocks that I was monitoring.  They had  RS  ratings of 94 and above with the  RS  line reaching all time highs.  They were all trading above the 50 day sma (simple moving average) and some of them were  trading above the faster moving 20 day sma.  These were the leading stocks while the market was under correction.  $SPY (general market performance index) and  $QQQ (growth stock index)  were trading below the 200 day sma at that time.  If one had invested in all these stocks on  Friday April 2nd  at market open (Following the IBD rule of dipping your toes in the market with a small starter position during a  Follow Thru  day), the results of each of those stocks as of Friday April 24th (3 weeks) is highlighted below:

Stocks on my watch list:

1. $AMZN   ... +26.11% (gapped up Jan 21st)
2. $AMD     ... +26.82%
3. $CHWY  ... +25.00%
4. $DOCU  ... +24.70% 
5. $DXCM   ... +26.11% (gapped up Nov 7th 2019 and Feb 14th 2020)
6. $GSX      ... -15.47%
7. $MSCI    ... +14.78%
8. $NEM     ... +30.76%
9. $NFLX   ... +18.10%
10. $NVDA   ... +14.03% (gapped up Feb 14th)
11. $PLMR   ... + 3.36%
12. $RNG     ... + 9.01%
13. $TEAM   ... +18.54% (gapped up Jan 24th)
14. $ZM         ... +27.76%
15. $XLRN    ... +20.52% (gapped up March 2nd)
16. $KPTI     ... +43.89% (gapped up March 2nd)
17. $MRNA   ... +53.92% (gapped up Feb 25th)
18. $MNTA   ... +33.86% (gapped up March 10th)
19. $RCUS   ... +91.29% (blog post April 19th)

Average return for all 19 stocks ... +26.02%

$SPY  returns during the same period ... +12.85%

$QQQ returns during the same period ... +15.28%

Stocks on my watch list performed  +70%  better than the  $QQQ and performed  +100%  better than the  $SPY.   

Happy Trading!

Amin

111%   Gains   in   2  weeks

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

Henry Ford, car producer.

"It is not the strongest of the species that survives, nor the most intelligent, it is the one most adaptable to change."

Charles Darwin, biologist.

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.


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 like $AMZN, $NFLX, $CMG, $NVDA, $NOW started their run to the high ground in a very similar manner.  In my blog post of January 20th, I had highlighted the story on  $CDLX  that exhibited the  '8 Week Hold Rule'.

$RCUS     Story

One lesson I have learnt trading the stock market for the last 25 years is:

 "Market  Fools  the  Majority"

That is one reason why every retail trader and an investor must stay laser focused on building a stock watch list every week.  It is best to social distance from all the media coverage on the virus.  It will depress you and stun you into inaction.  Let the stock charts tell you the story of what the institutions are doing.  Make decisions based on the data and not the hype of media coverage.  I had a list of 19 stocks that I highlighted in my blog post 3 weeks ago.  It looked like a very scary time to be in the market at that time.  $SPY  was in a free fall dropping  -5%  every week for the past 6 weeks.  No one had any idea that the market would just as quickly have a  'Follow Thru'   day with the  $SPY   on April 2nd.  Not all such days will materialize but if you follow the IBD (Investors Business Daily) rules laid out by Mr. William J. O'Neil (Founder of IBD), one must buy something with a test position on such days.  $RCUS   was a good candidate. 

• Feb 3rd, $RCUS  had a heart beat.  It traded with 8 times the daily average volume.  2 days later it punched through the high of  $10.96 attained on Dec 27th.  It began to consolidate for the next 2 weeks in a very tight and orderly fashion.  That's exactly what the institutions do to hide their interest in the stock.
• Feb 18th and 19th, institutions once again began accumulating shares of the stock with stock trading 6 to 10 times the daily average trading volume.  By Friday of that week (less than 4 days), the stock had attained  +20%  gain from the proper buy point of $11.06.   '8 Week Hold'   was established for this stock. 
• $SPY  had a  'Follow Thru'  day at market close on Thursday April 2nd.  Initial test position (10% of the total position) was established at market open for  $15.16.  10 day sma(simple moving average) had crossed over the 50 day sma the next day while both the  $SPY  and  $QQQ  were still hovering below the long term 200 sma.  
• $QQQ  had a  'Follow Thru'  day the following Monday April 6th.  This gave a good confirmation that the institutions were beginning to put more of their monies at risk by investing in the Growth Stocks.  Another position (10% of the total position) was added at market open the very next day at $15.85.  Stock was once again trading nice and tight and orderly - just as it did in early February.
• Within a week on April 16th Thursday, stock shot up 44.60% past the high of $20.40 attained on March 6th.  Market was in correction in early March but this stock was attaining all time highs while the the general market was slicing below the 200 day sma. 
• Once again the stock established another  '8 Week Hold'  rule.  Stock had a trading volume of over 20 times the regular average daily volume when it shot up on April 16th.  
• 10% stock position that was initiated at $15.16 on the first  'Follow Thru'  day just two weeks ago, was closed out Friday April 17th at market open for $32.00.  That is a gain of  +111%  within 2 weeks.
• 10% stock position that was initiated on April 7th will be held and monitored for the next 8 weeks.  10 day/20 day/50 day sma are all turning up sharply and the  RS (relative strength) line is at all time high.  RS ratings is at 99 currently (highest ratings).  This position is  +77%  and one can fully expect the stock to consolidate for the next few days to couple of weeks.  As a retail trader, you want to give this stock some room to breath before it makes a higher high. 

Expect the market to consolidate and retrace some this week.  $QQQ  has gained over  +15%  in the last 2 weeks.  Most Growth Stocks tend to break out within a week to two right after the  'Follow Thru'  days.  If you feel like you have missed the boat than don't fret.  You will get a second chance with some of these breakouts when they bounce back up from their 50 day sma with above average volume of shares traded.


Keep building your stock watch list every week.  Don't be consumed with every little details of the virus.  Stay laser focused with the market and let the data guide your decisions.  Be disciplined and learn as much as you can about the markets.  Observe the IBD rules of buying and selling a stock.



Happy Trading!

Amin

Relative    Strength

If you turn over 10 stones, you might find 1 attractive investment idea but if you turn over 100 stones, you might find 10.

By Peter Lynch (Manager of Magellan Fund 1977 - 1990)

$SPY  is up nearly  +25%  since it hit the bottom on March 23rd - 13 sessions ago.  We had a  "Follow Thru"  day on April 2nd with the  $SPY.  Monday April 6th,  $NASDAQ  posted  a  "Follow Thru"  day as well.  $RUT  has bounced up over  +18%  from its low attained on March 18th(16 trading sessions ago).  These are all good signs of institutions getting back in the market.  Retail investors should have started taking very small stock positions on Friday April 3rd.  It's quite possible that the market could fumble and test the lows of March 23rd.  Both the indexes - $SPY  and  $QQQ  are still below the 50 day sma(simple moving average).  That is a big negative.

One of the tools to utilize to build a stock watch list is  Relative Strength (RS) of a stock.  During market correction, look for stocks that are holding up well relative to the general performance of the market as expressed by the performance of  $SPY.  Identify stocks that are not correcting as much and resisting the correction.  Institutions control  75%  to  80%  of the daily trading volume in the market.  Stocks that are holding up well during correction is an indication that the institutions are holding onto them while dumping the laggards from their portfolio.  That is how you identify stocks that make big gains over a period of several weeks, months and years.  That is how one lands winning stocks like $AMZN, $NFLX, $CMG, $TSLA, $NVDA and others.  These are the stocks that barely budged during market correction before they made their triple digit gains.

IBD(Investor's Business Daily) plots a blue line (RS line) under the price bars.  Rising blue line relative to the  $SPY  line indicates that the stock is performing better relative to the general market as expressed by the performance of the  $SPY.  There is also an RS ratings number listed at the end of the  RS line.  This number compares the stock to all the several thousand stocks that are on IBD's data base.  1 is the lowest and  99  is the highest rated stock.  Personally I only look for stocks that exhibit an RS ratings of  95  or greater.  These are the best of the best Growth Stocks.  They are the ones that have a higher probability of making huge gains when we experience a  "Follow Thru"  day.

  Stock Watch List with High RS ratings and RS line

In my post 2 weeks ago (March 29th blog post), I had a list of 19 stocks that were some of the leading stocks while the market was correcting.  They had corrected less than the  $SPY  and were trading above the 200 day sma while both the  $SPY  and  $QQQ  were well below the 200 day sma.  A very small test position on 9 of these stocks was initiated on Friday April 3rd at market open.  These stocks were trading above the 50 day sma while the  $SPY  as well as  $QQQ  were below the 200 day sma.  3 of the 9 stocks survived my strict criteria of selecting stocks that exhibited a high  "Relative Strength"  and an  RS  ratings above 95  since the  "Follow Thru"  day.  Their performance during the last 5 trading sessions is:

1. $XLRN   ... +8.77%
2. $MACI   ... +9.77%
3. $NEM    ... +18.62%

Average performance for all 3 stocks is  +12.39%.

$QQQ  performance was  +8.59%

$SPY  performance was  +10.94%

Utilizing  Relative Strength  line and  RS  ratings above 95 resulted in identifying stocks that outperformed both the  $SPY  as well as  $QQQ.

Happy Trading!

Amin

Follow    Thru    Day

"First, do not be invested in the market all the time.

There are many times when I have been completely in cash, especially when I was unsure of the direction of the market and waiting for a confirmation of the next move.

Second, it is the change in the major trend that hurts most speculators."

Jesse Livermore (World's greatest stock trader of our times)

Investors Business Daily declared a  "Follow Thru"  day on Thursday April 2nd after the market close.  That is the market timing signal growth stock investors use to initiate a small testing position in the leading stocks.  We had reached a market bottom on March 23rd with the  $SPY (general market performance index) and March 16th with the  $QQQ (growth stock performance index).  These indexes started making an attempted rally for the last 2 weeks and did not undercut the lows attained in late March.

Did you initiate a stock position last Friday?

This recent "Follow Thru"  day has a lot of flaws.  They are:

1. Both the indexes,  $SPY  as well as the  $QQQ  are submerged below the 200 day sma(simple moving average).  They are prone to failure.
2. $QQQ  is 8% below the 200 sma while the  $SPY  is 15% below the 200 sma.  That is a lot of overhead resistance for these indexes to overcome.
3. Trading volume during the attempted rally by these 2 indexes was less than the trading volume of panic selling that occurred in the last 6 weeks.  That does not indicate to me that the institutions are ready to support the market right now.
4. 50 day sma still has a pronounced downward slope heading to the 200 day sma.  It's preferable to have that slope flatten out.  We need some more time for the market to consolidate.
5. Technical damage done to the 2 indexes mentioned has been very severe.  It took 16 weeks for the  $SPY  to attain a gain of +14%  and  $QQQ  +24%  from mid Oct 2019 to mid Feb 2020.   All that was wiped out within just 5 trading sessions in late Feb.

One of the positive things that I noticed with the two indexes is that the faster moving 10 day sma has turned up and attempting to crossover the slower moving 20 day sma.  I would like a confirmation from the institutional investors to start coming in with a buying spree this coming week. 

Mentoring  and  Coaching  Program

The market carnage we faced in the last 6 weeks was brutal to the retail investors that were not prepared.  We had a great bullish run from Feb 2016 to February 2020.  All that hard work and profits attained in the last 4 years have been given back.  This might be a good time to look over your trading and investing process.  Make an honest assessment of your methodology and seek help if you are getting frustrated with your performance.  Here are the real facts and data:

$QQQ - the leading Growth Stock Index doubled from Feb 2016 to Feb 2020

You should be asking yourself that very question.  A passive investor would have doubled their portfolio by just investing in  $QQQ  and not deal with sleepless nights.  The reason why a retail investor and a trader manages their portfolio and invests time in the market is because one wants to do better than the average performance of the indexes. 

We will be embarking on the greatest financial opportunities of our lifetime once the market settles.  Right now what we are witnessing is the wobbly legs with the market.  When you have an open heart by pass surgery, you will need time to recuperate before you can start running.  This market will take time to consolidate and regain its footing.

I shall be opening up very limited spots for the month of May and June for individualized mentoring.  This may be the last time I shall conduct such training.  This second quarter would be a perfect time to get educated with my process of:

• Identifying  WHAT  stocks to buy.
• Identifying  WHEN  to buy the stocks.
• Learning  HOW  much to buy initially.
• Learning to  SCALE  in and out of the stocks.
• Developing a  TRADE PLAN  for every stock position.

Contact us at:

investorspotlight@gmail.com

Schedule a  FREE   "Discovery Call"   with us and let us show you how our program can best help you with investing and profiting in the stock market.

Happy Trading!

Amin