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