Concentrate  Your  Portfolio  to  Few  Stocks

Groucho Marx on  'Peace of Mind'

Each morning when I open my eyes I say to myself: I, not events, have the power to make me happy or unhappy today. I can choose which it will be. Yesterday is dead, tomorrow hasn't arrived yet. I have just one day, today, and I'm going to be happy in it.

Groucho Marx, comedian

I was gone away for 2 weeks in early February to Mexico to observe the annual migration of the Monarch butterflies.  As soon as I got back from my trip, the market began to tumble after attaining an all time high on Feb 19th.  Within a week, I had migrated to CASH position since the market had gone into correction at this point.  News of the Corona virus was taking a hold and by the end of the month, we saw 24/7 coverage in print, television and all across social media platforms.  I was alerting my readers to distance from any news coverage or engage on social media about the virus.  In my post on March 9th, I specifically said:

"We are going to have an opportunity of a lifetime to make substantial gains when we finally get a successful  'Follow Thru'  day.

Market sentiment had turned very negative and everyone was very paranoid and stunned with the average drop of 1% per day for the next 35 days with the  $SPY.  Just as quickly the market began to rally on March 17th while everyone was still in shock.  History suggests that the market tends to rally when most investors sentiments are at the most negative.  Within 2 weeks,  $SPY  had a  'Follow Thru'  day  on April 2nd followed by another  'Follow Thru'  day with the   $NASDAQ  on April 6th.  I had published a list of 19 stocks that were on my watch list on the weekend of March 29th.  If you were reading my blog post in April and May, you probably noticed there were 3 stocks that kept reappearing every week.  I gave a detailed account of  $RCUS  in my post of April 19th.  It was intended to demonstrate how institutions help propel the stock higher when they start accumulating a certain stock.  

I am posting 2 links of an interview of Mr. Warren Buffet below.  I have watched it several times over the years and I draw a lot of inspiration from it.  I am sharing them with you to help inspire you as well and help you become profitable in your trading and investment journey.  Quite often my readers ask me as to how many stocks they should own.  If one has a portfolio size of $100,000 to $200,000, 4 to 5 stocks is probably the maximum one should have.  If one has a substantial size portfolio of $500,000 to $1 million, 6 to 8 stocks is probably the most that one can actively manage.  One can start out with more stocks during a  'Follow Thru'  day.  It should be trimmed down to get rid of the laggards and use that money to pile into the stocks that are taking off the starting gate.  You want to feed more of your $$$ to the ones that are performing for you soon after a  'Follow Thru'  day.

https://youtu.be/bHPzQIW_pww

https://youtu.be/iEgu6p_frmE

My  3  Stocks

1. $DXCM   ... April 3rd position at $263.32 (currently +43.7%)
2. $DXCM   ... April 20th added position at $322.87 (currently +17.2%) Waiting for a base to form to add to final position before June 30th.
3. $MRNA   ... April 3rd position at $32.81 (currently +87.4%)
4. $MRNA   ... May 8th added position at $53.06 (currently +15.7%)
5. $MRNA   ... May 28th added position at $53.50 (currently +15%) Waiting for a base to form to add to final position next 2 weeks.
6. $RCUS   ... April 3rd position at $15.16 (currently +106.9%)
7. $RCUS   ... April 7th added position at $15.85 (currently +97.8%)
8. $RCUS   ... May 15th added position at $31.35 (currently +0.06%) Waiting for the stock to move up to the 10 day sma (simple moving average) to add to the position.

Average performance for 3 stocks since the  'Follow Thru'  day ... +46%  in 8 weeks.

Currently we have only 1 distribution day with the  $NASDAQ.  $QQQ  is currently trending along the upper half of the Bollinger Bands.  It has been trending along the 10 day sma and has not breached the 20 day sma since the  'Follow Thru'  day.  That is a very healthy sign in the market.

Happy Trading!

Amin

Simple Rules of Growth Stock Investing

"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

"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 William J. O'Neil (Founder of Investors Business Daily)

I have posted over 270 blog posts and several thousand tweets and comments on tweeter and linkdin platforms over the last 5 years.  It amazes me that most of the retail traders currently are underinvested in the stock market.  There is so much fear and uncertainty - mostly created by the news media and all the opinions that self proclaimed GURUS express on tv and financial publications.  It's best to be data driven because opinions and feelings about the markets are often wrong.  Here is the real data:

• $QQQ - the leading growth stock indicator is just 3.17% away from the all time high attained on Feb 19th.
• $QQQ investing strategy (IBD strategy on page A16 of May 25th publication) is +23.85% from the follow thru day of April 3rd.
• $QQQ lost only -8.57% from Feb 19th high by exiting at market open February 26th when the market went into correction.  
• Following the IBD (Investors Business Daily) rules of investing in $QQQ etf strategy would have resulted in a net gain of +15.28%. 

Market Fools the Majority

Let Data Drive Your Decision

There are lots of rules that Mr. William J O'Neil (Founder of Investors Business Daily) has laid out in his book:

"How to Make Money in Stocks" (4th edition)

If you are new to investing, it's best to concentrate on a few critical rules to follow and acquire the expertise over time.  You can start building on your knowledge by observing some basic principles and applying them to your trading and investing.  Easiest ones to understand is to follow the lead of the institutions.  They account for over 70% to 75% of the daily trading volume in the market.  They can't really hide their intentions because it shows up on the stock charts as  "Sky Scrappers"  on the volume bars.  Stocks often gap up and will advance very rapidly within a few days to couple of weeks.  They will tend to rest after making a rapid advance and consolidate for a while.  They will build a base before propelling higher.  

Results of Stocks on My Watch List

During the weekend I usually go over 150 to 200 stock charts to identify the leading stocks that indicate to me that the institutions are showing an interest in accumulating.  Some of these stocks keep appearing over and over every week.  It's as if these stocks are just waving at me and saying  "Buy me buy me".  I focus on the most liquid stocks when ever possible.  Rarely do I initiate a position on stocks that are under $50 or trading less than a 1/2  million shares per day.  Institutions look for stocks that are very liquid and stocks that have a market cap of more than $1 billion.  Institutions often hedge their positions with options on stocks and thin stocks tend to have a very wide bid/ask spread.  That's a big negative for them.

Here are the results of some of those stocks during the last 7 weeks.  They were initiated the very next day that IBD identified the  "Follow Thru"  day with the $SPY on April 3rd and  $NASDAQ  on April 6th.  

1. $AUDC ... +36.20% 
2. $DXCM ... +53.84%
3. $DXCM ... +25.60% (add on position on April 20th)
4. $GOLD ... +33.49%
5. $NEM  ... +30.41%
6. $NVDA ... +20.65%
7. $MRNA ... +110.30%
8. $MRNA ... +30.0% (add on position May 8th)

If you took a position on some of these stocks that are listed, it is prudent to have a stop loss in place to lock in gains.  It's quite ok to take some partial position off to mitigate risk of losing the gains made.  These stocks are currently trading above the 20 day sma(simple moving average) and consolidating to build a base.  Monitor them as they might present the opportunity to add to your position or initiate a new position.  Money is made by concentrating your portfolio to a few leading stocks instead of diversifying your portfolio.

Happy Trading!

Amin

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.  They were highlighted in my 

blog post on May 10th.   I have indicated their performance for the last week in parenthesis.  They are trading above the 20 day simple moving average and consolidating in a very tight and orderly manner.

1. $AUDC ...  -5.71%
2. $CHGG ... +5.59%
3. $DXCM ... +3.02%
4. $EVBG ...  +3.20%
5. $FNV    ... +5.08%
6. $FTNT  ... +4.82%
7. $GOLD ... +2.37%
8. $IPHI    ... -5.12%
9. $MRNA ... +2.56%
10. $NEM   ... +5.19%
11. $RCUS ... +6.46%
12. $SFM  ...  -1.27%
13. $TWLO ... +5.30%

Average performance    ... +3.67% (Stocks on Watch List)

$SPY performance        ... +0.40% (General Market Performance)

$NASDAQ performance ... +0.80% (Growth Stock Performance)

Happy Trading

Amin

Market   Status

It took  $QQQ  5 weeks to drop  -35% (1% per day on an average) from an all time high that was achieved on Feb 19th.  I have not witnessed such a calamity in the stock market in the last 25 years that I have been involved trading and investing in the market.  That sort of a drop scared every investor and left many of the retail investors stunned.  Market just as quickly rebounded starting April 2nd when IBD (Investors Business Daily) changed the market pulse to  'Market in Confirmed Uptrend'.  We are just 5.30% away from the all time high as of Friday May 8th.  That's the real data and not opinions or what one feels about the market.  We have often heard the expression:

Market is always right and don't argue with it

Market does not care about anyone's opinions

Market fools the majority

Market sentiments however is extremely negative.  Most are afraid to invest in the market.  If history is any guide, I would like to remind everyone when media coverage was equally negative in 1990 while we were stationing 1/2 a million troops in the middle east during the Gulf war.  It was equally negative in March of 2009 (financial crises) when the market was once again turning bullish.  My advice is:

Turn off the news and learn to separate stock analysis from the market news

I have attached a link to a piece of music that I listen to when I am scanning for growth stocks.  Listen to it and enjoy it to get your attention away from all the fear promoting media coverage.

https://youtu.be/_HJga_8BWRU

Stocks Institutions are Exhibiting an Interest in currently

Market is consolidating for the last 2 weeks.  May through September are traditionally our worst months in the market.  If you have attained gains of 20% to 25% in your stock positions, it is a good idea to scale down and harvest some of those profits.  Build some  CASH  by closing down positions that are not performing well.  Have  CASH  ready and available to add to some of your leaders that are consolidating.  Earnings season is coming to an end and institutions have shown an interest in the stocks that I have listed below.  Scrutinize the stock charts and monitor them.  They are exhibiting signs of leading growth stocks.

Stocks:

1. $AUDC
2. $CHGG
3. $DXCM
4. $EVBG
5. $FNV
6. $FTNT
7. $GOLD
8. $IPHI
9. $MRNA
10. $NEM`
11. $RCUS
12. $SFM
13. $TWLO
14. $SFM  

Happy Trading!

Amin

Passive   Investing   With   $QQQ

"Write down exactly how you want to see your world, and visualize it. You have power in your thoughts. "

Bob Proctor (Expert in Law of Attraction)

"Freedom to be your best means nothing unless you're willing to do your best".

Colin Powell (Secretary of State)

We are experiencing a very successful  "Follow Thru"  day  that we had with the  $SPY  on April 2nd, followed by another one with the  $NASDAQ  on April 6th.  March was a horrible month.  We were bombarded with the news in the media about the pandemic.  If you paid attention to the news, you would have thought that the world was coming to an end.  Those that distanced themselves from interacting on social media with every post on the pandemic, were most likely alert when the market took a hold within 10 days of reaching an all time low on March 23rd.  We were all under lock down at that time and afraid to step out the door.  Market in the mean time was flashing an opportunity for the retail traders to start stepping in gradually in the market.

Did you miss this opportunity ?

Fast forward 10 days from the low of March 23rd and suddenly we had a successful rally attempt by the 2 indexes - $SPY  and $NASDAQ.  Lot of retail investors were caught off guard and couldn't believe that the market was taking off again.  Leading growth stock index  $QQQ  had fallen off almost  -35% (1% on an average every day for 35 days).  This was a fast and furious waterfall decline of these 2 indexes.  Lot of investors doubted the  "Follow Thru"  day  - including myself.  Mr. William O'Neil (Founder of Investors Business Daily) has a rule which says:

You must buy something on a Follow Thru day  

When in doubt, it would be a good idea to perhaps start out with a passive investment style of investing in  $QQQ  on  "Follow Thru"  day.  It's a simple strategy as explained below:

• Invest in  $QQQ  at market open the very next day that IBD (Investor's Business Daily) declares a  "Follow Thru"  day.
• Reduce it to 1/2 position when IBD declares  'Market Under Pressure'
• Close out the entire position when IBD declares  'Market in Correction'

 This strategy is explained in details on page  A14  of the current May 4th  edition of IBD print and digital newspaper. 

If You had followed this strategy, the performance results to date from the  April 3rd are:

1. $SPY    ... +12.77% (General Market Performance)
2. $QQQ   ... +12.99% (Growth Stock Index Performance)
3. $XLK    ... +13.98% (Leading Sector Performance)

Stocks   worth   Monitoring

April maintained it's reputation as being the best month traditionally, looking over the historical pattern of the stock market.  May through October are the worst 6 month period in the stock market.  Currently the 2 indexes - $SPY  and  $QQQ  are hovering along the 10 day sma (simple moving average).  It's a good sign that these 2 indexes are consolidating for the last 2 weeks.  We had  2  'distribution days'  on Friday  when both these indexes gapped down over  -2.5%.  $XLY (Consumer discretionary sector) was the one that took the hit with  $AMZN  dropping  -7.64%  and  $GM  dropping  -6.2%.  We will have to see what the market does this coming week.  It's a good idea to be cautious at this time.  Harvest partial profits if the stock has attained gains of over  +25%  from positions taken during the  'Follow Thru'  day.

Following 9 stocks (from the list of 19 stocks that I had on My Watch List posted on March 29th bog post) are consolidating their gains and forming new bases.  They may provide an opportunity for an entry if the market continues to maintain its bullish momentum.  I have indicated their performance to date in parenthesis when market was declared as   'Confirmed Uptrend'  in early April.

1. $DOCU   ...+22.36%
2. $DXCM   ...+30.11%
3. $MSCI    ...+13.03%
4. $NEM     ...+26.68%
5. $NFLX   ...+15.49%
6. $NVDA   ...+11.55%
7. $TEAM   ...+20.63%
8. $MRNA   ...+46.27%
9. $RCUS   ...+72.96%

Average performance of the 9 stocks  +28.78%

These 9 stocks are some of the leading stocks and they have Out Performed the Leading Growth Stock index  $QQQ  by  +122%.  It's critical that stop loss be placed to give these stocks some breathing room to consolidate but also to allow you the opportunity to add to the position once they form a proper base.

Good luck with your trading this week.

Amin