Principles  of  SCALIN (pyramiding)  in  Leading  Stock

"When they came on the scene, Kmart was one of them, when in 1962 it only averaged about 2,000 shares traded each day. Jack Eckerd was another, which in April 1967 also averaged just 2,000 shares of trading each day. Both of these stocks went on to become huge winners. Even though the institutions at first would not pick up Pic'N Save, O'Neil did for his own personal account. He actually kept purchasing this stock on the way up, buying more shares every one or two points when the stock would rise. He did this for several years. In fact, he made 285 different buys on this stock in a span of 7 n 1/2 years. This is probably one of the most masterful examples ever of how to pyramid a winning position. At one point he actually owned 4.99% of the total stock outstanding (if you own more than 5%, you must register with the SEC). This stock would turn out to be one of his biggest winners ever, with some of his initial positions up 20 fold when he finally sold out and his profits were a main source for starting the newspaper Investors's Business Daily a few years later".

Mr. John Boik, the author of his book:

"How Legendary Traders made Millions"

tweeted this passage from page 148 of his book a week ago.  I shared this excellent content on my tweeter account for the benefit of retail traders and investors.  I would highly recommend that you pick up a copy of this book for your library.  He highlights some of the principles that some of the greatest and most profitable traders utilize to accumulate a 7 figure portfolio.

$AMZN  Scaling  In

$AMZN stock is an ideal one to study if you are a student and a follower of IBD(Investor's Business Daily)  CANSLIM methodolgy.    

• Don't buy  CHEAP  stocks.
• Buy  HIGH  and  Sell  HIGHER.
• CONCENTRATE  your portfolio to a few stocks.
• Always buy several  LEADING STOCKS  in  LEADING INDUSTRY  group on a  "FOLLOW THRU"  day.
• SCALE IN (Pyramiding)  when the stock begins to quickly advance to  +5%  from your initial purchase.
• Have a  PLAN  in place to  SCALE OUT  to mitigate the risk of earnings nasty surprise.
• Follow the rules of exiting a position when losses mount to  -7%  to  -8%  from your initial purchase.
• HARVEST  profits when the stock gains  +20%  to  +25%.

$AMZN  became a $1,000 stock on Oct 27th 2017.  16 million shares (4.5 times the daily average trading volume) traded that day.  This was a very clear signal that institutions were on their way to accumulating this stock.  This year on Jan 31st (just 2 years n 3 months after becoming a $1,000 stock), it became a 2,000 stock.  Once again it traded 16 million shares (4 times the daily average trading volume) that day.  Following is classic way one would scale in with the winning stock such as  $AMZN.  

1. Friday April 3rd, initial small starter test position at  $1911.15 when the  $SPY  had a  "FOLLOW THRU"  day.  Stock had been trading tightly and orderly for 3 weeks.
2. Tuesday April 7th, a second starter test position at  $2017.11  when  $QQQ  had a   "FOLLOW THRU"  day.  Initial purchase was already  +5.5%  within 2 days. 
3. April 13th, within one week of trading, stock is  +10.91%  on average of the 2 positions initiated.  Faster moving 10 day simple moving average (sma) and the 21 day exponential moving average is surging up and away from the slower moving 50 day sma.  $QQQ  is still below the 50 day sma.  Stock is clearly the out performer of the growth index.
4. April 24th, scale in at  $2185.95.  Stock cleared the  $2150 resistance just the day before.
5. April 29th, just a day before earnings report is due, harvested the profits from 2 original starter positions for average gains of  +18.72%.
6. May 1st, renter at  $2336.80.  Earnings reported the day before bounced the stock up  +4.5%.  There was some profit taking the day after earnings were reported with a surge in selling volume.  The stock barely budged 90 points.
7. May 5th, scaled in at  $2340.  Technically the faster moving 10 day sma as well as the 21 day ema are smoothing out and running parallel to each other and rising slowly and methodically.
8. May 19th, stock has been consolidating for the last 5 weeks.  Institutions are fully supporting the stock at  2400  level.  Institutions tend to look at the round numbers from which to propel higher.  Scale in at  $2429.83.
9. May 27th, the stock bounces off the 21 day ema.  Slower moving 50 day sma is catching up to the rising 10 day sma and 21 day ema.
10. May 28th, scale in at  $2384.33.
11. Stock is hovering tightly around the  2500  mark for the last 2.5 weeks.  Initial trailing stop for the stock is monitored around the  2300  level which is closer to the  34 day ema.
12. June 15th thru June 19th week, the stock is trading tightly like it hasn't done in the last 4 months.
13. June 22nd, scaled in once again at  $2684.50.  
14. June 26th (last Friday) we had a major reversal and a  "distribution day"  on both the  $SPY  as well as  $QQQ.  Stock barely budged 18 points.  It is held up at the 10 day sma while the leading growth stock index  $QQQ  plummeted down to the 21 day ema (that's really not bad for the index that is  +12.79%  year to date.  $AMZN  on the other hand is  +45.55%  year to date.  It clearly is out performing the market.

This is a pretty aggressive way to scale into a stock when the market remains in a confirmed uptrend.  Stock has been trending up for the last 14 weeks out of the last 15 weeks when you examine the weekly chart of the stock.  This is a stock that was a $1,000 stock just 2 yrs 8 months ago.  It's hovering around  $2700  mark now.  It's become a  $Trillion  company too.  What one needs to see now is for the stock to consolidate its gains for a couple of weeks.  Allow the 200 day sma to catch up to the 50 day sma and let the stock digest the massive gains it has made this year so far.  Leading Growth Stocks often test the 50 day sma when the market corrects.  That will be a  -7%  to  -8% loss from the current levels of  $2700  down to the  $2500 mark.

We head into this week with a lot of caution.  We have accumulated a total of 6   "distribution days"  in the last 12 trading sessions between the  $SPY  and  $QQQ.  A few more distribution days like the one we witnessed on  June 11th  could possibly change the market pulse down a notch to  "Market Under Pressure".  That will definately put a damper on the upcoming July 4th holidays.

Stay safe and stay healthy.  Please do what ever it takes to prevent catching the virus or spreading it unknowingly.  It's been a very disturbing sign for the last 2 weeks to see a surge of virus cases in my state of Florida.  We have a large segment of our population that are retired and elderly.

God Bless.

Amin