$QQQ  Pyramiding (Scaling in)

"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"

had tweeted this passage from page 148 of his book over 2 weeks ago.  It impressed upon me so much that I felt I ought to share some of the modified techniques I utilize to accomplish pyramiding.  I have often mentioned that institutions account for the bulk of the move in the price and daily volume in a stock or etf.  Moving average lines of a stock tell a very subtle story of what the institutions are doing on a daily basis.  Following is a  brief synopsis of how the Growth Stock etf  $QQQ  was handled to increase the position size in a single equity.  One of the less riskier aspects of an etf trading is that there is no earnings report risk.  There are no earnings surprises like you would have with an individual stock every quarter.  It's a passive strategy to employ that simplifies your trading.  

$QQQ  Story

$QQQ  etf usually consists of all the stocks that are in the Nasdaq 100 index.  It includes 100 of the largest domestic and international non financial companies.  Currently its weighted heavily towards the US based companies - 97.55%.  That reduces the the risks of being exposed to China, Japan and European based companies.  83% of the Nasdaq 100 index is in the 3 sectors - Information technology, Technology communication services and Consumer discretionary.  The  FAANG  stocks ($FB, $AAPL, $AMZN, $NFLX, $GOOG, $GOOGL) plus the  $MSFT   account for 46.8% of the  $QQQ   etf.  Average price of these 7 stocks is over a  $1,000.  That may scare some investors.  3 of these companies are over a  $Trillion  companies and 2 others are getting close to it too.  Investing in  $QQQ  allows the retail trader to participate in these leading stocks with a little less volatility risk.

Following is a one of the ways one would scale in utilizing the technical chart action of the etf.  I have given my reasonings for scaling into each of the positions since the 2  'Follow Thru'  days in early April.

1. $188.50 ... Initial starter position on Aril 3rd when $SPY had a  'Follow Thru'  day.  I had my doubts since the index was well below the 200 day sma (simple moving average) and prone to failure.
2. $202.14 ... Second starter position on April 7th when the  $QQQ  had a  'Follow Thru'  day.  I still wasn't quite convinced since the index was well below the 200 day sma.
3. $210.63 ... Added on buy scaling up on April 21st.  Both starter small positions are now over 7.5% on average within 2 weeks now.  10 day sma crossed over the slow moving 50 day sma just the day before.  I am convinced now that the  'Follow Thru'  day has firm legs.  First 2 to 3 weeks of  a confirmed uptrend historically is when most of the gains are made.  This added on position is now a bit more shares than the initial 2 small starter testing positions.
4. $216.18 ... Added on buy scaling up on April 27th.  The index  21 day ema (exponential moving average) crossed over the 50 day sma.  Etf is showing momentum from institution support.
5. $218.77 ... Added on buy scaling up on May 15th.  Etf is trading along the faster moving 10 day sma for the last 2 weeks.  It bounced off the 21 day ema the day before.  Another sign that the institutions are continuing to propel the stock higher.  News and the politics is the least of my concerns right now.  Chart action is very positive.
6. $229.05 ... Added on buy scaling up on May 28th.  Index was supported at the faster moving 21 day ema.  It was held up and trading tightly for couple of days at 230 resistance level.  50 day sma has firmly crossed over the 200 day sma for a few days now.
7. $243.78 ... Added on buy scaling up on June 16th.  It was once again held up at the 21 day ema.  Etf is progressing up at every  $10  upward movements from $200 to $210 to $220 to $230 and onto $240 mark ever since the  'Follow Thru'  days.
8. $242.77 ... Added on buy scaling up on June 30th.  Its been trading very tightly around  $240.30  for 3 weeks now.

Currently the initial  2 starter positions are +33.79% and + 24.76% (Average for both starter positions is +29.28% in 13 weeks).  Average for all the 8 positions is  +15.99%.  Following this strategy simplifies your trading.  Best of all, you don't need to do the thorough and complicated and methodical research of all the individual stocks in the etf's.  You can just focus on daily charts every day and review the weekly chart at the end of the week.  It's stress free - especially when you have other things like your work or business that pulls you away from the computer during market hours.

Happy Trading!

Amin