Santa  Claus  Rally

Ryan Detrick, CMT, Chief Market Strategist and Senior Vice President of LPL Financial tweeted 3 days ago:

"December is usually a strong month for stock, but Santa doesn't show until the second half of the month"

There are no guarantees that the market will be predictable precisely for a rally in later half of December.  Market actually severely corrected from October through December in 2018.  In 2019 on the other hand, the market roared from October all the way through middle of February before it went into correction.  Last week there was a major distribution day on Wednesday the 9th when institutions sold off the technology stocks that were propelling the indexes higher.  $QQQ  dropped  -1.25%  while the  $SPY  dropped  -0.96%  that day.

As a retail trader and an investor, one ought to be prepared for sudden changes in the market.  I often react to market conditions and plan accordingly looking over the data of price and volume. 

"If  THIS  happens  than  I  do  THAT"
"If  THAT  happens  than  I  do  THIS"

It's very hard sometimes when we are constantly bombarded in the media by all the self proclaimed market  GURUS  and stock analysts sharing their opinions.  We also have to fight back our own personal biases and analysis of the stocks.  Every week it's a roller coaster with Mr. Trump tweeting creating uncertainty.  There is also virus to contend with and possible lockdowns.  Trucks are already rolling in as I write this post to distribute the vaccine that have been approved by the FDA. 

 

"Market   fools   the   majority"

DATA  doesn't lie and I find it best to let the data be the driver of our decisions.  Supreme courts have already ruled and on Monday December 14th, electoral college will cast their ballots declaring Mr Biden as our next president effective January 20th.  Market hates uncertainty and the uncertainty of our elections will be put to rest.  Market really doesn't care of anybody's opinions, religion or political bias.  As a retail trader and an investor, we are here to increase the size of our portfolio and mitigate risks in the market.

Scrutinize  Your  Process

We are at the tail end of the 3rd quarter earnings season.  That removes one of the risk factors going forward for the next 4 weeks.  One of the things to do over this week is:

• Harvest some profits if the stock has attained profits of +20% to +25%.
• Watch stocks that have fallen below the 21 day sma (simple moving average).
• Monitor stocks on your watch list that are doing better than the  $QQQ  or  $SPY.
• Have some  CASH  in your account to scale up in stock positions that are supported by the institutions at the 21 day sma.
• Mitigate risk if the market skips a beat and goes into correction.
• Always reduce your position prior to earnings report to avoid a nasty surprise.
• Have the discipline to follow your trade plan and cut your losses at  7%  or less.  

Performance  of  Stocks  On  My  Watchlist  

There were 10 stocks out of the 58 that I had published on Nov 4th  'Follow Thru'  day that I had highlighted.  They were showing signs of accumulation by the institutions.  One of the discipline that retail traders and investors ought to perform every week is to compare the performance of stocks on watch list against the performance of the  $QQQ  and  $SPY.  This way you are holding yourself accountable and fine tuning your process.  Here are the results:

1. $APPS   ... +17%
2. $FSLR   ... +8% (held up at 21 day sma)
3. $NIO     ...  +11% (Oct 29th post - made sizable gains. Took starter position $42.47 Dec 4th).
4. $PLTR   ... +155%
5. $PLUG   ... +61%
6. $ROKU   ... +53%
7. $SQ       ... +26%
8. $TTD      ... +46%
9. $U        ... +45%
10. $ZG      ... +29%
11. $SPY   ... +6.6% (General Market Performance)
12. $QQQ   ... +5.2% (Growth Stock Performance)

Average performance of my 10 strongest stocks is  +45%.   

 This amounts to 6.8 times better than the General Market and 8.6 times better than the Growth Stock performance. 

 I know I have a very strict process and criteria that enables me to identify the true leaders in the market.  Should the market correct like it did in 2018, I know there is plenty of cushion for me to ride out and scale down the positions.  On the other hand, should market consolidate and propel higher, I have a process in place to scale up in stocks that have earned me substantial profits.  $NIO is one of those stocks that I began accumulating once again last week.

Good luck trading this week

Happy Trading!

Amin