Portfolio  Management 

If you turn over 10 stones, you might find 1 attractive investment idea but if you turn over 100 stones, you might find 10.

By Peter Lynch (Manager of Magellan Fund 1977 - 1990)

One of the strict discipline that I have adhered to in trading Growth Stocks is to scan as many stocks as I possibly can every weekend.  It's not unusual for me to look over several hundred stocks over the course of the week.  Some of the things I look for in IBD (Investors Business Daily) charts is:

1. RS ratings above 92 (Indicates that the stock is a leading stock).
2. RS line attaining an all time high and pointing straight up between 12 and 3 dial of the clock (Strong up trending stock).
3. Sky scrapper volume on the stock chart (Suggesting a strong interest and commitment from the institutions).
4. Stocks trading above the 10 day sma (Simple Moving average).  It suggests that the stock is leading and in synch with the market that is in a confirmed uptrend.  
5. Stocks gapping up from a well defined base (Institutions bidding up the price of stock that has a limited supply of shares outstanding).
6. Stocks that are hitting all time highs and not budging when the market begins to correct (Suggesting that the institutions would prefer to hold on to this stock with a long term commitment to acquiring more). 
7. Stocks that are suddenly trading over $100 million in volume daily (price of stock X average trading volume) 

$CCIV  was one such stock that appeared on my scans on Monday January 11th.  It's a recent IPO with very little history of sales or earnings.  It woke up from its sleep trading over 100 million shares daily (33 times the average daily trading volume).  The price shot up over  +31.60%  from  $10.03 to $13.20.  One other stock in the same group of stocks  $ACTC  also acted in a very similar manner.  Both of these stocks triggered the IBD  "8 Week Hold"  rule.  Following is a brief synopsis of how this Growth Stock was managed and profits harvested to increase the size of portfolio in the last 3 weeks:

• Tuesday January 12th, 1st position with 50% position size was initiated at  $14.60.  First position is always the largest position to start out with a new stock.  Trading volume was over 100 million shares.  Institutions were showing a follow thru action on the stock.
• 2nd position with 25% position size was initiated at  $13.60 the same day when the stock was retracing from it's all time high of  $15.63.  Average price for both position was  $14.27.  Institutions had not let up yet and trading volume was still over 100 million shares.
• Wednesday January 13th, 1/3 of the total position was closed out at  $15.65  for a gain of  +8.82%.  Stock is already  +65%  from it's price of  $10.03  just 2 days ago.
• Thursday January 14th, institutions came in again with 140 million shares changing hands.  Stock traded as high as  $20.14 (100% gain within 3 days).  Another 1/3 of the position was closed out at  $19.00  for a gain of  +24.90%.
• Stock is very extended (50% above the 50 day simple moving average lines).  It will need time to consolidate for a few days to a few weeks. 
• Stock consolidated for just 5 days and on Friday Jan 22nd, institutions came in again buying the stock.  It went as high as  $22.67  with over 94 million shares changing hands that day.  2/3 of the remaining position was closed off at 2 different prices for an average price of $31.39.  Gain was  +35.71%.
• There is a small remaining position that is  +13.38%.  It will be held for the remaining 5 weeks to finish out the  "8 Week Hold" rule.  It will be evaluated at the end of that period.  If the market resumes it's uptrend and the stock is acting well, it would be wise to take additional position along the way.  Every additional position will have to be of a smaller size so as not to substantially increase the average price of the stock.

Currently IBD has changed the market pulse to  "Market Under Pressure"  as of Friday January 29th.  $QQQ  the leading Growth Stock Index has fallen off to the 34 day ema (exponential moving average).  $CCVI  in the mean time has been trading along the 10 day sma.  It has been trading higher while the  $QQQ  has been slicing through the 34 ema. 

Good rule of thumb to follow when managing your portfolio while investing in Growth Stocks is to harvest some profits when the stock attains gains of  +20%  to +25%.  Concentrate your portfolio to the leading stocks by getting rid of the laggards and utilizing that money to invest in stocks that are increasing in price.  

Happy Trading!

Amin

   

Harry Dent: 40% Stock Market Crash Coming By April (2021)

C A N S L I M

When I'm using the  CANSLIM  (Investors Business Daily system of Growth Stock Investing) to identify a particular stock, I like to take a position based on its momentum.  How do I determine momentum, you may ask?  I follow 3 simple steps as a part of my routine:

1.) Use The Most Recent Data

For starters, I pull up a 6 month chart on the stock to give me some insight on how the institutions are behaving.  I will look at the weekly chart to identify the bases but I will also look at the daily chart to identify appropriate ideal entry points.

"Keep in mind that institutions are highly informed and quite well versed in trading so their investment behavior has a significant impact on the value of a particular stock."

I use this same reasoning to help me pinpoint to my window of opportunity.  If the chart shows increasing volume over the most recent 30 day period, that means the big dogs are getting behind this stock.  For me, that's a really clear signal that my window of opportunity is approaching.  

Another key data point for me is the Relative Strength (RS) number and the (RS) line shown on IBD (Investors Business Daily) stock charts.  I use a very strict set of criteria on any position I am considering and for me, the RS line helps me to quickly identify whether a stock is a true leader of the pack.  If I'm seeing an 87 (RS) rating, that's still pretty good but I want to see 95 or above before looking any further into an opportunity.  IBD utilizes an (RS) line on their charts.  If I see that line at an all time high before the price reaching an all time high, my radar begins to hover over that stock.

2.) Don't Trade On Earnings

When it comes to earnings, there are two schools of thought.  Some people like to trade around earnings and have had a lot of success with it.  It's not something I choose to do, however, because it doesn't fit into my personal trade philosophy.  I think it really just boils down to risk management.

For me, the reason it's risky to trade around earnings is because you can't predict how institutions will react to the the information.  Even when a report looks good, institutions can react negatively.  I've always struggled to understand the "why" in these situations and since I can't really figure it out, I remove the variable.  I like to wait 2 sessions sometimes to evaluate the stock after the earnings report to confirm that institutions have really digested and settled down when the stock moves up +5% or more.

Quite often the leading stock will gap up  +10%  or  +20%  after earnings report.  As a general rule of thumb, I will hold on to a partial stock position if the stock in my portfolio has attained substantial profits.  It has to be in a very defined upward channel and not extended beyond the 8 day simple moving average line.  

Another thing that gives me a level of comfort is looking at other stocks in the industry group I am researching.  If they're running in the right direction - you better believe I am paying attention.  $NIO  is one such stock that came on my radar when everyone else was trading  $TSLA.  

   

3.) Trade During Uptrends

This is probably the most important factor in pin pointing my window of opportunity.  Given that my criteria are so strict, I need to make sure that the biggest market barriers aren't in my way.  Seeing the phrase  "Market in a Confirmed Uptrend"  in my IBD® Market Pulse removes the last barrier for me.  I don't really quite understand how currently IBD® uses the data it gets to make such a statement - but I trust it.  They have not failed me so far and I trust their data.  

With trading, there are variables all over the place and it's basically impossible to keep track of all of them.  Having a market in a confirmed uptrend means that I can settle down, tune out the noise, and get back to business - cultivating my watch list.  On Wednesday January 6th, we had a mob attack our House of Representatives and everyone in the world was glued to the tv coverage.  All my positions closed positively and my portfolio had one of it's best weeks.  We are in a confirmed uptrend currently with elevated   'Distribution days'.  All my current large positions - $RH, $PYPL, $NIO, $PTON, $PLTR are trading well above the 10 day sma (Simple moving average) and small starter position on $CCIV is above the 21 day sma.  Major indexex of  $DJI, $SPY and $QQQ  mean while just bounced off the  21  day sma and closed very near the tip of the line on Friday.  As I said in my blog post last week:

Market is apolitical

It is non religious

It really does not care for your opinion

Oliver Kell 2020 US Investing Champion

Oliver Kell - 2020 US investing champion had a remarkable performance of  +941%  return for the year 2020.  He utilized the Growth Stock investing strategy to fit his persona and what system he is comfortable with trading Growth Stocks.  Here is the link of the interview he had with Richard Moglen that was posted on utube on January 13th.  He is gracious and humble enough to point out all the mistakes he has made with his trades inspite of attaining a  +941%  gains in 2020.  It's a 90 minute video but worth every minute of it.  

https://youtu.be/eME0S4lwEz0

Happy Trading!

Amin

Don't  Follow  the  Herd 

Sam Walton on Innovation
"Swim upstream.  Go the other way.  Ignore the conventional wisdom"

Sam Walton, Walmart Founder

Wednesday January 6th is a day of infamy that most of us will remember for the rest of our lives.  Most of us in US as well as the rest of the world were glued to the tv news coverage that afternoon.  Market was open and trading continued as usual until 4.00 pm.  It would be a nerve wrecking experience to witness what was happening that day with the mob attacking our institution of the House of Representatives and the Senate.  The last time that happened was in 1812 when the British attacked us and assaulted our institutions and burned the White House down.  One would have thought that perhaps the market would take a deep dive that day. 

 None of that happened.   

Best thing that retail traders and investors should have been doing that day was to ignore the tv news coverage and all the chatter on social media.  I know a lot of traders took off some risk off the table and closed out some winning positions.  They allowed the events unfolding live on the tv screen affect their decisions with the stocks.  

Market is apolitical

It is non religious

It really does not care for your opinion

That would be contrary to what most retail traders were doing and thinking that day.  $SPY  was  +0.6%  with trading volume 20% higher than average daily trading volume that day.  My largest position  $RH   (read my blog post of October 22nd) was  +4.46%  that day.  All my other large stock positions  $NIO  (read my blog post of October 22nd), $PTON  and  $PYPL  did not budge much that day.  They all remained above the 21 day sma (simple moving average).  

2021  Will Be A Positive Year

January of 2021 has started off with a big bang and lots of Growth Stocks are getting extended.  Market has certainty with the confirmations from the electoral college votes with Mr. Biden taking office on January 20th.  My portfolio is concentrated to just 4 stocks and 2 Growth Stock Indexes (use that to park my profits from harvesting partial profits from my other 4 stocks).  They all had a stellar performance this week as shown below:

1. $FFTY   ... +4.58%
2. $NIO      ... +21.17%
3. $PTON   ... +4.02%
4. $PYPL    ... +4.07%
5. $RH        ... +8.60%
6. $QQQ     ... +1.75%

We are heading into the earnings season this week.  Stocks tend to react violently - up or down - during earnings report.  This would be a good time to lock in some profits if any of the stocks have gained  +20%  to  +25%  or more.  Have  CASH  available to scale up winning stock positions if and when they bounce off the 50 day sma or gap up during the earnings report.  I did just that with  $NIO  initiated at  $42.47  on Dec 4th.  Stock broke out past $57.30 buy point in volume that was  +40%  higher than daily average trading volume.  Partial position was closed at  $58.15  for +36.92%  gain in 5 weeks.  Earnings is not due for another 5 weeks.  

Happy Trading!

Amin

Why  I  Trade  Growth  Stocks 

I am a Growth Stock Investor and I follow Mr. William O'Neil's (founder of Investors Business Daily) methodology of trading Growth Stocks.    Studies by IBD has shown that Growth Stocks tend to perform  2 to 2.5 times   better than the average performance of the market, as measured by the performance of the $SPY.  Basic and very simplified strategy involves:  

1. Buy  "High and Sell Higher".
2. Do not   "Buy and Hold".
3. Do not  "Buy Cheap Stocks".
4. Buy  "Right and Sell Right".
5. "Harvest Profits"  as the stock moves higher.  Sell into strength.
6. Use  "Trailing Stops"  to protect profits and mitigate losses.
7. Concentrate the portfolio to a few leading stocks and don't diversify.
8. Get rid of the laggards in your portfolio and use the proceeds to invest in the leaders in your portfolio.
9. Mitigate risk by reducing the position size during earnings report.

For the year 2020, Growth Stock Index  $QQQ   is  +47.63%  while the General Market Index  $SPY  is  +16.16%.  Growth Stock Index has out performed the general market by  2.95  times. 

 

Studies of IBD has shown that most growth stocks that are fundamentally and technically sound, tend to rise  +20%  to +25%  and then form another base.  Stocks will move sideways for a while to digest these gains before they start making another run higher.  This is the behaviour of the institutions on display.  They have to accumulate a large position in the stock of their choice and it takes them several weeks to accumulate their entire position.  For retail investors, it's quite OK to take these profits and and use the proceeds to invest in other growth stock. 

One of the emotions that we as retail investors have to constantly deal with is the GREED factor.  It's a euphoric feeling when the stock attains a profit of  +20%  to  +25%  within a couple of weeks or less.  Just accept the fact that as a retail investor, you will never sell your stock at the very top or for that matter buy it at the very bottom.  Learning to sell your stock into strength takes a lot of discipline.  Market will be volatile heading into the new year.  February is traditionally one of our worst months of the year.  Earnings season will be upon us in 2 weeks.   I just have to remind my readers that one of the biggest risk with exposure to stocks is TIME.  The longer you have your stock position with profits in the market, greater the risk you are exposed to of the market retracing and giving up the profits on your stock.  

https://youtu.be/yFBFtGziGYo

I am taking the liberty of attaching the video that in my view is the best way to give one an over view of what the IBD system of trading is.  I have watched this video multiple times and I use it as a reference to help guide me.  Host of the show is Mr. Joseph Fahmy (an educator and an investment advisory representative at Zor Capital LLC).  Participants are Tom canfield (Very successful Fulltime day trader that utilizes the IBD Marketsmith tool) along with Irusha Peiris (Product manager of Marketsmith and the host of IBD podcast) and finally Mr Mike Webster (renowned and very successful former Portfolio Manager at IBD)

Happy Trading!

Amin