C A N S L I M
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
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