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