Simple    Moving    Average    Lines

"We've all heard the saying, 'timing is everything'. This is just as true in the stock market as it is in life. Knowing the optimal time to buy or sell a stock is a valuable skill anyone can and should learn" 

By Willian J O'Neil (Founder of Investors Business Daily)

Simple moving average (sma) lines are very simple tools to use for taking a position in a stock but also to exit a position for profit as well as exiting the position to mitigate loss.  Institutions account for more than 70% of the trading volume in the stock market.  Ultimately it is them that determine what the stock price is going to be.  If they  decide to enter a stock position, it may take them several weeks to accumulate the entire position.  Stocks will show that by having the price of the stock staying close to the faster moving 10 day and 21 day sma.  Conversely, if they decide to exit the position, it will show up as high volume of stock trading and the price will begin to get depressed lower.  It will show up as the  faster 10 day and the 21 day sma heading lower towards the  slower moving 50 day sma.


50 day moving average line is one of the most closely watched lines by the institutional investors.  Once the stock approaches this line after trading above the 21 day sma, retail investors ought to pay attention to see if the stock gets supported by the institutions at this level.  Institutional buyers will come in with huge volume buying to pick up these shares when they are committed to the stock.  One of the clues to look for during  'distribution days'  is to determine if your stock is being supported or disposed of by the institutions.  If your stock is supported and it bounces off the 50 day sma in volume considerably higher than the average daily trading volume, one might want to consider initiating a new position or adding on a second position in the stock.

$RH  Scaling Up

Scaling up the stock position and concentrating your portfolio to just a few leading stocks is the key to Out Performing the general market.  Most retail traders that have a portfolio size of $100,000 to $1,000,000 probably should not have any more than 5 to 8 positions.  It's ok to start out with a few more positions when the market has a  'Follow Thru'  day but within 2 weeks or so, one should immediately identify the ones that have the strength to ride above the 21 day sma(simple moving average).  Close out the positions that are lagging and force feed the $$$ from them to the ones that are propelling higher.  It takes a lot of skill to master this technique.  Mr Willam J O'Neil  has demonstrated this and he quite often had a heavily concentrated position in just 1 stock.  He accomplished this by adding to his original position several times along the way as the stock continued to show strength.  

$RH  was the stock of my choice when we had a  'Follow Thru'  day on April 8th 2020.  Total of 18 positions were initiated to date.  Following is the performance of each position as of May 21st 2021 (58 weeks):

1. 4/8 ... 110.56 (548%) Largest initial position
2. 6/8 ... 250.00 (242%) 2nd largest position
3. 7/1 ... 250.00 (242%) small addition
4. 8/26 ... 320.00 (189%) very small addition
5. 10/5 ... 375.00 (162%) smaller addition
6. 11/6 ... 387.50 (157%) smaller position
7. 11/13 ... 397.00 (153%) scaling in with fewer n fewer shares
8. 12/11 ... 433.15 (140%) adding a few more shares and not raise the average cost substantially
9. 1/25 ... 489.88 (124%) very small addition
10. 1/25 ... 499.00 (121%) added a few cause stock was acting very well
11. 2/12 ... 488.76 (124%) added a few with a tight base consolidation
12. 2/16 ... 483.02 (125%) added a few with a tight base consolidation
13. 2/17 ... 476.51 (127%) added a few stock as stock is consolidating
14. 2/24 ... 508.98 (119%) added a few as stock is trading along the 8 day sma (sign of strength)
15. 2/25 ... 495.86 (122%) added a few since stock is holding up while  $QQQ  has been correcting
16. 5/19 ... 617.03 (-0.20%) added small amount since stock bounced off the 50 day sma
17. 5/20 ... 609.66 (-2%) added small amount since stock hovering at 50 day sma
18. 5/21 ... 606.98 (-0.17%) added a small amount since stock is held up at 50 day sma

Mentoring Program

If you are seriously considering getting up to speed with learning about Growth Stock Investing and trading, Zoom weekly live Meetup session may be one of the best ways for you to:

1. Look over my shoulder every week as I go through the process of looking for stocks of interest.
2. Analysing the stock charts to decipher the institutional behaviour.
3. How to Annotate stock charts on the brokerage platform for future reference.
4. Going through the Investors.com website to extract some fundamental and technical aspects of the stock.
5. Developing an appropriate Trade Plan for the stock.
6. How to position size when you take an initial stock position or add to the existing position.
7. Look over some of the conservative option setup to consider to either protect your stock or to increase the profitabilty for slight moves in the stock.

It will be a monthly subscription based service with a blog post weekly to help keep the subscribers abreast of the stock positions taken.  Subscribers will have the opportunity to present Growth Stocks of interest every week that they would like for me to highlight. 

Class size will be limited to few students  to enhance the experience of active engagement with homework assignments.  Currently I am soliciting prospective students that could benefit from this start up Live Zoom Sessions starting in mid summer season.  Sessions will be recorded and archived  and will be available as long as you are a subscriber.  Launch date would be in mid July.  

Send me an email at: 

investorspotlight@gmail.com 

if you would like to participate in this subscription service and start your profitable investing journey with my guidance and mentoring.

Happy Trading!

Amin Hemani