Bulls and Bears Stand Off

In my post last week, I had highlighted my studies on  $QQQ  index.  I indicated that after the index makes a 15% gain in 6 weeks, it trends sideways to digest the gains.  $QQQ  is still the leading index of the 3 that I monitor  ($DJX, $SPY, $QQQ)   Currently the market is at a stand still and not making much progress.  Market is still in a  "Confirmed uptrend "   We have how ever,  accumulated 10  distribution days  between the S&P 500 and Nasdaq.  That is something of a concern.  Bulls and the bears are facing off each other in the current market.  $SPY  and  $DJX  have been trading side ways for the past 5 weeks in a very tight and orderly manner.   $QQQ  on the other hand has been trading sideways even more tightly and orderly between 117-118   This is a bullish sign for the market.   Bears could however just as fast, claw the market as it did in June of this year.  All the three indexes sliced down past 50 day sma (simple moving average) all the way down to  200 day sma  within just a few sessions. 

Sector Rotation is Occuring

Institutions are very good at holding their cards close to their chest.  It takes some analyses of the sector etf's to determine where they are deploying their profits.  As a retail investor, We want to follow their lead because ultimately, they are the ones that account for 80% of the market moves on any given day.  In the month of August  (last 3 weeks)  $XLE (Energy)  has outperformed the general market by +4.5%  while the 3 indexes have been trending sideways.  $XLI  (Industrial)  + 1.69%  and  $XLF  (Financial)  +1.5% are the next in line.  

Stocks on My Watch List

Earnings is pretty much out of the way with a few retail, restaurants and some tech names due to report earnings this week.  The only headwinds facing the market is Janet Yellen with her colleagues at the Jackson Hole meeting in Wyoming later this week.  Financial sector will be facing some risks of uncertainty since no one knows what they will decide or say.  I have the following list of stocks for my followers to review.  I took the liberty of highlighting what their performance has been since August 1st:

1. $PE      +19.2%
2. $WMB  +15.5%
3. $USO   +16.0%
4. $EOG   +12.3%
5. $PXD   +12.3%
6. $CLR   +10.6%
7. $CXO   +7.9%
8. $HAL    +7.3%
9. $COP   +6.1%
10. $FANG +2.3%

Virtual Trades

Some of the students that I mentor, came up with the following stock trades that they placed as virtual trades to practice their trading skills.  Please follow along with them and learn from their trade ideas.

1.  $EW Buy  @ $114.89 10% profit and -5% loss target (8/15/16)
2.  $VIPS Buy @ 15.60 8% profit and -4% loss target (8/22/16)
3.  $LN Buy   @ 46.00 10% profit and -5% loss target (8/22/16) 

Mentoring Service

If you would like to schedule a FREE 30 minutes of  'Discovery Call'  to explore our mentoring service, please contact us at:

investorspotlight@gmail.com

We are in the process of opening up limited slots for  September 

sessions.  Reserve them before they are gone.

Happy Trading!

Amin

All 3 Major Indexes Hit All Time High

In the past 4 weeks I have been approached by a lot of my followers on tweeter, linkdin, subscribers to my weekly blog and students in my mentoring program.  They indicated to me that that they missed the clues on July 1st when IBD  (Investors Business Daily)  called  "Market in Confirmed Uptrend"  Most traders were stunned by June 27th when the $SPY had dropped -5% within 2 days in trading volume 300% above average daily volume.  All the 3 indexes that I monitor - $DJX, $QQQ and $SPY - were trading below 200 day sma  (simple moving average)  We had distribution days where the institutions were taking their profits and taking risk off the market.  We were all concerned about the effects of Brexit at that time of course.  Most retail traders were in a very defensive posture. Disciplined traders ought to have been in CASH at that time and lot of my followers just did that.

Most of us were preparing for the July 4th long weekend when the market had tumbled on Monday June 27th.  All the 3 indexes surged the next 3 days after that and gapped up for 4 sessions in a row. This was a very powerful move in the market.  Every trader should have had a ready Watch List of stocks to trade when this occurs.   Most growth stocks will make their initial move as soon as the market exhibits strength.  Institutions were taking large positions after having harvested their profits earlier.  It takes them several weeks to accumulate their full positions.  Retail traders are nimble and one should have just followed what the trend was indicating and the trend was very bullish and very strong.  Institutions were signaling to us that they were ready to commit major $ to stocks.  

Will Market Continue Trending Higher ?

This weekend I did a thorough analyses of the market to see where we have been in the past and where are we likely to be headed in the near term.  Market is all about human behaviour and quite often the past performance of the market gives us clues as to what the future might look like.  Currently  $XLK (Technology) has been the leading sector since the June 27th lows (+13.71%)  I did a study on $QQQ index and here is what I noticed:

• $QQQ surged 15% in 6 wks from Oct  2014 Low
• $QQQ surged 15% in 6 wks from Sept 2015 Low
• $QQQ surged 15% in 6 wks from Feb  2016 Low
• $QQQ surged 15% in 6 wks from June 2016 Low

Does History Repeat?

After such a move, the market trended sideways to digest the gains and eventually retraced back down to the 50 day sma.   Could this happen again?  Time will tell.  I would however trade the trend and the trend is bullish right now.  Market just doesn't go up forever.  Even in a bullish trend, there is a counter trend and stocks do retrace.  Disciplined traders ought to have trailing stops on their winning positions and cut the losses short as soon as it meets the predefined loss exit conditions. 

Stocks on My Watch List

Currently there are quite a few stocks that are leaders in the market but they have earnings due in the next 2 weeks.  It is best to avoid them since earnings surprise could be a positive or a negative for the stock performance.  It is a risk that one should avoid.  We also have major retailers like $TJX, $ROST, $DKS, $TGT, $WMT, $LOW, $HD, $FL, $LB, $GPS reporting earnings this week.  Most brick and mortar retailers have not done well during back to school season although $M, $JWN and $JCP surprised us and they surged after the earnings report.  These retail stocks will influence the market this coming week.  They are a component of Consumer Discretionary Sector ($XLY) which has been up +9.67% since the June 27th Lows and is one of the 4 leading sector.  

Following are the stocks I have on my watch list:

1. $AMZN
2. $GOOGL
3. $LMT
4. $FB
5. $EW
6. $AYI
7. $BABA

These stocks are fundamentally very sound and they are showing technical strength.  They are accumulated by the institutions in the last 30 days.  Once again, I prefer to focus only on those stocks that exhibit RS ratings above 90

Mentoring Service

If you would like to schedule a FREE 30 minutes of discovery call to explore our mentoring service, please contact us at:

investorspotlight@gmail.com

We just have a few spots left for August.  Reserve them before they are gone.

Happy Trading!

Amin

 

Market Performance

Historically, June and July are the worst performing months in the market.  Trading Volume during the summer months is low too. Brexit occured on June 23rd and the market plummeted 5% within 2 days with volume 2 times the daily average.  I quickly changed my sentiments of the market towards a bearish stance since all the 3 major indexes that I monitor - $DJX, $SPY and $QQQ -  had dropped below the 50 dma (daily moving average)  That is an appropriate thing to do when the market makes such a dramatic move.  One needs to preserve the capital and it is prudent for retail traders to raise CASH.  Monday morning June 27th, the bears were still in charge.  Tuesday morning the market brushed off the Brexit risk and the 3 major indexes gapped up the following 3 days.  Market was up 5% within 3 days from June 27th lows and IBD called "Market in Confirmed Uptrend"  According to IBD rules, one must buy something and dip their toes in the market to test out the new trend.  This requires a trader to have a ready Watch List of Stocks at a moments notice.

Current Market Outlook

Currently the market is still grinding higher.  We have surged past the highs we had in May 2015.  Institutions are harvesting their profits from gold mining, utilities and dividend paying stocks and investing in technology, health care, material, financial and consumer discretionary stocks.  There is a distinct sector rotation occurring right now.  As a retail trader, we also must start harvesting our profits from defensive stocks and deploy them into sectors that institutions are rotating into.  Last week of July we had the tech titans $AAPL, $GOOGL, $FB and $AMZN, report earnings. They account for over 25% of the NASDAQ index.  In my July 24th post, I had highlighted $QQQ to reach 119 as a near term target.  We are just 2% away from that target now.  I still have a bullish outlook for the coming week.

My Stock Watch List

1. $PE
2. $EBAY
3. $ISRG
4. $SPGI
5. $AMZN
6. $MHK
7. $MBLY

These stocks are currently accumulated by the institutions and most of them have an RS rating above 86.  I prefer only the ones that are above 90  Some of them are however good candidates for an option trade.  Earnings surprise is out of the way since they have all reported their 2nd quarter results.

Trade of the week

If you would like to follow along with me on one of my Credit Spread Option Trades on $QQQ to learn and practice with a simulated  "Virtual Trade"  than here are the details of the trade:

$QQQ August Credit Option Trade Buy 115 put and Sell 116.5 put for total Credit $41:$109 Risk per contract

Manage the trade to harvest profits @ 80% of targeted Credit or if the index trades above 118  Conversly, close out the trade for a loss of $55 or if the index trades below 115

This will be just 2 weeks in the trade. Good Luck.

Mentoring Service

If you would like to schedule a FREE 30 minutes discovery call to explore our mentoring service, please contact us at:

investorspotlight@gmail.com

We have just a few spots left for August.  Reserve them before they are gone.


Happy Trading!

Amin

Minimize Risk During Earnings Season

We are heading into a very busy earnings report this week from the titans like $AAPL, $GOOGL, $FB, $AMZN, $KO, $MCD, $AMGN, $TWTR, $MBLY and $EW.  Major oil companies that have been beaten down for the past 24 months will also be reporting their earnings this week.  The tech titans trade huge volume of shares daily and they account for over 25% of the total $ volume traded daily on the $NASDAQ.  They will move the market for sure.  How stocks react to earnings and the guidance going forward is anybody's guess.  It is speculative and risky for retail traders to be holding onto the stock positions during earnings unless it is collared with selling a call and buying a put.  I lower my risk of losing my profits by closing the positions prior to earnings report release.  This is always built into my  Trading Plan

Below is a list of stocks that were on  My Watchlist  that I highlighted in my posts in June and July.  I have indicated entry price and profits made when the positions were closed off.  If you have been doing  Virtual Trades   that I have been suggesting to my followers to practice trading and sharpening trading skills, this will also be the time to make detailed entries of the trade in the journal.  This will allow you to look over your trades in future for valuable lessons learnt in trading.  Brexit  was a bonanza for some of the traders since devaluations of the Euro and British Sterling Pound currencies enabled the Gold miners to shine during several weeks of uncertainty.

Stock Positions Closed for Profit

1. $AU  $15.96 closed 7/1  for 19.30% profit in   4  wks
2. $ABX $19.73 closed 7/12 for 9.98%  profit in 5.5 wks
3. $GDX $25.13 closed 7/12 for 16.99% profit in 5.5 wks
4. $OKE $44.33 closed 7/13 for  9.00% profit in 4    wks
5. $AEM $48.47 closed 7/20 for 10.00% profit in 6.5 wks
6. $NEM $34.99 closed 7/19 for 18.29% profit in 6.5 wks
7. $SLW $20.39 closed 7/22 for 28.25% profit in 6  wks
8. $BGS $44.00 closed 7/22 for  7.68% profit in 6  wks 

Market Outlook

Currently my sentiments is very bullish. July normally is a dull month and the market just does +0.32%  when you look over the average the past 50 years.  This year it surprised most traders and most were caught off guard.  Institutions have been investing their profits into defensive utility names and dividend paying stocks.  That all changed at the end of June and the overall market surged 4% in just 4 days.  That is a very powerful move by the indices.  In the last 4 weeks :

• $DOW  is +8.35%
• $SPY   is +8.00%
• $QQQ  is +10.00%

Market has been very resilient for the past 7 sessions and indices has been trading within a very narrow range.  We have only 2 distribution days each for $SPY and $NASDAQ.  Most companies will be reporting their earnings in the next 3 weeks and we are starting off with some titans reporting this week.  100 of the S&P 500 companies have reported earnings so far and the market has reacted very positively towards it.  Charts of the 3 major indices that I monitor  ($SPY, $QQQ, $DJX)  look very similar to Oct 2014, Oct 2015 and Feb 2016 when the indices surged more than 10% within 6 weeks from the lows.  Momentum in the market is very strong and I have my sights set on the following targets for the indices in the next 4 weeks

• $QQQ 119
• $SPY  225
• $DJX  19,300

Option Trades

Most of the growth stocks that are on my radar are extended with the surge in the market we experienced the first 2 weeks of July. My post last week I had presented a detailed case study on $NVDA that was extended and where I highlighted the use of Credit Spread Option trades to squeeze some profits every week from a stock that continues to be accumulated by the institutions and maintains an RS rating of 98.  I also mentioned $ULTA as a possible candidate too.  This stock is extended but consistently shows up on the IBD  (Investors Business Daily)  sector leader screen, reaching new highs with RS line pointing up.  You might want to examine similar trades utilizing the 3 major indices that I monitor.  Do as many virtual trades as you can to learn how best to identify the right option strategy to profit from the momentum in the market.  

Last Wednesday I had placed Credit Spread Option Trade on:

 $SPY July (week 5) sell 216.5 put and buy 214.5 put for Credit $52:$148 Risk per one contract.   

On Monday I also placed a very similar trade on :

$NVDA July (week 5) sell 52 put and buy 51 put for Credit $31:$69 Risk for one contract.  

I never ever do naked option because that would be unlimited risk and I am all about mitigating risk in the market.

Happy Trading!

Amin

Follow me on tweeter @spotlightamin to keep yourself current daily on what is happening in the market.

Low Risk Trades on $NVDA

In my post last week, I had indicated that I will share with you 

Low Risk Trades utilizing Option Tools on $NVDA. This stock met all my criteria for the most minimums I look for in an IBD style growth stock. In the month of May, it was :

• In the Top 40 IBD (Investor's Business Daily) group
• RS and EPS ratings were in the high 90's
• Accumulation/Distribution rating was B+
• Up/Down volume had been 1.4 and increasing every wk
• Shares traded was over 10 million daily
• Share price was above $35 ($350 million trading daily)

Earnings was due on May 13th. It is always risky to buy stocks ahead of earnings because the stock could either be supported or dumped by the institutions. That is a risk I am never willing to take. Earnings was good and the stock surged over 22% in less than 4 trading sessions. Institutions came in with buying volume when the market opened on Friday May 13.  Stock gapped up 15% in volume 500% above average daily volume. They continued buying the stock with 200% above average daily volume for the next 4 sessions. 

8 Week Hold Rule

I follow IBD rules with growth stocks and the rule states that:

"If a stock surges more than 20% in less than 3 weeks from its buy point, you should hold it for 8 weeks"

Mr William O'Neal made this rule because he found that stocks that are heavily supported by the institutions, will let the stock digest its gains for 8 weeks and slowly add to their positions soon after. $NVDA has shown a history of consolidating gains of 10% to 15% during earnings for a couple of weeks and than continue to go higher soon after that until the next earnings. It is disappointing as a retail trader to miss out on an opportunity with $NVDA to make over 28% gains within just 14 sessions. All is not lost because one can utilize Options as a tool to capture profits that you missed in a stock such as $NVDA 

Credit Spread Option Trades

$NVDA was still meeting all my stock selection criteria on May 25th except that it was extended beyond its buy point and there was a risk of stock retracing. I wasn't willing to risk $4600 buying 100 shares of stock at that time. Since it was a stock that was on an 8 week hold rule, utilizing short term Credit Spreads offered me a low risk (less than $350 @ risk) to attain a profit of $100 to $150 in less than 10 to 15 sessions (3 weeks) $NVDA has options offered every week since it is such a heavily traded stock. Here is a summary of 5 Credit Spread Option Trades done on $NVDA

1. May 25th Trade June sell 44.5 put Buy 42.5 put 2 contracts $110 Credit:Risk $290
2. May 27th Trade June sell 45  put  Buy 43  put 2 contracts $100 Credit:Risk $300
3. June 13th Trade June (week 4) sell 45.5 put Buy 44.5 put 5 contracts $155 Credit:Risk $345
4. June 20th Trade July (week 1) sell 46 put buy 45 put 5 contracts $155 Credit:Risk $345 
5. July 1st  Trade July sell  46.5 put buy 45 put  3 contracts $138 Credit:Risk $300

I harvested profits of 92% on an average of the total credit planned. There was never more than $350 at risk in a trade at any given time. Profits were harvested from one trade and rolled into the following trade. Total profits was $600 in 6 wks. Stock only had to move up or down just a point. 

This is how I utilize options to profit from a stock that is extended but consolidating between earnings. You may want to scrutinize $ULTA which has very similar chart patterns as $NVDA

Happy Trading!

Amin

Follow me on tweeter @spotlightamin to keep yourself current daily on what is happening in the market.

Harvest Profits Now

The worst time period in the market is from May through September. Over the last 50 years, $SPY has averaged less than 0.13% in these 5 months. This is the time of the year traders should have little exposure in the market. There are growth stocks on  My Watch List  every week and I only take a very small position when the market is in a confirmed uptrend. I also do a lot of Virtual Trades to keep my trading skills sharp and to test out some new strategies. 

As a trader, you are looking for a Return on Your Money but I look for  Return of My Money  during the summer months. Growth stocks this year have returned 5% in most cases and rarely have they given us more than 10% profits. I have targeted 6% to 10% profit targets in my trade plans for stocks on my watch list and -3% to -4% as a loss exit. When my profit targets are met, I will have trailing stops in place if the stock continues to exhibit high RS ratings and trading above 21 day ema.  This is how I view Return of My Money

Leading Growth Stocks

I have highlighted over 50 growth stocks in my blog and tweets in the past month to alert retail investors like myself who are managing their own trading account. These are the stocks that the institutions are buying. They account for over 75% of the stock market activity. That is one reason why I look at stocks that have an RS ratings above 90 and trade more than $100 million daily. Market has been bullish last week and $SPY, $DOW and $QQQ are approaching their all time highs. It is a euphoric phase we are going through right now. GREED  is beginning to set in. This is the time to give your positions a second look and harvest profits or adjust your trailing stops. Quite a few of these stocks are getting extended. The worst thing you can do is to give back these profits. Here is a list of these stocks:

• $AEM
• $NEM
• $ABX
• $GDX
• $SLW
• $RGLD
• $BGS
• $OKE
• $DG
• $AWK
• $NI
• $SJM
• $WEC
• $DG
• $DLTR
• $ALGN
• $MO

Stocks on My Watch List

1. $MLM
2. $VMC
3. $SWHC
4. $ULTA
5. $NVDA

I am looking for low risk trades utilizing Option strategies this week. I shall review a case study on $NVDA in my next blog and share with you how to go about having little exposure of your $ in the market to profit from growth stock that the institutions are supporting.

Happy Trading!

Amin

Follow me on Tweeter @spotlightamin to keep yourself current on what is happening in the market.

Trade Plan

In my weekly blog, I highlight and share with my followers stocks on my watch list. It is a short list of 10 stocks or less. These are the best of the best candidates that have an RS rating of 90 and above and trading above the 21 day ema. They are stocks that are highly favoured by the institutions and they trade over $100 million daily. These stocks tend to be less volatile and the ones I prefer to trade because of their liquidity. 

In the month of June, I was asking my followers to do Virtual Trades (trading on brokers virtual platform without actual money at risk) to get practice at trading before actually executing a real live trade. I laid out a trade plan with entry price, profit target and a loss exit target for 19 stocks during the month. Some of my followers were sharp enough to follow the trade plans and adjust their profit targets up with the use of trailing stops. There were others who had losses of 3% to 4% but did not follow the trade plan for losses. They ended up with losses in excess of 10% and decided to just give up on the market. Planning a trade and trading your plan is the key to success in trading. One of my students made a remark to me a year ago  "No Plan, No Trade" 

Summary of Performance in June

I am a firm believer of Trade Plans and I just don't execute any trades until I have firmly established attainable profit targets. All stocks are bad unless they go up. Stocks performance is at the whims of the market conditions and that can change at a moments notice. Three weeks ago we had a pathetic jobs report and two weeks ago we had to deal with the uncertainties of Brexit. Lot of good stocks rolled over but than again some of them went counter trend. Last week US market made up all the losses that we suffered in the previous week. This week I thought it might be a good idea to share with my followers, all the successes and failures of 19 stocks that I shared last month with my entry and exit targets.

Losses: (closed)

1. $EDU  -3% 
2. $NTES -4%  
3. $AYI   -3% 
4. $FB    -3% 
5. $CTXS -3%
6. $ZBH  -3%
7. $MAS  -3%
8. $AVGO -4%

Profitable:

1. $MXL  +6%
2. $ALGN +5%  (open)
3. $BGS  +8%   (open)
4. $DG   +7%   (open)
5. $OKE  +8%   (open)
6. $AU   +19% (open)
7. $ABX  +12.6%(open)
8. $AEM  +14.7%(open)
9. $NEM  +15.3%(open)
10. $GDX  + 15.6%(open)
11. $SLW  +27%  (open)

Lessons Learnt

There were 19 stocks that I highlighted with specific entry point as well as profit and loss targets. I had a 47% loss rate and 53 % win rate with my stocks. It is just like a coin toss (50/50 chance) but I managed to have my losses controlled within my loss targets and managed my profit targets to take advantage of stocks that continued to trend higher. 

There were 8 stocks that amounted to losses of 26% and were closed off with contingent orders in place. This way I got my emotions out of the way and just allowed my trade plans to get executed. I had also 11 stocks that amounted to 138% profits. Most of those trades are still open with a trailing stop in place. Overall I am showing 112% return for the month. The most important lesson that I learnt in June is:

1. Keep your losses 3% - 4% from the entry point
2. Plan profit targets 6% - 10% from entry point
3. Trade only stocks that are trading above 21 day ema
4. Trade stocks that have an RS ratings of 90 and above
5. Use trailing stops for stocks that have attained initial profit target.

My Stock Watch List

• $NVDA ($47.64)
• $SJM   ($147.51)
• $DLTR  ($92.27)
• $MO    (66.23)

Currently $SPY is approaching 211 which is a major resistance area. Market is in a confirmed uptrend according to IBD and one has to be prepared to enter the market with small positions initially. We also have earnings season with $PEP and $WBA reporting this week. 

Happy Trading!

Amin