Follow   the   Institutions

"Wanting too much, too fast - without doing the necessary preparation, learning the soundest methods, or acquiring the essential skills and discipline - can be your downfall."

By Mr. William J. O'Neil (Founder of Investors Business Daily)

I have quite often mentioned that the institutions - hedge funds, pension funds and the mutual funds - are the ones that account for over 75% of the daily trading volume that occurs in the stock market.  They are the ones that ultimately determine the price of the stock.  We as retail investors have to learn to read the clues that the institutions leave behind by studying stock charts.  It's hard for them to hide their intentions when they are investing several hundred million dollars over a period of several weeks to acquire the size of a position in a stock of their choice.  It's equally hard for them to hide their intentions when they start to dispose of a stock that is out of favour with them.

In my post last week I had compared the performance of 2 retail stocks - $JCP  and  $AMZN.  Market has been correcting for the past 3 weeks because the institutions are harvesting profits.  Last week the leading Growth Stock Index  $QQQ  corrected  - 2.67%  but  $AMZN  corrected  - 2.45% (less than the index did).  $JCP  on the other hand corrected  - 18.42%.  It had already corrected  -98.69%  since the highs achieved in Feb of 2007.  $JCP  is now trading at  93 cents  while  $AMZN   is hovering at  $1823.00.

Ouch !  ouch !  ouch ! 

Buying LOW and selling HIGH certainly didn't work with  $JCP.

Buying HIGH and selling HIGHER certainly did work with  $AMZN. 

Institutions usually take several weeks to accumulate the full size position in a stock of their choice.  That is why the price of stock gradually keeps getting higher over a period of several weeks.  This is one reason why buying the stock at correct buy point as identified by IBD is the prudent thing to do.

Game  Plan  for  This  Week

I hope everyone enjoyed celebrating the 3 day  Memorial Day  weekend.  Market is in correction right now but we have already experienced 3 days of rally attempt in the market since May 14th.  No one knows what the market will do in the coming weeks.  We could just as easily have a  "Follow Thru"  day if the   $QQQ  or the  $SPY  moves up  + 2%  in above average volume in the coming days.  Don't fall into the trap with the common perception in the stock market that says  "Sell in May and Go Away".  In 2018 we infact had a  "Follow Thru"  day on May 4th, July 6th(right after the July 4th celebrations) and  August 7th.

The 3 major indexes - $DJI,  $SPY  and  $QQQ - are all hovering above the 50 day sma(simple moving average).  We had 3 days of attempted rally after attaining the lows on May 13th but the indexes were dragged down back to those lows by Friday May 24th.  There were however some Growth Stocks that did not retrace as much as the 3 indexes did.  Some of these stocks are still above the 20 day sma.  That indicates a clear preferance from the institutions for those stocks.  Some of these leading stocks that are trading above the 20 day sma and indicating a high RS ratings by IBD (Investors Business Daily) are:

1. $CYBR   ... $129.74
2. $LULU    ... $174.64
3. $MA        ... $249.85
4. $MNST   ... $  59.69
5. $NOW     ... $269.27
6. $OLLI     ...  $  99.42
7. $PAYC   ...  $203.20
8. $PYPL   ...  $108.54
9. $TEAM    ... $125.31
10. $TWLO    ... $133.32
11. $V            ... $163.03
12. $VEEV     ... $139.75
13. $VMW     ... $200.13
14. $ZS         ... $  70.90

I have indicated the resistance points next to the stock symbol.  They will change as the market progresses this coming week.  Consolidating for the coming week would be a good thing for these stocks.  It may provide a better entry for an initial small purchase or to add to the position you may already have when we do get a  "Follow Thru"  day.

Mentoring  Program

I shall be opening up a few slots over the summer months in my Mentoring Program.  June thru September are slow months usually in the market.  Historically our best quarter is from October thru Dec.  Now is an ideal time to learn to trade and invest utilizing growth stock strategies of IBD(Investors Business Daily).

Schedule a  FREE  30 minutes of  "Discovery Call"  with us and learn the basics of reading the Stock Charts:

• How to find the winning Growth Stocks?
• How to Buy the Stocks Right?
• How to Sell the stocks Right?
• How to TIME the market?
• How to protect and harvest your profits? 

Contact us at:

investorspotlight@gmail.com

Happy Trading!

Amin

Follow  the  Institutions

The hard - to - believe Great Paradox in the stock market is: 

"What seems too high and risky to the majority usually goes higher eventually, and what seems low and cheap usually goes lower."

By William J. O'Neil (founder of Investors Business Daily)

Institutions like hedge funds, mutual funds and pension funds are the power houses in the stock market.  They are the ones that account for over 75% of the daily trading volume in the stock market.  When they decide to bail out of the stock, we as retail investors better listen to what the stock charts show and just get out of the way before we incur massive losses that makes it hard for us to recuperate from.  In the same manner when institutions decide to accumulate the shares of a stock of their choice, you better learn to read the clues they send out like increasing volume and increasing price of the stock.  One very clear case to highlight this concept is to look at the price performance of 2 well known retail stocks - $JCP and $AMZN.  Looking at the weekly chart of these stocks, you find that $JCP was peaking at $87 on Feb 19th  2007 while the upstart $AMZN was barely trading at $42.

Fast forward to May 3rd when $QQQ the leading growth stock index that I monitor was peaking at $191.25.  It corrected -4.30% in the last 2 weeks and currently is being supported by the institutions at the 50 day sma(simple moving average).  $AMZN retraced -4.74% in the same time period and is trading between the 20 day sma and 50 day sma.  $JCP on the other hand retraced -15% in the same time period and has been trading under the 200 day sma ever since May of 2012.  Currently it's trading at $1.14 with no institutional support. 

Ouch!    ouch!    ouch! 

That is a very clear sign that the institutions prefer to own the shares of $AMZN instead of $JCP.  We as retail investors of growth stocks ought to do the same ... follow the institutions lead in the market. 

There is one more story that the stock charts of these two retail stocks is telling us.  While $JCP has been dying a slow death since May of 2012 when it sliced n plummeted below the 200 day sma, it has continued to hit lower highs and lower lows with no end in sight.  The stock has plummeted -98.69% since it's all time high of Feb 19th 2007.  $AMZN on the other hand continues to post higher highs and higher lows except when the market corrected over -20% from Oct 2018 to Dec 2018.  The stock has gained +4450% in the same time period as of Feb 19th 2007.  That is the power of institutions and a very clear message to us as retail investors that we should pay attention to. 

Learn  to  Read  the  Stock  Charts

Mentoring  Program

I shall be opening up a few slots over the summer months in my Mentoring Program.  June thru September are slow months usually in the market.  Historically our best quarter is from October thru Dec.  Now is an ideal time to learn to trade and invest utilizing growth stock strategies of IBD(Investors Business Daily).

Schedule a  FREE  30 minutes of  "Discovery Call"  with us and learn the basics of reading the Stock Charts:

• How to find the winning Growth Stocks?
• How to Buy the Stocks Right?
• How to Sell the stocks Right?
• How to TIME the market?
• How to protect and harvest your profits? 

Contact us at:

investorspotlight@gmail.com

Happy Trading!

Amin

Gap  Ups  R  Quick  Winners

Successful investing doesn't require sophistication and complexity; all that's necessary is a healthy dose of common sense."

By John Bogle, Vanguard funds founder

Last Sunday night when I was composing my post, I had absolutely no inkling that the market would take a turn for the worse during the week.  No one can predict what the market will do on any given day.  On Friday May 3rd, a position was initiated on $DMRC at the market open for $47.51.  The stock had gapped up +44.8%  after earnings report on May 2nd with volume that was 14 times the average trading volume of 135,000 shares per day.  Institutions are the ones that determine how fast and how high the stock will make a move during earnings.  This is a very thin stock with the market cap of only $700 million.  They have a very limited number of shares.  Within a week, the stock has climbed another +22.67%.  The stock is  +76%  within 8 days of trading.  This is why one ought to initiate a stock position on a stock that shows such powerful gap ups  during earnings report.  

Currently we have 10 distribution days between the  $SPY  and $QQQ.  IBD(Investors Business Daily) has changed the market pulse to  "Market Under Pressure".  This is the time to conserve your capital and harvest profits.  We are getting towards the end of the earnings cycle with over 90% of the  $SPY  already gone through the earnings confession.  The performance of the 3 major indexes last week was:

1. $SPY    ...  - 2.02%

2. $DJI      ...  -2.12%

3. $QQQ   ...  - 3.20%

$SPY  and the  $QQQ are still getting support at the 50 day sma(simple moving average).  We as retail investors ought not to allow our stocks to plummet past below the 50 day sma.  If the institutions support the stocks at the 50 day sma and the stocks trades in higher volume, one might consider adding more shares and scale up in stock position. 

4  Stocks  that  Gapped  up  

On Friday May 3rd, there were 4 stocks that had gapped up from earnings report.  Here is the performance of those 4 stocks once a position was initiated at the market open on Monday May 6th:

1. $OLED     ... - 0.14%

2. $MELI      ... - 1.37%

3. $LPLA      ... + 1.09%

4. $MNST    ... + 1.53%

Average performance for all the 4 stocks was + 1.11% for the week while the $SPY had corrected - 2.02% and the $QQQ had corrected  -2.12%.  

These 4 stocks are trading above the 20 day sma while the $SPY (proxy for general market performance) as well as $QQQ (proxy for growth stock performance) are below the 20 day sma and hovering around the 50 day sma.  Institutions are not giving up on these stocks while the general market is going through correction right now.  This is why identifying growth stocks that gap up during earnings announcement can help retail investors profit handsomely in the market.

Happy Trading!

Amin

Learn  to  Read  Stock  Charts

Successful investing doesn't require sophistication and complexity; all that's necessary is a healthy dose of common sense."

By John Bogle, Vanguard funds founder

I have been highlighting the  $QQQ  performance in my blog posts as the index that is the best indicator of the performance of the growth stocks.  That is the index to use to compare the performance of one's portfolio as a growth stock trader.  We had one of the most successful  "Follow Thru"  days on January 7th that I have witnessed in a very long time.  Currently the performance of the the 3 major indexes since that day are:

• $DJI     ...  + 12.91%
• $SPY    ... + 16.36%
• $QQQ   ... + 22.08%

Were you aware that on the day after the Christmas holiday celebrations, the market was staging a very powerful rally on December 26th?  I am accustomed to reading over 150 stock charts every weekend and just as many during the week.  What I saw was that the institutions were coming in droves the very next day on December 26th.  $QQQ  surged  +6.24%  and  $SPY  surged  +5.05%  on that day while we were all shopping and enjoying our families.  Volume on both those indexes that day was more than 2 and a 1/2 times as much as the normal daily volume of trading.  That is a very clear sign of institutions taking huge positions in the leading stocks.  Lots of leading stocks were breaking out from a sound base with equally powerful surge in the daily volume on shares traded.  

Barron's magazine publication of May 6th has the following quote from Mr. Jack Bogle:

"Our emotions cause us to plunge into stocks at euphoric highs, and to bail out as they reach depressing lows - precisely the opposite of what the cool logic of common sense would prescribe"

Gap  Ups

We are winding down with the earnings report by the end of this week with over 75% of the  $SPY  components finished with their  earnings and sales confession.  Institutions can't hide their intentions when they begin accumulating shares of a company.  Ultimately they are the ones who decide if the earnings report is good enough for them to start taking huge positions in the stock of their choice.  It takes them several weeks to accumulate the entire position.  Quite often they will bid up the price against each other to acquire their full position.  This is what causes a  "Gap Up"  in the opening price of a stock just as soon as the earnings are announced.  It's prudent for us as retail investors of growth stocks to isolate stocks that gap up and be prepared to take a position as close to the opening price of the gap up if that is possible.

Following are 2 stocks ($DMRC and $TWTR) worth studying.  They both gapped up during their earnings confessions.  One is a very thinly traded stock and extremely volatile while the other one is a very liquid stock with a lot of shares trading daily.  I shall do a follow up post on some other stocks that had gapped up on Friday May 3rd after the earnings report announcement.  I will highlight some of the strategies to consider when taking a position on such stocks after the gap up. 

1. $MRCY ... Earnings reported on May 2nd.  It gapped up + 44.8% with trading volume that was 14 times the daily average trading volume of only 135,00 shares.  It's a very thin stock with a very limited number of shares available for purchase.
2. $TWTR ... Earnings reported on April 23rd.  It gapped up + 15.64%  with trading volume that was 7 times the daily average trading volume of 15 million shares.  It's a a very liquid stock with lots of shares available for purchase. 

Happy Trading!

Amin

Lessons  Learnt  Trading  $XLNX

"It's necessary for us to learn from other's mistakes. You will not live long enough to make them all yourself."

By Hyman Rickover, US Navy Admiral

Investing and trading Growth Stocks is all about making profits in the market.  One of the main reasons for trading IBD (Investors Business Daily) style of stocks is the  GREED  factor.  Data shows that such stocks tend to do 2 to 2 1/2 better than the what the general market does using  $SPY  as a measure of the stock market performance.  $XLNX  was one of such stocks that came up when one scans for stocks that gaps up in volume several times the normal average trading volume.  This is a sure sign displayed by the institutions that they want to accumulate these shares.  Retail investors such as ourselves ought to pick up on this signal and take a position in the stock to ride the wave of accumulation exhibited by the institutions. 

One of the biggest risk factor to consider with any stock holdings or purchases is the earnings report date.  One never knows how the institutions are going to react to the earnings report.  $XLNX  had surged  +10%  to  +20%   within days of earnings report in July 2018, Oct 2018 and Jan 2019.  Trading volume on these 3 earnings report was 4 to 10 times the daily average trading volume.  That is a sure sign of institutional interest.  GREED factor sets in once you acquire this stock.  One would have the feeling that this stock would continue to behave that way during the earnings on April 24th after the market close.  A good rule of thumb to follow is to reduce the size of your position to satisfy your  GREED  of making a huge gains during earnings.  This way you are not exposing your entire position to the risk of a nasty earnings surprise.  $XLNX  had already attained a profit of  +29.77%  prior to the earnings announcement.  

$XLNX  reported earnings on April 24th after the market close.  They posted a  +30%  gain in revenue and  +34%  gain in earnings.  This would be considered good earnings and sales report but the institutions were not thrilled with these numbers.  The next day on April 25th, the stock gapped down and plummeted   -17%   in volume that was 12 times the daily average trading volume.  Institutions were done with this stock as well as other chip stocks that belonged to the same group as  $XLNX.  Having a trailing stop would not have helped mitigate the losses since the stock had gapped down. 

As indicated in my last 2 posts where I highlighted the synopsis of the trade and 5 possible trade plans to put in place on April 22nd, it makes sense to close out and harvest profits of  +29.77%  prior to the day of earnings release.  To satisfy the  GREED  factor and taking advantage of the stock possibly making a  +10%  to  +20%  gain that the stock had made during previous earnings report, one could have left a small half a position initiated at  $131.41  on April 11th.  This half position is designed to minimize the risk but also to take the advantage of higher profits just in case the stock behaved the way it had done during the last 3 previous earnings reports.  Your loss would have been only  -12.09%  for the half position (effectively -6.05% for a full position).  You would have still come out with a profit of  +23.72%  combining both the positions.   

Happy Trading!

Amin   

Trade  Plan  For  $XLNX

Passion:

"If our work does not feel like play, then we should ask our selves whether we are in the right job"

By Desmond Morris (zoologist)

Trading and investing in Growth Stocks is my passion.  Every Saturday and Sunday I look forward to getting my financial papers delivered at the front door.  I start out early before 6.00 am and pore over the data voraciously while I am having my breakfast and sipping my coffee.  It's the most fun time I have on weekend mornings, reading and scanning the financial papers and making all kinds of notes.  Markets are closed and there is nothing to distract my attention. 

In my post last Sunday April 14th, I presented a synopsis of how the break away gap on $XLNX during its earnings on January 23rd was traded for +27% profit within 8 weeks by Friday April 12th.  I had posed a question at the end of the post: 

• What should one do with $XLNX when the market opens on Monday morning April 15th?

There are several possible strategies to use when trading stocks such as $XLNX.  I shall highlight a few below, observing some of the IBD (Investors Business Daily) rules:

1. Close out the entire position.  According to IBD methodology, one should start harvesting profits once the stock attains a gain of +20% to +25% from its proper buy point.  The stock was already +27% before Monday morning.    
2. Close out 1/2 the position.  $XLNX had attained a profit of +20% within 3 weeks from its buy point of $95.28.  This prompted an  "8 Week Hold Rule".  Stocks that surge this fast and furious should be held for 8 weeks because they tend to get higher within that time.  Friday April 12th was the end of the 8 week period.  Stock had already attained a gain of +41.07% from its proper buy point of $95.28.  Stock is pretty extended now and there is the risk of stock retracing.  Keeping 1/2 a position allows the stock some breathing room to retrace and allow it the possibility to make the higher run after that.
3. Add another small position and scale up.  Stock has been trading tightly for 3 weeks from Mar 21st to Apr 10th.  Its been consolidating around $130 in a very orderly fashion with low volume of trading.  It broke out on Wednesday April 10th in volume that was +25% higher than normal average daily volume.  This was the institutions grabbing more shares.  On Thursday April 11th, second position could have been initiated at market open for $131.41.  Currently this position is +2.69% already.  $AVGO and $IPHI are also in the same group of chip stocks and they are acting in a similar manner as well.  When institutions buy a stock, they tend to buy other leading stocks in the same group.
4. Hold out for earnings.  $XLNX reports earnings on Wednesday April 24th.  Stock has surged +10% to +20% within days after reporting earnings the last 3 times.  Trading volume has been 4 to 6 times the daily average trading volume during the last 3 earnings report.  Institutions have been accumulating these shares when they were trading at $68 in July of 2018.  Some of those institutions have made over +90% since July 2018.  There is no guarantee that the stock would surge this time around though.  Technically there is no overhead resistance.  It has surpassed the highs of $96 that it had attained during the dot com bubble.  50 day sma(simple moving average) is holding tightly close to the 20 day sma.  The stock is acting well right now.    
5. Harvest 1/2 position and let the other half ride out the earnings report.  It's always risky to hold stocks during earnings.  It's prudent to minimize risk during earnings.  Locking in profits for the 1/2 position avoids being exposed to earnings in case the stock plummets. 

Please feel free to comment on the 5 scenarios that I have presented in this post.  I would like to encourage you to think of some other strategies that could be employed to attain a higher profit on this leading growth stock in the leading chip sector.  You can also address your questions and suggestions to me directly for detailed explanation on any one of these scenarios that I  have highlighted above.

investorspotlight@gmail.com

If there is a success story with a growth stock that you invested in, please highlight them for me.  I will gladly share it with my audience with my blog post. 

Happy Trading!

Amin  

   

Buy  High  Sell  Higher

"Remember, keep it simple. Investing is hard enough. Stick to the basic rules of  CAN SLIM  and don't complicate it by getting super - tricky."

William J. O'Neil (Founder of Investors Business Daily)

We are always looking for a deal when buying a house or a car or clothes and furniture.  Everyone loves a good sale and a bargain.  We have been accustomed to thinking that one should  "Buy Low and Sell High".  Growth Stock investing and trading however requires for one to think a bit differently.  It took me a while to fully understand this concept when I was first introduced to IBD(Investors Business Daily) very early on in my stock trading career.  Now it seems clear as a day to me after trading all these years and analyzing 150 to 250 leading Growth Stock charts every week for years. 

One very easy rule to follow is  "Buying the leading stocks with a breakaway gap."  It's one of the most profitable endeavor with Growth Stock Investing.  If the stock gaps up past the +5% proper buy point that IBD identifies, its quite OK to go ahead and institute a stock position as close as possible to the opening price of the stock the next day.  This may sound counter intuitive to ones's conventional thinking of buying low and selling high.  The more powerful the surge in price with equally powerful surge in daily trading volume of that stock, higher the stock will go in price with the passage of time.  It takes several weeks for the institutions to accumulate the position.  They will continue to accumulate the position over the next several weeks.  All we have to do as retail investors is follow the lead of the institutions and hold onto this stock.  

$XLNX  +27%  in  8  Weeks

Here is the synopsis of how the breakaway gap worked with  $XLNX in the last 8 weeks:

• Dec 3rd stock attained an all time high of  $95.18.  IBD(Investors Business Daily) identified  $95.28 (10 cents above the all time high) as an ideal buy point.  
• IBD rule suggests that one should not chase the stock when it's +5% beyond the buy point.  
• January 24th (Thursday) the stock gapped up after the earnings report and surged +18.43% to close at $106.06.  It surged past the +5% buy zone of $100.04.
• Trading volume during the earnings report was 6 times the normal average trading volume.  Institutions were grabbing every available share of the stock and were bidding up the price of the stock in the open market.
• January 25th (Friday), stock position to be initiated at market open price of $105.92 (+11.17% past the ideal entry).
• February 11th (Monday), the stock had attained +20.59% from its ideal buy point of $95.28.  Such a surge also invoked the  "8 Week Hold Rule".  This rule suggests that when the stock surges +20% from its ideal buy point within 3 weeks, it ought to be held for the next 8 weeks.  Stocks tend to go higher when there is such a powerful rally on the stock. 
• April 12th (Friday), the stock has attained the end of 8 weeks.  Currently its +27% from the day the stock was initiated the day after the powerful gap up.  It's also +41.07% from its ideal buy point of $95.28.
• IBD rule also suggests that one should consider harvesting some profits once the stocks attains a gain of +20 to +25%.
• IBD rule also suggests that one should evaluate the stock at the end of the 8 week hold period.

What should one do with $XLNX when the market opens on Monday morning April 15th?

There are several possible strategies one can utilize after attaining such a powerful gain of +27% within 8 weeks (+175% annualized gain).  I shall highlight a couple of strategies in my post next week how best one could lock in profits, hold part of the position for more gains or possibly adding more shares last week when the market was continuing to trend higher.  Stock has been hovering between $125 - $130 range during the last 3 weeks.  It has formed a  "3 weeks tight"  base.  Earnings for the 1st quarter is scheduled to be reported on Wednesday April 24th. 

Mentoring  Program

We had a  "Follow Thru"  day on January 7th.  $QQQ  the leading Growth Stock index has performed +18.71% in the 14 weeks since that day.  That's an annualized return of +70%.  Market continues to act well right now.  April is traditionally the best performing month of the year when you look over the average results for the past 50 years.  We have already attained +3.43% for  $QQQ  for the first 2 weeks of April.  We still have 2 more weeks to go.  

• Do you feel like you have missed out on the opportunities in the market this year ?
• Would you like to learn How to Outperform the market with Growth Stocks investing?

My schedule has been full for the last 2 months but if you are really interested in enrolling in our mentoring program, I will be glad to open up some slots for you.

Schedule a FREE 30 minutes of  "Discovery Call"  with us and learn my profitable system of trading and investing in Growth Stocks.

Contact us at:

investorspotlight@gmail.com

Happy Trading!

Amin