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 20 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 20 day sma heading lower towards the  slower moving 50 day sma. 

In my blog post on August 18th, I had shared 4 stock positions that were initiated on a  "Follow Thru"  day of August 14th.  They were identified by me as the leading stocks in the leading industries that institutions had already exhibited an interest in.  Some of them had gapped up in price during the earnings announcement - $MTH, $PCTY, $SBUX.  That is a clear signal that institutions were bidding up the price to acquire their position.  $PAYC on the other hand was staying above the faster 20 day sma since end of January.  That is a clear foot print left by the institutions that they want to continue to acquire a hefty position in the stock.

Performance  of  the  4  Stocks

Utilizing the tools of sma, one can start initiating a position when the stock is trading along the faster moving average 10 day and 20 day lines.  If the market is in a  "Confirmed Uptrend"  as identified in the market pulse column of IBD(Investors Business Daily) publication, retail investors should start out a small test position in the leading stocks in the leading sector on a  "Follow Thru"  day.  That is precisely what was done by initiating the 4 stocks positions that I mentioned.  Once the stock moves lower down towards the 50 day sma and crosses below that, it is a signal that the institutions are no longer interested in the stock.  It's time to exit the stock and cut your losses short.  3 of these stocks crossed the 50 day sma and exited the position at market open the next day.  One stock continued to move higher along the faster 10 day and 20 day sma.  Second position was initiated on that stock that institution continued to support with their purchases.

Here are the results of the 4 stocks compared to the 3 leading indexes that I monitor:

Stocks ;

1. $PCTY  ... - 5.56%
2. $PAYC  ... - 5.63%
3. $SBUX  ... - 5.97%
4. $MTH   ... +13.39% first position, +8.63% second position initiated on Sept 9th at $64.71

Indexes;

1. $QQQ  ... +2.96%
2. $DJI     ... +3.46%
3. $SPY   ... +3.54%

There were 3 losing positions and 2 winning positions.  Cutting the losses short by observing the sma lines helped me gain + 4.86% since August 14th  "Follow Thru"  day.  It outperformed the 3 leading indexes as well.  

Mentoring  Program

We are entering a traditionally very profitable 4th quarter in the stock market.  It will be a volatile month in October.  My mentoring schedule is very hectic for the next few months.  There are lots of nuances of timing the market utilizing sma as a tool.  I have explained some of these concepts in very simple terms in my last 4 blog posts.  If you would like to learn the precision methods that I utilize - along with observing the sma lines - I will gladly try to accommodate just a few students in the 4th quarter.  It will be on a first come first served basis.

Schedule a  FREE  30 minutes of   'Discovery Call'  with us and investigate how our program can help you Out Perform the Market like I do.

Contact us at:

investorspotlight@gmail.com

Happy Trading!

Amin

Stock   Charts   Are   Maps 

"I always check my charts and the moving averages prior to taking a position"
By Marty Schwartz (Wall street trader and winner of US investing championship in 1984)

Market conditions improved on Thursday Sept 5th when all the 3 major indexes - $DJI, $QQQ and $SPY gapped up at the open and bolted past the 50 day simple moving average in volume greater than the average daily volume.  IBD (Investors Business Daily) updated the market pulse to  "Market in Confirmed Uptrend".  That's a signal to retail investors to start taking some positions or to add onto the positions that held up well from the last  "Follow Thru"  day we had on August 14th.  Understanding the simple moving averages that I highlighted in my last 2 posts would help you decide which stocks to build on with a second position and at what price to initiate that position.

Simple moving average (sma) lines are like maps of what the stock is doing on any given day or the week.  It exposes the intentions of the institutions with the stock.  As a retail trader and an investor of Growth Stocks, we want to do exactly what the institutions are doing.  They ultimately decide what the stock does because they account for more than 70% of the buying and selling of stocks in the market.

The 4 stocks that I had mentioned in my post - $SBUX, $PAYC, $MTH and $PCTY - are all hovering above the 10 day sma for the last 4 weeks.  The 3 major indexes - $DJI, $SPY and $QQQ on the other hand have been bouncing up and down between the 50 day and the 200 day sma.  These 4 stocks indicates support from the institutions since they all are showing strength of support by staying above the 10 day sma.  Here are the resistance and support lines that I came up with before initiating a second position on these stocks.  These lines were drawn utilizing the lines of the 10 day sma.

• $SBUX   ... $96.04 ($95.75 triggered at market open on Friday Sept 6)
• $PAYC   ... $246.85 (Open order as of Friday Sept 6)
• $MTH    ... $ 64.71 (Open order as of Friday Sept 6)
• $PCTY  ... $107.95 ($107.95 triggered during the trading day Friday Sept 6)

Mentoring  Program

I shall be opening up a few slots in October in my Mentoring Program.  Summer training slots were very quickly snapped up and these months provided lots of opportunities to profit in the market.  We are heading into the 4th quarter which is a very busy and a profitable quarter traditionally.  If you are serious about speeding up your learning curve than I shall open up a few slots in the coming months.  It will be on a first come first served basis only.  We have already attained  +20%  gain with the leading growth stock index $QQQ year to date.  We could have an additional  +10%  gain in the next 4 months.  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 investigate how our program can help you 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

 

Simple    Moving    Average

"The market has a way of whittling all excessive pride & over blown egos down to size. The whole idea is to be completely objective & recognize what the marketplace is telling you, not try to prove that the thing you said or did yesterday or 6 weeks ago was right"

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

One of the simplest and easiest ways to track the performance of a stock is to plot the price of a stock along some very simple moving price averages(sma).  Most common ones that are utilized are:

• 10 days (faster moving average for swing trading growth stocks investors)
• 20 days (faster moving average for growth stock investors)
• 30 days (moving average utilized for faster moving 30 day sma cross over trading against the slower moving 50 day sma)
• 50 days (slower moving average utilized by institutions as a support area)
• 100 days (slower moving average utilized by institutions as a support/resistance area with volatile markets or stocks)
• 200 days (slower moving average over a longer time frame utilized by institutions for their larger holdings in their portfolio)

Simple moving average is the most widely known technical indicator.  It's easy to understand.  Closing price is averaged out over a specific number of trading days.  20 day sma is calculated by adding the closing price of each trading day over the last 20 trading days and averaged out by dividing it by 20 and plotting that line along the price bar of the stock.  It shows the price of the stock on any given day against the moving average line plotted on the stock chart.  It's a moving average because everyday, the new day price is added and the previous 21st day taken off the the list.  The line moves up or down daily with the new day of trading.  

Performance  of  My  4  Stocks

We had a  "Follow Thru"  day on Wednesday August 14th (13 days ago).  Market quickly changed its tune and now we have  7 distributions days between the  $NASDAQ  and  $SPY.  Market pulse has been changed to   "Market Under Pressure".  It's not the time to be taking any new positions under such conditions.  Understanding the concept of the simple moving averages will help you in holding your biases about the stocks.  If  your stocks are hovering around the faster moving 20 day sma while the the major indexes like  $DJI, $SPY and $QQQ  are below the 50 day, it tells you that institutions have a preferance for stocks that are further away from the 50 day sma and closer to the faster moving 20 day sma.  

In the last 13 trading sessions since the  "Follow Thru"  day, the performance of the 3 major indexes as well as the 4 stocks I suggested that we study are:

Indexes:

1. $QQQ   ... +1.17%
2. $DJI      ... +1.41%
3. $SPY    ... +1.52%

Stocks:

1. $SBUX   ... +0.68%
2. $PAYC   ... +4.91%
3. $MTH    ... +5.39%
4. $PCTY  ... +6.95%

Average           ... +4.57%

Data is very clear when you start looking at the simple moving averages.  It doesn't matter what your feelings are about the stock with it's fundamentals and technicals.  This data is what should ultimately drive your decisions about the stock.  Simple moving average line helps you to decide which stocks are preferred by the institutions.  They decide the movement of the price of the stock.  Currently all 4 stocks are along the 10 day sma while the general market as exhibited by the 3 indexes highlighted are struggling below the 50 day sma.  Average performance of these 4 stocks over the last 13 trading sessions is a whopping  3  times better than the performance of the general market using  $SPY  as a proxy for general market performance.  

Happy Trading!

Amin 

Chart    Reading    Skills

"I always check my charts and the moving averages prior to taking a position"

By Marty Schwartz (Wall street trader and winner of US investing championship in 1984)

"To capture the biggest gains, it's important that you use both the daily and weekly charts, since they offer different views on stock. You will get more exact timing indications from the dailies and the big picture from the weeklies"

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

Quite often I hear from traders some of the indicators they use to do their technical analysis on a stock.  Quite common ones are the candle sticks, MACD, Stochastics, RSI, ADX, Bollinger bands, DMI, Williams R%, CCI, money flows, Elliot waves, fibonacci retracement  and countless others.  Most of these indicators are lagging indicators.  Some of the best indicators and very simple ones that I find to be useful are:

• Simple moving averages.
• Exponential moving averages.

They sound like such simple indicators and yet very few traders quite know how to interpret them along with the price and volume of a stock movement.  These indicators will make your trading a very simple process.  Sometimes we as traders and investors make it a lot more complicated than it really is.  I shall do several posts in the next few weeks to explain in details what some of these moving averages mean and how best to utilize them with your trading.

We will use the 4 stocks that I had highlighted as a small test position taken at market open last week when we had a  "Follow Thru"  day on Wednesday August 14th.  Currently these 4 stocks - $MTH, $PCTY, $PAYC, SBUX - are  +3.57%  while the Growth Stock Index  $QQQ  got slammed  -1.75%  in the last 8 trading sessions.  All the 4 stocks are currently hugging the 10 day simple moving average while the  $QQQ  has plummeted below the 50 day sma and heading towards the 200 day sma.  Study these 4 stocks and plot the 10 day sma as well as 50 day sma on your brokers platform.  Institutions are supporting these stocks while the  $QQQ  is headed towards the 200 sma.  How we manage these 4 leading stocks utilizing the moving averages while the   "Market is Under Pressure"  will be something that I will cover in the follow up posts.  

Happy Trading!

Amin

Follow  Thru  Day  Worked  For  Me

Tuesday August 13th, we had a powerful 4th day of market rally.  $SPY staged a  +1.5%  gain while the leading Growth Stock index  $QQQ rallied  +2%.  Trading volume was higher than the average trading volume for both the indexes.  IBD(Investors Business Daily)  changed the market pulse to  "Market in Confirmed Uptrend".   This is how you time the market.  I was mentioning to my IBD Investors Meetup group on Tuesday night that effective Wednesday August 14th, one should start dipping their toes back in the market with a small test position.  I had once again emphasized to the Meetup members that:   

1. Don't buy  CHEAP  stocks.  They are cheap because institutions do not want them.
2. Buy  HIGH  and sell  HIGER.  Institutions drive the price of the stock higher because they are accumulating a position in that stock.
3. Buy the  LEADING  stocks that are in the leading industry groups.  You only want the best of the best merchandize out there.
4. Look for stocks that are trading above the  20 day sma(simple moving average).  That indicates that the institutions are supporting them while the Indexes are still hovering around the  50 day sma. 
5. Look for stocks that are showing a rising  RS  line with a ratings above 94.  These are the stocks that are outshining the rest of the stocks in the stock market. 

There were 4 positions initiated at the market open on Wednesday.  They were:

1. $MTH     ... (55.81)    $62.00
2. $PCTY   ... (103.71)  $102.12
3. $PAYC   ... (239.33)  $238.42
4. $SBUX   ... (95.21)    $95.91

I have indicated the resistance points for each of these stocks in parenthesis.  Follow along with me and check the performance of these positions this coming week.  

Currently, all these stocks are trading above the 20 day sma(simple moving average).  They have gained  +1.12%  in 3 days last week while the  $SPY is  +0.27%  and  $QQQ is  +0.09%.  These 4 stocks are leading the market and the institutions are supporting it by propping them up and increasing their size of the positions in them.  This happened inspite of the fact that we had a major market reversal on Wednesday.  IBD changed the market pulse to  "Market Under Pressure"  the very next day.   

Mentoring  Program

I shall be opening up a few slots in September in my Mentoring Program.  June, July and August training slots were very quickly snapped up and these months provided lots of opportunities to profit in the market.  I will make just a few slots available in September if you are serious about speeding up your learning curve.  We have already attained  +20%  gain with the leading growth stock index $QQQ year to date.  Historically our best quarter is from October thru Dec.  It's quite possible that we could have an additional  +10%  gain in the next 4 months.  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 investigate how our program can help you 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

Market   Fools   the   Majority

The most recent sentiment survey done by the American Association of Individual Investors last Wednesday indicates that the smaller US investors (retail investors), were the most pessimistic about the stock market.  48.2% were bearish but only 21.7% were bullish.  The gap of over 26.5% in favour of the bearish sentiments is the 10th time we have noticed such a huge gap since July of 2009.  Historically  $SPY has performed an average gain of +9.8% during the next 3 months after such an extreme bearish sentiments.  Interesting data that no one in the media talks about.  The most recent times that we had such a divergence was in mid Feb 16 and Dec 24th (Christmas eve) of 2018. 

We had a  "Follow Thru"  day on Friday Jan 4th 2018.  $SPY  gained  +16.50%  while the growth stock index  $QQQ gained  +22% within 4 months.  IBD (Investors Business Daily) style growth stocks tend to perform 1 and 1/2 times better than the $QQQ.  Data suggests that with such extreme bearish sentiments in the market, we could see  $SPY  gain on an average  +9.8%  in the next 3 months.  Its quite possible that one could expect the year end results to be:

• $SPY   ... 3,200
• $QQQ  ... 205

Just a cautionary word about the predictions of the market.  No one can predict what the market will do.  There are dangers when you extrapolate the data.  Market just doesn't go straight up in a linear fashion.  It zigs and zags with stomach churning volatility.  We just witnessed that in the last 2 weeks.  We have already had 3 good days of rally in the market last week.  We may be just one day away from changing the market pulse back to  "Market in Confirmed uptrend".  Patience is the key right now.  Building an actionable Stock Watch List is prudent right now.  Every retail investor should have done the home work over the last 2 weekends to scan for Growth Stocks that will be the next leaders in the market.

New  Leaders

It's quite common to see new leadership stocks emerge with the next  "Follow Thru"  day.  We are getting to the tail end of the earnings reports for the 2nd quarter.  Some of the characteristics of new leaders would be:

• Stocks that gapped up +5% or more with volume 3 to 5 times greater than the average daily volume.
• Stocks that held up above the 34 day ema(exponential average) while the market was correcting over the last two weeks.
• Stocks that are showing RS ratings above 94 and the RS line on IBD stock charts at all time high before the stock makes a new high.
• Look for stocks that are breaking out in the next couple of days as we head into a possible  "Follow Thru"  day.
• Stocks that are bouncing off the 50 day sma (simple moving average) or 200 day sma in volume that is decidedly higher than the average daily volume.

Mentoring  Program

I shall be opening up a few slots in September in my Mentoring Program.  June and July training slots were very quickly snapped up and both of these months provided lots of opportunities for some quick profits in the market.  I will make a spot or two available in August if you are serious about speeding up your learning curve.  We have already attained  +25%  gain with the leading growth stock index $QQQ year to date.  Historically our best quarter is from October thru Dec.  It's quite possible that we could have an additional  +13%  gain in the next 5 months.  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 investigate how our program can help you 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

Did you hear that noise when the market crashed last week?

It took the market two months from the  "Follow Thru"  day in early June to gain  +13%  with the leading Growth Stock index  $QQQ.  They were the best two months in the last 20 years.  We gave up  -4%  back within a week last week. 

Ouch !  Ouch!  Ouch!

That  was  a  Train  Wreck

Do you have a plan in place when such things happen in the market?

Last week I had received a lot of messages on my tweeter account as well as Linkedin n facebook pages.  Everyone wanted to know what I thought about the market.  On Thursday IBD(Investors Business Daily) had updated the market pulse to  "Market Under Pressure".  The very next day it changed to  "Market in Correction".  This is a very serious damage done to the market within a week.  We had a cluster of 6   "distribution days"   between the  $SPY(broad market index) and $QQQ(leading growth stock index).  $DJI has dropped almost a 1,000 points within a week.  I felt like a lot of my followers were feeling like a deer in the headlights.

I  Heard  the  Sound  of  Market  Crashing  ... Loud  n  Clear 

The easiest thing to do in the stock market is to buy a stock.  It takes just a mouse click.  How you manage that risk is ultimately what makes you a profitable trader and an investor or someone who loses money in the market.  One should have started down scaling the positions as of Wednesday and started the process of conserving  CASH  by harvesting profits.  This is the time to be very defensive with your positions.  No one can predict what the market will do this coming week.  Looking over the data, we know $QQQ  had corrected  -10%  in May.  In October of 2018, we had a similar action with  $QQQ and it plummeted down with a  -20% correction.  

Hope  and  Prayers  is  not  a  Good Strategy

Currently  $QQQ  as well as the  $SPY  are at 50 day sma(simple moving average).  Next stop would be at 200 day sma.  That would be a correction of over  -10%.  We have been in a sideways trend for the last 18 months now.  The last time we had such a scenario was in 1955 to 1957 when the market moved sideways for 18 months.  It plummeted over  -20%  after that.  This is not a prediction but that's what the data shows.  It s not an opinion because we all know that market could care less about our opinions or our religious and political beliefs.  Market has sent us a very clear signal from the way the institutions have behaved.  On Friday, the trading volume on both - $QQQ  as well as  $SPY  had twice the normal daily average volume of shares traded.  It was mostly selling volume and institutions were just reducing their exposure to the market.

Follow   the   Institutions

• Reduce exposure in the market.
• Harvest partial profits and start scaling down stock positions.
• Don't allow losses to exceed 6 % or more.
• Watch stocks as they begin to plummet below the 50 day sma and take defensive action.
• Monitor stocks that are bucking the trend ($CMG as one such stock).

These are some of the actions that professional traders take to mitigate risk.  As retail traders, we all must take the lead from what the institutions do.  75%  of the stocks will follow what the institutions do.  Market has sent us a very clear message.  

Happy Trading!

Amin