You   SNOOZE  ...  You   LOOSE

"The majority of the leading stocks are usually in leading industries. Studies show that 37% of a stock's price movement is directly tied to the performance of the industry group the stock is in."

By William J. 0'Neil (Founder of Investors Business Daily)

While some traders are glued to the financial news tv networks listening to all the doom and gloom in the market, all sorts of stocks in different industries are breaking out and reaching all time highs.  We have been experiencing a broad based rally in the market in the last several weeks now.  This ought to be a wake up call to all of us not to listen to all the noise in the market.  Stock charts ultimately tells us a story of what the market is really doing.  The leading Growth Stock Index  $QQQ  as well as the broad market stock index  $SPY is attaining all time high now and is heading higher.  Currently, here is what the performance of both these indexes are:

• $SPY    ... + 23.62%  year to date
• $QQQ   ... + 30.45%  year to date 

There is so much chatter in the media that we are over 10 years in this bull market and it could end very badly any day.  We are constantly bombarded with news of brexit or inverted yield curve or tariff wars and the risk of Iran and North Korea acquiring nuclear weapons.  Most retail traders are nervous with one foot already out the door. 

Utter    Nonsense ! 

 

Here is the actual data though.  We are in reality possibly heading into another cycle of bullish trend for the next 8 to 9 years.  We saw this happen with a 19 year rally from 1953 to 1975 (caused by the consumption demand of the Bob Hope generation born in 1920's to 1930's).  We also had an 18 year rally from 1981 to 2000 (caused by the consumption demand of the baby boomers born after the the end of the 2nd world war in 1945).  There are over 100 million millenials that are going to be reaching their peak earning years in the next 10 years.  They will be the ones responsible for buying homes, cars, investing in their retirement funds and setting up college funds for their kids.

Here is what the data shows with the performance of the two indexes since the market went on to rally 3 years ago, right after election on Nov 8th  "Follow Thru"  day:

• $SPY     ... + 43% (broad market rally)
• $QQQ    ... + 71% (growth stock rally)

This includes the bear market correction we had of almost  -19%  for the 3 months of October to December 2018.  This is phenomenal.  You can double your portfolio within 3 years by merely investing in the leading  Growth Stock index  $QQQ.

Mentoring  Program

Question you should all be asking of yourself is:

Is your portfolio mirroring the performance of  $QQQ?

If you have a hedge fund or a mutual fund managing your portfolio and you are paying them a fee for it, have they outperformed the  $QQQ  in the last 3 years?  

Chances are, they have probably underperformed for you.  If you have been managing your own portfolio, chances are you too have been underperforming the leading growth stock index  $QQQ. 

How long will you continue to do what you are doing and not take advantage of beefing up your portfolio during this market rally that we are experiencing? 

 Take action now and commit to enrolling in our  "Mentoring Program".  I shall open a few slots for anyone that wants to commit to learning our system.  Its a very busy season for the next 3 months and we could possibly add another  +10%  to the  $QQQ  from where it is today.

Contact us at:

investorspotlight@gmail.com

Happy Trading!

Amin

  

 

Institutional   Behaviour

What I believe about global economic/fundamental factors affecting price:

• Dominant factor theory (DFT) - there are only one or two major drivers of price during any multi-year period (all other fundamental factors are noise-makers)
• Conventional wisdom (what most investors and talking heads think and what most financial media report on) completely miss the fundamental factor.
• By the time the marketplace figures out what the dominant factor has been, a new dominant factor is silently emerging as the new driver of place.
• A very small subset of trading operators (perhaps less than 1%) will understand in real time the factors driving price.
• I have a better chance identifying the dominant fundamental factor by looking at charts with imagination than by monitoring financial/social media.

By Peter L. Brandt

I came across a tweet on my tweeter account @spotlightamin last week with the above quote from Mr Peter L. Brandt, a 40 year trading veteran.  I found this to be so appropriate at this time when we constantly hear the print and broadcast media spouting gloom and doom in the market.  We constantly hear the talking heads and self proclaimed GURUS on CNBC, Bloomberg tv and other media about the trade wars, brexit, inverted yield curve, pending recession fears,impeachment hearings.  Its all noise in the market while the market just keeps tugging along.  Market data on the other hand reflects something quite different.  I have often said that one should let the data drive our decisions as a trader and investor instead.

Looking over the data for 2019, here are the empirical facts:

1. $SPY - the proxy for General Market Performance is  + 22.50%  year to date.
2. $QQQ - the proxy for Growth Stock Performance is + 29.92%  year to date. 

Wow!    wow!    wow!

That's a phenomenal performance.  It's the institutions that actually drive the market since they have the power of huge amount of $$$ that they invest daily in the market.  That is why it is so critical to understand the stock chart behaviour reflected on price and volume on the charts.  Institutions can't hide their behaviour when they start accumulating shares of a stock they are interested in.  Once you learn to recognize the fine details of the stock charts with skyscraper volume (surge in trading volume that is 3 or 4 times the daily average trading volume) or the gap up in price of a stock, you quickly learn to take appropriate action of initiating a stock position in stocks that the institutions are showing an interest in accumulating.

Stocks Institutions are showing an Interest 

Here is a list of stocks that have either gapped up in price or the stock has risen 20% or more within 3 weeks and they are trending along the 10 day sma(simple moving average) in the last 2 weeks.  These are the stocks that no one hears about on the daily chatter in the news media.  That is why it's best to look at the  stock charts and the data instead.

1. $ALGT
2. $AMKR
3. $ATKR
4. $BLD
5. $BRKR
6. $CRUS
7. $FTNT
8. $IPHI
9. $LRCX
10. $MKSI
11. $MKS
12. $OLED
13. $ORLY
14. $QRVO
15. $RNG
16. $SPXC
17. $TPX
18. $UCTT
19. $UFPI
20. $ROCK

Please look over these stock charts and make a note of their price behaviour.  I shall discuss some rules for ideal inititial entry points and an additional entry point as the stock continues to trend higher in the price from institutional interest.

Happy Trading!

Amin

https://youtu.be/UW_EUo0Zrz4

Follow     the     Rules

I often highlight basic rules of Growth Stock investing as preached by Mr. William J. O'Neil (Founder of Investors Business Daily).  These rules help guide us and avoid the pitfalls of trading and investing.  Some of these rules may seem counterintuitive to conventional wisdom of investing.  They do work though.  I shall highlight some very basic rules that worked for me during the last 8 weeks of choppy market.  There is so much noise in the market daily with tariff wars, impeachment proceedings, yield curve inversion, fear of recession and the geo political news of Brexit and the wars in the middle east.  Best thing one can do as a trader and an investor is to just tune off the tv and the print media.  Focus instead on the data.  

Be  data  driven  and  not  news  driven

Mr. Chris Ciovacco(Founder and CEO of Ciovacco Capital Management) had tweeted the following study couple of days ago:

Study: Top Performers Are Very Selective And Focused

Morton E. Hansen, a professor at the University of California, Berkeley, recruited a team of researchers and performed a five year study to identify which specific set of behaviours led to high performance; the key takeaway was summarized in The Wall Street Journal:

"The common practice we found among the highest ranked performers in our study wasn't at all what we expected. It wasn't a better ability to organize or delegate. Instead, top performers mastered selectivity. Whenever they could, they carefully selected which priorities, tasks, meetings, customers, ideas or steps to undertake and which to let go. They then applied intense, targeted effort on those few priorities in order to excel"

I found this tweet to apply very well to all of us a traders and investors of Growth Stocks.  I focused on 3 very basic principles and rules to follow investing in $MTH.  The rules that I observed was:

1. Always buy something on a  "Follow Thru"  day.
2. Add a second position as the stock continues to make gains.
3. Add a third position when the stock bounces off the 200 day sma(simple moving average) in above average daily trading volume.

Here are the details of the trade to show how to profit in Growth Stocks focusing on the 3 basic rules I have highlighted.

• July 24th stock rose +20% within 2 days during earnings breakout session.  Volume was 5 times the daily average trading volume.  This was a clear signal of institutional support.  It invoked an 8 week hold rule.  If one had this stock position than it should be held for 8 weeks because the stock often tends to move higher after consolidating.
•  August 14th was a  "Follow Thru"  day and a small test position was initiated at $62.00.
• Sept 9th, the stock continued to gain in price and hovering along the faster moving 20 day sma.  Second position was initiated at $64.72
• Oct 23rd the stock bounced back up from the 200 day sma in volume 3 times the normal average daily volume.  This reflected institutional interest and support of the stock.
• Oct 24th a third position was initiated at $74.50.  IBD rules suggests that one should follow the institutions.  They ultimately have the power of their trading volume to propel the stock higher.

First position is +21.15% in 10 weeks and 3 days.

Second position is +10.39% in 7 weeks.

Third position is +0.82% in 1 day. 

Currently the stock is trading $37 million daily(stock price $75.11 x daily trading volume of 495,000).  It has an RS rating of 98 out of 100.  It hasn't breached the 50 day sma on a weekly chart since the end of March.  These are the signs of a winning Growth Stock that is currently one of the leaders in the market.  The entire home building group is currently leading the market. 

Happy Trading!

Amin 

M E X I C O

"Once  a  year,  go  someplace  you've  never  been  before"

By  Dalai Lama

I have read this statement before and every once in a while I remind myself to do just that.  It forces me to think outside the box.  I have travelled to many countries and most states of the union with the exception of just 5 in the Northwest and Alaska.  2 weeks ago I decided on the spur of the moment to escape the Florida heat and humidity and head out to the remote mountain places in Mexico central highlands.  Market is just trading sideways and the 3 major indexes - $DJI, $SPY and $QQQ are all hovering and bouncing up and down the 50 day simple moving averages (sma).  It's best to stay out of the market for now and travel to get a better perspective.

There is so much noise in the market with constant commentaries in print and broadcast media on interest rates, trade wars with China and Europe, ratifying the new NAFTA deal, North Korea nuclear deal and sanctions against Iran, border wall on the southern border, oil disruptions in the Persian gulf and now finally the impeachment hearings against Mr. Trump.  I headed south of the border to actually experience Mexico from the perspectives of a local living there in the heart of Mexico where the majority of the population lives.  Here are some facts and my personal observations looking through the eye glasses as an investor and a trader.

Mexico is a republic just like the US.  It has 31 states and the federal district of Mexico City.  It has a free market economy that is the 11th largest economy in the world with a population of 129 million people.  Per capita income based on purchasing power parity is $20,645 as compared to the US which is over $50,000.  I was astonished to find out that the unemployment rate is 3.6% as compared to Western developed world of the Eurozone where its 7.5% and the US with 3.7% unemployment rate. It has one of the worlds best demographics with over 46% of the population under the age of 40 and only 7% 65 plus.  US on the other hand has baby boomers of over 80 million (25% of US population)  and now retiring in droves.

Mexico just celebrated 209th year of independence while I was there.  I was in the most remote part in the central highlands during celebrations.  People were very friendly and out going and welcoming me just because I uttered a few words in Spanish.  I ate what they ate and most of the time I wasn't sure what I was eating but it was all delicious.  80% of the population has a cell phone and they all seemed prosperous to me.  It is one of the most urbanized country in the world with close to 78% of the population living in 5 major cities around the central Mexico city that has 21 million ppl living there (that translates to the entire population of my state of Florida living in just one city).

Wow !   Wow!   Wow!

I was fascinated to read and experience Mexico again.  I have visited the country numerous times but just as a typical tourist that visits the Yucatan or Baja or the beach communities of Acapulco and Puerto Vallarta.  The richest man in the world with a personal fortune of over $60 billion Mr Carlos Slim - just like Mr. Warren Buffett - is a businessman and an investor with reaches in all the major aspects of the Mexican economy.  Mexico is the 7th largest producer of oil.  89 out of 100 top auto parts makers have production facilities in the country.  Ford, Audi, Mercedes, BMW and Nissan have auto plants in the country.  Most Mexicans are employed in the service industries.  Financial services, technology and manufacturing are the major sectors where people are employed.  

I am a trader and an investor first and foremost.  I don't express my personal opinions or politics when investing.  That is what businesses do in US as well.  Lately the market has been responding to the news on a daily basis.  There is a lot of uncertainty in the market.  In my last several posts I was highlighting how best to look at simple moving averages to determine entry and exits of stock position.  Market is highly volatile and now we are back with the change in the market pulse to  "Market Under Pressure"  as highlighted by the Investors Business Daily.  Its a good thing I left for Mexico and learn to make a trading and investing decision on my own with my own observations.  Every retail investor ought to do that and not listen to the noise that is spilled out in the media.  It will ruin you financially and you will lose your emotional capital that is crucial to succeeding and profiting in the market.

Happy Trading!

Amin

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