Stocks on My Watch List

We are heading into the second week of earnings release for the 1st quarter of 2021.  Stocks tend to be volatile the day before as well as the day of and the days after the earnings release.  No one can predict how the stock is going to perform from an earnings report release.  It's a good idea to lighten up on your stocks that are showing profits when you head into the earnings period.  Having a profitable stock turn into a losing stock from the earnings release is a sin that no trader should ever commit.  Always annotate your stock charts so you are not caught off guard from mitigating the risk associated with the earnings release.

Lots of stocks are currently performing well with the  $SPY  as well as the  $QQQ  that has reached all time highs.  We are in uncharted territory right now and some of the stocks are a bit extended.  It is perfectly normal if these 2 Indexes retrace  3%  to 5%  since they have been hovering along the faster moving 5 day simple moving average for the last 2 weeks.  That would be healthy for the market and it could provide one with an opportunity to initiate new stock positions or possibly add to existing positions that are profitable.

Stock List:

Prices in parenthesis are support/resistance areas.  Please don't take these as my recommendations.  I am watching and monitoring the progress of the general market as well as the stocks listed below.  These will change as the market makes a progress or it retraces.

  

$ASML   ... $627.30

$ATKR   ... $ 71.29

$BPOP   ... $ 71.49

$CLF      ... $ 17.78

$COOP   ... $ 32.44

$COWN  ... $36.31

$DE        ... $379.50

$ENTG    ... $114.00

$GNRC   ... $330.31

$HOME   ... $ 28.44

$HZO      ... $ 49.67

$INMD     ... $ 77.80

$JEF       ... $ 31.38

$LOGI     ... $111.09

$LSCC    ... $ 50.77

$LOVE    ... $ 66.00

$MRVI    ... $ 35.61

$NVCR   ... $179.88

$PGNY   ... $ 50.25

$PYPL    ... $267.66

$RH        ... $619.52

$RILY     ... $ 64.08

$SCCO   ... $ 71.46

$SF         ... $ 65.24

$SNAP    ... $ 60.88

$SQ         ... $252.50

$WAL       ... $ 92.13

$ZBRA     ... $502.85

Good luck trading this week.

Amin Hemani

investorspotlight@gmail.com

Mitigate  Risk

Every trader looks like a genius when the market supports all of their positions but for me, the smartest traders are those that come up with a system that eliminates their risk variables.  

All too often, traders will focus only on their profit target and overlook properly setting up a contingency plan for when things start moving in the wrong direction.  I believe any trader can benefit from a refresh on the basics so today, we're going to look at some core elements of a good exit plan.  

Work off of the $1 loss to $3 profit ratio

One of the worst mistakes you can make is to think of the profit to loss ratio only from the profit side.  Let's use our imaginary friend, Terry The Trader, to highlight an example.

Terry feels really good about taking a position on a particular stock.  All of the charts look solid and the profit target is clearly defined.  The overall market has been soaring for weeks.  To top it off, recently all of Terry's moves have benefitted from the Midas touch so what's to lose?  Time to pull the trigger and start looking for the next golden goose, right?

Wrong!  

What Terry couldn't anticipate was the upcoming earnings report and how the institutions would react to it.  As a real example that I had to face recently was with  $BBBY.  Earnings was reported April 14th Wednesday.  Stock dropped off  -16.88%  within 2 days between the day before and the day after earnings release.  This is one of the reasons why one must not hold onto the stock through the earnings season.  It's always a good idea to trim the position and harvest some profits prior to earnings release.  Mitigating earnings risk is something that should be a part of the Trade Plan.   

Situations like this have confronted every trader out there but they're completely avoidable if you take the extra steps needed to plan out a loss threshold.  

Stop second guessing your plan

Any time you take a position, you need to place an order for a contingent stop loss right afterwards.  Don't put this off for any amount of time - act immediately before your emotions and biases can enter into the mix.  Just make this a part of your routine for every single position you take.  By the 3rd time, you will have formed a new habit!

It's also important to monitor your position after you've taken it.  In my experience, the 34 day EMA (exponential moving average) can be an early indicator that a stock is going against your profit plan.  If you see a sudden increase in the selling side of the Volume, that's a danger sign as well.  

Focus on emerging opportunities

You can spend days spinning your wheels in analysis paralysis after a position goes against you.  Unfortunately, throwing a pity party sucks up all of your energy and leads to missing the boat on new opportunities.  

When a position goes against you it's important to have your stock watch list on hand.  Building an actionable stock watchlist one needs to make sure to:

• Look at stocks in the same industry group as your profitable positions.
• Avoid stocks that have surpassed their buy point.
• For an early indicator of a stocks momentum, review the 21 day exponential moving average and the relative strength line.  

If you aren't already aware, relative strength line is your best indication of a stocks value against all of the other stocks in that particular industry group.  That's a key metric that you don't want to overlook!

Keep in mind that IBD® is a tremendous resource when you're putting together a growth stock watch list.  If your list creation process is solid, you might even be able to identify stocks before they crack the IBD® 50 .  The earlier you can identify an opportunity, the more prepared you can be to pounce when a buy point hits. 

I hope this information helps you get into the habit of establishing a proper loss threshold for a position.  

As always, keep the comments and emails coming!

Amin Hemani

investorspotlight@gmail.com

 

Market  Conditions 

Conditions for Growth Stock investors has improved dramatically over the last 2 weeks.  $NASDAQ  had a  "Follow Thru"  day on Friday March 26th and  $QQQ  went on to attain a gain of over  +6.51%  since that day in 2 weeks.  It rose up from below the 50 day sma(simple moving average) and is now within a spitting distance to all time high that was achieved over 7 weeks ago on Feb 16th.  In my post over the weekend on March 28th, I had alerted the readers to stay focused on the semi conductors, home furnishing and some of the retail names in the retail segments associated with the home building segments of our economy.  That theme has played out very well in the last 2 weeks.  If you had taken some stock position in the stock names that were highlighted in my blog post the last 3 weekends, some of those stocks provided us with the opportunity to add to the existing position and concentrate portfolio into the leading Growth Stocks. 

Mr. Stanley Druckenmiller a very well known and respected money manager, Chairman and CEO of Duquesne Family Office said:

"I strongly believe the only way to make long-term returns in our business that are superior is by being a pig.  I think diversification and all the stuff they're teaching at business school today is probably the most misguided concept anywhere.  And if you look at all the great investors ... they tend to make very, very concentrated bets.  They see something, they bet it, and they bet the ranch on it.  And that's kind of the way my philosophy evolved ... if you really see it, put all your eggs in one basket and then watch the basket very carefully". 

Here is a link of a clip of the remarks that Mr. Druckenmiller made during one of his interviews:

https://youtu.be/lLM5TwxFMCU  

Stock  Watch  List

I am a firm believer of concentrating portfolio to just a handful of names.  If one has a portfolio the size of $500,000 to $1 million, one needs to whittle it down to just a handful of stocks - perhaps 6 to 9 names only.  Anything more than that becomes very hard to manage effectively.  Focus on only those stocks that are making you outsize gains.  Get rid of the losing stocks or stocks that are lagging the performance of the leading Growth Stock Index  $QQQ.  Currently I am focused on Home furnishings, Home builders and construction, Finance and credit card payment processors and the Internet content group.

Stocks:

1. $ADS
2. $ATKR
3. $BBBY
4. $BLDR
5. $EVRI
6. $HOME
7. $HVT
8. $KIRK
9. $LOVE
10. $MHK
11. $PINS
12. $PYPL
13. $RH
14. $SNAP
15. $SQ
16. $TWTR
17. $WSM

We are starting out with the earnings season for the 1st quarter this week.  Be aware that earnings reports can present a risk of a stock gapping down and wiping away all the profits that you may have in a stock.  It's critical to weigh the risk associated with holding the entire stock position through the earnings cycle as well the possible benefits of the stock gapping up for further gains possibly.

Good luck trading this week.

Happy Trading!

Amin

Semi Conductor Sector Took Off

"Seek advice from others in your profession who have been successful and who have achieved the goals that you want.  Talk to those who have been through it and have been successful.  Learn."

By Elgin Baylor, Basketball player.

Market went into retracement Feb 25th when the leading growth Stock index  $QQQ  breached the 50 day sma (simple moving average) line.  Semi conductor sector however was held up above the 34 day ema (exponential moving average).  Some of the stocks in this sector were help up above the 21 day sma.  That is a sign of institutional support.  While the market was retracing towards the latter part of February from the institutions harvesting profits from the technology names, semi conductor sector was being firmly held up.  This is the sector that is powering up our new economy that is being technologically driven.  Covid has speeded up the transformation of our lives as to how we work, play, travel, shop, bank, eat out and educate our children.  Genie is out of the bottle and it's not going to go back.  

Last couple of weeks, there was so much talk in the media about the  'Value Stocks'    We were constantly bombarded with the concerns being raised about the rising inflation and how it adversely affects the growth Stocks.  As a Growth Stock investor and a trader, one must not concern themselves too much with  PE  ratios of a stock.  Growth Stocks are valued for their future earnings.  Value stocks were devalued during the pandemic.  Some of these value stocks may have met their demise from the pandemic and may never come back to their glory days.  I grew up with Sears, JC Pennys, Kmart and banks being open only Monday to Friday 9.00 am to 5.00 pm.  All that has changed and now we do all of our shopping online and never ever visit a bank with the ability to do online banking 24/7.  Legal documents are signed online with docu sign too and court cases, conferences and learning is all carried out with zoom platform.  Most of us will be working from home and not spending 2 hours every day commuting.  Lot of these innovative ways that has transformed our lives has been due to the advances made in the semi conductor industry.

One of the hedge fund managers that has the foresight to identify the future trends is Cathie Wood of  ARK  invest fund.  She has been in the lime light lately with some of her bold investment in  $TSLA   and her target of that stock reaching  $3,000.  $AMAT   was a  $20  stock 5 years ago and I distinctly remember highlighting that stock during a meeting at IBD( Investors Business Daily) local meetup group in the Tampa Bay area of Florida.  Today that stock is  $142.90.  Here is a link to hear some of the views of Cathie Wood.  I found it to be very interesting.  

https://youtu.be/G9yciyMZURM

Semi conductor sector has brought us some true market leaders in the past 5 years and continues to present opportunities under current market environment.  There were 8 semiconductor stocks out of the 19 that I had highlighted in my blog post last Sunday March 28th.  They all had broken out on Friday March 26th.  Here are the results of their performance last week:

Stocks:

1. $AMAT   ... +11.09%
2. $ASML   ... + 1.83%
3. $ENTG   ... + 9.15%
4. $ICHR    ... +14.30%
5. $INTT     ... +11.26%
6. $KLAC   ... + 9.39%
7. $LRCX   ... + 9.94%
8. $UCTT   ... +11.68%

Average performance =  +9.83%

These stocks are now extended but there are other stocks in the group that might be worthy of being scrutinized.  They are:

1. $AMKR
2. $ACLS
3. $BRKS
4. $COHU
5. $IPHI
6. $LSCC
7. $MCHP
8. $MKSI
9. $NVMI
10. $NXPI
11. $ON
12. $ONTO
13. $QRVO
14. $TXN

Good luck trading this week.

Happy Trading!

Amin

 

Get Rid of Your Christmas Merchandize 

I was working at JC Pennys as the Merchandizing Manager during my younger years and was very successful at selecting the right merchandize for the store.  Florida has tropical weather and swim wear is in great demand starting out in the month of March when tourists and college kids come for the spring break.  My initial shipment of swimwear has to land at the stores by middle of February.  Merchandize orders for swim wear have to be placed by early December.  Stores are packed full of christmas merchandize in mid December and my money is all tied up with toys and all the holiday trimmings, lights and christmas trees.  As a Merchandize Manager, I have to make sure there is enough $$$ available for new inventory purchase.  Unfortunately I had the store packed full of winter clothing as well as holiday merchandize.  I presented my dilema to my store manager.  I did not want to miss the opportunity of profiting from selling high mark up items of swim wear.  Without missing a beat, the store manager told me:

Mark down your christmas merchandize and get rid of it

I have adhered to this wisdom with my trading of Growth Stocks.  Getting rid of laggards from your portfolio is always a good decision.  Laggards tie up your capital that could possibly be used for a stock that is trending higher.  We had a  'Follow Thru'  day on March 11th but the market has not made much progress since that time.  If your recent buys in stocks are experiencing a loss of -6%,  it is a wise decision to dispose of it and look for something else instead.  Also if the stock has attained gains of +20% to +25%, harvest some of those profits and use that capital to invest in stocks that are making a progress during market correction.

Stocks  that  are  acting  well

Currently on a weekly chart, the  $SPY  has been staying above the 10 day sma(simple moving average) but the  $QQQ  is the weaker index and staying around the 21 day sma on a weekly chart.  It is sandwiched between the 10 day and the 21 day sma.  Market is definately rotating away from the technology stocks under current environment.  Looking over my stock watch list, I noticed that the semi conductor group, home furnishing group and some of the retail segments are doing very well.  Have a look at some of these stocks.  Most of them are extended but they could provide an opportunity if they retrace to their 10 week moving average or consolidate their gains in the next couple of weeks.  I have indicated the price in parenthesis from where the stock has made the recent progress.  Some of these stocks were mentioned as being on my stock watch list in Feb as well as this month in my blogs :

Stocks:

1. $AMAT   ... $117.82
2. $ASML   ... $608.71
3. $ENTG   ... $103.37
4. $ICHR    ... $ 47.85
5. $INTT     ... $ 10.35
6. $KLAC   ... $301.60
7. $LRCX   ... $560.70
8. $UCTT   ... $ 51.95
9. $AZO     ... $1297.82
10. $BBBY   ... $ 29.39 (Building position since follow thru)
11. $BBY     ... $116.02
12. $GNRC  ... $308.04 (Building position since follow thru)
13. $HOME   ... $28.44
14. $ORLY    ... $496.61
15. $RH        ... $524.22 (My largest position)
16. $SNBR   ... $133.61
17. $TGT      ... $194.22
18. $W          ... $342.99
19. $WSM     ... $151.16 (Gapped up with 8 week hold rule)

Good luck trading this week.  We are heading into our strongest month of the year on Thursday.  Have the capital available to trade new opportunities if the market continues to make the progress like it did on Thursday and Friday.

Happy Trading!

Amin

     

Market  Conditions

Market is still in a   'Confirmed Uptrend'   but it appears the Growth Stocks are not making much progress since the  'Follow Thru Day'  that was declared on March 11th.  Currently the leading Growth Stock index  $QQQ  is residing below the 50 day sma (simple moving average) and closer to the 100 day sma.  That does not bode well for the IBD (Investors Business Daily) style of investing.  We currently have 10   'Distribution Days'   between the  $NADAQ  and  the $SPY.  It's critical now to stop the bleeding and mitigate losses.  Personally I am cutting losses at  -5%  for new starter positions that were initiated during the  'Follow Thru Day'.  There was nothing wrong with the stock selection but the realities are, when the market goes through a corrective phase, 75% of the stocks will follow the general direction of the market.  Raising  CASH  should be the theme for this week and selling stocks into strength ought to be the primary goal of preserving the trading capital one has.

Stocks  to  Monitor

Lots of the market leaders we had last year and this year may not be the ones that will be the leaders again when the market decides to follow it's uptrend.  We have to start looking at the stocks with a fresh pair of eyes and monitor stocks that are residing above the 50 day sma.  Quite a few of the old market leaders are extended 10% or more beyond the rising 50 day sma.  If the market continues to retrace slightly and consolidate, some of these old leading stocks could form a tight base.  That would be ideal.  

Here is a list of stocks that are worth watching this week.  They are trading above the 34 day ema (exponential moving average) and showing institutional support.  I have indicated support/resistance price levels that I shall be monitoring.  Those levels will change however as the stock makes the progress.  

Stocks: 

1. $AMAT   ... $110.88
2. $APHA   ... $ 19.14
3. $ASML   ... $541.33
4. $APPS   ... $ 77.38
5. $BBBY   ... $ 30.08 (Have a position +5.79%))
6. $DKS     ... $ 78.39
7. $ENTG   ... $100.12
8. $ESI       ... $ 19.40
9. $ETSY    ... $211.85
10. $FANG    ... $ 74.60
11. $FRHC   ... $ 51.84
12. $GNRC   ... $293.00 (Have a position -3.90%)
13. $GOOGL ... $2035.00
14. $HI          ... $ 48.85
15. $IAC        ... $235.61
16. $INMD    ... $ 69.75
17. $KLAC    ... $287.34
18. $LGND   ... $154.95
19. $LRCX    ... $541.00
20. $MRVI     ... $178.19
21. $MU        ... $ 89.22
22. $PLT       ... $ 41.46
23. $SBUX   ... $104.86
24. $TDC      ... $ 42.18 (Have a position -0.94%)
25. $TGT      ... $181.11
26. $TLRY    ... $ 24.70 (Have a position +7.22%  Took 1/3 off for +31.80% gain)
27. $TWTR   ... $ 66.02
28. $WAL     ... $ 93.94
29. $YY       ... $115.28

Good luck with the market this week.  Lighten up with your stock positions this week and adhere to your rules for mitigating losses.  

Happy Trading!

Amin

 

Follow   Thru   Day

IBD declared a  "Follow Thru Day"  at the close of market on Thursday March 11th.  This clears the way for retail investors to start dipping their toes back in the market. 

Do You Have A Ready List Of Stocks To Initiate A Position?

Follow-Through Day Concept

System developed by William J. O'Neil to identify an important change in general market direction from a definite downtrend to a new uptrend.

A follow-through day occurs during a market correction when a major index closes significantly higher than the previous day, and in greater volume. It happens Day 4 or later of an attempted rally. Leading up to a follow-through day, an attempted rally takes place during a downtrend when a major index closes with a gain. The rally attempt continues intact as long as the index doesn't make a new low.

Follow-through day variables include: an index closing sufficiently above 1% on increased volume, positive behavior of leading stocks, and improved market action regarding support vs. resistance levels. The most powerful follow-through days often happen Day 4 through Day 7 of an attempted rally.

In the wake of a follow-through day, the market should continue to add gains in strong volume, with breakouts by top stocks. This is further confirmation a new uptrend is underway.

Above is an article found in IBD (Investors Business Daily) website:

Investors.com

In my blog post on Sunday March 7th, I had mentioned :

 "Quite often the market could rally strongly and we  could face a confirmed uptrend within 3 days sometimes"  

That is exactly what happened this time around.  Last 3 weeks were critical for retail traders.  Starting Feb 25th, we should have started scaling down our positions and raise  CASH.  It was also the time not to watch the broadcast media and get you all riled up.  Time would have been better spent instead looking over as many stock charts as possible to look for hidden opportunities.

This week was a critical week for Growth Stock investors and traders to stay very engaged with the market.  I listed over 50 stocks in the post this week that I was holding a watch over very closely.  There were 9 stocks that were clearly showing signs of accumulation by the institutions on Tuesday March 9th, the 2nd day of attempted rally.  They had increased in price by double digits.  Institutions were waiting for the market to open to grab every share they could lay their hands on.  These 9 stocks continued to make additional gains on Wednesday and Thursday.  

Here are the results of the performance of these 9 Growth Stocks on Tuesday March 9th (2nd day of attempted rally) with the gains in parenthesis indicating further gains on Thursday March 11th.

Stocks:

1. $ARKK ... +10.66% (+6.12%)
2. $APPS ... +15.36% (+14.62%) mentioned blog post 11/4/20
3. $DQ     ... +22.45%(+8.42%)
4. $ENPH ... +12.63% (+8.42%)
5. $FUTU  ... +24.16% (+9.81%)
6. $GME  ... +26.50% (-1.91%) should have sold into strength for more than 50% profit in 1 day
7. $NIO   ... +17.36% (+10.40%) mentioned blog post 11/4/20
8. $PLL   ... +21.87% (+8.11)
9. $QFIN  ... +20.27% (+16.88%)

Stock market correction is something all Growth Stock investors and traders ought to embrace.  It helps clear out the weak holders who don't quite know how to decipher institutional behaviour.  Once you learn and acquire the necessary skills of learning growth stock behaviour, you will learn to hold your emotions in check and let the data drive your decisions.

Good luck trading and acting on an opportunity that has presented itself to us.

Happy Trading!

Amin