My trading style of buying breakouts in momentum stocks has been a highwire act. It requires heightened risk management because I expect that many of my trades will fail. I'm wondering if there might not be a better way. That affords more margin of error.
A friend of mine keyed me on to Dr. Wish and gave me some links to review. I took some notes for my weekend research. It re-emphasised for me the importance of the broad market. As good as I have been over periods, I frequently have been trading against the grain of the broad market.
Here is the video I watched,
and my notes from the video:
Key points:
- Buy stocks making new highs -- Darvas
- Stay out of a bear market. Do not go against the Grain.
- Weinstein Stages
- 30 week average cross stage 2
- Only be in a stage 2 stock long -- Stage 4 for shorts
- The importance of stage analysis is crucial. Buy only stage 2 and short only stage 4.
- O'Neil CANSLIM
- M - Market indexes 3/4 stocks follow market trends
- Be on the right side of market averages
- There is a time to be out of the market
- Cup with handle
- It is a base in a stock that has already launched at least 30%
- 7 weeks
- Livermore -- Buy going up. " I never buy too cheap or too easily."
- Never average against a losing position.
- Pyramid up
- If a position fails. sell it
- if it gives another signal-- re-buy it often an initial failed trade an lead to big gains if it re-sets.
Guidelines for buying growth stocks
- Market must be in an uptrend
- GMI must be buy
- IBD market pulse
- "IBD is very good you don't want to go against them"
- other?s
- Great fundamentals -- IBD 50
- new highs--- stocks up 100% from a year -- MDT
- Weinstein --
- Stage 2 -above 30 week.
- multi-month base
- MACD rising
- Stoch rebound from oversold
- 10 > 30 week > avg.
- price > 30 ma or close
- Exit -
- - below 30 week avg
- tops never lowered only raised
- tighten stop -- stop if GMI < 4 or TI2109 > 80-85%
- sell if doesn't act like it is expected
- stops entry every trade as if it failed
- know where it failed
- know what you are going to do.
- Key to market -- preserve capital
- start with pilot buy
- buy up, never down
- options to hedge positions
General Market Trend
- GMI
- Put / Call Ratio
- if above 1-- people too bearish bounce likely
- T1208 --% stocks > 40 ma.
- Yearly if single digits -- start pilot buys in indexes and add as it goes up.
- weekly 80 tops -- < 20 bottoms
- Market Trend Checklist
- Warning-- when leading stocks break down-- its a leading indicator for the market
- measured by % of stocks that hit new highs 10 days ago that are higher now.
SCANS:
Darvas- - TC2000
- percent of 52 Week high 90 -100
- EPS % change last quarter > 50
- c-30wkma >.01
- c/minlow250 >1.8
- Price > 30
- 4wkgt 10wkgt 30wktg = true
Results. I put the scan together and it produced one good stock. However, due the Market conditions--O'Neil's "M", no stocks should be bought at this time.
good fundamentals / Good technical Scan
- new high 250 days
- Return on equity > 14
- % change of rev last qtr >0
- price >20
- volume 20,000
- eps change last qtr >25
Results: I ran this scan and came up with only 1 stock. Even without the price and volume requirements. Likely because the market sold off so heavily there are no stocks making new highs.
Timing purchase
- 10.4.4 stochs
- MACD
- 30 day avg
- volume
- multiple time frames
Oversold and then cross 30 day avg buy signal
Other tool for buying stocks
look for cross of 10 week over 30 week.
- Green line charts
- Monthly - above 5 month average -- new monthly highs
- Yellow Line
- Now uses Guppy "Red white and blue" charts.
!!The same setup that works in an up trending market will fail in a downtrending market!!
More videos and Webinars
Doctor's Orders:
Goal is to catch a trend and ride it till it ends.
- Manage risk / Trade smart
- General Market is key --
- if you know the overall trend you have half the battle won
- 70-80% stocks follow general market
- In a downtrend do not try to find the needle in the haystack.
- GMI/ GMRR
- Gets out of market < 4.
- In a good market stocks that hit new stops should keep going
- want to see 100 new highs
- IBD Mutual fund index 9currently bearish
T2108 -- lowest every 1987 crash -- below 10 look for market bottoms.
- 80% tops out.
- Tracks every day
- MACD -- Nasdaq 100 stocks > MACD signal line.
Stan Weinstein's stage analysis
longs only worth to own stocks in Stage 2
Only time worth shorting is Stage 4.
- Sell stage 2 as 30 MA starts to flat --- *Scot1and note, how about using MAMA to ascertain flattening?
- Win the easy ones
- When market is in stage 2 -- it easy to make money on longs
- if its not clearly in stage 2 it is better to be out of the market.
Submarine Scan -- stocks to short
