My trading diary entry from William O’Neil’s workshop in 1995; a set-up for buying $LMAT; $HEIA–Cup and handle break-out


In the 1990’s while I was teaching myself to trade in that roaring bull market, I kept a diary of my trades and reactions to the market and current events. I looked it over this weekend and saw this entry from 11/11/1995 and thought you might be amused by it:

This past week I attended a lecture at the Sheraton by William O’Neil, founder of Investor’s Business Daily and one of my heroes. Most of what he said I already knew from reading his book. The most startling thing that I learned was that contrary to his rules about selecting only stocks with high EPS values, he was advising institutional investors to buy the current fad internet stocks like C-Cube and Netscape. I got the distinct impression that he was saying that volume and price action was more important than demonstrated earnings growth. In fact he did say that a dramatic rise in volume could be the most important factor. His lecture sensitized me to the need to always look for the most dynamic and fastest growing companies. Stocks that are growing 100% in price a year or have 99 Relative Strength seems to be his major criterion. I would have liked to ask him whether he consciously breaks his written rule to also require a high EPS before purchase. (Copyright, Dr. Eric Wish trading diary, 11/11/1995)

I have written 200+ pages about my thoughts while I traded my way to a small fortune during the 90’s. The diary shows how difficult it was for me to trade profitably as I reacted to the market and current events. When one looks at a long term chart of the indexes over that period it looks like it was easy to make money. It was not. I wonder if anyone would want to read my trading diary if I chose to publish it………

The focus of my class for undergraduates is to teach them, “in a rising market buy visionary rocket stocks that are breaking to new all-time highs or bouncing off of support.” They have now completed 5 weeks of classes and are ready to start specifying their set-up for purchases during a trading competition of a virtual 100,000 margin portfolio. I am posting this analysis of LMAT to provide them with an indication of a possible set-up.

LMAT came to my attention because it hit an all-time high on 8/30.  I looked at a monthly chart using TC2000 and drew in a green line top at the last all-time peak that had not been surpassed for at least 3 months. I then looked at its modified Guppy chart of 13 weekly exponential moving averages (six short term and 12 long term averages plus a one week average that shows its weekly closes).

lmatrwbI saw that LMAT  had an RWB pattern with all 6 short term averages (red lines) rising above the rising longer term averages (blue) with a white space between them. Thus, LMAT had an RWB pattern and is a launched rocket stock.  In other words, it was an advancing stock that had rested for at least 3 months (formed a base) and broken to an all-time high.

LMAT closed above its green line 2 times on above average trading volume (see daily chart below). The first time the break-out failed, as it traded back below its green line for 3 days. (I immediately sell failed break-outs.) Then LMAT had a much larger break-out on considerably higher trading volume. If I missed that break-out or had exited after the failure, then I wanted to enter this rocket after a decline to short term support and a likely resumption of the up-trend. That happened on Friday when LMAT bounced up off of its rising 30 day average and its lower daily 15.2 Bollinger Band on increased volume. This is one of my favorite set-ups. If I were to buy LMAT on Monday I would do so and place a sell stop around the low of the bounce, near 19.29. However, I must sell immediately if the bounce I bought on does not hold. One never knows in advance if a particular set-up will be successful. Of course, I would first check LMAT’s news and fundamentals to make sure that it was worthy of my risking capital to purchase it. For example, IBD gives LMAT a composite ranking of 99, the highest possible reading.


I actually use TC2000 to scan for stocks with this set-up. By the way, the Worden people are presenting a workshop in the DC area next weekend.  Will see you there on Saturday…

I noticed this possible cup and handle break-out from Friday. Note HEIA is above its last green line top–a good sign. It also has a nice RWB pattern (not shown).  I do not like the high volume down day in the handle on Friday, just  before Friday’s bounce, however. IBD composite rating for HEIA= 98. Let’s see if HEIA  holds this break-out on Monday.


The GMI remains Green. Note the QQQ short term up-trend is now 11 days old. Since that short term signal at the close on 9/16 through Friday’s close, the QQQ has advanced +1.22% and the leveraged 3X bullish ETF, TQQQ, +3.37%.




How I buy rocket stocks bouncing up off of support (BOS): Examples: $HII and $AWK


After tradings stocks for over 50 years my trading strategy continues to evolve. I used to ignore indicators like stochastics and Bollinger Bands because I mistakenly believed that such concepts as overbought or oversold were useless. I fortunately  began to re-analyze some of my trades using these indicators and found these indicators to be extremely valuable.

The biggest problem faced by me and my students is buying great stocks that then turn out to be “extended.” These stocks promptly turn around and decline right after what we thought was a perfectly timed purchase. Sound familiar? After listening to some of the expert traders who come to lecture to my students I decided that rather than buying stocks that break to new highs, I should buy strong stocks that have rested and become oversold and then start up again. I do like buying green line break-outs (GLB) but maybe should wait to buy them after the break-out when they subsequently become oversold. The GLB is just evidence of a strong stock that has broken out to an all-time high after a rest of 3 months or more. At the moment of break-out they are rarely over-sold!

I prefer to buy  strong oversold stocks that are bouncing off of support (BOS) and to place a sell stop just below where they have bounced. This means that if the bounce fails I am sold out quickly with a small loss. Since a lot of my purchases will likely fail, it is critical to have very small losses when my trades go awry. When the bounce holds, I can then ride the stock and even add more to my position  so that my relatively few large profits make up for my many small losses. There is nothing more freeing emotionally than to buy a stock and place an immediate GTC stop loss order to sell with a very small loss. My mantra is that each small loss brings me closer to the next big gain–no ego allowed.

I have written a number of scans in TC2000 that can detect strong rising stocks that have become oversold and that are bouncing off of support  (BOS). My primary measure of oversold is a bounce up from the lower  15.2 daily Bollinger Band. Once I find a list of bouncing stocks I  investigate such things as their trading volume, fundamentals, market trend and anything else that can help me decide which stock to buy. But these additional  analyses really do not matter much because in the end it  is impossible to reliably predict which stock’s bounce will hold. By the way, I have used this strategy successfully with all types of stocks and ETFs.

Below is a chart of a BOS stock that bounced on Friday, HII. Each previous bounce from its lower BB is shown with a “B.” The 2 magenta lines show when the major market indexes’ recent mini-corrections ended. Note that even though the decline to Bottom 2, the Grexit decline, was lower and steeper than the decline to Bottom 1, HII managed to show incredible relative strength and resist the declines. HII was actually trading higher at Bottom 2 than Bottom 1! Will HII’s Friday bounce hold? I do not know. But if I wanted to trade it I would buy it on strength (if it trades above Friday’s high) on Monday and place my sell stop below the bounce, perhaps around 167.19. I am presenting this only as an educational example of my technique. I do not own HII.

HIIbouncesWhile I am not showing its chart, my favorite water stock, AWK, showed a similar BOS on Friday.

During the trading day, when TC2000 alerts me to a BOS, I often tweet the symbol to the world. You can receive my tweets intraday at @WishingWealth. Just keep in mind that I tweet only to teach people and to enable them to evaluate any of these stocks using their own criteria. I do not trade all of the stocks I tweet about. I am looking forward to fall semester when I will teach a class of 180 freshmen what I wish someone had taught me at their age.

The GMI remains at 6 (of 6).



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Introducing BOS alerts for my tweets; GMI at 6 (of 6); a Dr. Wish Favorite Post; BOS: $RTN


The primary trading approach from my course on technical analysis that I teach undergraduates is contained in the following quote from yours truly:

ClasssloganI have for years been stressing the  break-out strategy at the end of this quote. (Who quotes himself?) Buying stocks breaking out of a base and through resistance is highlighted in the works of successful traders I have emulated, like Nicolas Darvas, Jesse Livermore and William O’Neil. (Their exceptional books are listed on this blog.) Each trader defines a base somewhat differently, however. For me, it is defined by a green line breakout (GLB).  I draw a green line on a monthly chart at a stock’s all-time high that has not been penetrated for 3 or more months. This defines an advancing stock that has rested or consolidated. I then become interested in the stock the moment it exceeds its green line top, preferably on unusually high trading volume. I set alerts on TC2000 to signal me when a GLB occurs. I have recently taken to tweeting GLB alerts intraday.  The major problem with GLBs is they often fail and equally important, it is not really easy to define in advance a price at which I think will indicate the break-out has failed and I should exit. I usually try to exit if the stock that has a GLB closes back below its green line. So many of the GLBs occur when the stock is overextended and it soon retraces and I get (rightly or wrongly) scared out.

Over the past couple of years I have developed an alternative set-up for buys that seems to work very well for me in an advancing market (GMI on a Buy signal or QQQ short term trend is up).  I actually like this strategy better than trading GLBs. As the first part of the quote above states, in an advancing market, I find a strong rocket stock that has become oversold and/or is on support. I programmed TC2000 to alert me when a stock meets my criteria (rocket stock and not extended)  if the stock trades up. (This set-up I label Bounce on Support, BOS.)  If I like the stock, I buy it and place an immediate sell stop order in below the bounce or the support level. I really like this approach because my stop or exit level is typically quite close to where I entered, so I likely risk little. I know that a good percentage of these entries will fail, but the name of the game is to lose very little when it fails, to exit quickly,  and to retain stocks that behave. I do not know in advance which BOS position will succeed. No one really knows that. So I take an unemotional and detached attitude, making my purchase, setting an immediate sell stop, and then letting the market decide whether I will profit or lose. This really is a succinct summary of where I come out after a 50 year journey of trading stocks.

I have newly embraced tweeting some of my stock alerts intraday. (If I begin tweeting, this mode of communication must have peaked!) You can sign up to receive my intraday tweets here: @WishingWealth.  My goal, as always, is to teach people how I systematically trade stocks and manage risk and not to make trading recommendations or to sell anything. I often have already researched a GLB or BOS stock long before I receive an alert. So I am ready to act. Many of my stocks come from the IBD 50 list. Everyone must design their own set-ups that are consistent with their tolerance for risk and financial situation. My tweets appear each day on my blog site,, but they come much quicker and directly to people who have signed up to follow me on twitter. So last week I tweeted that I bought RTN and placed a sell stop to exit if the stock traded back below 129. Take a look at the daily chart of RTN. RTN never looked back–yet…  Can you guess why it is a BOS?

Screen Shot 2016-06-05 at 3.14.20 PMI define support or oversold levels on the basis of a few criteria which I will not specify here. (Ask my undergraduate students!)  Just keep in mind that not every BOS will work out. When I tweet a BOS alert, I will also specify the price at which I think it would have failed and where I would place my stop loss order. When a BOS position succeeds, I must then decide where to raise my sell stop to. Sometimes I may not raise it at all, if I want to try and ride a strong stock that I have been waiting for an entry for, or to avoid being whipsawed. Other times I might raise my sell stop to a level that will likely prevent a gain from turning into a loss. This is where science ends and the art of the trade begins….

Friday was the 7th day of the new $QQQ short term up-trend and the General Market Index (GMI) remains at 6 (of 6). As long as my market indicators stay positive I will tweet some of my alerts for GLBs and BOS. By the way, you can check out the performance of selected recent GLB alert stocks on the right of my blog page. Many are doing well, as the market is in an up-trend.



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All World Stock Markets entering BWR Down-trends! I am in cash and monitoring T2108


I assume that most  U.S. part-time traders, like me, tend to monitor  closely the U.S. stock indexes. I have been writing that the major indexes I follow (DIA, QQQ, SPY and NYSE) appear to be entering major down-trends, showing the RWB pattern I invented by modifying GMMA weekly charts. My charts have 12 exponential weekly moving averages, a band of 6 shorter averages plotted in red, and a band of six longer term averages in blue. A strong up-trend is evident when all of the red lines are well above the rising blue lines such that there is a white band separating them. I call this an RWB pattern, Red/White/Blue. A significant down-trend is evident when the reverse is true, giving a BWR pattern. I also include in my charts a gray dotted line that shows the weekly close of the index being plotted. This more recent price line (gray dotted line) tends to lead the averages.

The past few weeks I have been showing you that the U.S. indexes I follow have been transitioning from a multi-year strong RWB up-trend into a BWR down-trend. This is clearly evident in this weekly chart of the SPY. The NYSE index, composed of large multi-national stocks, is in a fully formed BWR down-trend.



All of the other U.S. indexes I follow have  patterns  similar to the SPY, although the QQQ, shown below, composed of nonfinancial tech stocks,  is  less far along than the others in forming a BWR pattern. It is clear from these charts that these markets have come out of a  multi-year RWB up-trend. In an RWB the gray dotted line is largely above the red averages, showing that the direction is headed up. In a BWR down-trend the reverse is true. Note that the gray dotted lines in the above two charts are now below all 12 averages, signalling a deepening down-trend. One  sign of a new up-trend would be if the gray dotted line were to close back above all 12 averages, although I prefer to see the full RWB pattern develop before I trade big with a changed trend. My primary conclusion is that the RWB pattern (bull advance) of the lest few years in the U.S. markets  is clearly over and no one  knows when it will come back. Is it too late to sell?  Sorry, no one knows.


The above discussion would have been my routine analysis of the markets. But given the current market turmoil and the primary cause being ascribed to the market in China, I thought I would look at the chart patterns of markets world-wide. I examined 37 ETFs representing markets across the world. With the exceptions of the markets in Belgium and Ireland, all markets I examined were in well developed BWR down-trends!  Can we legitimately blame all of this on China? I will post just a few representative examples below.





RussiaSouth Africa:

SouthAfricaUnited Kingdom:








SwedenChina 25:

ChinaI am not an expert on world markets. Maybe one of you can comment on these relationships. Is it really possible that all world markets are going down because of the China market? I suspect not. There is probably another factor driving all of these markets? Deflating commodities?

Did similar relationships occur in 2008? Not all of these ETFs existed in 2008. When I looked back at the patterns across a few countries in 2008 I again saw tremendous similarity across the markets. That does not necessarily mean that we are entering  another crisis like the one  in 2008? Nevertheless, the possible implications of these charts concern me more than a little……..

My GMI remains on a Sell signal with all indicators negative. Where is the bottom? A major past signal of  panic-induced market bottoms that I have noticed is when the Worden T2108 indicator, now 15,  falls into single digits. The monthly chart below shows that T2108 reached 1 at the 2008 bottom,  7 in 2011 and around 6 last August. I post T2108 each day, to the right of this page.

If T2108 goes below 10, I hope to hold my nose and move some cash into an index ETF (SPY or QQQ) or an index mutual fund. I will then only average up if the market continues to recover. I make this promise each time we have a large decline but seldom keep it! At the bottom the market always looks too scary to buy…..




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GMI back to 0 (of 6); Why I heed my General Market Indicator (GMI)


My QQQ short term trend indicator is back to a down-trend, after only 2 days of an up-trend. This indicator is focused on the very short term trend and is different from the GMI. I have said that I trust a change in my short term trend direction only after it lasts 5 days. Below are daily charts of the QQQ, colored according to the GMI Buy (green) and Sell (red) signals. While not perfect, the GMI gets me out of significant down-trends and back in during up-trends. Note that the GMI has been on a Sell signal since the market close on August 24. I am mainly in cash in all of my accounts. (Click on charts to enlarge.)





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Is worst of stock market decline over? I’m not betting on it…..


Wouldn’t you know that the extreme market action would occur just after I went on vacation? I was not surprised by the down market last Monday. When stocks have a bad week and end on a down note on Friday, people get scared over the weekend and sell on Monday morning.   The depth of the Monday flash crash was very scary, however,   and will probably affect the market for some time. It is interesting to me how few commentators are stressing the utter failure of the exchanges to have an orderly market open on Monday morning! Fortunately, as my readers should know, I have been exiting the market for weeks. I have been 90%+ in cash and am now 100% in cash in my trading accounts.

I listened to the CNBC market pundits occasionally for entertainment, not to follow their advice. I discovered this   neat site while looking for the famous quote in October 1929 by the economist of the day who said the market had reached a permanent high plateau, just before the   October 1929 great crash! In searching for the quote, I found this site which shows graphically how wrong the economists, businessmen and politicians   at the time were about the future impact of the October 1929 decline on business and the stock market. Note the assertions similar to those we heard this week,   that business was good and would not be affected by the market action. Note also that the October 1929 crash was only the first leg down of a multiyear decline that bottomed out in 1932 with the Dow below 50 during the Great Depression. I show my students a more recent example of the sagacity of market pundits during Enron’s dissent from $90 to 0.   The great Wall Street stock firms kept recommending that their clients buy or hold Enron stock as it fell to nothing. After seeing that example, my students have a healthy skepticism for   most brokers’ advice. As I warn them, their broker will make them broker. So it did not surprise me when I listened to the CNBC pundits in recent days saying that the market decline had nothing to do with business conditions, which look just fine to them now. History does not exactly repeat it just rhymes…

The huge Boomer bulge in the population has driven cultural events all of my life, from turning our parents to read Dr. Spock for child rearing advice, to the hippie culture of the 60’s,   the boom in college enrollment, and to the huge economic boom of the 80’s and 90’s as the Boomers reached peak earning power grew their families. Now we Boomers are heading toward retirement. Most have mainly Social Security and 401 (K) earnings to sustain us. What do you think the Boomers are going to do with their pension investments after last week’s market action? I suggest many will reduce their exposure to stocks, and cut spending on luxuries and big ticket items. Money protected in low yielding CDs and even savings accounts is safer and more attractive than money invested in stocks and even ETFs. So, right or wrong, I suspect that we will see Boomers exiting the market, especially if the indexes retrace a little more of this vicious decline and they can get out near their recent account balance highs. If the markets start to fall again and break last week’s lows, I fear we will see a   protracted decline that will extend for months and thousands of Dow points. Bear markets used to last 10 months.

While all of my trading accounts are in cash, I am less able to time the market in my pension mutual funds in my 401 (K). However, I will likely transfer even these funds into money market funds in the coming days or weeks. I would rather miss a further 5-10% rise than sit through a possible 20-40% decline. The GMI has now been 0 (of 6) for the past 5 days. The last time the GMI was zero for so many days was last October. That decline ended and a nice rally began that lasted thorough this summer. But compare the depth of the QQQ’s decline last October to the debacle that just occurred. The technical break-down is far greater (no, this weekly chart is not wrong). I therefore would not expect a quick resumption of the up-trend, although as we know, anything is possible when it comes to the market. If the QQQ fails to retake its 30 week moving average (red solid line) like it did quickly last October, the recent decline could be just the beginning of something nasty.   Being in the seasonally weak part of the year for the market (September/October) and with the Fed   likely to start raising rates by year end, I think this is not the time for me to be bravely in the market on the long side. I hope I am wrong, but I am a chicken when it comes to my investments.

Screen Shot 2015-08-30 at 3.03.10 PM


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10th day of $QQQ short term up-trend; $AAPL leading market higher; 5 GLB stocks; GLB in IPOs


With AAPL showing strength, it looks like this market will move higher. Check out AAPL’s daily chart.

AAPL05222015And its strong RWB pattern.


Stocks are breaking through their green line tops to all-time highs. Like SYNA



IMAX05222015And MGA

MGA05222015And TCX

TCX05222015And CTRP

CTRP05222015I like to hold stocks that break up through their green line tops (GLB) as long as they stay above their green lines.

A green line top occurs when a stock reaches an all-time high that it does not exceed for at least 3 months. By definition, an IPO may not have existed long enough to rest for 3 months. I rediscovered what Jesse Livermore once wrote. If an IPO opens strong and then recedes from its peak for a few weeks, buy it when it breaks to a new high.   As Jesse said, it means something has changed. FB did this quite a while ago, although it took it almost two years until 2013 (monthly chart) to hit a new high.

FB05222015SHAK flashed the buy signal much more quickly, after 12 weeks (weekly chart). It pays to watch the IPOs for this truncated GLB pattern.


The GMI remains at 6 (of 6).



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