My Favorite Posts

Blog Post: Day 26 of $QQQ short term up-trend; $WING flies to ATH, how I missed the GLB–true confessions, and see my green line rules

@ 6:03 pm
GMI4/6
GMI-23/9
T210847%

As you know, I like to buy stocks that have moved to an ATH (all time high) have then rested, and then moved  up to a new ATH. That is the strategy of the greatest traders I follow. I draw a green line at the stock’s peak once it has not been surpassed for a least 3 months. When the stock stops resting and moves above the green line, a GLB or green lie break-out, I consider buying and holding unless the stock CLOSES back below the green line. I say closes because many times the stock trades below the green line intraday only to close back above it.  If the stock closes below the green line, it is a failed GLB and I exit immediately. If it retakes the green line and closes back above it I buy it back. Sometimes this dance goes along for a while until the stock finally takes off, often without me, as occurred with WING. When I draw the green line I immediately set an alert in TC2000 good for one year to tell me immediately when/if  the stock trades back above the green line. I and some of my former students then receive a text from TC2000 informing us of the break-out. After WING came up on today’s ATH scan I looked at my alert log and found the following.

 

On April 18, I received 3 alerts because WING had crossed above its green line! Three alerts, because I had mistakenly set multiple alerts over several weeks whenever I would look at a chart of WING. I am embarrassed to admit that I NEVER saw these alerts until today! I was too busy with other things and too down on how the market was behaving. Hopefully, some of the people who receive my alerts benefitted from these alerts.

The daily chart below shows the day of these 3 alerts. Note several prior failed GLBs. On March 18 WING closed above its green line ($187.35) and closed the next day at $187.43. Then it was off to the races.   Note the above average volume on March 18 and today–good signs. The train has left the station.

So what can you learn from my miserable mistake? It is salt in my wounds because I had bought and sold WING several times in March and incurred small losses. The famous Turtle Traders  (book appears at bottom of this blog) had a rule that said they had to act on every buy signal. The one signal you do not take after several fails is often the one that works. I do not know if WING will continue to fly. If I owned it I would sell if it closes back below the green line. And earnings are coming up on May 3. The last time earnings were released was in February when the stock gapped up and rose above the green line but then failed. The key is to continue to monitor stocks for a break out and not let your emotions or other things get in the way. Perhaps you can learn from this example and my rules below how to trade GLBs. Some, not all,  may work out if you buy them on the day of the GLB. Look at this shining example of APLS.

 

Don’t waste your time trading the fallen angels trading well down from their all time highs. Focus on those climbing to new heights. That is what Darvas and O’Neil did. Check out their charts of their biggest winners and you will see. In a weak market you have very few stocks trading at ATHs. Those that do can turn out to be the new leaders. Below are my green line trading rules for my students.

 

 

Blog Post: Day 13 of $QQQ short term up-trend; 85 US new highs and 227 new lows; $QQQ 10:30 weekly chart is strong, see how I read it

@ 7:07 pm
GMI5/6
GMI-26/9
T210834%

This weekly chart usually alerts me to market turns. QQQ is closing (gray line) above the 10 week average (dotted line) which is above the 30 week average (solid line). And the 30 week average is beginning to turn up. This would also be considered a beginning Weinstein Stage II up-trend. All recent market bottoms have this pattern. As long as the 10 week is rising above the 30 week average the up-trend is intact. Note the 2021 top. The first sing of weakness is a weekly close below the 30 week average.

Note the beautiful 2020-2021 bull market.

Blog Post: Day 11 of $QQQ short term up-trend; GMI= 6 (of 6); Time to abandon low risk income and buy stocks/ETFs; Mutual fund window dressing is over, on to earnings, see list of 18 growth stocks at ATHs

@ 9:26 pm
GMI6/6
GMI-27/9
T210836%

Everyone is talking about hiding in safer FDIC insured money market accounts now that one can earn 4%+ in interest, risk free. I told you in November, 2021 that I was exiting the market because the Fed would raise interest rates and that would suck the $$$ out of stocks. Now get ready for the reverse. We are closer to a decline in rates and that will eventually cause money managers and the public to return to stocks again. It really is that simple. The Fed tightens too much and then slashes rates to get the economy going again. Read the late Martin Zweig’s classic book.

In addition, my GMI (see table below) has now gone to the maximum value of 6. I protected myself from the 2022 decline and am now ready to move back into equities. In my university pension I have begun to transfer out of money market funds and back into mutual funds.  In my trading IRA I will begin to buy ETFs and a few growth stocks. I only buy stocks that are above their last green line and trading near their ATHs. The great winners bought by Darvas and O’Neil were stocks going to ATHs. I do now want to buy fallen angels that are turning up or building bases.  If they can make it back to ATHs I will consider them. Any stock that can come through 2022 at an ATH is showing incredible relative strength and proof of buying by the big boys.  On Friday, there were 18 stocks on my watchlist of stocks recently appearing on IBD/MS lists that traded at ATHs. (I omit cheap or low volume stocks.) This list contains possible market leaders and bears (bulls) watching. (I own some.)

The list is sorted by the last column, Friday’s closing price divided by their lowest price during the past 250 days. Thus, ELF has the highest value of 4.0. Any stock that is hitting an ATH and is trading 4x higher than its yearly low is worth considering. So is INTA, at 3.3x, a recent IBD New America stock, which I wrote about last week. Remember, both Nicolas Darvas and O’Neil’s protege, David Ryan, preferred buying stocks that have already doubled. I want to jump on rockets that have been launched and are heading to the moon, not those  close to the earth.  Note also the next earnings date column for each stock.

Last week was the end of the quarter when mutual funds dress up their portfolios with the strongest performing stocks. Their end of quarter reports will then show them owning the winners, but do not state when they purchased them. So they look like smart investors to persons reviewing their fund.That is one reason why growth stocks did so well last week.  With earnings season coming up we are likely to see more advances. However, remember we are also approaching the Sell in May period which will coincide with the debt ceiling battle. There may be an opportunity to increase positions during this summer’s hysteria.  For now, I am following my market indicators. See the GMI table below.