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%.




10th day of $QQQ short term up-trend; P/C ratio=1.10; $DBC=Stage II up-trend


With the p/c ratio=1.10 the market may bounce again on Friday.

I have been buying DBC, the commodity tracking index ETF. This weekly chart is showing a new Stage II up-trend. I will hold DBC as long as it holds its 30 week average (red line).


$QQQ, $DIA and $SPY in RWB up-trends; GLB: $MB; 9th day of $QQQ short term up-trend;


I have to buy this market. The QQQ is in a strong red/white/blue, (RWB) up-trend with all of the shorter term averages above the rising longer term averages with a white space between them. All three index ETFs (QQQ, DIA, SPY) are showing RWB patterns. I have been accumulating TQQQ, the 3x leveraged bullish QQQ ETF.


This weekly chart shows MB had a GLB this week on above average volume. The weekly volume is on track to reaching the highest since it came public in June, 2015 (not shown below).


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Performance of $QQQ during GMI signals; GMI to issue new signals; GLB: $FOXF, $FLT


Below is a plot of the QQQ during periods when the GMI was on a Sell (red) or Buy (green) signal. Decide for yourself if this signal would have helped you stay out of bad markets, as it did for me. The GMI signals are rather conservative because the GMI tends to turn green well after the bottom of a major decline and a new up-trend has become firmly established. It also tends to turn red well after market tops. Such is the nature of trend following indicators!


A plot of the shorter time period, from 2014-2016, shows more clearly that while the GMI is red during longer declines of the QQQ, it has had a number of times when it turned red right at the bottom of a very brief decline. I therefore do not necessarily exit all positions when the GMI flashes a “Sell” signal but look at additional indicators for confirmation. I am therefore changing the GMI signals from Buy/Sell to Green/Red.   Green signifies to me that conditions favor being in stocks, while Red means the opposite and that extreme caution is needed.


Speaking of short declines, the GMI  turned Green at last Thursday’s close after being Red for just 8 days. As noted in the charts above, the GMI turns Red after registering 2 consecutive days below 3 and turns Green after 2 consecutive days above 3.

All of the indicators measured by the GMI and GMI-2 are currently positive. In addition, Friday was the 6th day of the new QQQ short term up-trend, which is assessed differently than the GMI signals. Note that the SPY is still (for 3 weeks) below its critical 10 week average.


FOXF had a GLB on its highest weekly volume since it came public in 2013. FOXF is being added to an index ETF.


FLT also had a GLB last week.