Some of William O’Neil’s wisdom exemplified by the great traders I watched; GMI is Green

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“Another way to use the tape productively is to review a comprehensive graph book every week and make a list of stocks that meet your technical plus fundamental selection criteria.
      Then jot down the pivot price where you would consider buying. Also write down the average daily volume for each stock on your prospect list.
      Keep this shopping list with you every day for the next couple of weeks when you are watching the ticker tape or the market. In time, one or two of the stocks on your prospect list will begin prancing all over the tape and will approach your buy point. This is the time to get ready to make a possible buy decision—if the stock trades at your buy price and you conclude the day’s volume will be up at least 50% above average. Generally, the more demand for a stock at the buy point, the better.”
                                           William, J. O’Neil, How To Make Money in Stocks, 1st edition revised, 1988, p.197
In preparing for yesterday’s exciting AAII DC Metro workshop with the talented option educator, Dr. Alan Ellman, I reviewed a lot of sources that had influenced my trading career. The above quote from the great trader and founder of IBD, William O’Neil, caught my eye and really captured the way I saw the great traders Mark Minervini and David Ryan, trade at their extraordinary annual workshop. Note that this quote was written long before we all had the super computers with which to review our charts, monitor volume and set alerts. It also references technical and fundamental criteria.
The approach here is very different than just scanning the market real time and buying something that looks good. This more reasoned approach suggests that during the unemotional calm of the weekend or night before trading, review stocks that are setting up and have the technical and fundamental characteristics that one values. This strategy assumes that one’s trading is rule based and systematic, guided by specific criteria. Then make a small list of candidates to monitor for a break-out on above average volume. One can then pull the trigger quickly. (I use TC2000 to alert me when a stock on my list is having a GLB on unusually high daily volume—volume buzz.) When I attended the Minervini workshop last October and watched Mark and David Ryan trade real time, I saw that both men showed extreme discipline, and when neither of them found a stock on their watch lists that met their criteria that day, they just sat tight–Wow!!!
How many of us think we have to buy something every day and get seduced by the action? These men, and the great Nicolas Darvas and, I suspect, many great traders, have the patience to wait for a stock to meet their stringent criteria before they risk their money.  Food for thought….
The GMI is back to 6 (of 6) and Green. By the way, I updated my list of GLB stocks on my site.

GMI turns Green, 1st day of new $QQQ short term up-trend; $HQY successful GLB retest and yellowband up-trend

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After 4 days of being Red, GMI changes back to  Green. However, volume has been low and the QQQ may be heading into resistance at channel line or at  top Bollinger Band.

HQY has successful test of recent GLB at its 50 day average (green dotted line) –must hold green line.

Also in yellowband up-trend (weekly chart).

 

 

GMI and $QQQ short term indicators about to turn positive; GLB: $GEMP; DC AAII workshop this Saturday

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It is likely that with Thursday’s close, the GMI will turn back to Green and a new QQQ short term up-trend will have begun. I had written that the weakness we were experiencing might lead to a rebound when earnings started coming out. I have seen this play before…

A recent IPO that had a GLB to an all-time high is GEMP. I haven’t researched the company yet, but it did have increased volume on the break-out. Below is the weekly chart. I sell a GLB if it trades back below the green line.

Alan Ellman and I will be speaking at the AAII workshop this Saturday.