For nearly 50 years, our company founder, and my father, William J. O'Neil has survived and thrived through various market cycles employing the investment strategy he pioneered. His passion for the market led to the development of premium, equity research tools that our customers use today; his latest offering being MarketSmith.

 

While MarketSmith was built for equity investors of any investment strategy, we are very proud of the heritage of his system and the disciplined approach that promotes success in the market. There is, however, the occasional misconception about our investment philosophy which is ‘buying proper patterns guarantees the stock will move straight up.’ Allow me to clarify that although, this has occurred in the past (TSAR as an example) this is not considered normal. In fact, my father, who has been incredibly successful trading his system, mentioned recently that he has really only seen a dozen of these homerun trades. The real money lies in your ability to lock in singles and doubles or multiple 20-25% gains each year.

 

It’s important to be patient and understand what is normal behavior for the stock you are holding.

 

• Don’t expect stocks to move straight up out of the gate.

• Many stocks will pullback and retest the buy point immediately following a breakout.

• In good market conditions, a stock with sound fundamentals should be able to gain 20% before consolidating again.

• Most stocks breakout, run up, consolidate and breakout again 2-3 times during a broader move.

 

The example above illustrates a normal pattern of price advancement in increments of well over 20% and then correcting. You don’t have sit in a stock for the entire broad move. You may consider taking a 20-25% profit and then getting back in when it breaks out again. By studying charts and understanding their typical behavior you will be able to capitalize on several 15-20% gains over the course of a year, which coupled with cutting your losses short, should result in a year with solid returns.

 

Best Returns,

 

Scott O'Neil, President, MarketSmith, Incorporated