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Hi everyone,
I thought with the new year starting that it would be fun to track an account using the CANSLIM methodology.
The basic portfolio rules are that the portfolio will have 4-5 positions, investing about $15,000 per position. I plan to buy 60% of the position near the stock's pivot point but sometimes I cheat a little bit for reasons I will discuss in the future and buy the other 40% of the position in either 1 buy or 2 buys depending how my 1st position acts. Depending how skittish I am, I don't always buy 60% of the position at first (see recent ISRG buy).
I have a small margin account that I am going to use for this purpose. As of today's close the account has a balance of approximately $40,000 give or take $10 bucks with a small 15 share position in ISRG established at $448.00 and the rest of the balance is in cash.
The reasoning behind the ISRG trade is that it was breaking out of a 5/6 week flat base or cup w/ handle above a rising 10 wk moving average. This breakout occurred 2 days after the market formed a follow-through day on December 20th. The volume on the day of the breakout is not as much as I would have liked but I also realize that volume is historically low during this time of year. The stop is currently placed at $437.75. Once I figure out how to attach a chart to this forum, I will send a chart of ISRG.
Let the experiment begin,
Steve
Steve,
Sounds like an interesting experiment. Hope you find the time to do all the posts required with what it sounds like you want to do. Don
That is a great idea Steve, and I appreciate you sharing it with the MS community. I would be very interested in following your trades and rationale behind each one. Maybe you can establish a blog here? I think easier to post charts on blog section directly from your MS tool.
dthomas,
I hope so too. I only work 4 months out of the year and trade year round so hopefully I will have enough time. However, there are usually only 2-4 windows of opportunity as William O'Neil would call them that occur each year so there are not as many opportunities to buy leadership stocks as some folks might think. I have found out that the more I trade, the worse I do.
Thanks for the suggestion S. Kostreci. I may just do that.
Bought 100 shares of BIIB at $113.15 with a stop currently placed at $109.15 rising from a upsloping 10wk MA and a 3 weeks tight pattern.
I have a current buy stop order for today only to buy 30 shares of BIIB IF it trades to $115.10 which is about 2% above my 1st purchase price and gets me to basically a full position in this stock.
Also, I am moving my protective stop in ISRG to $449.00 which is just above my $448 purchase price. Generally, I wait for a stock to rally 15%-20% before moving my stop up to about breakeven but due to the current market environment, I have been quicker to move up my stops to breakeven. Now, for the big liquidity stocks like ISRG, I will begin moving them up once they rally 5%-10% above my entry price, especially when the rally is occurring on weak volume which is happening in ISRG after its breakout. This modification in my trading rules really helped me improve my gains in 2011 even though I was stopped out for basically breakeven trades many times. Without this rule in 2011, I would have been stuck with plenty of 3-5% losses which can really add up if you are not careful.
I doubt the order gets filled due to the weakness we are seeing in the major indexes this morning but I am placing the BIIB buy stop order once again. See below for details.
Best of success to all,
I am just letting everyone know that the 30 share add-on position in BIIB mentioned here ahead of time was filled at $115.10.
Here is a recap of the current holdings of this portfolio.
ISRG 15 shares @ $448.00 bought 12/22/11 currently at $472.36
BIIB 100 shares @ $113.15 bought 1/3/12 currently at $115.26
BIIB 30 shares @ $115.10 bought 1/5/12 currently at $115.26
Most of the portfolio is still in cash.
The portfolio is making a little bit of headway but the distribution days in the major indexes have been piling up. A strong reaction in the major indexes will likely lead to more distribution days which will likely put an end to the most recent follow-through day. If a strong reaction does occur, the portfolio's risk is defined by its exit points on the 2 stocks it does own. As always, I will let the market and my stocks determine whether I can continue to buy more leadership stocks as they breakout or move back to the sidelines.
At the close, I exited the 15 share position in ISRG at $460.48 for a gain of only $187.20. The reason for exit was that ISRG was not making much upside progress and the volume has been weak during the rally. Yesterday when volume did increase putting ISRG in a position to continue upward, it falls instead on the widest spread down bar since the breakout began and the volume was about 50% above average.
When demand volume is absent on a breakout and continues to be absent on the next few days, I do not give the stock much wiggle room. When I see strong selling enter the stock, I sell to take whatever small profits I may have.
Buying 100 shares of MELI at $83.50 as it rallies with demand from its rising 10 wk moving average and from its strong gap up bar from November 3rd. MELI is currently trading at $84.22 so the order has not been executed yet. IF the order is filled, the stop will be placed at $79.80. I will probably buy another 50 shares around $83.00 if it gets there. I am just trying to build a position as close as I can to the $82.77 pivot point without missing the trade while at the same time controlling my risk. I am NOT averaging down.
Just to keep everyone up-to-date after today's purchase of MELI, I have listed the portfolio's activity and current holdings.
ISRG bought 15 shares @ $448.00 12/22/11 & sold 15 shares @ $460.48 1/6/12 for $187.20 gain
BIIB bought 100 shares @ $113.15 1/3/12 currently at $114.88
BIIB bought 30 shares @ $115.10 1/5/12 currently at $114.88
MELI 100 shares @ $83.55 1/10/12 currently at $83.70
MELI 50 shares @ $83.10 1/10/12 currently at $83.70
The portfolio is making a little bit of headway but not much. I am still cautious of this market due to the lack of leadership and lack of persistently strong volume entering the market. Based on where my stop orders are currently placed, if the market suddenly begins to turn down with signs of distribution leading to me exiting my positions, the portfolio will only suffer about a 1-1.5% total portfolio loss. However, if the institutions begin to more aggressively accumulate stocks, I should get the opportunity to add more leading stocks to this portfolio.
Hi Steve,
If you dont mind, can you please tell me what your reason was for buying MELI, do you see uneven cup-with-handle on weekly?
Thanks,
YD
I just exited the 130 share position in BIIB at $115.91 for reasons I will explain after today's close.
Hi YD,
I bought MELI because it rallied above its rising 10 wk moving average and it tested the huge breakout bar from November 3rd on the daily chart. Also, looking at the weekly chart, I can see a huge cup w/handle possibly forming where the cup forms from the late April 2011 high and early December 2011 high and last week MELI was at the bottom of the handle. The pivot point for this huge cup with handle would put 10 cents above 95.48 which was the December 2011 high.
Glad to help,
MELI is the AMZN of Latin America. The only problem is they report earnings in USD. Strong USD may hurt earnings reporting. Bit speculative so I'm skipping this one. Otherwise good to go.
The reasoning for my exiting my BIIB position this morning was because yesterday's bar formed an important stalling day in my judgement. Yesterday, the volume in BIIB was the highest in over a month yet BIIB was able to make very little net upside progress and the close of yesterday's bar was at the midpoint of the range. Then today, after the 1st 15 minutes of trading, I saw BIIB struggle to hold above yesterday's close so I went ahead and exited the position for a small gain. Normally, I would not let one stalling day lead me to selling my position but as I have said before, I am cautiously bullish and therefore, not giving my stocks much wiggle room.
Here is a recap of the activity in this account as of today's close
BIIB bought 100 shares @ $113.15 1/3/12 & sold 100 shares @ $115.91 1/12/12 for $276.00 gain
BIIB bought 30 shares @ $115.10 1/5/12 & sold 30 shares @ $115.91 1/12/12 for $24.30 gain
MELI 100 shares @ $83.55 1/10/12 currently at $86.51
MELI 50 shares @ $83.10 1/10/12 currently at $86.51
The portfolio slowly but surely continues to make a little bit of headway. Including the unrealized $466.50 profit in the MELI position, the portfolio has total gains of $954.00 or roughly a 3% return through the first 2 weeks of the year. The 3% return is basically what the major indexes are producing for the year. The portfolio is far under vested but is still doing an okay job keeping up with the major indexes as I continue to look for more buying opportunities which has been a difficult task for me.
sswetz:
Thank you for doing this Real-Time Canslim Experiment. It's always good to see and learn how others trade the system. Quick question regarding position size. I'm trying to get a feel for how you are sizing your positions and I want to make sure I'm following you correctly. Based on yesterday's closing price (1/12/12) in MELI of $86.51, what is your current position size % in MELI in relation to your overall portfolio? Based on my calculations I'm coming up with a position size of appx. 30%-31% in MELI (assuming a portfolio of appx. $41,000).
Better position sizing is something I'm really working on this year and I'm always interested in how others size positions.
Thanks.
Hi ph10,
You are correct that this account started off at about $40,000 but is a margin account so I actually have $80,000 of buying power. My intention is to have a portfolio of about 4-5 stocks. If I divide the $80,000 by 5, I can allocate $16,000 to each of the 5 positions. In the case of MELI, my average original purchase price was $83.40 so I can buy 190-200 shares ($16,000 divided by $83.40). I like to start off buying about 60%-70% of the number of shares required for a full position and then pyramid up if the trade appears to be working out which is why I only have 150 shares of MELI instead of 190-200 shares at this time.
With all of that being said, I have 2 risk management rules that I NEVER break and that is I will not risk more than 2.5% of my total account on a single stock and I will not risk more than 10% of my total account on all of the stocks I own. In other words, I am willing to risk losing $1,000 (2.5% of $40,000) on a single stock and willing to risk $4,000 on all of my stocks when I am fully invested. In the case of MELI with my stop just below $80.00 and my average purchase price just below $83.50, I am only risking about $525 on this trade which easily meets my risk management rules.
It may sound confusing but I already have the number of shares calculated ahead of time that I would buy IF a trade triggered. So, when the trading day is unfolding, I just have to place the order.
I am just providing an end of the week recap of the portfolio's activity.
Recap of the activity in this account as of today's close
MELI 100 shares @ $83.55 1/10/12 currently at $86.72
MELI 50 shares @ $83.10 1/10/12 currently at $86.72
After about 2 weeks of trading, the portfolio ended the week with a total gain of $985.50 which includes both realized and unrealized gains with one open position in MELI. The 3% return is basically what the major indexes are producing for the year. After going through my weekend routine, I may come up with a stock or two to add to the portfolio next week. I do not want to get too heavily invested before earnings season gets going next week and then get my head handed to me with a large gap down on a disappointing earnings announcement. I may buy one more stock before the earnings release date and then buy the rest of them based on how they respond to their earnings announcement.
I am moving my stop position in the 150 share MELI position to $82.40 which is just below the January 12, 2012 minor swing low which reduces the risk to a very small $150 potential loss. Today's stalling action is a little bit worrisome due to MELI rallying less than 1% even though the volume was the highest in over a month so we know more supply entered the market to meet the available demand. The subsequent action will tell us if the buying was exhausted or the selling was absorbed which would open the door for higher prices. It is possible that this rally is the right shoulder of a head and shoulders pattern which is worrisome as well. Regardless, my risk in this trade is so small, it really doesn't matter to me what eventually occurs in MELI. If buying continues to overcome the selling in MELI leading to more upside progress then great, I will make more money and should get an opportunity to add to my position. However, if things turn down for the worse, my risk is now so low, I only lose about $150 which is nothing.
Here is the end of the week recap of the portfolio's activity as of January 20, 2012.
MELI 100 shares @ $83.55 1/10/12 currently at $87.40
MELI 50 shares @ $83.10 1/10/12 currently at $87.40
After about 3 weeks of trading, the portfolio has a total gain of $1,087.50 which includes the $600 unrealized gain in the open position in MELI. Getting over the $1,000 profit mark was nice but the portfolio is under performing the major stock indexes a little bit due to only having 1 position.
I am still cautiously bullish on this market. We saw some of the big cap leaders like ISRG and GOOG get hit pretty hard after their respective earnings announcement this week. But then I see a big cap leadership stock like FFIV act strongly after its earnings announcement. I see that volume continues to be relatively low in both stock exchanges but the higher volume is on the up bars. I see a few stocks breakout of sound bases with strong demand like ALXN, JAZZ, and MNST for example but I would be hard pressed to find 10 breakouts similar to these 3 across the whole market over the last 2-3 weeks. For every bullish clue I see in the market, I also see a bearish clue. For me, the bottom line is that I will continue to buy stocks because my rules have given me the green light but will do so in a cautious manner. In other words, I will take things slow. I still see pullbacks in the major indexes as buying opportunities in the leadership quality stocks on my buy list. Of course, a few distribution days in the major indexes can quickly change my plan.
The year has just started so we have plenty of time to not only easily outperform the market but also have some strong gains by the end of the year, if the market is willing to cooperate.
This portfolio just sold 100 shares of MELI at $87.50. Keeping the stop on the other 50 shares at $82.40.
This portfolio just bought 300 shares of OAS at $33.58 with a stop placed at $31.90. Also, the portfolio is moving its stop on the remaining 50 shares of MELI to $83.40 which basically eliminates all of the risk on this particular trade.
My reasoning behind the OAS purchase was that on January 17th, it broke out of a 11 week cup w/handle base with 109% above average volume with the pivot point being $33.48 which was the high of the handle from January 4th. I actually missed the breakout buy. However, it worked out okay because I missed what I would call a shakeout bar on January 20th when OAS gapped down after the Keystone pipeline project fell through. What was interesting about the shakeout bar was that volume was 115% above average and the close was near the upper end of the range so it looked like the institutions were using the "bad news" as an opportunity to accumulate shares. Therefore, I was ready to begin building a position in this stock as well when it traded 10 cents above the $33.48 pivot point.
Well my OAS trade did not last long. This portfolio sold 100 shares at $31.95, 100 shares at $31.96, and 100 shares at $32.76 for a total loss of $377. OAS is still on my watch list but my timing was definitely off on this one.
I will update the activity of this portfolio after the market closes and add a few comments about the market.
This portfolio just bought 200 shares of JAZZ at $47.99.
Here is the end of the week recap of the portfolio's activity as of January 27, 2012.
MELI bought 100 shares @ $83.55 1/10/12 & sold 100 shares @ $87.50 1/23/12 for $395.00 gain
MELI bought 50 shares @ $83.10 1/10/12 currently at $89.90
OAS bought 300 shares @ $33.58 1/26/12 & sold 100 shares @ $31.95, 100 shares @ $31.96, 100 shares at $32.76 1/27/12 for $377.00 loss
JAZZ bought 200 shares @ $47.99 1/27/12 currently at $47.98
I am still cautiously bullish on this market but am continuing to have a hard time identifying leading stocks breaking out from sound bases in a strong manner. The NASDAQ composite index has rallied 12.5% from its mid-December low in about 6 weeks and the SnP index has rallied 10.9% from its mid-December low in about the same 6 weeks so the market is a bit extended and due for a pullback of some kind. I would like to see the market pull back a couple of weeks similar to what happened in November 2010 which allowed more leadership stocks to form the handle or complete the right side of their base before breaking out. The November 2010 pullback really gave me a great opportunity to add onto some of my strongest stocks and buy new ones.
In the SnP index over the last 3 weeks, I count 4 distribution days which includes a stalling day on January 20th. The distribution days, excluding the stalling day, are on January 13th, 24th, and 26th. But, 2 of those distribution days are weak. The one on January 13th closed near the upper end of its range indicating that buying was present and the one on January 24th closed near the upper end of its range and the close was only 0.1% lower. Some folks may not even judge this day to be a distribution day since it did not close at least 0.2% lower. In my judgment, the SnP is NOT signaling any trouble YET. The NASDAQ composite index paints a rosier story. I only count 1 distribution day which was on January 26th in the last 3 weeks. I need to see a lot more distribution days than what I have seen so far to make me back away from buying stocks at this time. If I saw 2 or 3 obvious distribution days in the next week, then I would change my tune.
Sold the remaining 50 shares of MELI at $89.50 for a $320 gain. The portfolio only owns 200 shares of JAZZ at this time.
The market is doing a pretty good job slapping me around. This portfolio was stopped out of its 200 JAZZ position at $45.25 which was purchased at $47.99 for a $548 loss. This portfolio is back in cash with only a small $277.50 overall gain. I am back to drawing board as I have not given up on the long side YET. In fact, I will not mind buying either JAZZ or OAS again if the recent action turns out to be just a shakeout.
Don't feel bad about all that JAZZ monday....I got slapped pretty hard too...That was insane volatility:)
Well, I usually like to wait about 15 minutes after the market trades before placing my stops to avoid those shakeouts but I have been out of town the last 2 days so I did not have that luxury. I can remember being shaken out of a stock 2 times and then getting in the 3rd time which really paid off. CMG was a great example.
This morning, this portfolio bought 200 shares of JAZZ again at $48.01 with a stop placed at $44.96.
This morning, this portfolio bought 200 shares of IACI at $45.50 which is just about 5% above the $43.38 pivot point from the December 27th high.
Here is the end of the week recap of the portfolio's activity as of February 10, 2012.
MELI bought 50 shares @ $83.10 1/10/12 & sold 50 shares @ $89.50 1/30/12 for $320.00 gain
JAZZ bought 200 shares @ $47.99 1/27/12 & sold 200 shares @ $45.25 for $548 loss
JAZZ bought 200 shares @ $48.01 2/2/12 & currently @ $48.30 for an unrealized $59 gain
IACI bought 200 shares @ $45.50 2/6/12 & currently @ $45.05 for an unrealized $90 loss
As of this Friday, this portfolio has a total gain including unrealized gains(losses) of $246.50 this year. This portfolio has basically been stagnant over the last week with neither JAZZ nor IACI showing much ability to rally away from their respective pivot points.
My current plan for this portfolio is to let the market indexes react a little more before buying any more stocks. As I discussed over a week ago, the market indexes have gotten extended and are vulnerable to a 1 or 2 week reaction. As long as the next reaction fails to record several days of distribution, I plan to buy additional stocks and possibly add to the 2 this portfolio owns assuming they are showing the best relative strength. If the next reaction contains several days of distribution, I will likely be back on the sidelines waiting for the next window of opportunity, as William O'Neil would say, occur to get back into the market again.
JAZZ is not making the upside progress that I hoped it would make and so this portfolio just sold its 200 shares position at $49.30 for a small $258 gain.
IACI is still hanging in there but I am moving my stop on this stock to $43.80.
Here is the end of the week recap of the portfolio's activity as of February 17, 2012.
JAZZ bought 200 shares @ $48.01 2/2/12 & sold 200 shares @ $49.30 for a $258 gain
IACI bought 200 shares @ $45.50 2/6/12 & currently @ $45.81 for an unrealized $62 gain
As of this Friday, this portfolio has a total gain including unrealized gains(losses) of $597.50 this year. This portfolio made a little bit of improvement this week but is still under-performing the major indexes by a wide margin. However, we are only about 6 weeks into the new year so this portfolio has plenty of time to catch up and hopefully surpass the performance of the major indexes by the end of the year.
I was hoping that the sideways action before the up day on Thursday would lead to more of a decline which would allow some leadership stocks form handles or at least react toward their respective 20 day or 50 day upsloping moving averages. But, as usual, the market does not care what I want. The market seems to be leaving without me but I am honestly having a hard time identifying stocks on my list setting up to buy. They are way too extended and I have learned the hard way NOT to chase stocks that are extended from their pivot points.
This portfolio just bought a really small 100 share position in CPHD at $40.86 on a test of its pivot point which formed after the very large gap up to its strong earnings report on January 27, 2012.
This portfolio is taking another shot at JAZZ by placing a buy stop order to buy 100 shares IF it trades above $51.20. The stop will be at $47.90 IF the order is filled. Currently, JAZZ is trading at $50.95.
Here is the end of the week recap of the portfolio's activity as of February 24, 2012.
JAZZ bought 200 shares @ $47.99 1/27/12 & sold 200 shares @ $45.25 1/31/12 for $548 loss
JAZZ bought 200 shares @ $48.01 2/2/12 & sold 200 shares @ $49.30 2/15/12 for a $258 gain
IACI bought 200 shares @ $45.50 2/6/12 & currently @ $45.19 for an unrealized $62 loss
CPHD bought 100 shares @ $40.86 2/23/12 & currently @ $41.60 for an unrealized $74 gain
JAZZ bought 100 shares @ $51.23 2/24/12 & currently @ $50.81 for an unrealized $42 loss
As of February 24, 2012, this portfolio has a total gain of $505.50 which is not much of a change from last week's total gain. The portfolio is still primarily in cash. I continue to hope for more of a pullback in the major indexes to unfold to allow some leadership stocks to form handles or to at least pullback to their rising 20 day or 10 week moving average lines. The upside momentum has slowed but the buyers are still overcoming the sellers. We have seen only a few distribution days in the last couple of weeks so the market is in no danger of topping yet.
This portfolio just exited the small position in CPHD at $40.60. It is not rallying away from the pivot point like a strong stock should.
This portfolio just exited its 100 share position in JAZZ at $51.51 for a very small gain. It is not rallying away from its pivot point like it should especially after reporting its earnings.
This portfolio just bought 300 shares of SLXP with 200 shares bought at $50.22 and 100 shares bought at $49.11 rallying from the handle of its cup w/handle pattern.
I will update the portfolio this evening.
This portfolio just bought 200 shares of SWI at $39.26 on a pullback to the pivot point of its 3 week tight pattern.
I keep saying I am going to update this portfolio and I will for sure this weekend.
This portfolio just sold 150 shares of its 300 share position in SLXP at $53.08 for a small gain and moving its stop on the remaining 150 shares to $51.90 guaranteeing a profit on the other 1/2 as well.
Also, this portfolio its stop on its 200 share position in IACI to $49.40 guaranteeing a profit on this position as well.
This portfolio just sold 100 shares of IACI at $50.91as it nears the 15% profit taking area. This late into the current bull cycle, I like to take profits on at least 1/2 of my position in the 15%-20% area rather than the 20%-25% area unless the stock moves up 20% in the first 3-4 weeks then I hold for hopefully a larger profit. I am keeping the stop on the remaining 100 shares at $49.40 just like the morning email stated.
I forgot to update everyone yesterday but this portfolio exited its 150 share position in SLXP at $51.90 and exited its 100 share position in IACI at $49.40 as the earlier forum posts stated. Both positions were sold for small profits.
Also, this portfolio just exited its 200 share position in SWI at $38.35 for a small loss.
The portfolio is 100% back in cash after making some okay profits over the last few weeks.
Since it's the end of 1st Quarter 2012, mind sharing a recap of your portfolio, % net gain, etc?
Also it might be beneficial to do Blog Posts, with annotated charts for entry and exit points, as this is a very useful tool here on MarketSmith. It would help others understand what you are seeing and why you choose the entry points that you do, etc.
Thanks and good luck;
PDE
how do you calculate your stop losses??
Hi hkdeut,
I generally place my stops about 5-6% below the pivot point but sometimes place them 7-9% if the stock is more volatile. The CANSLIM method suggests that we place them no more than 7-8% below the pivot point.
Best of success to you,
Hi Petro,
I will do a recap for the 1st quarter this weekend. I have been meaning to do a recap over the last 3-4 weeks but I keep putting it off.
This time of year is my busy time of year so I do not get a chance to watch the market much or participate in this forum much. But, I will be back to full-time trading after April 17th and will participate more so my apologies to everyone that follows this forum.
I am back from vacation and the IBD Market School in Orlando and now back to trading.
This portfolio just bought 200 shares of URI at $44.95 with a stop placed at $42.90.
A summary of the portfolio for the 1st quarter of this year is coming up next. The portfolio was in cash for the month of April.
Sorry for the very long delay of the portfolio update but here it is.
Here is the end of the week recap of the portfolio's activity as of March 31, 2012 (1st quarter ended).
Recap of the activity in this account as of March 31 close
IACI bought 200 shares @ $45.50 2/6/12 & sold 100 shares @ $50.91 3/27/12 & sold 100 shares @49.40 3/28/12 for a $931 gain
CPHD bought 100 shares @ $40.86 2/23/12 & sold 100 shares @ $40.60 2/29/12 for a $26 loss
JAZZ bought 100 shares @ $51.23 2/24/12 & sold 100 shares @ $51.51 3/1/12 for a $28 gain
SLXP bought 150 shares @ $50.22 3/13/12 & sold 150 shares @ $53.08 3/27/12 for a $429 gain
SLXP bought 50 shares @ $50.22 3/13/12 & sold 50 shares @ $51.90 3/28/12 for a $84 gain
SLXP bought 100 shares @ $49.11 3/13/12 & sold 100 shares @ $51.90 3/28/12 for a $279 gain
SWI bought 200 shares @ $39.26 3/22/12 & sold 200 shares @38.35 3/29/12 for a $182 loss
By the end of the month of March, this portfolio was totally in cash with a total gain of $2,078.50 or a 6% gain for the quarter. The S&P 500 index gained 12% for the quarter so I definitely underperformed the index. Hopefully, this portfolio will do better the next quarter. The portfolio did a bad job not outperforming the major indexes but did a good job getting into cash just as the correction in April began.
Now, with the market showing signs of getting back in gear, I am looking for buying opportunities beginning with URI today.
This portfolio got stopped out of its 200 share position in URI on Thursday at $42.90 for a $410 loss. This portfolio is back in the same position it was during the month of April which is 100% in cash.
Friday's very wide range down bar on another day of increased volume in the NASDAQ not only keeps the distribution count over the last 25 days very high but also has confirmed a failure of the follow-through day as far as I am concerned for several reasons. First, the back-to-back increased volume down bars in the NASDAQ Thursday and Friday formed 2 days of distribution so soon after the April 25th FTD in the SnP. Second, both the SnP and the NASDAQ closed below their April 25th up bars on Friday. Third, many of the stocks which have lead in this last bull cycle seem to be rolling over. CMG and AAPL are great examples of what I mean.
On a positive note, some recent breakouts have been successful so far such as LNKD, SXCI, TDG, SWI, Z, FIRE, PII, LQDT and there are other stocks that seem to be building sound bases like RAX and ZUMZ for example. However, a poor response to its earnings report next week can change all of that for RAX. Lastly, there are stocks that are only declining toward their rising 10 week moving average line such as PCLN for example. IF the market can form another FTD, at least there are some stocks worth buying. But, based on the action this week, that might be a big IF. Also, if this week's poor action leads to more weeks of poor action, then what I thought were sound bases, successful breakouts, and declines to the 10 week moving average may turn out to be nothing. Since I am terrible at predicting, I will just try to keep a fresh list of stock leaders so I can be ready when the market gives me the go ahead sign to get back into the market whenever that might be. Until then, this portfolio will stay in cash.
Hi Steve.
i am a ibd subscriber for the last 2 years, the way i pick stocks is mostly from the IBD 50, but i just reviewed all my picks for the last 2 years, and it seems like then when a stock hits in the first 10 spots on the list, they are almost near top, i,e, i had the last 2 months, ALXN, RGR, GNC, QCOR, CSTR, CELG, and look what happened to all of them,???? the same happened to me when i picked up RVDB, IGTE etc, they were then the #1 picks in the 50 list, any idea where i should start getting my picks??
P.S. how was the CAN SLIM course,??
Hi Emanude,
In my opinion, the IBD 50 is an EXCELLENT source for your stock picks. You owned some wonderful stocks that performed very well at times. One thing that has helped me out and continues to help me out is to print out a chart of all of my stocks that I bought/sold and plot on the chart where I bought them and where I sold them. I usually find some mistakes that I am able to correct in the future. One of the mistakes that I would make is not selling at least a portion of my stocks that make 15-25% gains. Taking one of your stocks as an example, ALXN broke out of a sound base on 12/27 (7 days after the FTD) and went from $70 to $95. Since it didn't rally 20% in 3 weeks, at least some of the ALXN position should have been sold for 20-25% gains or so around $87.
Another thing you may want to consider is begin my sticking to stocks that trade at least $50 million in average daily volume because are usually not as volatile. Also, I think everyone needs to develop a plan on what to do when one of your stocks heads into an earnings report. I personally like to exit 1/2 of my position if I have less than a 5% gain heading into an earnings report.
Lastly, I think many people don't realize how important the M in the CANSLIM method is. I have heard William O'Neil say that you can pick stocks with all of the right criteria but if the market is in a downtrend then it doesn't matter. Over the month of April not much of anything did well except the stocks which responded well to their earnings reports. April was a good month to take profits from stocks bought from December to March rather than building new positions in my opinion based on the number of distribution days building and the number of stocks reaching 20-25% profit targets.
The Market School course was wonderful. They really pounded home the importance of keeping in tune with the market and discussed in great detail a great way to increase/decrease your stock holdings depending where the market is, especially the NASDAQ index.
Thanks, hands up to you Steve
This is not much to say this week. This portfolio remained in cash all week as I wait for another follow-through day to occur. I have been spending this week compiling a fresh watch list to use just in case a FTD occurs next week and running some portfolio simulations to help me fix a few mistakes I made during the last bull cycle.
My plan is to begin getting back into the market as soon as a FTD occurs. Sitting on my hands can be difficult but I am just trying to follow the CANSLIM method as best as I can. I realize sitting on my hands is required at times. Now is one of those times.
what are the stocks you're looking at?? would you mind telling us?
Mostly from the IBD 50 list such as LNKD and SWI and a few others.
I'm following like 20 stocks from IBD 50, and i follow them everyday, my only issue is, when the market turns around to an uptrend, how do you decide which of these 20 to buy? it's so hard to rate them??
Thanks
buy the ones that breakout of a proper base in high volume
Steve17 makes a good suggestion.
I would focus on those stocks that dominate their market with a new product/service and have a high return on equity. I would focus on stocks that have the potential to change our daily lives. Lastly, focus on those stocks showing the greatest relative strength.
However, I would not get caught up in over-analyzing the situation. For example, during the bull cycle that began after the early September 2010 FTD, there were 4 stocks I particularly liked - PCLN, CMG, BIDU, and NFLX. I bought PCLN and CMG but missed out on BIDU and NFLX. BIDU and NFLX did extremely well but so did PCLN and CMG. The point is, no matter which of the 4 stocks you would have bought, all 4 stocks did well. By the way, notice that these stocks are not small cap stocks. These are stocks that trade 100 million $ volume a day on average. This is the kind of liquidity that the big institutions like. I think many traders get caught up in the small cap stocks and miss out on the big stocks that are the true leaders.
Back in 1997 when I first started trading, the big leaders were DELL, CSCO, MSFT, AOL, and YHOO. I was too inexperienced at the time to understand this point. While I was messing around in stocks that never did much, I was missing out on the big leaders. Sure, there were some smaller stocks that did well too but those stocks that William O'Neil made his big money on were not the small stocks but the big leaders: the AOLs, Charles Schwabs, Nokias, Qualcomms of the world.
Maybe LNKD will be that big leader of the future. It definitely has the institutional liquidity, the impressive quarterly earnings and sales growth numbers, strong estimated earnings growth rates which have been rising, and dominates its market. The only thing that it misses is a high return on equity but does have an accelerating after-tax profit margin. Maybe some other stocks will be the big leaders of the future. The only thing we know for sure is that they will come. We just have to be prepared to look for them and be prepared to take action when the CANSLIM method gives us the go ahead signal.