I have been working on a tool titled “Watchlist Performance” that I will release soon.
The tool will include only stocks/ETFs that while on an antichartjunk list have passed through their initial pivot (i.e. breaking out) on a daily chart with at least a 40% increase of its 50-day average daily volume while also closing above the initial pivot point. If a stock/ETF has already broken out with the above parameters or “gaps” into or above the range then it will not be included. Therefore, recent big antichartjunk winners such as MSG, QIHU, LAD, XXIA, KORS, and PRLB will not be included. The tool will provide both an example of potential gains as well as an example of potential losses. Performance will not account for the effects of proper risk management or poor risk management, pyramiding in and out of positions, potential dividends, liquidating before earnings, varying positions sizes, entering at the most ideal point of the pivot range, etc. I say ideal instead of minimum for the reasons discussed here in one last year’s posts Average Daily volume and Investor’s Business Daily. Due to such ongoing challenges, the price basis shall remain conservative relative to the pivot range. The price basis will be the closing price on the day of the breakout. If the closing price exceeds the maximum of the pivot range, then the maximum of the pivot range will be used as the price basis. Therefore, the price basis will not reflect the ideal point of the pivot range. The tool will exclude a bounce from the 50-day moving average due to its somewhat subjectivity if that occurs only on or also slightly above/below the line as well as the less definitive price basis. The tool will also exclude names that breakout during times of overall market distribution.
Though perhaps obvious, I would like to point out that growth stocks typically outperform the overall market during an overall market uptrend and typically underperform the overall market during an overall market downtrend. Further, a greater number of stocks will typically breakout in a stronger uptrend versus a relatively weaker uptrend and a greater number of stocks will typically breakdown in a stronger downtrend versus a relatively weaker downtrend. Therefore, underneath the surface of showing mere what-if scenarios, the tool may provide insight into the strength of the overall market. Performance will show loses at times which will highlight the real life trading importance of such techniques not implemented within the tool such as proper risk management, pyramiding, liquidating before earnings, varying positions sizes, entering at the most ideal point of the pivot range, conviction, etc.
Data tracking started Week 48 of 2012. At the time of writing, all of the losers so far include RAX from Week 51 (-18.55%), THO from Week 4- Day 3 (-10.31%), STX from Week 4 (-8.35%), FAF from Week 3 (-2.65%), and VPFG from Week 1 (-2.08%). Some of the big winners so far include LNKD from Week 2 (+37.80%), DDD from Week 48 (+27.88%), HTZ also from Week 48 (+25.31%), CELG from Week 50 (+22.70%), and SODA from Week 51 (+17.36%). Keep in mind that the market will and always will correct and will likely take at least some of these names with it.
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