MARKET UPDATE #148
Free weekly stock market education service with 3 stock ideas.
Disclaimer: The content is for educational purpose only. No investment advice. Please read the full disclaimer. |
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Hi ,
Last week was a good test for your patience, risk management strategies and nerves. The stock market pulled back strongly with a gap down and a lot of growth stocks pulled back too. Nobody knows if a 5% pullback will turn into a 12% or even 20% correction. That's why I always focus on risk management and that means to sell down to a level where I can sleep at night.
After the pullback the markets bounced back sharply and some growth stocks reached new highs or are close to a new high now. Monitor the situation closely so that you do not miss the next upmove.
Thank you that so many people pre-register for the video course! You already received a small thank you gift. I will start the sale of my video course next week! Everybody who pre-registered will get the 30% discount and can buy the course then. I am very excited about the feedback!
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Here is what you will find in this newsletter:
- Questions and answers from the subscribers forum
- Comment on the current market situation: Volatile but very robust market
- Stocks I am watching at the moment: $SNAP, $TSLA, $U
- Trading tips: My trading book recommendations
If you have questions, please use the subscribers forum.
Thank you and good trading,
Julian
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MARKET CONDITIONS
Volatile but very robust market
The last week showed me 2 things: The stock market is volatile, but very robust. Every pullback get bought, but the pullbacks are quick and deep. It is not an easy market environment as we experienced in 2020 or at the beginning of 2021.
In hindsight everything looks easy and clear. But you cannot make decisions in hindsight. You have to make decisions in real-time. That’s why sometimes you look stupid after you reduced your portfolio size and the stocks bounced back on the same day or the days after.
Don’t be frustrated if the market will let you look like a fool. Markets will always try to fool and test you. Instead follow your rules. If you have a strong down day in your portfolio, managing risk to avoid a bigger damage to your capital is the number one priority. I always start to reduce my portfolio size if I have a down day of 3% or more! I know from my experience that the most deeper draw downs started with a down days of 3% or more and I want to keep my draw downs small. But I avoid to sell out all my stocks too quickly. Bull markets can last longer as you think.
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NASDAQ composite: A huge shakeout in the stock market! The NASDAQ is the strongest market at the moment and retested the EMA 65 last week. Be careful: There is the possibility of a head and shoulders top! It's now important that the index will follow through or find support in the next couple of days. |
3 LEADING STOCKS
This week I have 33 stocks on my watchlist, 10 less than last week (!). I reduced my watchlist dramatically. I want to be very focused on the best names which meet my criteria and style.
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$SNAP: I observe $SNAP for a while now. The stock consolidated nicely after the huge gap up and now it broke out to a new all-time high with above average volume.
I think $SNAP is the most innovative social media company. It provides a total different platform and user experience in comparison to Facebook, Twitter or Pinterest. The new AR advertising formats are innovative and will definitely change the ad business. $SNAP is the pioneer in that field.
Sales growth in the last 3 quarters: 62%, 66%, 116%. EPS growth in the last 3 quarters: 200%, 113%, 211%. Positive EPS estimate for 2022.
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$TSLA: The stock is or was a clear laggard in the last couple of months. But the relative strength improved in the last weeks and the IBD RS rating is 87. I want to at least 90, but 87 is very close.
$TSLA tried to break out of the bast on Friday on slightly above average volume. We will see next week if $TSLA can come back or not.
Do not forget that the company is a mega-cap company. But it's still one of the most innovative companies of the world and there is a huge future potential (electric vehicles, green energy, space tourism, space business, Hyperloop, Tesla Bot …).
Sales growth in the last 3 quarters: 46%, 74%, 98%. EPS growth in the last 3 quarters: 95%, 304%, 230%. EPS estimates for 2021 and 2022: 127% and 41%.
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$U: I was not so familiar with the story behind the stock and because of this I did some research. I always thought it was just another software business which provides a special software kit for 3D / AR visualization. Such businesses are often not unique enough and can be copied easily by another software company … However I think $U is more.
$U is expanding into new fields of application: Offline product visualization, product development, automotive … It's not only a gaming or metaverse company. They try to enter the B2B side which has a huge potential to sell enterprise software licenses.
Sales growth in the last 3 quarters: 39%, 41%, 48%. No positive quarterly EPS or EPS estimates.
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TRADING TIPS
My trading book recommendations
I get this question over and over again: What are you favorite trading books? It's very important to select the right books and read them over and over again. With more experience you will notice new parts in a books and interpret them in a new way.
Here are my favorite stock trading books:
1) How to Make Money in Stocks: A Winning System in Good Times and Bad, Fourth Edition (William O'Neil)
This is the bible of CANSLIM and growth stock trading. It contains everything you need to know: Stock selection, chart analysis, fundamentals analysis, risk management … The first chapter contains dozens of charts! This is very helpful to train your chart reading skills.
2) How to Trade In Stocks (Jesse Livermore)
The wisdom from Jesse Livermore is timeless. There are some people saying that you cannot quote Livermore because he lost all his fortune and committed suicide, but I found so much wisdom and help in his book.
3) Trading in the Zone (Douglas)
I like all books from Mark Douglas. He is my favorite author when it comes to trading psychology and mindset work. There is a second book called "The disciplined trader" which is great too.
4) Trade Like a Stock Market Wizard (Minervini)
Mark is a living legend. You can follow him on Twitter, read his books, watch interviews and listen to podcasts. Currently he is number 1 in the US Investing Championships. I love all his books and can recommend them.
5) Reminiscences of a Stock Operator (Lefèvre)
The unofficial biography from Jesse Livermore. I like the books because you can see that the mindset problems 100 years ago are still the same today. I always find something interesting in the lessons from Livermore.
6) How I Made $2 Million In The Stock Market (Darvas)
Another timeless book. Darvas can show you how simple trading was 60 years ago and can still be today. You don't need all the fancy indicators and hardware to make money. Darvas was a dancer and he made money when he was on a dancing tour!
7) Pit Bull: Lessons from Wall Street's Champion Day Trader (Martin Schwartz)
I love the book! You can look over the shoulder of a great trader and can learn a lot of lessons. In addition it's easy to read and funny too.
8) Market Wizards: Interviews with Top Traders (Schwager)
The whole series is great! All books can give you deep insights into the mindset of very successful traders. Dozens of interviews with successful traders.
9) Trend Following: Learn to Make Millions in Up or Down Markets (Michael Covel)
A great book about trend following, CTAs, risk management and systematic trading. It was one of my first books about trend following and it impressed very much at that time.
10) The Perfect Stock: How a 7000% move was set-up, started and finished in an astonishing 52 weeks (Brad Koteshwar)
The author wrote 2 great books: The perfect stock and The perfect speculator. Both are highly recommended. You can see how a perfect trader would handle a super stock. |
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