MARKET UPDATE #110
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 ,
First of all: Happy New Year! I wish you a successful, happy and healthy 2021. Thank you all for your support, loyalty and feedback.
In 2021 I will continue my work to provide real, practical trading education for people who are interested to learn and master the craft. Besides the newsletter, I will offer a online video course in mid 2021 which provides all the knowledge in a structured way. I am really looking forward to this. As trend followers and reactive traders, we don’t have to predict what will happened to the stock market or single stocks in 2021. I don’t have to tell you the themes or highlight special stocks. No, we follow our rules! Every day and week we will do our homework, go through the screeners, update our watchlist and let the market tell us what the high potential stocks are. We know that the market, our rules and routines will guide us! Let’s leave the predictions to the others who need this for their ego!
Here is what you will find in this newsletter: - Questions and answers from the subscribers forum
- Special 2021: Focus on improving your trading
- Comment on the current market situation: Look at the stocks in the first January week
- Stocks I am watching at the moment: $UBER, $FUTU, $NARI
- Trading video: How to trade pullbacks in stocks. Entry, stop loss, types of pullbacks and examples.
If you have questions, please use the subscribers forum.
Thank you and good trading, Julian
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Special 2021: Focus on improving your trading
My goal is to remind you from time to time of the important facts about reactive growth stocks trading. Repetition is the key! The first newsletter of 2021 is a good place to do that. - Do you homework every day: No matter if we are in an uptrend, downtrend, sideways, if you are in cash or fully invested, you have to do your homework. Go through your screeners every day, update the watchlists and prepare your trades.
- Monitor your small niche: With the screeners I provide in my videos, I look at less than 1% of the total US stock market. The behavior of the stocks in this small niche gives you important clues. Ignore the indices as much as possible and focus on the number of high quality setups on your watchlist and the quality of stocks which come up in your screeners.
- Use screeners for a consistent stock selection: I made 3 videos about screeners. You find them in my YouTube channel. Use screeners to become more consistent in your trading!
- FinViz growth stock screener: https://youtu.be/NlEZ2uBqVLY
- Going through the FinViz screener: https://youtu.be/GLwsAcJcwuo
- MarketSmith stock screener: https://youtu.be/UlGz_Bg_z54
- Protect your capital with stop losses: Stopping your losses is the only way to survive long-term in the stock market. It’s part of our business to keep the losses small. Otherwise the winners have no chance to wipe them out. Limit all losses to 7% at maximum. Use correct position sizing. I made a video about that. Watch it again and again until you understand it: https://youtu.be/tQaJDFH38A4
- Let your winners run: It’s important to limit your losses and it’s important to let the winners run. Nobody knows how long a trend lasts. One big winner can wipe out multiple small losses and after that a profit is left. As growth stock traders we know that stocks can easily double or triple in a few months. You don’t want to limit the profits. Instead we have sound exit rules. Here’s a video about that: https://youtu.be/xwqoZvjNjEk
- Do research: Owning 5-8 great, high potential growth stocks requires to let all other go. You must have a lot of confidence in your skills as a stock picker. And you need a lot of confidence if you trade big positions. That’s why doing research is so important for us! We know that our stocks have a huge potential and we know that we select some stocks in a year which can double or triple. Here’s a video about research: https://youtu.be/OqgZwBf8H9w
I provide 48 videos with deep knowledge in my YouTube channel! I know that the most of them are longer than you usually see at YouTube. That has a reason: Superficial knowledge and summaries will never help you in trading. Trading is an area of deep, specialized knowledge.
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MARKET CONDITIONS
Look at the stocks in the first January week
There is nothing to say about the general market right now. Between Christmas and New Year, the trading on the stock exchange slows down. Erratic and fast moves to the up or downside can happen and we saw that with a few names.
But the first days in January are always exciting! Sometimes you can see that some stocks get dumped while other stocks get bought heavily. Institutions clean up their portfolios and buy into names where they see a huge potential in the next year. The buying and selling activity often started before the new year arrived.
One thing I noticed are the tight consolidations in the big FANG names. While the NASDAQ already broke out to a new all-time high, the largest stocks by market cap consolidates. They underperform the index! That's not a surprise because they already had a nice rally in 2020, but that's a dangerous situation. What will happen if all of them break down? The NASDAQ will correct. As long as they go sideways or up, everything is ok. But it's always helpful to monitor the large caps to get more clues about the market direction.
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NASDAQ 100 ($QQQ ETF): The index underperforms the S&P 500 since September. That's a clear sign that something changed in the reception of the mega cap tech stocks. I personally don't give so much about the volume activity in the ETF, but the dry up in volume is another sign that something changed here. We will see what happens next. |
NASDAQ mega cap stocks with more than $600 billion market cap: $TSLA and maybe $APPL are the only stocks which look good here. All other stocks are in a tight consolidation which can break out up or down. The appetite for mega-cap stocks is currently not very high ... |
3 LEADING STOCKS
There is not much left to trade on my watchlist. Be very careful to buy laggards! Only very few of them can turn into leaders. Most of them fail or strongly underperform.
This week I have 42 stocks on my watchlist, one less as last week.
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$UBER: I highlighted the stock some issues ago. It's the only stock on my watchlist with negative sales growth. But is has some other characteristics which are interesting: Consistent sales growth before COVID-19, strong institutional sponsorship, improving negative EPS AND an interesting story. The company has a very strong brand, expanding world wide and add more and more services to their service portfolio. I think institutions see $UBER becoming the number one transportation company in the world: public transport, medical, food, delivery and maybe also logistics.
The chart shows a wonderful IPO base with a new all-time high! Many young super stocks showed such a pattern before they start their first rally. However, it's too early to buy the stock. |
$FUTU: You already know the stock. I highlighted it in some recent issues. I removed it from my watchlist some weeks ago and now it came up again. That's the beauty of screeners: The will show you the stocks which are in favor of the market. Together with $FUTU, some sister stocks came up in my screeners. They are all engaged in fintech, brokerage services.
$FUTU is growing very fast: Sales growth accelerated from 110%, 167% to 267% in the last 3 quarters. EPS growth accelerated from 300%, 300% to more than 1000% in the last 3 quarters. EPS estimates for 2021 are +44%. |
$NARI: This medical instruments company cam up in my IPO screener. I already know the name, but did not so much research about it. However, the chart caught my attention: A wonderful consolidation or flat base pattern in a young IPO stock.
I don't like the volume right now. If a young IPO stock is under strong accumulation, you normally see much higher volume spikes. Currently it looks that there is some institutional interest, but not enough for an explosive rally. Maybe that will change soon. Another reason could be that the stock as only a float of 12.2 million shares. That's very little for a $4 billion market cap stock any maybe too little for the most institutions.
I added the stock to my watchlist because of the technical pattern and the fundamentals. Sales grew 288%, 152% and 172% in the last 3 quarters. EPS were up over 1000% in the last quarter.
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TRADING VIDEO
How to trade pullbacks in stocks. Entry, stop loss, types of pullbacks and examples.
You asked me to produce a video about trading pullbacks. Although I trade 90% breakouts, I decided to make a video about that. Enjoy it!
What you can learn about trading pullbacks: – Pullback vs. consolidation vs. correction – How a pullback morphs into a consolidation or correction – Entry and stop loss – Trade pullbacks at the EMA 21 / 65 and other support levels – Interpreting volume on pullbacks – Why I only buy the 1st or 2nd pullback – Examples in the video: $TTD, $EXPI, $CHWY, $MRNA, $FVRR, $PDD, $PLUG, $JKS, $SNAP, $ZS, $IIPR, $PTON, $BILI
If you have questions, please make a comment below the YouTube video and don't forget to subscribe to my channel!
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