MARKET UPDATE #150
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 ,
did we saw another deep shakeout last week? The current market period is very exciting and I am sure you can learn a lot from that. I added 5 new lessons to the video course last week to help students to understand what's going on in the market. It's so important to always learn from complicated market situations.
However, the stock market is still in correction, even though we saw a potential bottom last week. I see some very nice rebounds and strength in leading growth stocks! Remember: The last months of the years and the beginning of the new year is often a strong period. I am excited if we see a end of year rally. Be prepared for everything.
Here is what you will find in this newsletter:
- Questions and answers from the subscribers forum
- Comment on the current market situation: A potential window of opportunity
- Stocks I am watching at the moment: $NET, $APP, $SI.
- Trading tips: Update your analysis every day
If you have questions, please use the subscribers forum.
Thank you and good trading,
Julian
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A student posted a review about my course on Twitter. Thank you!!
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MARKET CONDITIONS
A potential window of opportunity
The buying tactic I apply is very simple: Buy stocks which show a high relative strength and breakout to a new all-time high or 52 week high when the market is turning around after a correction. That's how I make the most buys.
Behind that is a simple assumption: Stocks with a high relative strength show a high demand. That's the reason why they hold up much better than the general market. Nobody wants to sell!
The behavior you see: Stock market corrects 8-12%, the leading stock is going sideways or correct a little bit. As soon as the market starts to bottom or move higher, the leading stocks breaks out to a new high! That's the reason why I welcome every market correction.
When I look at the stock market at the moment (indices, market indicators, stocks in my screeners and watchlist), I see a potential window of opportunity. There are some leading stocks which ignored the correction in the market or bounced back strongly last week. That's a sign of strength. Of course it is possible that this will change next week, but at the moment it's a sign of strength.
Is it now the time to become aggressive? No! Wee need more evidence that the stock market will turn into a new uptrend. Give the market the time which is needed to create a real bottom.
I offer a lot of examples, helpful indicators and tactics to interpret the market environment in my video course Growth Traders Toolbox.
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NASDAQ composite: This is a critical moment in the market. Will it recapture the EMA 21 and the bulls take over again? When a market creates a bottom you want to see decisive bullish action. The gap up was a good sign. Now you want to see a follow through. Weak action below the EMA 21 must be watched closely. The market can continue the correction anytime. |
3 LEADING STOCKS
This week I have 31 stocks on my watchlist, 12 more (!) as last week. I added a lot of stocks back to my watchlist and decided to watch a broader range of stocks to get clues about the health of the market.
Would you like to learn how to find stocks like below? Look into my video course Growth Traders Toolbox. |
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$NET: What a strong reaction! The stock needed 4 days to print a new all-time high. That's a true shakeout below the EMA 65.
I personally see $NET as a true market leader. The company offers cyber security solutions for small teams and is working on replacing the VPN standard with their own technology. They make it very easy for teams to have a secure connection in their home office. In addition they offer other cloud services and maybe will become an alternative to the big 3 in the cloud business (AWS, Google Cloud, Azure).
Sales growth in the last 3 quarters: 50%, 51%, 53%. No positive EPS or positive EPS estimates.
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$APP: I highlighted the stock in the newsletter some issues ago. Now I did more research about the company. They offer a full stack marketing solution which is specialized on app marketing. They are growing very fast on the software side of the business and their new AXON algorithm helps to drive the business. In my view they are becoming more and more a leading marketing software company and compete with Facebook or Google.
I posted a detailed analysis in the video course.
Sales growth in the last 3 quarters: 83%, 132%, 123%. EPS growth in the last quarter: 167%. EPS estimates: Positive for 2021 and 183% for 2022.
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$SI: The company provides infrastructure behind digital currencies. They provide the SEN (Silvergate Exchange Network) which allows USD transfers in real-time between clients. Their customers are usually digital currency exchanges, miners or institutional funds which need access to crypto trading. They are also providing loans collateralized against Bitcoin and other services.
Sales growth in the last 3 quarters: 16%, 26%, 82%. EPS growth in the last 3 quarters: 147%, 139%, 176%. EPS estimates: 104% for 2021 and 31% for 2022.
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TRADING TIPS
Update your analysis every day
Bad traders are selfish and rigid in their analysis. They unconsciously try to prove their intelligence to others, which is expressed in their market analysis. They try to tell everybody how smart they are. You can see that every day on social media! If you see such a behavior in yourself, immediately stop with trading.
In opposite, good traders are very flexible and humble. They don't care about what they thought yesterday. As soon as they have new information which change their view on the market, they change their analysis. That can look stupid and indecisive, but in reality this is flexibility. Traders are information processors. They take information, create scenarios, apply rules and when new information appear which impact a scenario, they change it. One day they can be bullish, the next day neutral or bearish. Of course this should be in synch with the rules of the overall trading system.
Especially in volatile and unclear market periods you want to adjust your market analysis on a daily basis. New information (price and volume action, stock behavior) can appear very quickly and you want to be in synch with the market all the time. Redrawing charts, increasing or decreasing exposure, buying hedges or go to cash – these are all possible reactions to new information. Be flexible and do your homework every day!
When the markets turn into a steady and clear trend, it is often not necessary to adjust your market analysis every day. The speed of availability of new information slows down, but that can change anytime. So be prepared for everything. That's why I always create multiple scenarios when I analyze the market. |
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