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Learning from a Market Wizard: Swinging Stocks in the Style of Mark Minervini
Stocks still look meh with most recent breakouts I've tracked failing. Sitting with the current positions and cash awaiting more hospitable conditions.
I mentioned earlier in your journal that I had also recently had some decent success with breakouts on individual stocks on a daily timeframe. I will state right off the bat that I have not done nearly as much research on this subject as you have, and I would hardly consider myself an expert on breakout trading in general, so please take what I say here with a big grain of salt, but in the interest of sharing, I'd like to offer a thought.
First, I'm a pretty firm believer in the concept of relative strength - that is, how a particular stock is behaving relative to its peers, an index, or a broader market. In that spirit, I generally only trade upside breakouts in stocks when the aggregates are down for the day. This tells me that there's much more to the breakout than a casual "rising tide" phenomenon driven by indiscriminate index fund and ETF buyers. If a stock can make new highs on a day that the S&P500 and many other industry peers are down, then I have much higher confidence that the move is real.
This is also why I haven't bought any breakouts in a few weeks now. I've been content just to let my existing positions ride as the market carries them higher. But with ES printing new ATHs day after day, I fear that the risk of false breaks and bull traps is just too high to justify entries at current levels.
Again, take this for what it's worth. There are surely better traders than I who would disagree with some or all of my points. But incorporating some measure of relative strength into your analysis could, perhaps, and under the right circumstances, be of value.
This tracks logically to me, but I’ve never had the idea to actually test the validity myself.
I am already exclusively buying stocks that are relative strong on 1-6 month timeframes but haven’t considered the day to day RS vs. the indexes as a data point.
All I did today was sell ~1/3 of ZIM into strength as it was breaking out. The behavior I've observed recently is breakouts fading so I saw that opportunity and took it. Ability to sit on my hands when conditions suck will probably pay in dividends over the course of my career. Cliché but every loss averted adds to the bottom line the same way a gain would.
My objective is to make money! Recently breakouts haven't been doing me any favors in that department. Sometimes you've gotta be a buyer and sometimes you've gotta be a seller I think. In this market I'm scaling out of any of my small remaining holdings into strength and tightening stops where reasonable. Ready to change my opinion as the data changes!
And I only sold a third! My trade plan states I should sell 1/3 to 1/2 at a multiple of my risk. Long-term I believe this practice smooths out the equity curve even if it reduces net profit slightly. Reward always considered relative to risk.
Super great thread. I just recently finished a Minervini book and about half way through Weinstein one. In the last couple weeks I’ve been scanning for stocks in the Canadian market looking for a Minervini/Weinstein type breakout and seems like there isn’t much except for maybe some stocks in trading ranges and possibly them breaking out. I’m watching BHC.
Take it with a grain of salt. I’ve only been at this for about a year. Been trying to learn as much as I can before my main gig(pun intended) of playing music comes back....if ever. Lol.
