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Learning from a Market Wizard: Swinging Stocks in the Style of Mark Minervini


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Learning from a Market Wizard: Swinging Stocks in the Style of Mark Minervini

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 mtzimmer1 
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While not specific to futures trading, I wanted to start this journal on futures.io because it is THE best online trading forum!

There are many terms used to describe the broad style of trading in which I am currently engaged - trend following, momentum, breakout, and growth are but a few of the more popular titles. Regardless of verbiage the objective remains the same: participate in trends that are already underway in an effort to catch the 'meat of the move.' The fundamental underlying belief is that trends are more likely to continue than they are to reverse.

A 2014 study by Capital Fund Management found trend following to be a "genuine market anomaly" to the strong correlation observed between "risk premium" and tail-risk skewness. In other words, over the long run we would expect 'riskier' assets or trading strategies in this case to yield higher net returns. Trend following was found to have unusually high sharpe ratios in conjunction with negative skew.


link to study: https://www.cfm.fr//insights/risk-premia-asymmetric-tail-risks-and-excess-returns/

It has been the conclusion of my own research that a high percentage of traders/investors who have achieved exceptional performance have done so utilizing a strategy that is trend following in nature. Moreover trend traders have found success since the inception of stock markets - from Jesse Livermore in the early 1900's to Darvas in the middle of the century to the current 2020 US Investing Championship contestants the strategy has not yet fallen out of favor. Such a long track record and many variations of a central theme suggests to me that trend following exploits a permanent characteristic of the markets.

The particular style of trading that I will be journaling about is closely resemblant to the strategy outlined by Mark Minervini in his books. In short I will be looking to buy strong stocks as they break out of properly formed bases. Let's break this down.

A strong stock is one that has outperformed both the index and its sector during the most recent months. Typically these will be exciting companies offering a new product or service. Sometimes they are recent IPO's while other times they are well-established companies with a new and innovative idea. In the futures world, there are many stories of great fortunes being built trading persistent trends in commodities.

A properly formed base, as defined by Mark Minervini, must have a few characteristics. To qualify as a VCP (volatility contraction pivot) each successive pullback in price must be smaller in magnitude from high to low than the previous one. Volume should trend lower from the left to the right side of the base suggesting that less and less supply is coming to market. While not essential, it is preferable to see the days with the lowest volume and narrowest ranges occur during the final contraction before the buy point. In short, we want to see a stock quiet down before breaking out.

Here is an excerpt from Mark Minervini's book that explains VCP's succinctly.



The expectation here is that, after undergoing the basing process, a strong stock is likely to continue its ascent.

Risk management is integral to this and every trading approach. I set my stops at the low of the final contraction - a location that will only get hit if the stock fails to properly break out.

In 2021 I am competing in the US Investing Championship and this strategy is an integral component in my approach to the competition. I am coming into this year with no open positions and intend to document every new trade in this journal.

In 2020 I yielded 17% between September, when I began trading this system live, and the end of the year.

Here's to an epic New Year!

-Zimmer

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  #2 (permalink)
 mtzimmer1 
Legendary Recovering Method Hopper
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Resources:

Books:
"How I Made $2,000,000 in the Stock Market" by Nicolas Darvas
"Trade Like a Stock Market Wizard: How to Achieve Super Performance in Stocks in Any Market" by Mark Minervini
"Think and Trade Like a Champion: The Secrets, Rules and Blunt Truths of a Stock Market Wizard" by Mark Minervini
"How to Make Money in Stocks: A Winning System in Good Times Or Bad" by William O'Neil
"Unholy Grails: A New Road to Wealth" by Nick Radge

YouTube:
IBD Podcasts by Investors Business Daily
Market Chat by Richard Moglen
All of Mark Minervini's videos

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 trendisyourfriend 
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What is the average frequency of trade opportunities with this system? And average time in market?

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 mtzimmer1 
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trendisyourfriend View Post
What is the average frequency of trade opportunities with this system? And average time in market?

Over the past four months I've opened 90 trades for an average of ~1 buy per day. Number of trade opportunities depends greatly on market conditions as setups will be plentiful during bull markets and scarce during bear markets.

My average trade duration has been 17 calendar days so far.

-Zimmer

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 Schnook 
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I'm looking forward to this journal, in no small part due to the fact that I've also been working on some breakout ideas over the past several months, and, like you, have had some encouraging results applying my concepts to individual stocks on daily (as opposed to intraday) timeframes. That said, I do feel that broader market conditions have been extremely supportive of trend-following and breakout strategies in general over the past several months, and I worry that I won't be able to achieve the same results if and when market conditions invariably change. This is something I'll clearly need to work on.

Either way I wish you great success, and hope to maybe pick up a few good pearls by reading your journal. In the meantime perhaps I'll read some of Minervini's published work as well. I've been following him on twitter for a while and like what I've seen so far.

May I ask how you're screening your stocks? I've been tinkering around with finviz.com but ideally would like to create my own custom technical studies, which I don't believe I can do on that platform.

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 mtzimmer1 
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Schnook View Post
I'm looking forward to this journal, in no small part due to the fact that I've also been working on some breakout ideas over the past several months, and, like you, have had some encouraging results applying my concepts to individual stocks on daily (as opposed to intraday) timeframes. That said, I do feel that broader market conditions have been extremely supportive of trend-following and breakout strategies in general over the past several months, and I worry that I won't be able to achieve the same results if and when market conditions invariably change. This is something I'll clearly need to work on.

Either way I wish you great success, and hope to maybe pick up a few good pearls by reading your journal. In the meantime perhaps I'll read some of Minervini's published work as well. I've been following him on twitter for a while and like what I've seen so far.

May I ask how you're screening your stocks? I've been tinkering around with finviz.com but ideally would like to create my own custom technical studies, which I don't believe I can do on that platform.

Schnook, it is a pleasure to read and respond to your comment!

Recently I've been sorting my watchlists by length of time in days since the most recent high from longest to shortest. In doing so I start by looking at the stocks with the most mature bases. I find stocks from two primary sources: 1) colleagues, and 2) reviewing the new 52 week highs list every day. In order to add a stock to my watchlist the company needs to either have solid sales/earnings growth, or have an innovative product or service that I believe to have great disruptive potential. Companies that satisfy both criteria are optimal!

Cheers,
-Zimmer

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 mtzimmer1 
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Bought NVDA @ 539.465, Stop 510.52


NVDA Daily

The solid green line was the pivot level I originally identified. In a closer look last night I realized that the more recent high marked with dashed green and labeled 'Pocket Pivot' may be buyable as well if volume surged as price traded through that level.

NVDA Intraday

Price ripped through the 'Pocket Pivot' level (labeled 1) on elevated volume but by the time the alert went off and I calculated my share size price had already advanced. I've learned it is best to exercise restraint and not chase entries because doing so opens the door to trade plan deviation.

As price traded through the originally marked pivot level (labeled 2) on increased volume I initiated a position.

Open Positions:
NVDA

-Zimmer

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 mtzimmer1 
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Bought OZON today. Dominant e-commerce company in Russia with impressive growth figures. Clean VCP setup on the chart finalized by the inside day pocket pivot that formed yesterday.

OZON Daily


Open Positions:
NVDA
OZON

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 mtzimmer1 
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Stopped out of NVDA.

Bought LPRO @ 34.7399, Stop 32.76


1.6 LPRO Daily


1.6 LPRO Intraday


I love everything about this LPRO buy. IPO'd less than a year ago. Disruptive technology. Relative strength. VCP base pattern. Huge volume surge intraday as price cleared the pivot.

Open Positions:
OZON
LPRO

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 mtzimmer1 
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Bought KSS @ 42.20, Stop 38.64
Bought LMND @ 126.52, Stop 117.99


1.7 KSS Daily

$KSS is perhaps an unpopular pick for this style of trading but I can't argue with the relative strength of the past few months. This is very much a play on reopening, stimulus, and continued growth in new construction and existing home sales. Technically a well formed HTF/VCP.

1.7 LMND Daily

$LMND: Recent IPO. Disruptive Technology that has only scratched the surface of addressable market. Meets the High Tight Flag/Power Play criteria + clear VCP pattern.

1.7 LMND Intraday

I see the final contraction as the time period from 12:45-14:52 yesterday which explains the stop placement.

LMND hit my 2R target today and I took half off. Always nice to have a trade take off right out of the gate.

Open Positions:
OZON
LPRO
KSS
LMND

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 mtzimmer1 
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Bought LOW @ 165.76, Stop 157.12
Bought DSGX @ 60.79, Stop 56.54

1.8 LOW Daily

$LOW is another play on a continued boom in new construction and remodels. Technicals look great to me with volume drying up in noticeably in the past two weeks. Potentially emerging from this cheat here.

1.8 DSGX Daily

$DSGX: Talk about a business with consistent revenue and earnings growth... the numbers aren't crazy but seem very sustainable. Long base with VCP characteristics. Nice end of day breakout today. Interested to see if the buying continues into Monday.

Open Positions:
OZON
LPRO
KSS
LMND
LOW
DSGX

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 mtzimmer1 
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Week 1

Ended Week 1 with a YTD gain of $1,386 and 2.27%

On Tuesday I passed on a setup because volume did not increase as the stock traded through the pivot price. The next day the stock ripped up 9% prompting me to question whether or not this volume requirement is well-based. I checked my stats for the past four months and determined that volume on the day of breakout had little to no noticeable correlation to trade outcome. This experience was a positive as it inspired me to remove a baseless entry condition.

-Zimmer

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 mtzimmer1 
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All I did today was add to KSS and tighten up the stop on the whole position.

1.11 KSS Daily

KSS and the entire retail sector was showing relative strength this morning. Other than that, nothing to report.

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 mtzimmer1 
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Bought TGTX @ 55.93, Stop 51.30
Bought NTRA @ 113.91, Stop 108.42
Sold DSGX ahead of stop in order to....
Buy PYPL @ 243.72, Stop 233.82


1.13 TGTX Daily

In hindsight I think the Pocket Pivot was the better buy location but I'm long from 55.93, stop 51.30. Like this HTF setup but not seeing much followthrough yet. Will give it benefit of the doubt.

1.13 NTRA Daily

Hard to find a short-term Cup w/ Handle that looks much nicer than this one. Love the volume taper as price came up the right side and the tight ranges of the past three days. Long from 113.91

1.13 PYPL Daily Marked Up.png

I see this little Cup w/ Handle as a continuation or secondary base after the longer VCP that formed between September and December. $PYPL is just a great all-around CANSLIM name that checks all the right boxes.

Open Positions:
OZON
LPRO
KSS
LMND
LOW
TGTX
NTRA
PYPL

117% invested here. Sold DSGX in order to buy PYPL because I liked the setup on PYPL but didn't want to increase my notional exposure. My positions have some traction but it doesn't feel like a frictionless environment enough to justify getting deeply into margin.

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 mtzimmer1 
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Somehow I missed Thursday and Friday of last week!

1/14/2021 (Thursday)

Sold 1/4 OZON (1/4 remaining)
Sold 1/4 LMND (1/4 remaining)
Stopped out TGTX (0 remaining)
Sold all NTRA (0 remaining)
Sold 1/2 PYPL (1/2 remaining)

Wednesday night my scans turned up only seven buyable setups (in the past 4-5 months this last has gotten up to 40 names at times) which had me in caution mode. TGTX closed near lows on Wednesday and NTRA closed below the pivot after moving up a decent amount. Because breakouts weren't getting much traction and the watchlist was slim I was very aggressive with closing positions and reducing exposure.

1/15/2021 (Friday)

Sold 1/2 PYPL (0 remaining)
Sold 1/2 LPRO (1/2 remaining)
Bought 1/10 PLTR (diagnostic position)

With the early session weakness on Friday I was pleased to have reduced my exposure significantly the day before. At this point I was fully in caution mode. As opposed to not trading I take very small positions to serve as real-time live diagnostics. These small positions won't really push the P/L needle either direction but they will give me valuable information on the pulse of the market. Once these and any previous positions not stopped out during a correction begin to gain traction and the watchlist of buyable setups begins to widen I greenlight bigger size for any new opening transactions. This method of portfolio management and position sizing will likely decrease performance marginally during short and shallow corrections but make up for it in spades during a protracted bear market or crash.

Open Positions:
OZON (1/4)
LPRO (1/2)
KSS (1)
LMND (1/4)
LOW (1)
PLTR (1/10 diagnostic)

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 mtzimmer1 
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Bought 1/10 positions in CALX and TT.

On balance my three diagnostic positions are still not getting much traction. CALX was a nice breakout today. TT was a somewhat weak close. PLTR had neutral action today.

Sold 1/4 LOW position (3/4 remaining)

Open Positions:
OZON(1/4)
LPRO (1/2)
KSS (1)
LMND (1/4)
LOW (3/4)
PLTR (1/10 diagnostic)
CALX (1/10 diagnostic)
TT (1/10 diagnostic)
54% invested

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 mtzimmer1 
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Bought more diagnostic positions: TDOC and RDFN.

Now have six of these smaller positions open and still not getting much traction on any but TDOC and, to a lesser extent, CALX. Seems that sizing down has been the right decision thus far. Will continue to trade small until conditions improve.

Open Positions:
OZON (1/4)
LPRO (1/2)
KSS (1)
LMND (1/4)
LOW (3/4)
PLTR (1/10 diagnostic)
CALX (1/10 diagnostic)
TT (1/10 diagnostic)
TDOC (1/10 diagnostic)
RDFN (1/10 diagnostic)

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 mtzimmer1 
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Sold 1/2 CALX, everything else unchanged

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 mtzimmer1 
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Stopped on RDFN
Sold 1/2 PLTR at 2R (1/20 remaining)

My diagnostic positions have begun to gain traction with only one of the five hitting stop, one down slightly, and three showing unrealized gain. TDOC was a nice breakout that has held up thus far. PLTR chopped sideways but then broke out strongly today. Nothing crazy in CALX but appears to be constructive price action post-breakout.

Number of buyable setups seems to be on par for Mondays so far this year despite tightening up my scan criteria today.




Overall I feel that the market has given me signs to begin getting more aggressive. Pending price action I intend to scale up size for new positions next week to at least 1/2 size from 1/10.

Interesting data shared with me by a trading colleague practicing a similar approach suggests that both Average Daily Dollar Volume (left) and Average Daily Dollar Volume divided by Market Cap or Percentage of Shares Outstanding Transacted per Day (top) impact the expectancy of breakout trades. Credit: https://twitter.com/enter_order

Liquidity and Market Cap vs. Expectancy


My takeaway from this is to filter out all stocks that don't satisfy both of the following criteria: 50-Day Median (decrease effect of outliers) Daily Dollar Volume > $100M AND MDDV / Mkt Cap > 1%

This effectively wipes out over 2/3 of the scan results. Considering this I see the 15 setups currently buyable as well above average relative to the looser scan I've been running prior to today.

Open Positions:
OZON (1/4)
LPRO (1/2)
KSS (1)
LMND (1/4)
LOW (3/4)
PLTR (1/20 diagnostic)
CALX (1/20 diagnostic)
TT (1/10 diagnostic)
TDOC (1/10 diagnostic)
53% Invested

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 mtzimmer1 
Legendary Recovering Method Hopper
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Week 3 Results


+$3,975.35 on $61.2k starting balance
+6.49% YTD
62% Average Exposure

Exposure

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 mtzimmer1 
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Came into today feeling confident and ready to begin taking larger-than-diagnostic positions.

SHOP set up nice and broke out. Bought 1/2 size position. Stopped later on the mid-morning flush.
Sold 1/2 TDOC (1/20 remaining)
Sold ~1/4 KSS (~3/4 remaining)

The action today was interesting and I'm not sure what to make of it. Volatility definitely increased but on the other hand, the dip was bought and the close was strong. Cautiously bullish... no new positions larger than the 1/10 diagnostic size.

Watchlist for tomorrow is quite short at only seven names.

Open Positions:
OZON (1/4)
LPRO (1/2)
KSS (~3/4)
LMND (1/4)
LOW (3/4)
PLTR (1/20)
CALX (1/20)
TT (1/10)
TDOC (1/20)
48% Invested

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 mtzimmer1 
Legendary Recovering Method Hopper
Upstate NY
 
Experience: Intermediate
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Sold 1/4 LPRO (1/4 remaining)
Bought 1/10 ARWR (diagnostic)
Bought 1/10 ZI (diagnostic)

Only found five potential setups for tomorrow. Fully in the cautious camp here.

Open Positions:
OZON (1/4)
LPRO (1/4)
KSS (~3/4)
LMND (1/4)
LOW (3/4)
PLTR (1/20)
CALX (1/20)
TT (1/10)
TDOC (1/20)
ARWR (1/10)
ZI (1/10)
47% Invested

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 mtzimmer1 
Legendary Recovering Method Hopper
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Stopped TT
Stopped LPRO on trail stop
Stopped ARWR
Sold 1/2 KSS into the morning strength (1/4 remaining)
Bought 1/10 NTAP
Bought 1/10 NVAX
Sold LOW on trail stop

Open Positions:

OZON (1/4)
KSS (1/4)
LMND (1/4)
PLTR (1/20)
CALX (1/20)
TDOC (1/20)
ZI (1/10)
NTAP (1/10)
NVAX (1/10)
22% Invested


My caution has been increasing the past two weeks and today it paid off coming in under 50% invested. I was very fortunate to sell KSS into strength this morning. Because of this and general outperformance I actually ended the day flat despite the carnage in the indexes.

Added two new diagnostic positions. A few of them are working great such as PLTR and TDOC but many have hit stops suggesting that I still don't have much traction in this environment. I'd be pleasantly surprised by an up day tomorrow.

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 mtzimmer1 
Legendary Recovering Method Hopper
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Stopped CALX
Stopped ZI
Bought 1/10 DKNG
Sold 1/2 NVAX at 2R+ after hours

Open Positions:
OZON (1/4)
KSS (1/4)
LMND (1/4)
PLTR (1/20)
TDOC (1/20)
NTAP (1/10)
NVAX (1/20)
DKNG (1/10)
19% Invested

My diagnostic positions continue to show divergent performance. Majority hitting stops and a select few have broken out strongly and shown extreme relative strength. I still don't feel that this is a time to get aggressive. Found only three setups for today suggesting an extreme shortage of stocks with well-constructed bases. With no stocks breaking out how can the market move higher? Of course Minervini's is just one of many ways to trade. It's entirely possible that other trend-followers are finding many setups for their methodology while I am finding few for mine.

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 mtzimmer1 
Legendary Recovering Method Hopper
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January Closed Stock Trade Stats:
+5.20% Pct Gain
52.63% Win Rate
1.65 W/L (R units)
.35R Expectancy



I've done a good job preserving gains as conditions became less favorable and the indexes moved off of highs.

In a month where the S&P500 and DJIA closed negative, the Nasdaq closed slightly positive, and the Russell closed up ~5% I am quite pleased with my return given that I generated it with an average daily exposure of only 54%. This means that adjusting for exposure I doubled the return of the best performing index, with less portfolio volatility.

Slow, smooth, and steady wins this race. Looking for any bits of outperformance I can pick up against the indexes each month. Buy & hold creates huge wealth over a 40+ year period. Consistently edging ahead of buy & hold generates the same results in a shorter period of time. Amount of outperformance in % is exponentially related to the number of years required to reach the same $ result. Keep on searching for those small edges.

-Zimmer

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 mtzimmer1 
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Yesterday I was stopped out of my remaining KSS on trail stop.
Bought 1/10 SNAP.

Open Positions:
OZON (1/4)
LMND (1/4)
PLTR (1/20)
TDOC (1/20)
NTAP (1/10)
NVAX (1/20)
DKNG (1/10)
SNAP (1/10)
16% Invested

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 mtzimmer1 
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Bought 1/10 ARWR

Diagnostic positions have been working great. Portfolio up 1.22% this week while only 18% invested on average ~= 6.77% if fully invested vs. indexes weekly returns ranging between ~3.5%-6.2%. Outperformance suggests traction. My watchlist has been broadening recently although the one concern I have is that any stocks off of highs are weak relative to the indexes over the past weeks timeframe - that includes any and all stocks currently basing. All things considered, if stocks break out tomorrow I will hit new setups with 1/2+ size, up from the 1/10 I've been trading.

Open Positions:
OZON (1/4)
LMND (1/4)
PLTR (1/20)
TDOC (1/20)
NTAP (1/10)
NVAX (1/20)
DKNG (1/10)
SNAP (1/10)
ARWR (1/10)
21% Invested

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 mtzimmer1 
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Failed to check earnings on ARWR and SNAP! Got lucky on SNAP but not so much on ARWR.

Stopped out ARWR just before it reversed and ripped higher.
Sold 1/20 SNAP at 2R (1/20 remaining)
Bought 1/2 ATUS
Bought 1/2 GH

ATUS


GH


Portfolio getting traction + watchlist broadening = increase position sizing. Neither ATUS nor GH were screamin' setups that I HAD to take hence the 1/2 positions sizes. For next week I'm prepared to go full size on A+ setups and 1/2 size on anything good but less than A+. Haven't completed my weekend scanning yet but it looks like this is going to be the longest actionable watchlist I've had for a Monday yet this year. The theory is that the more stocks set to break out the higher the likelihood of follow through in the event of a total-market breakout.

Open Positions:
OZON (1/4)
LMND (1/4)
PLTR (1/20)
TDOC (1/20)
NTAP (1/10)
NVAX (1/20)
DKNG (1/10)
SNAP (1/20)
ATUS (1/2)
GH (1/2)
46% Invested

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 mtzimmer1 
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Bought LAZR, DADA, and SBE - all full size positions as planned.

All closed below the pivot and with negative P/L! Bummer but nothing I can do but wait and see what kind of price action we get tomorrow. The worst case scenario is all three hit the stop and I take a -3% hit on the overall account. Recognition and acceptance of the worst likely outcome (fear-setting) has been a hugely beneficial practice for me in continuing to detach my emotions from money/outcome.

My existing positions worked reasonably well today, returning +1.27% on dollars invested, beating all the indexes except for the ever-so-powerful and squeezelicious Russell 2000.

Overall I'm still feeling pretty good about market conditions and looking to add exposure. Would like to see my three new positions advance before adding more exposure though. In absence of the three new positions advancing I will sell one position in order to finance any new risk in a more promising setup.


Open Positions:

OZON (1/4)
LMND (1/4)
PLTR (1/20)
TDOC (1/20)
NTAP (1/10)
NVAX (1/20)
DKNG (1/10)
SNAP (1/20)
ATUS (1/2)
GH (1/2)
LAZR (1)
DADA (1)
SBE (1)
78% Invested

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 mtzimmer1 
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Stopped out of LAZR and SBE
Sold remaining SNAP
Bought INFO
Bought AI

Was stopped out of two of my three buys from yesterday and the one that has not hit stop is down healthily and approaching stop. Despite this market feedback I felt the setups were too good to not take in INFO and AI. I originally took full size positions in both but as the day progressed I decided it would be prudent to cut them back a little bit so I sold 1/4 of each (also sold SNAP at this point). By the end of the day SBE and LAZR had both recovered which, while annoying for me, is a good sign for the market and makes me feel better about the amount of exposure I currently have on.

Most stats I look at suggest short-term weakness in the broad market but long-term no major warning signs yet.

Open Positions:
OZON (1/4)
LMND (1/4)
PLTR (1/20)
TDOC (1/20)
NTAP (1/10)
NVAX (1/20)
DKNG (1/10)
ATUS (1/2)
GH (1/2)
DADA (1)
INFO (3/4)
AI (3/4)
73% Invested

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 mtzimmer1 
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This year in my USIC account I've been keeping track of what my trade results would have been had I used a tighter LOD stop instead of my standard stop at the recent swing low.


Initial Stop


R Units


Percentage


Stats:
Swing Low - LOD
Win Rate: 52% - 40%
WL %: 1.27 - 2.16
WL R: 1.16 - 2.59
Expectancy %: .93% - .80%
Expectancy R: .10 - .40

My takeaway here is that the majority of my winning trades hit neither the LOD nor swing low stop. Trades that hit LOD stop are quite likely to hit swing low stop prior to a reasonable target being achieved.
It appears that a LOD stop has been more optimal for this dataset and I think I'll be using a LOD stop moving forward. The idea makes sense to me from a capital efficiency perspective as well. Quickly kill losers and put that money to work in something new breaking out.

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 mtzimmer1 
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ATUS gap up + earnings announcement after the close today = sell it all
Bought LAZR w/ LOD stop
Tightened my stop on AI after the opening dip and recovery - stopped out
Bought 1/10 RIDE (things don't seem to be working at this point + market volatility increasing)
Stopped on GH
Stopped on RIDE
Tightened stop on INFO ala AI and was stopped out as well
EOD RIDE closed strong, bought 1/10 again

Seems that my recent breakouts sized up to full positions have not been working - almost a perfect 100% loss rate. Time to size back down.


Open Positions:

OZON (1/4)
LMND (1/4)
PLTR (1/20)
TDOC (1/20)
NTAP (1/10)
NVAX (1/20)
DKNG (1/10)
DADA (1)
RIDE (1/10)
25% Invested

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 mtzimmer1 
Legendary Recovering Method Hopper
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Stopped RIDE

Open Positions:
OZON (1/4)
LMND (1/4)
PLTR (1/20)
TDOC (1/20)
NTAP (1/10)
NVAX (1/20)
DKNG (1/10)
DADA (1)
25% Invested

Sizing down until equity curve begins to make progress again. The chart below illustrates my effort to increase exposure when things are working and scale back when conditions are tough.


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 mtzimmer1 
Legendary Recovering Method Hopper
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About one month ago I stumbled on Kristjan's twitter (https://twitter.com/Qullamaggie), followed the links to his website (https://chartsandstories.com/start-here/), read his story, watched his YouTube videos, tuned in to his daily twitch stream, and began to practice his breakout setup in a separate account.

General Similarities between Minervini and Kristjan Approach:
-Trade stocks displaying relative strength (recent outperformance, hot sector, etc)
-Buy stocks as they break out of a range
-Use a tight stop loss
-Sell some into strength

Specific Differences:
-Minervini uses his trend template to scan ( Minervini Private Access) while Kris scans for the stocks that have made the largest % advances over the past 1,3, and 6 months that also satisfy liquidity requirements (relative to account size)
-Minervini has a handful of very specific setups or base patterns from which a stock can be bought on a breakout. Kris has variations on one simple setup that can but doesn't necessarily satisfy Minervini's VCP criteria.
-Minervini typically uses a stop at the recent swing low while Kris almost always uses a stop at the low of day at the time of breakout
-Minervini sells some at a multiple of his risk while Kris typically begins scaling out on days 3-5 after a successful breakout

Generational Evolution:
I've found that breakout/momentum swingtrading has continually evolved over the past century. Many of the original concepts discussed by Livermore and Darvas are still relevant today - these storied traders laid the foundation from which the next generation built upon. The human race continually seeks progress - evolution - improvement. Trading is no different from any other pursuit in this general sense. Minervini's approach clicked most with me prior to discovering Kris' material. I believe that there are many ways to skin this cat and that the job of the aspiring trader is to seek the process most efficient for themselves. With this in mind I've now traded in Kristjan's style for a month, made 56 trades, and have collected stats from which to compare to the results of my Minervini-style trading during the same time period.

Equity Curves and Exposures


Notably better linearity in the Kris equity curve. Also notable that, as of now, net returns are approximately equivalent while avg exposure over the sample has been only 15% (Kris) vs. 45% (Minervini). With 1/3 the exposure I've achieved the same returns (superior if considering drawdown as risk metric).

Closed trade stats paint the same picture.

Closed Trade Stats


Expectancy %: +.20% vs. +5.37%

I don't believe that Kristjan's method of trading is definitively 'better' than Minervini's by any means. I suspect that Kris' style has outperformed relative to Minervini's in large part because of stock selection. Median mkt cap of stocks traded has been $10.5B (MM) vs. $650M (KK). Small caps (highly speculative companies in particular) have outperformed mid and large caps by a huge margin so far this year. Russell-2000 up ~15.5% YTD while the S&P500 is up only ~4.5%. In a market led by large caps I'd expect Minervini's style to perform better but I'm interested to see firsthand if that hypothesis proves to be true once the regime shifts.

Given the compelling evidence and the current market conditions I have decided to begin trading Kristjan's style in my USIC account beginning this week.

I'm out of town for a ski trip most of this coming week so my trading activity will be quite minimal as I enjoy some treeskiing - fresh powder too with any luck.

That's it for my mid-month update, cheers all!

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 mtzimmer1 
Legendary Recovering Method Hopper
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Lots of failed breakouts in the names I'm following closely. In combination with the fact that indexes have made a sizable advance recently, treasuries bonds have gotten killed, and few buyable setups, I am anticipating a correction or some sideways action at the least. Financials were the one bright spot today and I bought both DFS and SYF with 1/10 size positions.

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 mtzimmer1 
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You guys know I love analyzing trade statistics. I ran a test on my 2020 trades and bucketed into two categories: Companies I know nothing about (purely technical setup) vs. companies whose products/service I am at least aware of. Ex: TGTX has therapeutics in their name but I don't know anything else about the company vs. PINS, a site I've been on and am familiar with.





Performance: Known vs. Unknown
Win Rate: 69% / 38%
W/L %: 3.11 / 1.45
W/L R: 2.29 / 1.31
Expectancy %: 5.95% / -.13%
Expectancy R: .89 / -.11

I have two possible explanations
1) I subconsciously manage positions differently in companies I understand.
2) During the dataset 'Name Brand' stocks performed better at large.

Either way I think I'm going to focus on stocks that I understand moving forward!

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 Silver Dragon 
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mtzimmer1 View Post
You guys know I love analyzing trade statistics. I ran a test on my 2020 trades and bucketed into two categories: Companies I know nothing about (purely technical setup) vs. companies whose products/service I am at least aware of. Ex: TGTX has therapeutics in their name but I don't know anything else about the company vs. PINS, a site I've been on and am familiar with.





Performance: Known vs. Unknown
Win Rate: 69% / 38%
W/L %: 3.11 / 1.45
W/L R: 2.29 / 1.31
Expectancy %: 5.95% / -.13%
Expectancy R: .89 / -.11

I have two possible explanations
1) I subconsciously manage positions differently in companies I understand.
2) During the dataset 'Name Brand' stocks performed better at large.

Either way I think I'm going to focus on stocks that I understand moving forward!

Excellent observation! These are the kind of nuggets which can take your trading to the next level.

Robert

nosce te ipsum

You make your own opportunities in life.
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 mtzimmer1 
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Silver Dragon View Post
Excellent observation! These are the kind of nuggets which can take your trading to the next level.

Robert

Thanks Robert. Little by little, bit by bit! Good thing I'm a data junkie and love this stuff!

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 mtzimmer1 
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It's been quiet in my account. As the indexes correct few stocks break out from proper bases. Still have only one of my original positions open - 1/4 OZON. I've been trying a few other trades with small size but most have resulted in stop outs which is a great indicator to remain cautious.

In the downtime I've been working on testing one very simple setup (ATH breakout) on some of the best stocks from the past fifty years (AAPL, MSFT, XOM, AMZN, etc) to determine optimal stop placement and profit-taking criteria. In addition to the spreadsheet I intend to build a visual reference chartbook with annotated screenshots of the best 'textbook' setups. There is a ton of nuance in trading but for this first research endeavor I wanted to stick to something involving as little discretion as possible. Stock XYZ breaks out to new ATH's and the low point of the base was higher than the previous ATH breakout point. Preference to stocks outperforming relative to the indexes.

Example: XOM

2004.7.26 XOM 1


2004.7.26 XOM 2


2004.7.26 XOM 3


CAN broke out from it's IPO base a couple weeks ago, and today broke out from the first continuation base: a textbook setup in all ways I've yet identified.

-Zimmer

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 mtzimmer1 
Legendary Recovering Method Hopper
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Took my first larger position size since mid-February today. Bullish clues: SPX had a decent thrust last Friday and has continued to follow through at least somewhat since. DJIA has been the clear winner of the indexes recently thanks to the prominent strength in Energy (Oil & Gas) and Financials. I've just noticed some recent breakouts, particularly in the aforementioned sectors, beginning to hold higher. WFC has been building a solid base for the past 2.5 weeks. Today it broke out to new highs on decent volume, leading the big banks and the financial sector at large. If this trade works and more setups begin to come out of the woodwork I will be looking to increase my exposure.


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 mtzimmer1 
Legendary Recovering Method Hopper
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Added WYNN and SBNY last week as well as GTE and ZOM. Currently 55% invested.

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 mtzimmer1 
Legendary Recovering Method Hopper
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No breakout setups recently so I've been all cash but OZON. I have spent a lot of time researching one very specific setups and finding historical examples from the past few decades in nearly 500 stocks at this point. This study is almost concluded and I look forward to sharing my findings here soon!

In other news I'm beginning to see some recent breakouts holding higher and my watchlist began to widen out with the scanning I did tonight. Hopeful that we may see a decent run here if stocks can continue to break out and continue. My game plan for tomorrow is to take very small positions on some of my favorite setups and aim to keep portfolio exposure under 25% until I see more constructive price action post-breakout.

-Zimmer

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 mtzimmer1 
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As I mentioned yesterday. Seems some breakouts have begun to hold higher. Lots of setups today but I focused on my favorites: TLRY, APHA, and ON. Both TLRY and APHA are weed stocks with similar setups: narrowing range w/ a gap up out of range. ON is a semiconductor with a clean VCP chart pattern. Semis have been hot recently and it seems like one of the niches that makes sense to have some exposure in currently. Took somewhere around 1/2 size positions in all of these names as a way to test the water before jumping back in.

2020-3-31 TLRY


2021-03-31-ON


Unfortunately TLRY was stopped out. APHA barely hung on as of the close and I don't have high hopes for tomorrow unless we start with a gap up.

Currently 23% invested.

-Zimmer

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 mtzimmer1 
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Added to ON at ATH's. Also bought BOX and SEAS. Stopped out of APHA.

Currently 37% invested.

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 mtzimmer1 
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Keeping up with this journal is something I just haven't been inspired to do recently. Fell out of the habit with the slow market conditions and now trying to get back on the horse.

Yesterday I bought: TKAT, MCD, GMBL, and added to SEAS
Today I bought: ZIM, EL, and APPS

Current Positions (sorted by priority in portfolio):
SEAS
APPS
ZIM
BOX
TKAT
GMBL
OZON
EL
ON
MCD


I am currently 90% invested with a beta well over 1. I don't have enough conviction yet to go onto margin so anything that I buy tomorrow must excite me more than one of my existing positions.

-Zimmer

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 mtzimmer1 
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Sold MCD to buy KOPN today. Stopped out of GMBL.

Nothing else to report. ~80% invested.

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Recently I've been sorting my watchlists by length of time in days since the most recent high from longest to shortest. In doing so I start by looking at the stocks with the most mature bases. I find stocks from two primary sources: 1) colleagues, and 2) reviewing the new 52 week highs list every day. In order to add a stock to my watchlist the company needs to either have solid sales/earnings growth, or have an innovative product or service that I believe to have great disruptive potential. Companies that satisfy both criteria are optimal!

Cheers,
-Zimmer

I just stumbled over your journal. Thanks for taking the time and effort to post your trades.

I also trade break-outs and use 52 week high to find trading ideas. I follow the methodology of O'Neil, Darvas, Weinstein and Wyckoff. I haven't read Minervini. Although there is a YouTuber, Jack Corsellis, that mentions his VCP method.

I'll be following your progress. Good trading!!

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 mtzimmer1 
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I just stumbled over your journal. Thanks for taking the time and effort to post your trades.

I also trade break-outs and use 52 week high to find trading ideas. I follow the methodology of O'Neil, Darvas, Weinstein and Wyckoff. I haven't read Minervini. Although there is a YouTuber, Jack Corsellis, that mentions his VCP method.

I'll be following your progress. Good trading!!

Thank you! Good to know there are a few people out there that may actually enjoy or get value from reading this journal. I'll try to put more effort in as I do believe it will be beneficial for myself and hopefully others as well.

Do you have any open positions currently? I've seen a ton of failed breakouts in the past few weeks and just starting to get some traction in my portfolio over the past few days.

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Do you have any open positions currently? I've seen a ton of failed breakouts in the past few weeks and just starting to get some traction in my portfolio over the past few days.

I trade mainly the Canadian market.(Home country bias). Right now I'm holding BHC and a couple Canadian banks (BNS & BMO).

I'm looking to do some bottom fishing with the gold miners. FNV a week ago and KL if it breaks above the 50ma.

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 mtzimmer1 
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Frustrating day for me. Some stops hit this morning was a loud and clear "foot off the gas" signal from my portfolio. I listened and watched quite a few great setups pass: $BLNK, $GRWG, $PLL, and $ETSY. The one I did take, $MU, seems to have been a fakeout. It can be annoying but thinking risk first is essential for longevity.

2021-04-08-MU


Barely took out the highs before reversing... oh well!

The close today was very promising with lots of stocks appearing to have successful breakouts today. I was stopped on BOX and TKAT, and sold 1/3 of my SEAS position on the close below the 10 day. Currently ~80% invested and interested in continuing to add exposure if tomorrow is a characteristic follow-through day. If not wait to see if stops hold.

Thanks @deaddog for gently prodding me to put more effort into these daily posts.

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 deaddog 
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Do you have a set of criteria that has to be met before you consider a stock?

Just looking at the stocks you hold they don't seem to meet what I think is Minervini criteria.

MU for instance, although it made a new high didn't do so on above average volume. What is encouraging is the gap up on the 1st that did move with above average volume. I believe Minervini refers to that as a pocket pivot.

Did you enter as soon as the high was broken or just because it was broken?

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Do you have a set of criteria that has to be met before you consider a stock?

Just looking at the stocks you hold they don't seem to meet what I think is Minervini criteria.

MU for instance, although it made a new high didn't do so on above average volume. What is encouraging is the gap up on the 1st that did move with above average volume. I believe Minervini refers to that as a pocket pivot.

Did you enter as soon as the high was broken or just because it was broken?

Yes. I currently take actions at points that meet my interpretation of either Minervini's or Kristjan Kullamaggie's approach. Something that amazes me is how differently two people can interpret the same methodology - I chat with three other traders all using the same approach (O'Neil/Minervini/Kullamaggie) and while our watchlists and portfolios often have some overlap there is a tremendous variety between our four individual interpretations of the methodologies we've learned.

Having read Minervini's books and studied some of his past trades I have a base knowledge of how he makes decisions yet sometimes he'll tweet out a trade that leaves me scratching my head... always more to be learned.

Anyway MU: I'd agree, no convincing breakout yet due to the lack of above average volume and range. Looking great as a setup though and I think it's something Mark would definitely look at. Semis are a strong leading sector. Volatility (measured by daily range) has declined persistently from the left to the right side of the base. Volume has done the same.



A break above the horizontal line (new highs) on volume would be a decisive entry point for me... if that doesn't happen early next week I'll cut the position.

Another data point that has been difficult for me to reconcile: in backtesting setups and looking at historical trades (O'Neil, Minervini, et al.) I do notice that high volume on the day of breakout seems to be correlated with trade outcome, yet in my live trading (100's of trades now) I don't observe the same correlation. In fact volume on day of breakout has had nearly zero correlation to the outcomes of my trades. I'm always more inclined to believe live data vs. backtest yet I doubt that the conventional wisdom is wrong. My best explanation is that volume in the underlying used to be more important when less notional volume was transacted in derivatives. Options allow large players to express significant outright positions without leaving a footprint on the underlying's volume histogram. Savvy traders may look at options chain volume but it's more complicated to collect and analyze that data then it is to look at a simple chart of the underlying. This explanation fits what I've observed: volume was more important in the past and seems to be less important now. So where that leaves me is thinking that on non-optionable securities I should care more about volume, and on optionable securities I should either go whole-hog and analyze the entire options chain OR just not weight volume heavily in my analysis/approach.

I entered with a buy stop .01 above the previous high which is my customary opening order for this style of trading.

Great questions and I hope my rambling answers made some sense!

-Zimmer

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 mtzimmer1 
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Coming into Friday I was quite excited by the three tight days and flag forming at all time highs on the DJIA.

djx


While I prefer trading stocks with bigger range I'll happily trade great setups in 'boring' stocks if they seem to be leading the market. GE was one of my favored setups within the DJIA universe so I bought as it traded above the highs of this tight multi day range and final contraction in the VCP (volatility contraction pivot) pattern. I sold it as it sliced back through the pivot late morning after making a nice advance to finance my new position in TIGR. I'm comfortable with my current exposure (~80-90%) so for every new position I have to cut or reduce an existing position.

ge


Huge advance in TIGR during the first two months of 2021. Pullback since then that is just beginning to show signs of bottoming. Strong advance last Thursday on volume (marked with black lines on the candle and volume bar), and then the formation of a "cheat" pattern: one of Minervini's signatures. Not much follow-through from my buy point (horizontal black line), but looking promising. "Cheats" offer less confirmation but commensurate risk:reward.

tigr


-Zimmer

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 mtzimmer1 
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Sold EL today to free up a lot of capital.

Bought SI and RIOT (both bitcoin exposure) as they seemed to be the most attractive setups today.


si


riot


Both have that same signature VCP / Pennant pattern. They looked nice early on but closed weak. Hoping for some follow-through this week because this market has been choppy and rife with failed breakouts!

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 manualtrader 
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Do you think about 15% stoploss for SI is kind of large? For EL, it seems profit is 1.5%, and stoploss is 3%? What is the difference between VCP pivot point and Trading Range top?

Thanks for sharing.

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 mtzimmer1 
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Do you think about 15% stoploss for SI is kind of large? For EL, it seems profit is 1.5%, and stoploss is 3%? What is the difference between VCP pivot point and Trading Range top?

Thanks for sharing.

15% SL on a stock with a 13.5% 50 Day Median Daily Range seems right to me. It's all relative as far as I'm concerned because the potential reward on SI is commensurately higher due to it's volatility. Looking at my stats I actually have a higher expectancy for stocks with larger daily ranges so I don't ever shy away from 'large' stops as measured in terms of percent (general) so long as the stop in terms of MDR (specific) is reasonable. In short it doesn't make sense to ignore differences in volatility between stocks. Just as applying the same strategy in all markets is usually a recipe for disaster, applying the same arbitrary stop loss % to stocks of vastly different volatilities is a recipe for disaster in my view.

I sold EL not to take profits but to free up capital to buy SI and RIOT. Because the market hasn't been terribly strong I don't want to add notional exposure to my portfolio. Working within these restraints I need to sell existing positions in order to open new positions. EL was my least favorite existing position and I liked both SI and RIOT better so I replaced EL.

I usually am referring to a few days of overlapping ranges when I say 'trading range' whereas a VCP buy point can just be a recent swing high so long as each contraction is tighter than the previous one.

Hope that is clarifying about my thought process.

-Zimmer

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Sold EL today to free up a lot of capital.

Bought SI and RIOT (both bitcoin exposure) as they seemed to be the most attractive setups today.

Both have that same signature VCP / Pennant pattern. They looked nice early on but closed weak. Hoping for some follow-through this week because this market has been choppy and rife with failed breakouts!

What I don't see on either is a breakout to new highs on above average volume. Both closed in the bottom half of their range.

I wouldn't consider SU a Minervini stock. Too much overhead in the 23 to 25 range. Nothing new and exciting about SU that would cause investors to bail in and drive up the price.

RIOT on the other hand may be the perfect Minervini type stock. Once it get into new highs who knows where it might go.

Hope you don't mind me critiquing your trades. Just my opinion and hopefully helpful. Just started reading his book.

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 mtzimmer1 
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What I don't see on either is a breakout to new highs on above average volume. Both closed in the bottom half of their range.

I wouldn't consider SU a Minervini stock. Too much overhead in the 23 to 25 range. Nothing new and exciting about SU that would cause investors to bail in and drive up the price.

RIOT on the other hand may be the perfect Minervini type stock. Once it get into new highs who knows where it might go.

Hope you don't mind me critiquing your trades. Just my opinion and hopefully helpful. Just started reading his book.

I don't mind at all! I implore you to critique as harshly as possible - I can take it and I'll thank you for making me a better trader!

I don't see anything on SU's chart either. The stock I bought yesterday was SI which, like RIOT, tracks Bitcoin with a >80% correlation over the past 100 sessions.

Also beware when reading Minervini's books that he doesn't really trade today with the exact method outlined in his books. Check out the recent trades he's shared on his twitter and you'll see very little mention of fundamentals, growth, or catalysts - in my view he's trading 99% off of price action patterns. Some of his recent trades include DECK and FDX, both of which are long past their major growth phase IMO. He also buys well below highs depending on market environment. One of his signature buy setups is the cheat: a tight range as price comes up the right side of the base but is still off of highs. Kristjan Kullamaggie, my other biggest influence, almost always buys lower than base highs as price is breaking out of a tight range.

Cheers!

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 deaddog 
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I don't see anything on SU's chart either. The stock I bought yesterday was SI which, like RIOT, tracks Bitcoin with a >80% correlation over the past 100 sessions.

Well be warned you are dealing with an idiot. In my defence it was late at night and the I is right next to the U.

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 mtzimmer1 
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Well be warned you are dealing with an idiot. In my defence it was late at night and the I is right next to the U.

I noticed the time you responded, looked down at my keyboard, and figured that was exactly what happened.

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 mtzimmer1 
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Stopped out of MU and SEAS. Sold APPS as it was coming back through the pivot after attempting to break out - defensive play given the lack of follow-through observed recently.

Bought TSLA 1m ORH as it was gapping out of range on a low cheat setup.


TSLA

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Stopped out of MU and SEAS. Sold APPS as it was coming back through the pivot after attempting to break out - defensive play given the lack of follow-through observed recently.

Bought TSLA 1m ORH as it was gapping out of range on a low cheat setup.

Where did you place your stop?

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 mtzimmer1 
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Where did you place your stop?

MU 92.53
SEAS 49.09

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 mtzimmer1 
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Bought SONO today at the open gap up. 20/4 'Perfect Setup' occurring after the IPO Base. Sell signal is conditional: close below 10 day moving average - optimal based on my historical testing for this particular setup.

Zoomed Out


Zoomed In


Stopped out on SI this afternoon as crypto stocks got pillaged - rumor is it had something to do with the Coinbase IPO. Either way, I've taken enough paper cuts in the past few weeks to realize that this market is horrible for breakout trading. Seeing amazing setups fail back through the pivot is a bad sign in my view and speaks volumes as to the lack of follow-through in this environment. All of that can change in just a few days so I'll continue to track breakouts closely, just won't risk any more money on them until conditions visibly improve. Currently right around 40% invested and will continue to chisel that down unless the environment changes and breakouts start sticking.

I keep a noteback on my desk and just quickly jot down every buyable breakout I see each day. Every evening I go back over all the breakouts from the past few days and record how much the stock is up or down from the breakout level. This gives me a really quick reference as to the average strength of breakouts as well as any patterns. Right now the pattern is breakout first day and fail either same day or the next day. Watching for when this behavior changes.

-Zimmer

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 deaddog 
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MU 92.53
SEAS 49.09

How about TSLA

And todays buy SONO

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 mtzimmer1 
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deaddog View Post
How about TSLA

Swing low initially, 667.83. Low of breakout day now, 710.65.

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 deaddog 
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Bought SONO today at the open gap up. 20/4 'Perfect Setup' occurring after the IPO Base. Sell signal is conditional: close below 10 day moving average - optimal based on my historical testing for this particular setup.


Quoting 
Right now the pattern is breakout first day and fail either same day or the next day. Watching for when this behavior changes.
-Zimmer

I don't understand a 20/4 perfect set up but is there a reason you take the trade as soon as the breakout occurs.
The way I understand it you are looking for stocks that will make a huge move. A few cents or even dollars won't make a discernible difference in the long run if the stock takes off. You might consider waiting a while before making your entry.

That said I would have taken the TSLA trade at the end of the day on Tue.

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 mtzimmer1 
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deaddog View Post
I don't understand a 20/4 perfect set up but is there a reason you take the trade as soon as the breakout occurs.
The way I understand it you are looking for stocks that will make a huge move. A few cents or even dollars won't make a discernible difference in the long run if the stock takes off. You might consider waiting a while before making your entry.

That said I would have taken the TSLA trade at the end of the day on Tue.

I'll describe the 20/4 setup in detail here soon. In short it's the following: A stock breaks out of a many month base to new ATH's and advances at least 20% in four weeks or less. Then forms a range at these new higher prices. Buy as soon as a new all time high is made.

Yes there is a reason why I buy as soon as the breakout occurs. It has a positive expectancy from that point to the close so why give up the gains even if it is only a small bit? The only reason I would wait for the close is if I wasn't available to trade during the session and didn't want to leave a buy stop working. As I grow older I'm sure I'll want to streamline my operation and spend less and less time looking at charts - in that case the tradeoff in performance would probably be worth the reduction in time spent. Currently at age 21 I am trying to maximize returns - time is no object.

-Zimmer

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 deaddog 
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As I grow older I'm sure I'll want to streamline my operation and spend less and less time looking at charts - in that case the tradeoff in performance would probably be worth the reduction in time spent. Currently at age 21 I am trying to maximize returns - time is no object.

-Zimmer

Speaking from experience I can almost guarantee you'll want to spend less time. I spent some time day trading and found I make just as much swing trading as I did sitting in front of a computer all day. 1/2 hour at night and then watch the open. Put on a trade and spend the rest of the day doing what ever I want. Stress level close to zero.

I retired early and my lifestyle depends on my trading returns. I've been doing that since you were born. You've got lots of time and seem to have a good grasp of what's required to make it in this game. You'll do well.

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 mtzimmer1 
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Speaking from experience I can almost guarantee you'll want to spend less time. I spent some time day trading and found I make just as much swing trading as I did sitting in front of a computer all day. 1/2 hour at night and then watch the open. Put on a trade and spend the rest of the day doing what ever I want. Stress level close to zero.

I retired early and my lifestyle depends on my trading returns. I've been doing that since you were born. You've got lots of time and seem to have a good grasp of what's required to make it in this game. You'll do well.

Appreciate your kind words and encouragement. That sounds like exactly what I'll gravitate towards as I get older and my accounts larger - 1/2 hour at night and 1/2 hour at the open. First I need to turn this $100k into several million - then I'll be joining you in the 5 hour workweek schedule.

Cheers!

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 mtzimmer1 
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No buys today. Stopped out of RIOT.

Stocks still look meh with most recent breakouts I've tracked failing. Sitting with the current positions and cash awaiting more hospitable conditions.

-Zimmer

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 Schnook 
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For what it's worth...

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.

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 mtzimmer1 
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Schnook View Post


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 tracks logically to me, but Iíve 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 havenít considered the day to day RS vs. the indexes as a data point.

Thank you,
Zimmer

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 mtzimmer1 
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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. Clichť but every loss averted adds to the bottom line the same way a gain would.

-Zimmer

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 deaddog 
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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. Clichť but every loss averted adds to the bottom line the same way a gain would.

-Zimmer

I thought the objective was to buy breakouts (Big Grin).

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 mtzimmer1 
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I thought the objective was to buy breakouts (Big Grin).

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!

-Zimmer

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 deaddog 
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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!

-Zimmer

Right and there is no law that says you can't get back in.

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 mtzimmer1 
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Right and there is no law that says you can't get back in.



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.

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 deaddog 
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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.

Is there a set multiple you use? How do you determine whether to sell 1/3 or 1/2?

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onetake
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I trade mainly the Canadian market.(Home country bias). Right now I'm holding BHC and a couple Canadian banks (BNS & BMO).



I'm looking to do some bottom fishing with the gold miners. FNV a week ago and KL if it breaks above the 50ma.



Super great thread. I just recently finished a Minervini book and about half way through Weinstein one. In the last couple weeks Iíve been scanning for stocks in the Canadian market looking for a Minervini/Weinstein type breakout and seems like there isnít much except for maybe some stocks in trading ranges and possibly them breaking out. Iím watching BHC.

Take it with a grain of salt. Iíve 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.

Keep the updates coming.


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 mtzimmer1 
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deaddog View Post
Is there a set multiple you use? How do you determine whether to sell 1/3 or 1/2?

I think that many trade management techniques can work for this style of trading. One detail I've found to be true in my research is that gain per day steadily declines post breakout. This means that if there were theoretically unlimited trade setups the highest returns would be realized by taking profits quickly and reinvesting into the next breakout. Another fact is that the major gains from a trend-following strategy are realized on the infrequent occasion that a major trend is caught and ridden until termination. To reconcile these two facts I've decided to do an unscientific blend of both approaches.

I use Median Daily Range instead of Average Daily Range because median, being less sensitive to outliers, strikes me as a more true measure of 'normal' volatility for a security. My initial stop is almost always less than 2 MDR and usually less than 1 MDR. In my testing I've found a sell target between 2-3 MDR to yield optimal stats all things considered.

How much of my position I sell into strength vs. trail depends on a multitude of factors that I've found to influence trade outcome. These include company age, strength of initial breakout, and broad market trend phase. In the case of ZIM:
-It is a young company (check in the box for trailing more)
-It had a strong breakout (check in the box for trailing more)
-The broad market is likely in the early stages of a bull market (check in the box for trailing more)
For these reasons I sold only 1/3 of my position.

Hope this explanation is clear!

-Zimmer

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 mtzimmer1 
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onetake View Post
Super great thread. I just recently finished a Minervini book and about half way through Weinstein one. In the last couple weeks Iíve been scanning for stocks in the Canadian market looking for a Minervini/Weinstein type breakout and seems like there isnít much except for maybe some stocks in trading ranges and possibly them breaking out. Iím watching BHC.

Take it with a grain of salt. Iíve 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.

Keep the updates coming.


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Glad you find this thread helpful! I, like you, am nothing more than a humble student of the markets.

I just nailed down a 4-6 week gig playing upright bass for a local theatre companies summer production of Gershwin Cabaret! Kudos to you if you were able to make a living as a musician - that is a damn hard way to pay the bills! I hope the music scene comes back where you are!

Cheers,
Zimmer

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 deaddog 
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Iíve been scanning for stocks in the Canadian market looking for a Minervini/Weinstein type breakout and seems like there isnít much except for maybe some stocks in trading ranges and possibly them breaking out. Iím watching BHC.

Sold my BHC this week when it broke the 50ma. Got in in early Jan when it broke out from 27.

I'm watching ATD.b nice contraction pattern although it's not breaking out to new highs.

Also for your consideration PBH, PBL, OTEX, PHO & TSU.

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 deaddog 
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How much of my position I sell into strength vs. trail depends on a multitude of factors that I've found to influence trade outcome. These include company age, strength of initial breakout, and broad market trend phase. In the case of ZIM:
-It is a young company (check in the box for trailing more)
-It had a strong breakout (check in the box for trailing more)
-The broad market is likely in the early stages of a bull market (check in the box for trailing more)
For these reasons I sold only 1/3 of my position.

Hope this explanation is clear!

-Zimmer

I tend to be a more all in all out type of trader. I set a stop based on price action. Could be swing low or low of the breakout day.

I then adjust my trailing stop as the trade progresses. I might us a trend line or a moving average. The longer I'm in a trade the more room I tend to give the position. I tend to leave quite a bit on the table so I'm looking for ideas how to be a little more efficient.

I was using Weinstein's 30 week but have recently changed to a 50 day for my longer term holds. I traded BHC on the Canadian market and the 50 ma cross took me out this week.

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onetake
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mtzimmer1 View Post
Glad you find this thread helpful! I, like you, am nothing more than a humble student of the markets.



I just nailed down a 4-6 week gig playing upright bass for a local theatre companies summer production of Gershwin Cabaret! Kudos to you if you were able to make a living as a musician - that is a damn hard way to pay the bills! I hope the music scene comes back where you are!



Cheers,

Zimmer



Great to hear about your gig. Cabaret is a fun show to play. Iíve done quite a bit of theatre stuff in the last 10-15 years.
You must not be form Ontario, Canada because we just got hit with another lockdown. Oh well. Iíve resigned myself to thinking that this summer will be a write off and if gigs materialize then thatís just a plus. In the meantime Iím putting my time into learning more about trading, building my studio, spending time with my kids and trying to stay positive.




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onetake
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deaddog View Post
Sold my BHC this week when it broke the 50ma. Got in in early Jan when it broke out from 27.



I'm watching ATD.b nice contraction pattern although it's not breaking out to new highs.



Also for your consideration PBH, PBL, OTEX, PHO & TSU.



Thanks for the recommendations.

When ATD.b made that huge decline in Jan I was telling myself that I should buy it, it came down to the weekly 200 EMA but I chickened out Lol.

Also watching OTEX. That Minervini pattern shows up nice on the weekly chart.

I bought DR early last week as it broke out from Dec highs but itís not looking good now.

Others on my watchlist are VB, GCL, RECP, UNS.


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 mtzimmer1 
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deaddog View Post
I tend to be a more all in all out type of trader. I set a stop based on price action. Could be swing low or low of the breakout day.

I then adjust my trailing stop as the trade progresses. I might us a trend line or a moving average. The longer I'm in a trade the more room I tend to give the position. I tend to leave quite a bit on the table so I'm looking for ideas how to be a little more efficient.

I was using Weinstein's 30 week but have recently changed to a 50 day for my longer term holds. I traded BHC on the Canadian market and the 50 ma cross took me out this week.

This makes a lot of sense and will result in better stats at the individual trade level I believe. Another great example of ways to reduce time spent in front of the computer. Longer trade durations, simpler trade management practices.

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 mtzimmer1 
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onetake View Post
Great to hear about your gig. Cabaret is a fun show to play. Iíve done quite a bit of theatre stuff in the last 10-15 years.
You must not be form Ontario, Canada because we just got hit with another lockdown. Oh well. Iíve resigned myself to thinking that this summer will be a write off and if gigs materialize then thatís just a plus. In the meantime Iím putting my time into learning more about trading, building my studio, spending time with my kids and trying to stay positive.

Oh man I'm sorry to hear that. It sounds like you have a good attitude though!

Here in New York (state not city) the summer is looking very promising! It's been a long time since I've played a gig - been trying to get my chops back on upright in preparation for this show and my body can feel it!

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onetake
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mtzimmer1 View Post
Oh man I'm sorry to hear that. It sounds like you have a good attitude though!



Here in New York (state not city) the summer is looking very promising! It's been a long time since I've played a gig - been trying to get my chops back on upright in preparation for this show and my body can feel it!



All good. I can only control things I can control. So good to hear about NY state. And good luck to your fingers. Start building up those calluses again. Lol.

Anyway, sorry to gum up your trading journal with this covid/music stuff. Back to trading


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onetake
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Zimmer, Deaddog

How much weight to do place on previous resistance. I think in Weinsteinís book he mentions that as long as thereís no previous resistance 2 years back then thatís better. Just wondering what your take on that is.


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 deaddog 
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onetake View Post
Zimmer, Deaddog

How much weight to do place on previous resistance. I think in Weinsteinís book he mentions that as long as thereís no previous resistance 2 years back then thatís better. Just wondering what your take on that is.

Depends.; I grab a weekly chart and look back 5 yrs. Longer until I find an all time high.

What it depends on is the catalyst. Why is the stock breaking out now? What's new? Management, product, merger or is there any reason for the renewed interest.

I also look at where and how long price traded at former levels. What is the likelihood of trapped buyers waiting to get out at breakeven or panic if the price drops as it did in the past.

If you buy stocks breaking out to new all time highs it is one less thing you have to worry about.

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 mtzimmer1 
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onetake View Post
Zimmer, Deaddog

How much weight to do place on previous resistance. I think in Weinsteinís book he mentions that as long as thereís no previous resistance 2 years back then thatís better. Just wondering what your take on that is.


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@deaddog took the words out of my mouth with his response. ATH's preferred. The longer ago prices were traded the fewer open positions will remain from those prices. The more compelling the change in the company the more likely it is to attract new money which overwhelms the 'overhead supply.'

-Zimmer

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 mtzimmer1 
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Stopped on my remaining TSLA trailed stop around breakeven this morning. Not a great sign for the market though to see such a heavily watched stock and barometer for 'growth' slice back through the breakout level from last week.

I didn't buy anything because I've seen no improvement in conditions. Here are breakouts I recorded as buyable today if market conditions were good:

BILI
CRWD
VCEL
ALGN
FUTU
VSTO
TRIP

As of the close 5/7 are red - failed breakouts are not a good sign. I'll continue to watch the recent breakouts and wait for the tides to shift before making any large commitments.

-Zimmer

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 deaddog 
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mtzimmer1 View Post
I didn't buy anything because I've seen no improvement in conditions. Here are breakouts I recorded as buyable today if market conditions were good:

BILI
CRWD
VCEL
ALGN
FUTU
VSTO
TRIP

As of the close 5/7 are red - failed breakouts are not a good sign. I'll continue to watch the recent breakouts and wait for the tides to shift before making any large commitments.

-Zimmer

I took a quick look at the symbols above and with a couple obvious examples didn't see what I would call breakouts. Only VCEL didn't have overhead resistance.

How many checked all the boxes?

Market was down today. I don't usually buy on days the market is down. Swimming against the tide.

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 mtzimmer1 
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deaddog View Post
I took a quick look at the symbols above and with a couple obvious examples didn't see what I would call breakouts. Only VCEL didn't have overhead resistance.



How many checked all the boxes?



Market was down today. I don't usually buy on days the market is down. Swimming against the tide.



Haha. Thatís the opposite of what @Schnook does. He said he doesnít buy stocks when the market is up because most stocks drift higher when the market is up. When the market is down and an individual stock is up itís showing relative strength.

Thatís what is funny about this game - two traders can do OPPOSITE things and both can logically justify their choice!

All of the tickers mentioned checked my boxes for entry. Some Iíd consider higher quality than others, but all were good enough to take in a good market.

-Zimmer

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  #96 (permalink)
 mtzimmer1 
Legendary Recovering Method Hopper
Upstate NY
 
Experience: Intermediate
Platform: TOS
Broker: TD Ameritrade
Trading: Equities, Treasuries, Gold
 
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Posts: 827 since Dec 2018
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Nothing for me today. Stopped on ON and SONO. Down to three remaining positions and about 15% invested. Keeping the gunpowder dry until the next opportunity comes around.

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 deaddog 
Legendary Market Wizard
Prince George BC Canada
 
Experience: Advanced
Platform: IBs TWS
Broker: IB
Trading: Stocks
 
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All of the tickers mentioned checked my boxes for entry. Some Iíd consider higher quality than others, but all were good enough to take in a good market.

-Zimmer

Here are the boxes I like to see checked. I would prefer to see the stock breakout to new all time highs and should maybe add that in but I do some bottom fishing.


"The days when I keep my gratitude higher than my expectations, I have really good days" RW Hubbard
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 mtzimmer1 
Legendary Recovering Method Hopper
Upstate NY
 
Experience: Intermediate
Platform: TOS
Broker: TD Ameritrade
Trading: Equities, Treasuries, Gold
 
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Posts: 827 since Dec 2018
Thanks: 2,194 given, 1,827 received


deaddog View Post
Here are the boxes I like to see checked. I would prefer to see the stock breakout to new all time highs and should maybe add that in but I do some bottom fishing.


I imagine my criteria will become more and more selective as the years go by. 80/20 principle is relevant here I think. 80% of a trend-follower's gains will be made on the 20% or so trades that are ideal opportunities (such as those that check all your boxes) while the remaining 20% gains will be made from 80% of the trades. If one wants to spend less time in front of the computer, focusing on the 20% that are ideal seems the most efficient use of time!

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 deaddog 
Legendary Market Wizard
Prince George BC Canada
 
Experience: Advanced
Platform: IBs TWS
Broker: IB
Trading: Stocks
 
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Posts: 879 since May 2013
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I imagine my criteria will become more and more selective as the years go by. 80/20 principle is relevant here I think. 80% of a trend-follower's gains will be made on the 20% or so trades that are ideal opportunities (such as those that check all your boxes) while the remaining 20% gains will be made from 80% of the trades. If one wants to spend less time in front of the computer, focusing on the 20% that are ideal seems the most efficient use of time!

Even with my criteria the 80/20 principle applies. 80% of my profits are made by 20% of my trades. Cutting losses quickly eliminates over 50% of the trades. Of the remaining forty some odd percent only a few will run hard and strong.

Definitely worth waiting for.

"The days when I keep my gratitude higher than my expectations, I have really good days" RW Hubbard
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razle
Westland
 
 
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Even with my criteria the 80/20 principle applies. 80% of my profits are made by 20% of my trades. Cutting losses quickly eliminates over 50% of the trades. Of the remaining forty some odd percent only a few will run hard and strong.

Definitely worth waiting for.

With this criteria, I would like to know if you have a fixed % that you generally risk per trade?

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