Andy, @buynholdisdead From the other thread you said you just subscribed to MarketSurge and were going to try out IBD buys, so let’s do that here and only talk about Saul stocks on the Saul board. Anyone else is welcome to play along.
I know, I have started a lot of IBD threads, but I like to keep things segregated so my pea-brain does not get too confused.
@buynholdisdead just bought HTLF on the earnings gap breakout, so let’s chat that up.
First and foremost, IBD/CANSLIM says only buy when the market is in a confirmed rally. The reason is that the market accounts for about 75% of the movement of you stocks, so don’t fight the trend. Yes, you can always find something, but this is about improving odds. No catching falling knives, no picking bottoms, no swing trading (Ok, they have a swing trading service, I am not a member and I will not talk about it).
I am an engineer and I am good at being frank but bad at making people feel all comfy, so nothing I say is personal, just my understanding of what you do right and wrong. I am by no means an expert, but I am ok at spouting out the dogma, not as good at following it. And that is the biggest flaw with any rule-based approach, letting human nature override the rules. Yes, I do it.
we should not be buying anything because the market is in a correction. During the day Friday, it seemed like we would get an FTD, so I did start nibbling on a couple things. They are not working out. While this earnings gap was great, you should not be buying. You can hit a 17 when the dealer is showing 16, but you don’t have the odds in your favor then !
this is not a strong stock, look at the IBD rankings. Everything I ticked off in red is bad/weak…
earnings and sales growth is bad, this is not a growth stock…
look at forward estimates, weak…
its group is #127 out of 197. The group (and sector) play a strong role in the success of a stock. You don’t want to buy the best house in a bad neighborhood.
ok, the chart is good, it has a nice base, its RS is 92, the breakout was an earnings cap with huge volume. (but the RS was way lower before the gap up day). There was one nice “big blue bar day” in the base well before the breakout. (But having a big red bar down day at the bottom of the base is actually good because it is capitulation and gets rid of weak holders)
IBD says try to buy low in the buy zone because breakouts often come back in to test the buy point or below, if you buy at the 4-5% top of the buy range, then you can get shaken out too easily.
For gap ups, they have a different rules. It is ok to buy within 5% of the opening gap price. I am pretty sure you were ok there.
IBD does have that hard and fast rule, sell at a 7-8% loss so you live to trade another day, The rule is a corollary to the “Buy right rule”. You have to buy right - good fundamentals and breaking out of a base on strong volume. If you are buying random stocks at random prices, you can’t use a sell rule like that.
Anyway, you would have probably been lucky if not for that big drop after hours due to an unexpected event. However, MarketSurge does not show afterhours trading for this and FinViz does not have any news. The takeover is for $2B and this trades at $1.7B, so I don’t understand how that could impact it unless the deal were called off.
If this stock were only up on a takeover offer, as opposed to earnings, then you would be buying if for arbitrage and not as an IBD growth stock.
Let me know how tomorrow goes, don’t buy any more “IBD” stocks yet.
Here’s and example of great IBD numbers.
That is perfect Pete thank you. I think I was really lucky. After looking into this I found out that the buy out was announced before I bought. I think this really could have been bad. I am really glad you did this because I can learn from you.
Ok look at Jun on the chart you posted. It show that earnings are going to be down -2 percent yet June 24th earnings are supposed to be 1.12 and June 23 was 1.09. Why the -2 percent.
I think I will sell this and wait like you advise. Thanks again.
Andy
Futures are up strong today. If there is higher vol than yesterday, it will likely be a follow-through-day and start of a rally. That does not mean a good rally and a strong rally, only time will tell. I fell the market may remain choppy, which is the worst market. It will suck you in and spit you out with loss rules.
Bill would always walk around on a FTD and ask people what they bought and he would scold them if they bought nothing. But, you really don’t know if it is an FTD until near the end.
In this situation, you should already have a watchlist of strong stocks, you can’t just scramble around on what you think is an FTD. That is a recipe for failure.
IBD recommends having a concentrated portfolio of 5-10 stocks, you should start with a goal of 10 in your dedicated account. For a $100k portfolio, that gives you an allocation of $10k each (duh). But, if today is an FTD and you have a list of stocks near a breakout, then pick one of those and invest 20% of your 10%. This becomes a way for you to test your process. If market and that stock performs well, then maybe you add another stock or two, but not at full allocation.
IBD talks about pyramiding in and talks about early buys to get you in at a lower basis before the breakout.
Here is an example from DKNG. It was forming a base so I drew some downward sloping trendlines and also watched the 50dma. The red slanted line was my first buy and it was “early” entry. The justification was the gap up above the 50dma on high volume. You will also notice that I highlighted all the good up blue-bar days before and after that. That is showing VERY good accumulation (professional buying). That is very good to see in a base. You will see another green horizontal line just inside the blue buy-box (buy zone) where I added (pryamided) to the buy.
Good luck, go slow and learn.
If you want to learn to trade the IBD way, then there are a number of things you will want to do. One is to have a daily routine that forces you to look at various list of stocks so you can start to find good candidates for your watch list. On MarketSurge, there is a green button “Open Stock Ideas”. This will open a screen with lots of options, both daily and weekly. Look through those and see which ones you like.
For breaking out today, look at all those and try to see your own patterns. Is the base tight or loose? Is there good buying on the right side of the base? Was the RS strong before the breakout? Look at the 4 quarters of earnings at the bottom of the daily chart. Are earnings growing at 25-35% a quarter? Same for sales.
Look at the weekly view of the chart. Is the green line heading up or down?
Its earnings season, so beware. IBD warns about buying a stock close to earnings. It is preferred that you have a profit margin if you want to hold through earnings, because as you can see some things go up 20% and some go down 20%. If you buy a 20% loser the day before earnings, you have no way to get out with only an 8% loss. In a way, all trading is gambling, but you need the odds in your favor. Buying the days before earnings is a coin flip and you can’t make money long term on a coin flip.
Remember, we are really waiting for a Follow Through Day…
From Stock Guide 2024Q1
• Always buy something on an FTD.
• FTD is a substantial jump (at least 1.25%) of Naz or S&P on higher volume than the day before on Day 4 or later of a rally attempt
• Not all FTDs work, but no bull market rally in history has ever started without one.
• The key with FTD is to be selective with your buying and start with smaller position sizes
• Find the strongest leaders, avoid the laggards.
• Start with leaders with proper setups, and if it works, put more money to work. That is, get confirmation your trades are working
• In the downtrend, maintain your watch list
• New leaders will often have RS lines near new highs and 90+RS
• The biggest money is made at the beginning of new uptrends when the future leaders take off and begin their ascents.
@buynholdisdead et al, if you are new to MarketSurge (charting tool) or just interested, there is a 1 hours “how to” seminar this Saturday.
MarketSurge | Stock Research & Investment Tools for Stock Market Analysis (investors.com)
You should be able to access it in the archive as well.
I am signed up for it Pete thanks.
Andy
So I bought TMDX today, just a nibble. Even though it is a Saul stock I have been in and out of it for awhile. So I am in at $118.66. Now according to Oneill it says that the EPS is not good but on the screen it shows the rating at 81 so I am in and watching. Been wanting to get back in and they had a phenomenal quarter and I think the management is superb. Adding Chart.
I also sold HTLF for 42.53 so made .88 cents on a mistake.
Andy
@buynholdisdead I was considering replying to @stocknovice about TMDX on the other thread, but now I will do it here.
As noted before, buying a great gap up is not a bad thing, but we are also not in a “confirmed uptrend”, so the IBD portfolio should tread lightly and not be overcommitted. For TMDX, the growth fundamentals are looking decent. On the weekly (not shown), MarketSurge shows an inconsistent ziggy-zaggy earnings line, but the 2024 and 2025 estimates are very big increase (coming of small or negative earnings). I ticket off the good growth rankings in the top left corner. The EPS is now 81, which is not too bad. On the far right you see the O’Neil screen that shows 8/9 criteria are met, but with the EPS now at 81, it is really 9/9. Bill found that the criteria of this screen were common in a large percentage of the stocks that had great runs, before they had great runs.
Sales growth has been very strong and estimates show it is expected to continue.
What I would want to see in the chart is for it to create an nice high bull flag, moving sideways for a week or two, not really going above the high. Then, we want to see it move above that consolidation, which could be a good place to add.
In the case of @stocknovice I would also have no problem locking in some gains, but leaving some on the table to see if it can move higher over the next few quarters. There is really no reason it would plummet until next earnings.
I have the blue up volume bars highlighted in a green box. It is interesting that this was seeing meaningful accumulation (professional buying) well before earnings. Did someone start sniffing out something? Down days in that period were on lower volume, a good sign.
This would not have been on my radar as it does not seem to have a well defined base to entice me.
Pete
Some stocks to watch: NXPI, CARR, LLY, RMD (and study)
We are reminded that “buying gap-ups in a choppy market is risky.”
DraftKings reported a surprise profit, easily beating, with strong revenue growth also topping. DKNG stock climbed modestly overnight. The online sports betting giant climbed 2.9% to 43.03 on Thursday, modestly below the 50-day line. A decisive move above that level could offer an early entry for DraftKings stock as it builds the right side of a base.
NVDA: Investors could use a decisive move above the 50-day as an early entry, using the April 30 high of 888.19 as a specific trigger.|
@buynholdisdead homework for the weekend, watch the checked-off videos below (but the first one will be the Friday version, not today’s. Friday Stock Market Today features Mike Webster, always worth the time.
I thought I had talked about Cloudflare as an example, but I don’t see it. Since it was down 14% tonight, I will briefly touch on it.
I made my first buy during the 11/2/23 FTD. On 11/3 it had a good jump above 50dma on very strong volume. This was an early buy and a small percent of a full position. Then on 11/14, it had been building the right side of the base and the market was looking very strong. It had another higher volume pop, so I made another early add. On 11/29 it officially broke out on 81% higher than average volume, so I filled my position. On 1/9/24, I added a little more after it had dipped and come back. It dipped again but found support at 50dma then bounce up. I could have added more with this proven support, but did not. Not long after that, it hit resistance and started coming back down. Earnings were in a few days so I locked in some profits, but held most of the position. If earnings were not looming, it would have been proper to hold all, but I don’t know if I would have. Earnings were great and it was a big gap up on volume +530% on one day and +1000% the next day. However, the stock quickly fell below the low of the gap, something I don’t like to see. It kept acting poorly and I sold all on 3/8/24 (you can see the red horizontal line).
Did all that poor action portend this quarter’s really bad earnings? Who knows, there were no big sell off days before today. Was I smart or lucky? Don’t know, but IBD does suggest locking in profits and that is what saved me.
Pete, just a guy trying to follow some rules.
FYI, this feels like a FTD. The indexes are up a sufficient level and it seems the volume will be higher than yesterday. Lots of earnings gaps and breakouts. Looking at QQQ and SPY, their volume is coming in above average for this time of day, but IBD only uses the index volume, which is not easy to verify during the day.
At any rate, I am adding to some old positions where I did offensive selling earlier (NVDA, ERJ) adding a bit to some recent positions (REX, CAVA) and added SHAK as it broke above the top of a recent consolidation.
I added another tranche to TMDX and bought a new position in Cava. I also bought a new position in ALKT.
Andy
Just for a little context on why I started buying today.
As you can see the nasdaq is about the 21 day ema which IBD says is a must and it peeked above the 50 day today also. It looked very positive to me so I started buying but who knows I have been wrong so many times.
Andy
I am a little worried about that Pete because we didn’t have the higher volume. Do you think I made a mistake?
Andy
@buynholdisdead Did you make a mistake. That depends 
IBD is saying it is ok to be 20-40% invested (in your IBD allocated funds ). So, if you are at 80%, it is a mistake. It may or may not work out, but it is going against the rules and the advice, therefore it is a mistake. Cramer often talks about discipline, and that is what I am talking about. If you are going to have rules, follow them.
That said, the Naz finished above the 50dma and we have been looking for that. The S&P did not quite make it. We almost had an FTD today and last FTD, but almost does not count. The lack of an FTD does not mean the market can’t do ok, and not all FTDs create a profitable rally, but IBD say NO strong rally has ever started without one. And they talk about it being in day 4-10. Today is in Day 10. There was one great rally that started in day 3 and as Bill walked around the shop, he found people were not buying because of the rule, and he essentially said “hey you dummies, look at how strong today it, buy something!” But this was a strong day after a low price that started a rally “attempt”, this was not one of the big bounces we get when the market is crashing.
FYI,Fidelity makes it easy to create new accounts for my IRA and move activity specific. I have several for my different MF services, one for my “Saul” stocks and one for my “IBD” stocks. That keeps me from over allocating to a strategy and it makes it easy to track returns.
Blah, blah, blah. I too have put more money in. Some last Friday, some today. Am I going to dump it all Monday? No, but I am at about 50% in my IBD account. If we start to tank next week I will need to cut back. I did get a little to excited today and in my head I was saying “well, I already bought some stuff, why I am buying this”. FOMO? We have all weekend to reflect on our actions and get a little better for next time.
@buynholdisdead here is my analysis of the ALKT chart.
Disclaimer: I am just a guy trying to learn and use the rules. I am not a certified chartologist or IBD guru. I make plenty of mistakes and I welcome challenges to force me to defend my position. I am never telling you to buy or sell, I am just saying what I might do or what IBD might say in a certain situation. I can’t turn $5000 into $12 million in 10 years.
I really like this chart, the stock is very strong. In the upper left corner I have highlighted the strong growth rankings. The are pretty good, but not awesome 99s. EPS may go up after this release (or maybe it just did).
In the bottom table of the chart we see strong quarterly revenues and improving EPS, going in the right direction. Sometimes I like to highlight good and bad volume in green or red. It is quite obvious when the blue bars are big, but I just like doing it so I am immediately reminded when I see the chart.
This is a stage 2 cup base and only 15% deep, looks nicely formed, not too wide and loosey goosey (which is a bad sign). There were some big red sell off days on the left side of the base. This is no surprise, that’s why basis form. Sometimes they form in light volume. IBD/Bill likes to see a big sell-off day near the bottom of the base as that is a sign the weak holders have given up. Same as a capitulation day in a big market correction. (3/9/2009). From the middle of the base, the right side is looking pretty good, up days have better volume than down days. We like that sign of accumulation very much. Three days ago, we had a jump above the 50dma on strong volume, 59% above average. The next day was the reaction to earnings and it shot into the buy zone on volume 224% above average, a definite buy signal in a strong market (we are not confirmed, but market is looking stronger). Today we had another gain on 98% more vol than average. All this volume is the sign of the big boys buying. Part of the IBD/CANSLIM theory is that it can take months for the big boys to get all the shares they want, but little guys like us can get our full share fast. We are in, they are still driving up the price.
The RS is 95 and it has a blue dot on the weekly (you will learn about this sign of strength later).
The astute trader would have been watching this the morning after earnings and buying on the way up. You can see the blue price bar started off low, but it did jump up pretty fast - look at the 5 minute chart and think about the right place to buy was after the early dip then the retake of the morning high.
Risk: I look at the risk of holding this stock to be pretty low. 3 big volume days and great earnings make the odds of a 7-8% loss pretty low.
This is a stock that I will consider strongly.
That was awesome Pete, I missed the blue dot on the weekly but I came across it yesterday and put it in for a buy today. Thanks for the read out. It really helped.
Andy
Chart Chat: ITRI. This was mentioned by IBD staff a few days ago, but I did not follow it. The chart is worth looking at to make a few points…
Back in Jan, a stage-2 base setup and had a breakout. You might have bought it on the big volume day right before the buy zone. I try to buy a partial position “Early Entry” on a jump off the 50dma like that. But the breakout day was barely into the buy zone, was on low volume and closed below the zone. It declined for a bit after that. If you had bought an early position, you could have still held it or decided to cash out and look for better opportunities. I probably would have held until it went down more or I definitely had a better buy. Since the breakout failed, your expectations were broken and you should have sold and moved on with life. That is actually a clarifying statement I have grown to like. You buy a stock with certain expectations or a thesis, and if you are wrong, just move on. Less worrying about the market or it might come back or its not so bad.
Then on 2/26 they had blow out earnings and a gap up. It was not in a base, so IBD would say not to buy and you probably did not even have it on a watch list. After that it settled in and did form the current base. If you had bought on the close of the gap day, you would not have lost 7-8% from there and been shaken out before the base was finished. (Maybe this is a pattern you will see with TMDX and it will form a shallow base and then breakout and you will say “Gosh darn, I knew I should have held that”. No, you did not know!
So now we are tooling around in a Stage-3 base that is a flat base with only a depth of 11%. It is a pretty base, nice and tight. You could still have an 11% deep flat base that has 8% swings every day, you don’t want to touch that crap, but “nice and tight” is a sign of a strong base. You will also note the price was living above the green 21dma line, another sign of strength, that is no one is really selling. The remember those last earnings and want to hold on for the next earnings. A few days ago we had a “Breakout” into the blue buy zone, but it was a failed breakout. Very low volume and could not even hold the buy point for a day. If you had received an alert that it was breaking out, the first thing you check is volume, if it is low, go slow or don’t go. It is probably no moving fast on low volume and you have time to think. After that, it was 3 days down on slightly higher volume. Hmm, not so great. But, things change. In this case, it found support on the 50dma, but you can’t buy it, earnings were the next day, and you can’t make that bet. It did take off on earnings day, and on high volume and even if you bought at the close, it would still be in the blue buy zone that goes up to 5% above the pivot. If I had bought it there with a partial position, I would not have added today after it was way up again. I don’t want to raise my basis in a way that makes me much more likely to get shaken out with a 7-8% loss. IBD says that about 50% of breakouts come back down to the buy point or below (and many then go back up, but some fail). The farther you buy from the buy point (pivot), the more likely you get shaken out. So there we are. If we bought yesterday, we hold and don’t add. If not, don’t touch it.
So when can we add? The rules say that the first trip to the 50dma after a breakout is usually a good place to add. The institutions seem to like to add there, so if it provides support you can add 10% (to keep your basis low). There are also cases where it will form a 3-weeks-tight formation and you can add 10% after that breaks out. So go look at the chart, the tight pattern, the support at moving averages, the volume bars. Start to learn what looks good.
Also, with a subscription to MarketSmith, you can see the William O’Neil filter, which for this stock has a perfect score of 9/9. It always feels go to have that on your side.
