Trading IBD Stocks

I have noticed that in a few charts Pete. Weekly and Daily do not always Match.

On 5/24/24 Mike Webster said this about downside reversal days: If you come back over the high of the downside day within two days, then is it a Buyback scenario. Of 61 qualifying downside reversals, only 11 became buyback scenarios. All 11 of those happened in a power trend like we are in now. That is, that market had been strong when the downside reversal happened. It shows the market is much stronger than you thought, because normally the DR will cause the market to continue to go down. In other words, if we go above that high Tuesday, push on the gas. (Buy back anything you sold on the DR

Might happen tomorrow, but that does not guaranty further upward movement. Check out the DR we had in May (on Naz)

||○ All the Magnificent Seven megacap techs saw buying demand increase on Monday, and four of the companies rallied 2% or more. |

OLLI chart had a big jump and is building a very tight, high flat. Good for the watch list. Should be a 3-weeks tight

Also view the SNPS chart.

ARM: had a little upside reversal near the 21dma. I added a little today.

As noted in the Market Health Thread, the Naz close above the high of the downside reversal day “activates” the Downside Reversal Buyback rule. And we are in a power trend, so “press on the gas”, is what Webby said to do in this scenario.

Biden yelled at LLY today and it send the stock to the 21dma, followed by a bullish reversal, closing at the 84% range of the day. This is a sign of support. The untrained eye sees a down day with a 68% increase in volume, which would be bad if it did not reverse as it did.

Leaderboard is a little below IBD’s recommended invested percentage of 80%-100%. But that’s only because we’ve done some pruning lately, getting rid of some dead weight while giving our winners more room to run. We’re still on the lookout for new adds, but growth stocks are painting a mixed picture as some leaders come under selling.

some leaders in the restaurant group have come under pressure, including Chipotle Mexican Grill (CMG), Sweetgreen (SG), Domino’s Pizza (DPZ) and Texas Roadhouse (TXRH). (Are investors worried about consumers running out of money for eating out?)

Another area of softness has been homebuilders and a slew of building-related stocks|

A leading economist, Ed Yardeni, on Tuesday warned of a bubble in artificial intelligence stocks. Yardeni said AI rock stars such as Nvidia’s (NVDA) chief executive and OpenAI founder Sam Altman were overhyping the technology, helping boost AI stocks to new highs.|

Look at FANG, WFRD, FTI|

Many banks near breakouts. They passed the recent stress tests and can now raise their dividends|

Video Review Stocks: WFRD, GS,NVO|

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7/5/25: Friday Video Show notes regarding stocks mentioned:

Oil services were looking good, may be building out handles now. Could take a couple weeks (FANG, WFRD)
○ XLI: GE and UBER are worth watching.
○ XLF: lots of head fakes. Earnings starting this coming Friday. Wait for earnings to make trades.
○ XLB: some recent action, but in a downtrend. GLD “has got a bid”
○ XLRE is “tightening up. Might look for REITs with RS over 70 for various periods”
○ XLV: has had some head fakes, but there are some good stocks that could be used for diversity.
○ XLY: AMZN and TSLA are helping it out.
○ XLP: COST and WMT have been looking good. Mike wishes he had bought it off the 21dma a couple days ago. Good diversity from tech, nice and steady, but too late to buy now.
○ XLC: META, GOOGL are the big boys here, both are looking good. TMUS looks interesting.
○ Stocks reviewed
○ META. Had a breakout, pulled back to 21dma the back into buy zone with a great day today. Looking at the weekly makes Mike think this is ready to move up like after the last 2 bases. Looking at old breakouts, Webby reminds us that if the stock starts to fade, if you don’t start to slowly get out, you will probably be forced to blow out your entire position at the low. If you slowly get out, you can slowly get back in.
○ The last earnings for META resulted in a big gap down and Mike says those are usually bad for stock for a while, maybe just goes sideways if you are lucky. But what we saw as a nice rebound off the bottom that day and that low was never tested. Big funds like this opportunity to buy low. "Our style is to wait for it to get back above the 50dma, or waited for this cup with handle to breakout, as it has. Mike tries to only buy stocks with the RS above the moving averages (that he showed us weeks ago).
AMZN: In Mike’s theory, it looks like there is a seller unloading at $200 (based on looking at thousands of charts for many years). He says that often, when the selling is done, there is a downward spike, maybe to around $195 in this case. Then you can buy. Swing Trader has a position and Mike has a personal position. If it closes under 21dma it would be “problematic”.
CRWD: Mike has a position and so does swing trader** Feels like a magnet to $400, feels like it is under accumulation. RS line still above its moving averages, so he is going to give it more time. EPS and Rev growth is impressing. Revs are have steady growth in the 30s.
○ **Note that if they recommend a stock on swing trader, they can’t be holding it personally and can’t buy it for 30m after the rec. I have heard Mike recount how he has had to sell a position, have swing trader rec it and buy it, then Mike buys it back 30m later.

EDIT: adding chart chats from last half of the Friday show with Webby…
This is that last 10 minutes of show and is worth watching…

○ 56:00 reviewed stocks in the Breaking out Today list. NEM touched the pivot point today and it is a large stock, so that means we should look at other gold miners to see if there is anything interesting since stocks in a group tend to trade together. You don’t just buy the one that pops up on the list, you go into that group and find candidates that may be about to break out.

○ (Edit ticket is APP not APPN) APP: started out looking good and had a strong move into buy zone. Mike bought some, but then it reversed and he got out with a tiny loss. His expectation is that in a strong market like this, a breakout should continue to show strength. No point in sticking around in one that has action like this. |
||○ 58:37: Recent breakouts list: Looking at this list is not just for ideas, but to see if breakouts are working in general. AMGN is like APPN, it broke out and failed and Mike would have sold it same day. This is a stock Mike would keep an eye on. Maybe be forming a new base in the handle|
||○ 1:00:03 Near Breakout**. PLTR** is near a breakout, but it is wild, so you might want to dial back your percent. Does not like that iceberg (island) in middle of base where it popped up one day then tanked in early May. It has recovered and Mike almost bought some today but it was a little more risk than he wanted to take on.|
||○ NOW: not a perfect base, but in the IGV enterprise software ETF, and that is looking good. Go and look at all the stocks in that ETF and see if there are good candidates. Mike and Justin did buy this 30 minutes after they added it to the Swing Trader buys today. For this swing trade he expects it to go from current $806 though the high of $815 pretty quickly, if not he would cut back on his position. Since the gap down, it has wedged up, which means it did not have a shakeout, so that is a negative thing. So he expects a shakeout, which means he might have to sell and buy it back.
||○ DDOG is also like the IGV, gap down and a wedge up.

○ Homework: go into relative strength settings and change it from S&P500 to a stock symbol, in this case IGV. Then compare the members of the IGV (Really the IBD software sector) to the RS of the IGV. Don’t forget to undo this change when done.

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Software is just brutal. Look at Snow, a darling at one time, it’s already formed a double bottom and looking to go down again for another shakeout. One to watch as a turnaround should happen though.

Andy

I just want to keep reminding people that every four years we have this thing that causes the market to run up and we haven’t seen it yet this year - the election year run up. Maybe the fed is getting ready to cut interest rates. I don’t know but I am anticipating this one happening.
Call me a fool…doc

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I agree Doc I am thinking we will get a blow off top but who knows.

Andy

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I’m on board with this thinking too. Then after the election I’m guessing there will be some tough times, no matter who wins.

That and three bucks gets you a cup of coffee. :slightly_smiling_face:

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Not to get too political, but if the Dems take control of all 3 branches, they promise to let the tax cuts expire (actually, they don’t need full control). The promise to raise the stock-buy-back tax from 1% to 4%. They promise to raise corporate taxes back to 28%. If these promises are kept, it will be very bad for earnings outlooks and that will be reflected in the markets.

If the Republicans take full control, they promise to lower corp tax rate by another 1%, renew the current tax law, cut back on regulation to allow easier business expansion, drill-baby-drill. They will no doubt end the 1% stock-buy-back tax. All that should be very good for the market. Will it cause inflation and slow Fed cuts? Will there really be a lot more tariffs that have the same effect as higher taxes?

Given the current poles, if Biden stays it, it seems certain that Trump will win. Even Dems are starting to say possible landslide. But that should be built into the market before the election.

Will the Fed cut in Sept or Dec? I still think Dec will be first cut.

We shall see. Again, I am trying to objectively say what each party seems to be promising, I do not want to start a political conversation about good and bad. Thanks, Pete

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#AEM - bought 1/3 position then 1/6 position as it proved itself. COMP99, EPS97, others very strong. Fund ownership steady for last 3 quarters. No IBD top rated funds own it. Gold sector is strong (group 14) and lots of good candidates. Expect this is a shorter term holding.

#GVA - 1/6 position on strong rebound off 50dma with +97% vol. TRS91, COMP99, EPS02, Group10. I had been watching this and did not buy on original breakout. It had come back and tested the by point and rebounded well and closed just below the 50dma. Earnings est for coming year are pretty good. Fund ownership not really changing, not IBD top funds hold this.
Clearly, I am very timid on this one. It has formed a base above the recent base buy zone, so this is an early buy off the show of strength on today’s rebound.

#ERJ - I still have my original position. Sold recent new adds at tiny loss, but now trying to buy back in. added to old position., 1/5th position. RS97 COMP98, EPS 73, Group35. day 2 of rebound of 50dma, hit resistance at recent high. No IBD top funds own this, but fund ownership growing 6 quarters in a row.

#WING - had to sell as it fell below 50dma

#CAVA - almost sold, but it held 50dma. Entire restaurant group was strong but now selling off. Probably have to sell tomorrow. At about 10.5% profit at the moment and definitely would look to get back in.

My IBD account is up about 22% for the year. Same as passively investing in Naz and just hanging out at the beach.

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I haven’t sold Wing yet. It hasn’t hit my stop at $370.68. It’s important to stay with your plan when you first bought the stock but once you have gained a profit and have some cushion it’s proper to use a 50sma or 21EMA as a stop.

Andy

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Interesting, WING and CAVA both flash buy using SS rulez today. Green bars and TSI crossover per the rules that I follow. Following with interest.
I bought ETF CONY yesterday on buy signal using SS rulez and my son and son in law are both buying as well. They sent me their prices and we all got in in the 19.01 to 19.10 range. Today they are texting like crazy asking how SS works because CONY popped today and I’m trying to explain it to them. They can’t believe its so simple but I continually warn them that its not 100% and set tight stop losses…doc

Just curious Andy why you held with the sell signal from SS rules. I know this is more of a technicals thread, but the sell on WING would have you buying back in after the dip vs holding through the dip (I’ve done the same thing by the way). Also, how do you determine your stop loss? Enjoying the conversation and learning a lot here. Thanks to you and Pete for the educational experience…doc

I don’t see that yet Doc.


Are you using a 2 month chart?

Andy

I am not an expert Doc just trying to learn. But I have been doing a lot of reading and have come to the conclusion that it is very important to know your win/loss ratio ie batting average. It is also very important to know how much you are losing or winning on each trade. Ideally you want to have a 2 to 1 winning ratio. So it’s ok if you have really tight stops if you are only taking 4 percent in winnings and that is what a lot of day traders do. But position traders have bigger wins so can take bigger losses. It is all built around your own risk profile. That is why it is crazy for anyone to tell anyone else that they are wrong on how they are doing it. I don’t think I am right but it is the rules I am building for myself. So Pete wasn’t wrong as long as he was following his rules. Now here is my rules. When I go into a trade I always set a stop. That stop can be anywhere between 3 to 8 percent. Depending on how I am trading. If I have been having a lot of wins I might be up to 8 percent stops. If I have been having alot of losses I will be down to 3 percent stops. No matter what I am out at the stop, no excuses. If my trade gets up 8 or 9 percent I will move my stop up to break even. Now these are all mental stops that I set on my marketsurge screen. So here is Wingstop and what I wrote when I went into the trade.

Doc it is very important to limit risk and that is why you have to stay with your stops. It doesn’t matter what your rules are because they should be built around your style but you must stick with them no exceptions. So Pete could be right and so could I. I hope that helps.

Andy

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I think that the worst thing a trader could do is to mix two sets of rules. You can’t buy a stock on an IBD breakout and then sell it on a swing trader (Simon Sez) rule. As noted, IBD is about position trading, which means you need more leeway in waiting through a “small” loss. IBD has a hard rule to cut losses at 7-8% no matter what. That is based on buying very close to the pivot or even starting with some early buys. Their studies show that 40% of breakouts revisit the pivot and, I think I recall, that plenty drop 5-7% below the pivot yet go one to be successful. In addition, they say that you can lose 7-8% on 3 of 4 trades and make it up with the one that goes up 25%. Then, you make your money on the ones that really take off and become big winners and by being 100% in cash before the crash gets anywhere near bad.

You can’t do all that if you are mixing in swing trading. But rules are made flexible by those of us that implement them. You don’t have to wait for a loss to sell a stock. I sell stuff that is “doing nothing” all the time, as I did with Dell today. I am sure you can be successful by setting lower stop losses like Andy does sometimes. That lets you look for faster moving stocks that are properly breaking out.

Andy is right, have a set of rules and stick to them and see if those rules make you successful. IBD claims their system and rules are based on extensive analysis, so I am trying to stick to those.

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Pete’s Real-time IBD moves. Today was a fascinating day, the CPI came in cold, rates dropped, investors became more confident of rate cuts by the Fed. This drove up interest rate sensitive stocks: homebuilders, regional banks, even infrastructure stocks. It appears the Mag-7 were “sources of funds”, selling not on fundamentals, but on the desire to rotate money elsewhere.

Today I sold Dell with a tiny loss. I bought a small, early position as it had a nice move above the 50dma. All it has done since then is just move along the 50dma. Not terrible, but my expectations were that the move above the 50dma would result in more up days. So I sold it to buy new opportunities.

I added a little AMZN at the pivot. That was my plan, but in reality, the plan was if AMZN went down, not all the Mag-7.

GVA and AEM both had strong follow-on days so I added a little more.

I bought a (new) 1/2 position in CARR. I have been watching this as an infrastructure and global warming play. Not long ago, they bought a top HVAC company in Europe, which should help out. Anyway, the breakout seemed decent with +44% vol increase when I bought it, but then the price faded a little below the buy point and the volume ended at only 22% above avg.

Pete, I don’t know what I was looking at regarding WING and CAVA. I use the same setup for SS as you and Andy use, but I also add in that TSI that Quill will once in a while refer to…doc

Doc I suspect you shoved the screen to the left making the chart smaller and the smiley faces change. I have seen Quill do this but I don’t know when or why he does it.

Andy

Andy, I do that on every chart. It doesn’t change the buy sell from what I have seen. I’m wondering if I had the time set to 30 or 60 minutes vs day…doc

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