Trading IBD Stocks

[PuddinHead42]

@PuddinHead42

Today I sold most of my IBD NVDA holdings (except some of my oldest from Nov 2023). I also sold ORCL, CCL, AMZN. I should have sold my new GE, but since it did so well after earnings, I am HOPING it is the most likely to bounce a little tomorrow. I heard hope was the best strategy or something like that

That was 7/24. Here are the notes and thoughts
NVDA:
On 6/20/24 NVDA experiences downside reversal on higher than average vol, sells off 2 more days on higher than avg vol. The run up into this was on very low volume for 7 days.
This is a sign of institutional distribution. As of 7/21, we have had 2 recent down days on volume much higher than other recent days… The down day on 7/11 took us through the 21dma on a gap down and then landed just on the 50dma. The next day was an attempted bounce of 50dma, but the day after that it went back down to near the 50dma Lots of weakness. This is the first bad 3-day sell off since this run started back around Dec 2023 at $47. The rally attempts after that drop were on low volume.
7/24/24; hit my sell plan so sold all but the shares bought in Jan, which are up 128%. If I had a stop loss in, it would have sold sooner at less of a loss

That was the right thing to do, even with a good profit buffer. Good to have cash in bad market and I can always buy it back. I felt good that I had a sell plan and followed it. Made 44.85% on those lots.

ORCL
My notes at time of sale: Market under pressure, this has tested 50dma a couple times but can’t move up. Weak stock so sell to raise cash and reduce exposure. This was only a 1/3 position.

CCL
This was a measly 1/6 position.
Here are my notes at time of sale. Market getting volatile and big down days. IBD says lower exposure and this fell to my cost basis. It was also a small holding, so I sold. It was a very long cup with handle, so that gave me some hope it would be a good breakout

also, it had a very weak breakout and no opportunities for me to add.

AMZN:
I started with a half position and added a little when it came back to the pivot.
Here are my sell notes: market in trouble, AMZN below 50dma, cut losses at 6.2% and raise cash. I have long term faith in AMZN, but need to follow IBD rules and advice

I owe reviews of the other sales: VSEC, GE, BKR, MOGA.
Still holding: NVDA (tiny), CARR, AEM, GVA, TOL, SPOT, MELI. I am well above the 0-20% exposure recommendation. Probably a lesson to be learned there if we don’t get some more up days

[PuddinHead42]

Some stock mentions from the Friday video…
○ HWM: Demonstrates an “ideal setup”. It broke out of a base, but then the market dragged it back down. However, it found support at the 21dma, which was above the pivot point of the base, which is what you want. Then it gapped up the next day. So look for that in future setups on market weakness.
○ NVDA: building the left side of a base. If it were to shoot back up to $140 again, you would want to sell into that. You really want to see a month or two of grinding sideways or rounding out the right side of the base. Get your popcorn and watch, no need to jump in now.
○ COST: moved above 50dma. Added to Swing Trader (5% of portfolio) in case there is a follow through day. A swing trader could put a stop at Friday’s or Thursday’s low.
○ CAVA also got above 50dma Friday. Swing Trader bought it and so did Webby. It had showed good support on Monday considering it is a new name that had made some big moves. ATR is higher on CAVA than COST, so shakeout is more likely
○ ONON: earnings soon. Above 50dma. Mike sees it as a double bottom.

[PuddinHead42]

$SHAK is worth watching. Gapped up on earnings last week, but the bad market dragged it down to the 50dma on “bad Monday”. It rebounded that day an finished at 61% of the true range (strong support). From that point it has been building a handle on the cup base. It is a Stage-base with a depth of 30% (not great). IBD rankings are not great. A lot of restaurants have felt the rath of customers who have run away from high prices, but apparently Shake Shack customers are still coming in. If we get an FTD, this will no doubt breakout, if not that would be an expectation breaker. Happy watching and waiting.

I have just put limit buys on $SHAK right below the pivot and right above, total of 1/2 position. I have never tried this before but I think with the PPI and CPI with week, that we are in a binary outcome after those announcements. If good, we will get and FTD and $SHAK will breakout, if bad, $SHAK will not hit my limit orders.

$CAVA is also setting up.

Edit:
3M is not a growth stock, but the new CEO (my old CEO), is making big changes that are impacting growth and the bottom line. I would expect some spin-offs of poor performing and low margin divisions. This could be another GE. If we have a Follow-Through-Day, it will break this downward trend line in the Bullish Flag. That could be a good buy signal.

[PuddinHead42]

8/13/24 I wanted to repost this from a separate thread…

From an IBD point of view: Mike Webster may well consider today a “Virtual” Follow-Through-Day. IBD dogma (Bill O’Neil) requires a strong up day (like today), but also volume higher than day before. It looks like vol will be weak today. Mike Webster, Bill’s disciple and right-hand man, tells us volume is too polluted with all the algos these days, so he pretty much throws that out. Mike really focuses on the 21dma to know when to “push on the gas”.

All that said, today’s rally is due to the PPI numbers. Tomorrow, CPI comes out, then I think we are clear for a while. So, if the market is happy again with CPI tomorrow, my expectations would be that we are done going down, were are in a confirmed uptrend and volatility will decline. But expectations are broken all the time

and add this…
Here are some stocks on my watch list you guys might want to evaluate
ONON: was down on earnings in the mornings, but has now made a nice upside reversal, so I bought a 1/3 position. I keep wanting to love this stock and be able to hold it for a few years, but it keeps breaking my heart.

DY: very strong IBD rankings, strong RS, just in buy zone.
META: back in a buy zone.
ROAD: a smaller infrastructure play. good growth ranks, consolidating below pre-correction buy point.
IBM: comeback story, has a nice handle on a cup.
MMM: reorg story, new CEO has proven record. Giant gap up on recent earnings and now forming bullish flag. IBD people would say you can buy “early” when it moves above the downtrend in that flag.
RACE: Ferrari - has a nice tight flat base. great support at 50dma, pretty strong IBD numbers.
NOW: Long term leader/monster. Had earnings gap into buy zone before the correction and is now back in buy zone. Good area to add if you are confident we are in a rally (wait for FTD)
SHAK: putting on a nice handle. gapped up on earnings pre-correction and is almost back to the peak, which is the top of the handle. Strong RS and Composite rankings, others pretty good. I have a limit order in and might buy early if CPI is good tomorrow.
GE: small gap up on earnings before correction, now just below buy zone. Stage 3 base, but it was tight, only 10% deep. Had some 3-weeks-tight patterns in base, very strong IBD rankings. RS96, COMP98. I have a small position in this.
VIRT: 18% jump on earnings before correction. In a bullish flag pattern and rounding it up to previous peak. It is what we might see 3M doing, so compare the 2 charts. See how it worked out if you had bought VIRT as it broke the downtrend in the flag.
CAVA: strong move above 50dma a couple days ago. Up nice today, but on low vol. Hoping it rests a few days so I can buy it on a breakout from a handle. I am personally biased to buy this because I expect long-term growth.
VIST: from a big upside reversal off the 200dma, it has come “Straight Up From The Bottom” as Bill would say. That means it needs to rest before we would buy. It is sitting right below the pre-correction buy point. Watch it and hope it builds a handle to breakout of.

See the Saul board for IOT, NU, NVDA, etc.

EDIT: 7PM
IBD calls a Follow Through Day and raises exposure to 20-40%. Bill would say “You have to buy something on an FTD, what did you buy”.

As noted, I added a tiny bit of NVDA to my tiny IBD position and bought ONON. I bought some non-IBD stocks as well.

Build your “best of” watchlist tonight. If CPI is “good” tomorrow, we can get a confirmation day. See above

[PuddinHead42]

Isn’t if funny how support seems to work. CMG hit a low during that bad day last Monday. Today the CEO left for SBUX and the stock tanked. But it stopped at that same low and the upside reversal looks the same. Funny.

[PuddinHead42]

My buys from yesterday and today.

[buynholdisdead]

Since NVDA was not showing any kind of pattern to base your entry Pete, why did you decide to buy it?

[PuddinHead42]

Excellent question. Like the market, NVDA had that strong upside reversal on “carry-trade” Monday. So that showed support. But the market was in correction, so I did not trust that as a place to add to my small remaining position in NVDA. I took Mike Webster’s thoughts of the 50% retracement line and drew in the pink dashed line you see. That is 50% of the 3-day sell off. Webby says a retracement to that is normal and would not change the (down) trend. Conversely, if the 50% retracement is broken, you can consider the trend broken. So I was looking for that positive action. In the daily video of that, a couple folks said they took an early position there. The next day, I could tell it was going to be an FTD and NVDA would finish above the 21dma, so I nibbled. If I was wrong, it was still the proper bet and I could sell. Today, the CPI did not ruin the market so I added a little more. Not big adds, but something. If it gets above the 50dma, I might add a little more. If it jumps above the 50dma on good volume, then I would make a bigger buy (showing support over and over). Upside reversals off a trend line could entice me to add a little.

SHAK: I had two GTC buy-stops in and the first one hit below the buy point. That is a measly 1/6 position. The next buy-stop is just above the pivot. I was hoping CPI would make us happier and it would run up through both today. Nevertheless, I am leaving the order in. If it triggers and then the price goes down, I will have to decide if I want to sell. Probably not unless it is ugly.

RACE: this was another on my “hot” watch list. It had a tight flat base and strong IBD rankings. This was a beauty today. I was actually at home in the morning and when CPI did not hurt the market, I started looking through my list after market open. RACE gapped up and you can see from the two green lines where I was able to buy it. I am proud of myself for getting to a 1/2 position so early, that has been one of my lesson’s learned - I am too timid and get stuck with a 1/3 or 1/2 position while the stock exits the buy zone.

ONON was an early buy base on the price action. It dropped on earnings, but then the Conf Call made everyone happy and is staged an upside reversal. You can see it faded after I bought it. It is a 1/3 position. I have a bias toward wanting to own based on my Peter Lynch “research”. I keep seeing medical people wearing these and Hokas because they are so comfortable. I see a number of strangers wearing them. I think they have huge potential to be a fad for a few years. I should stop using IBD rules and just buy some and put it away.

SE: this was on my radar from a non-IBD reason but I notice it forming a nice base. It is way off the top, but price was above 200dma and 50dma. It jumped above 21 dma on day before I bought it. Then on the FTD day, gapped up over the 50dma with +246% vol and finished at the top of the range, where I bought it. Then today, it broke out on +81% volume so I added more. It has come “Straight Up From The Bottom”, so it might be a little extended and riskier, but we did have an FTD.

I am a little over 50% invested, which is slightly higher than the recommended 20-40% exposure range.

[PuddinHead42]

I had owned RACE before as an IBD buy. It made a good breakout and run, but then consolidated back close to my buy point. I took the advice to not “round trip double digit gains” and sold out. But it ended up bottoming near the old buy point, then building a base and make more nice runs. Something might be learned from this. I rarely seem to hold winners long enough.

[Dance369]

I bought a pair of shoes (similar to ONON) along with some friends. They were all crazy for this type of ultra comfort shoes. One said it ruined all her other shoes. As more people prioritize health they’ll like comfort over beauty.

[buynholdisdead]

@PuddinHead42

That is 50% of the 3-day sell off. Webby says a retracement to that is normal and would not change the (down) trend. Conversely, if the 50% retracement is broken, you can consider the trend broken. So I was looking for that positive action.

I don’t know Pete but it seems like we can find a reason to buy whenever we want to buy something. I find myself doing the same thing. I think I need to tighten up until I get this right. It just seems to loosy Goosy.

[PuddinHead42]

@buynholdisdead

I don’t know Pete but it seems like we can find a reason to buy whenever we want to buy something.

That is always true for humans. We have biases that we must overcome. I tend to be more willing to buy a stock I like, or am familiar with (ONON, CAVA, NVDA) than a better stock and chart I don’t like. Webby is more of a swing trader (and leads the Swing Trader service). I can justify by calling them “early buys” at technical points that show meaningful support. In the case of NVDA, I kept the size small and am really waiting for a breakout.

A strong rebound from 50dma (for a quality stock) has always been part of the philosophy.

I was listening to an IBD podcast that featured one of the long-time “friends” of IBD. It was David Ryan is 3-time investing champ and a protégé of Bill O’Neil. He ran a fund for Bill, then his own hedge fund now trades for himself and he comes on IBD Live once a week. (I am 75% sure it was him, but could have been a similar trader)

He was recalling how he tightened up his trading at one point in his career and it significantly improved his results. He said he started to only buy cups with handle bases and only looked at stocks with a COMP rating of 95 or above. So maybe you try something like that to tighten up your trades.

Right now my IBD account is up 12.5% for the year. I think that is a little below the S&P. It is a lot of work to just break even, but the bet is that I am able to go to cash during a bigger decline and then out perform. Then I would be getting in on the early breakouts coming out of a correction and outperform a little. The lack of loss and slight outperformance in the beginning would let me stay ahead with a break-even performance. Add the rare life changer like NVDA that you manage to hold to greatness and the IBD method can pay off.

[PuddinHead42]

If the market closes strong today, maybe where it is now, the I am confident IBD will raise exposure to 40-60% and they will call this a “confirmation of the FTD”.

Here is what Eric Krull’s research shows regarding FTDs and “Accumulation days”

• The first 3 days (after FTD) are important because if you see professional distribution on day 1,2, or 3, that is a yellow flag and rally will rarely be good. If 2 of first 3 days is distribution, there has never been a “Life Changer” rally after that.
• The first 25 days are also important, you want to see some subsequent FTDs, as major rallies average 2 to 3 subsequent FTDs and about 8 accumulation days.

Unfortunately, I did not document the difference between “Subsequent FTDs” and “Accumulation days”. I imagine there is a fuzzy line between the two.

[PuddinHead42]

How I let MELI get away.

On “ugly Monday”, MELI sliced below the 50dma like the market. It finished near the bottom of its range, just above the 200dma. Earnings came out the next day and it gapped up above the 50dma and rested right below the buy zone. Of course I could not buy that, the market was terrible and there was no reason it might not keep going down. I believe IBD had lowered its exposure range to 0-20% and declared a
“Market In Correction” state.

The next day, MELI went all the way back to its 50dma but had a great upside reversal, which was also an outside day. This was a great show of strength in a bad market and perhaps the first time I really should have opened a small position just in case. The following day was a good up day on good volume and I did buy, but near the highs. It closed in the mid-range of the day and below my purchase price. The market was still very uncertain and I did not add anymore after that.

As it stands today, MELI has done great and is 10% above its buy point. I cannot add at this extended level and am “stuck” in a stock with a small allocation. I love MELI and am happy to let the small position run. Perhaps it will build another base in a few months and I can add.

Did I do anything wrong? I don’t think I was terribly wrong. I think someone else analyzing this might agree that the market was in a bad place and too much risk should be avoided. It is easy to look at the chart now and see what I should have done, but that is always easy. Not even sure if there is something to learn here. Perhaps my first small buy should have been on the upside reversal day and then I could have had a little more faith in adding a little more the next day.

Oh Well.

[buynholdisdead]

@PuddinHead42

A strong rebound from 50dma (for a quality stock) has always been part of the philosophy.

Right or the 21ema but when you bought NVDA it was still under the 50dma. But it had pierced the 21 ema and the RS was in an uptrend. That was good, I can see that being a good buypoint under the IBD rules. Especially for a leading stock.

[buynholdisdead]

One problem I have with drawing trendline’s though is that there is really no way to track how successful they are . Look at this.

$SNOW

If you look at that dark dotted line it is a trendline. I have seen these drawn by IBD all the time and supposedly when it breaks the trendline to the upside it would be a buy. You can even set an alert on the trendline. Draw it on the weekly with a temporary pen line and then switch to track price and hover over it till the finger shows and set alert. They say that allows you an earlier entry. But the same could be said for someone bottom fishing. I think (my own observing) is that you would want to see the RS turning up before taking it on because you are grabbing a falling knife.

[PuddinHead42]

@buynholdisdead

I think (my own observing) is that you would want to see the RS turning up before taking it on because you are grabbing a falling knife.

Agree, Webby adds RS trendlines to his charts and he wants the RS value to be above those trendlines. RS is very prominent in IBD discussions and they want strong RS. I agree with the drawing of trend lines and other lines, if you draw enough of them, you are bound to get one right and get your confirmation bias. My recollection is that most of the manually drawn trendlines in IBD discussions (videos) are in bases and handles, and thus the early buy before an impending breakout. At least, those are the manual ones I am most likely pay attention to. I do give more credence to the 50dma and 21dma (like I just bought a little more NVDA because it broke above the 50dma today)

[buynholdisdead]

@PuddinHead42

My recollection is that most of the manually drawn trendlines in IBD discussions (videos) are in bases and handles, and thus the early buy before an impending breakout.

Right Pete but again, it is before the base has formed, they call them early entry points. In fact on one of the video’s they were talking that early entry points seem to work better now than waiting for a pivot point. I can see that since most of the pivot points have been breaking down. But I am thinking that maybe stage one and stage 2 pivots might work better. Just starting to see if that is the case. I have decided to stay away from any stages other than 1 and 2 to see if that helps.

[PuddinHead42]

@buynholdisdead

I have decided to stay away from any stages other than 1 and 2 to see if that helps.

That is a fair approach. You will note that my early buys are usually on the small side. For example, the NVDA I bought today was a 1/6 position when it was destine to close above the 50dma. The earlier buys above 21dma and the next good day were smaller. I feel I get the best of both worlds that way. I don’t recall IBD folks saying how big they go in on an early buy.

You might also want to set yourself a minimum Comp rating, like 90 or even 95.

[PuddinHead42]

@buynholdisdead Andy, here is one on my watchlist with pretty good rankings. It had a good upside reversal on “ugly Monday” and finished positive. STUFB since then, so needs a rest, which might produce a handle-like opportunity. Smallish cap, small mutual fund ownership but consistently increasing. COMP97. Earnings behind it.