MonthSeptember 2020

David Ryan on the Telltale Signs of a Correction

On a recent IBD Investing podcast, Irusha Peiris and David Ryan walked through a number of clues that may indicate we are heading into a correction. The chart of QQQ was used as many of recent leaders can be found in the Nasdaq 100.

I annotated a chart of the key points and added some additional notes as it relates to the moving averages and RS Line.

It’s important to note, these same principles apply regardless of the index, so I’d recommend keeping this information handy for future reference.

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TSLA Swing Trades

Given how quickly TSLA can move, in both directions, at this point I’m more comfortable with swing trades over a position trade. With that said, had I purchased TSLA in the $100-$200 range, I’d probably have a completely different perspective.

All the details of my swing trades are shown in the image that follows:

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Bucking the Trend – RS Line New High Screen

The Nasdaq has been on a steady decline since last Thursday (9/3/2020). Today the Nasdaq officially closed below both the 50-day and the 10-week moving averages.

How about a screen looking for stocks bucking the trend? This screen focuses on:

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RS Line and Recent High in thinkscript

One very helpful gauge within MarketSmith is the RS Line, which represents a stock’s performance versus the S&P 500. As growth traders, we look for an upward trending RS Line.

In addition to MarketSmith, I also use thinkorswim, as I can write scripts to customize the charts, do back-testing and otherwise tinker with the UI. I thought it might be a nice addition to my workspace to show an RS Line indicator.

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Position Size Calculator for thinkscript

A position size calculator can help you focus on fundamental and technical analysis without getting bogged down in repetitive tasks such as determining the number of shares to buy and the resulting position size. Let me explain.

Before I enter a trade, there are a few things I always know up front: how much I am willing to risk as a percent of my equity, where my original stop will be set, and my first target to consider taking profit (full or partial).

As far as a stop, based on my research of previous chart patterns as well as my own trades, I often find that a break of a moving average is a good place to consider a stop.

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How to Use Average Daily Dollar Volume

One way to reduce volatility in your portfolio is to focus on stocks that have an average daily dollar volume of at least $20 million.

In this post I’ll show you how to calculate the average daily dollar volume and how to sort lists in MarketSmith based on the 50-day average daily dollar volume.

There is nothing magical about $20 million. What’s important to take away is that stocks with a lower average daily dollar volumes may have more volatility and are typically thinly traded.

How you choose to determine what is a good baseline, depends on your investing style and risk tolerance.

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View % Gain or Loss with Just a Click

It’s often helpful when viewing a chart to know the percent gain or loss between two bars, it could be an intraday, daily, weekly or monthly chart. In this short video I’ll show how you view that information, with just a click, in thinkorswim.

Simple stuff like this is where computers truly make our lives easier. Given MarketSmith is my go-to charting app, hopefully this feature is on the roadmap.

How Mark Minervini Uses His Trend Templates

One of the most viewed posts on this site is Custom Screens From Mark Minervini’s Trend Templates.

Given the current state of the market, this is an ideal time to revisit the trend templates. What follows are a few quotes from Mark Minervini on his thought process and how he incorporates the templates into his own research routine. The information is based on an interview with Mark that appeared in a previous edition of MarketSmith’s Q1 Stock Guide.

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