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Russell has sideways consolidation

Posted on 2/29/2012

Bull markets don't go up in straight line. There are pullbacks, consolidation, shakeouts.


Currently we are witnessing a sideways correction.
Can it develop in to a pullback, possible. 
But will that be end of the bull market? Unlikely. 
The underlying buying and setup and the kind of stocks leading point towards a likely hood of bull move continuing after any pullback.
Short term market vulnerable to correction unless we get a breadth thrust.

Dip buyers at work

Posted on 2/28/2012
Dip buyers wasted no time, an aggressive dip buy program quickly reversed market weakness yesterday. The dip buying trade petered out for rest of the day.

This is evolving in to sideways correction. As you can see in the table below, the longer term momentum is still holding up well, but short term momentum has dipped. What it tells you is number of stocks are having pullback/consolidation on shorter 20 day time frame.


We need to see a breadth thrust to start new up leg. High volume selling can change this picture. So far we have not seen much distribution. 

Market is consolidating

Posted on 2/27/2012

The market has been having trouble progressing further. In last 10 days we had 5 positive breadth days and 5 negative breadth days. The selling is very muted so far with no 300 plus day. 

The secondary breadth indicators peaked on 2/6/2012 and since then have seen big drops. That indicates stocks that had made big moves have in last few weeks given up some of that gains or gone sideways. 

So far the underlying setups continue to point to further upside after a minor correction. If we see broad based selling that picture might change. 

A wall of worry is building up and the excessively bullish sentiment is coming down.

How to use IBD 200 to find swing trade candidates

Posted on 2/24/2012
The IBD 200 is published every Thursday. It is a list of top 200 stocks ranked by IBD Composite Rating.


IBD 200
 

Stocks in 200 under certain circumstances offer a quick 10 to 20% profit potential. That is the reason to focus on these stocks. It is convenient way to quickly narrow  a universe of 7000 stocks to 200 stocks. As a vehicle selection strategy, it is convenient, cheap and readily available. 



What you need to do is to run a range expansion scan on it, it will give you 5 to 10 stocks that are having range expansion and volume expansion. 


For example yesterday 11 stocks had range expansion and volume expansion out of the 200 stocks.
  1. swi
  2. acat
  3. scss
  4. cmn
  5. tal
  6. sxci
  7. halo
  8. ssys
  9. akrx
  10. qcor
  11. holi
Out of that you can find 2 or 3 good swing trade ideas like ACAT for example.




Essentials for setup to work
  1. Stocks in IBD 200 list have price momentum+sector momentum+ earnings momentum
  2. The quality of momentum should be good. Denoted by orderliness and symmetry of moves. Relative linearity and absence of too many 4% breakdowns.
  3. There should be a momentum pause of 10 days plus. Either through pullback or sideways move.
  4. The momentum pause should be orderly denoted by shallowness of pullback, compactness of pullback, absence of heavy selling.
  5. Volatility should compress during the momentum pause. Volatility compression/squeeze can be indicated by Bollinger bands. It is also indicated by series of narrow range bars during the momentum pause.
  6. Stock should breakout from such momentum pause on volume and certain magnitude move (4% plus)
  7. The immediate day before breakout day should be narrow range day or negative day. (ideal but not must)
  8. Stock should not be up 3 days in a row prior to breakout.
  9. Stock should not give up intraday gains. Should close near its day high.
  10. The stop is low of entry day.
  11. The exit is on profit target of 8 to 20% in 3 to 5 days. If stock is breaking out of less than 10 day consolidation operate with smaller profit target. If stock is breaking out of 10 day plus  consolidation work with 10% target. 
  12. Partial exits in strength are advised.
  13. Anyday after entry stock goes up 10% in a day move the stop immediately to protect open profits or sell part of the position.
  14. Risk between .25% to 1% per position depending on market phase and quality of setup.
  15. Check earnings date before entry. If entering before earnings take a smaller position of less than 5% of portfolio. 
Most of these things you can see in good breakouts. If you understand and internalize these things you can select a good IBD 200  breakout in a snap.
If you internalize this you can anticipate some IBD 200 breakouts.
This kind of swing trading method works best in a market undergoing momentum phase. In that kind of market breakouts are aggressively bought and tend to have 3 to 5 days follow through.
Those 3 to 5 days follow through moves tend to be of 8 to 20% magnitude during bull phases.
That is why Market Monitor filter or breadth thrust filter is important to improve your odds of success. 

For working people with complicated lifestyle the IBD 200 offers a very convenient way to focus on Top 200 momentum stocks with growth characters. In a traditional bull market growth stocks make big moves so this list will keep you on right side of the stock selection universe.




Are you serious about your trading?

If you are serious about your trading and want to build an enduring edge the Stockbee Member site might help you. Members tell me they have tried lot of things before coming to my site and it has offered them the most extensive and detailed methods to swing and position trade.

It is only for those who want to develop their own self sufficient trading method. It is not a stock picking service. It is service for you to build your own scans and trading method to have your own daily pick based on your method.

Be warned it will take you time to learn to trade. Learning to trade is difficult art and unless you are willing to spend months or years to perfect your strategy and also develop your mental edge you are unlikely to succeed in this game. Unless you understand that no site, no service, and no mentoring is going to work.

Why traders come to stockbee?

The member site is one of the most recommended site for learning to trade by other traders and bloggers. You will see no advertising, no hard marketing, no promotions, no free offers, no affiliate marketing, no incentive to other bloggers to promote the site, no constant twits self promoting the site, no free trial  and no tall claims of making you instantly wealthy, and yet the site attracts new  members everyday. Members come from all walks of life and all kinds of trading size and trading styles.

You will see that many trading bloggers have been using my market timing methods, scans , stock ranking lists and chart templates. They have developed their own methods based on my methods. Many paid newsletter site recommend my site to their subscriber for learning about trading and market.

Over the years thousands of traders have been members and those who benefited from the learning talk about the site to others or talk about the methods used and that is how new members learn about the site.





What will I learn in the members site?

The members site will give you in depth understanding to develop your own trading method. The emphasis is on making you self sufficient and confident of your own trading method and style.

As a member you will learn the basics of swing trading, momentum investing, growth investing and risk management.

You will learn about Stockbee Trend Intensity Breakouts method that uses momentum based swing trading to find 3 to 5 day swing trades for 8 to 40% profit.

You will learn about Stockbee Episodic Pivots Breakout method which uses Post Earnings Announcement Drift (PEAD) to find stocks that had a game changing earnings and that are likely to rally for 3 months to 12 months.

You will learn about  Stockbee Dollar Breakout method that uses momentum, range expansion and swing trading approach to find 5 to 40 dollar moves in high priced stocks.

You will learn about  Stockbee Lemonade Strategy for 401k which uses market timing and momentum to invest in 401k. You will get weekly update on how I am using the strategy on our 401k to do allocation decision.

You will learn about Stockbee Market Monitor method for market timing using breadth. It allows you to avoid risky periods in market and allows you to identify market turns. It is used for 401k allocation decisions.

You will learn about Stockbee Double Trouble method to find stock with confirmed upside momentum using anchored momentum and that are likely to continue their up move.

You will learn about Stockbee Night Time is Right Time method to find news catalyst based trade ideas for short term day trade and swing trade.

You will learn about Investor's Business Daily’s IBD 200 list and how it can be used to find swing trading candidates for explosive moves.

You will learn about Telechart 2000 and how to use it effectively to scan for swing and position trade ideas and to set up your 401k strategy.

You will learn about Jesse Livermore Range Breakout, Darvas Box setup, and many other member shared methods.

You will learn how to set up your own scans, select right kind of stocks, how to set up stops, when to enter , when to exit, how much to risk, how to track your trades and all other details about trading. You will learn about developing your own methods and not relying on others for trade ideas.

The site has hundreds of videos and trading methods and variation of methods. Members help each other in developing the methods and share actively their research and finding. A collaborative spirit allows you to get input from others on your trading ideas or problems.

The site gives you opportunity to interact with some of the most successful traders and learn from them about their trading methods. It is a vibrant community with members from different background and experience willing to help each other. The emphasis is on continuous learning and up gradation of market knowledge and setup knowledge. The members range from hedge fund employees, financial advisers, active swing traders, investors and new traders.

If you are looking to develop your own trading strategy the membership site might be for you. You have to be willing to put in the effort to build your own method. There are no silver bullets offered on members site. Every method, every scan, every nuance is detailed and all possible help is offered to design your own method.

Do you have a trial?

If you are just looking for trial you are better off trying thousands of other trading sites that offer free trial or one month trial and offer you promise of riches.

It is for those who are ready beyond the trial phase and ready to put serious months or years  of efforts to learn to trade on their own. It is for those who want to learn to find their own fish.

The free blog has all the details about the methods I trade and if you go through the posts highlighted in the sidebar you will learn about them.



How can I become a member?

To sign up go to www.stockbee.biz and follow the sign up process. The site uses Paypal for payment processing.

The next move for the market will likely be up.

Posted on 2/23/2012
In last 8 days there have been 5 negative breadth day on Stockbee Market Monitor. None of the day was above 300. This indicates very low selling pressure.


This is in line with a orderly pullback in the market. How long this phase lasts is not known, but a 300 plus day and breadth thrust would indicate fresh buying in the market. Currently both 5day breadth ratio and 10 day breadth ratio are below 2. Readings above 2 indicate strong buying.


The practical implications of this has been failure of many breakouts and very weak follow through on some breakouts. For momentum swing traders that can be problematic.

Under the surface several stocks are going sideways and having very orderly pullback. There are hundreds of stocks setting up like that. That kind of action leads me to believe that the next move for the market will likely be up.

It is time to start putting a watchlist together either on stocks or ETF's.



ETF with minimum liquidity of 100000 in last 3 trading days.ETF are ranked by momentum.

  1. soxl
  2. tyh
  3. tqqq
  4. edc
  5. fas
  6. urty
  7. tna
  8. scif
  9. bgu
  10. upro
  11. epi
  12. qld
  13. uyg
  14. drn
  15. mvv
  16. erx
  17. uwm
  18. gaz
  19. udow
  20. tur
  21. pin
  22. itb
  23. xbi
  24. uym
  25. sso
  26. ure
  27. dig
  28. xhb
  29. agq
  30. ura
When it comes to ETF just relying on momentum alone may not be the best way to find swing trading opportunities. Range expansion might be a better way to enter and exit ETF. 

A recent example of a trade on NUGT will show you that. NUGT had low momentum rank but had a range expansion signal and that offered good entry point for swing trade. It is as of now open position.


Market has lost a bit of momentum

Posted on 2/22/2012


Market has lost a bit of momentum in recent days. Follow through on breakouts is a bit of problem.

A stock that breaks out should find intraday momentum rather than fading. After a breakout stock should immediately have 3 to 5 days follow through before a pullback. Many stocks are just giving up gains post breakout.

A slow selling is apparent in number of stocks. But the selling is more like orderly pullback and not breakdowns.

As of now this looks like slow sideways move.



Stocks priced above 20 and with minimum liquidity of 100000 in last 3 trading days. Stocks are ranked by momentum.

  1. cie
  2. bvsn 
  3. pcyc
  4. regn 
  5. ilmn
  6. acat (setting up for breakout)
  7. soa
  8. tex
  9. fsys
  10. stx (setting up for a breakout)
  11. moh
  12. ggc
  13. ttm
  14. nflx
  15. swks
  16. whr
  17. txt
  18. nxpi
  19. sats
  20. wprt
  21. ipgp
  22. cvi
  23. mdc
  24. mdvn
  25. rrr
  26. uri
  27. ra
  28. hfc
  29. bwld
  30. gmcr
You will see that most of these are extended currently. 

Screening for stocks likely to double

Posted on 2/17/2012

On the members site there is ongoing discussion on potential candidates 
One of the systematic way to find stocks likely to double is by running couple of growth screens.

Extreme Growth Screen

Avg eps % growth last 2 quarters >= 100
Avg sales growth last two quarters>=50%
Price within 25% of 52 week high

Growth Acceleration Screen

5 year avg eps growth>50
2 qtr avg eps growth>=100
price within 25% of 52 week high.

Turnaround Growth

avg 5 year eps growth 15 to 25%
last 2 qtr eps growth>100%
price within 25% of 52 week high
The screens give you potential candidate. After that you have to look for one which has not run to much and is just beginning the move...
The screens will capture many but not all stocks likely to double. Simple momentum screen will capture almost every stock that doubles. 

If we get broad based and sustained selling then things can change

Posted on 2/16/2012


Short term picture indicates pullback . As of now there is no broad based selling. But indexes have stalled.



Good thing is wall of worry is building and the excessive bullishness is fast getting replaced by worries.



In the short run tactically defensive and will look at ETFs or other good setup.

Today morning I went through around 1200 stocks up most in last quarter and you still see signs of orderly pullback and no major breakdowns.

If we get broad based and sustained selling then things can change. As of now it still looks like a pullback after a first bull leg.

There are lot of nice setups below the surface

Posted on 2/15/2012


The market spent some time going sideways in last 8 days There has been selling in some in extended stocks and some breakdowns in stocks post earnings. But at the same time new sectors have had breakouts.

Major stock indexes have run into resistance around their 2012 highs. Breaking the year long range is proving a challenge for the market. The S&P 500 and Dow Jones Industrial Average has failed in recent days to take out the high. However the Nasdaq 100 and Nasdaq Composite have broken through the yearly range and also 11 year range.


Long term range breakouts indicate change in underlying economic conditions and empirical observations support the belief that such major range breakout often lead to long duration rally.

While the market has run it to bit of trouble here, the underlying breadth is positive and buyers buy every dip. Good example of that was yesterday. Stocks flirted with their worst point decline of the year before staging an impressive comeback in the last half-hour of trading. The Dow has risen in five of the last six trading days. But yesterday was the eighth straight session it failed to close above 12,900, let alone 13,000, underscoring the rally’s fatigue.

The gap up you see today morning may be the straw that breaks the camels back and we might get multi month range breakout on the two indexes.

Keep focused on finding best setups. Do not worry too much about market till you see 500 plus day on 4% down in MM.


Looking for setups like these. There are lot of nice setups below the surface.

Remain bullish till you see evidence of bearishness

Posted on 2/14/2012


It is a bull market. Probably a young bull market. It might have dips and corrections but it has probability to last for long time.



In the short run the MM readings are extended. Any dip here will be buying opportunity. In a bull market keep buying dips till it stops working.

Key character of bull market moves tend to be:
  1. steady buying with very few 300 plus days on MM
  2. low volatility
  3. small moves of less than 1% in Indexes. Market crawls up in small increments.
  4. sector rotation
  5. Growth and momentum stocks lead

All these things are happening currently.

Remain bullish till you see evidence of bearishness.

How I calculate position size

Posted on 2/13/2012
In the post Understanding the maths of swing trading I discussed the basic concept of how swing trading returns are generated and the number of trades required to double. The number of trades required is a function of your trading style. Some traders shoot for higher per trade rewards , so they will have less number of trades. As against that a scalper might shoot for very small target and will require large number of trades.

The number of trades required is also a function of % of your trades that are profitable. Best of the traders in the industry will tell you that 50% win rate is considered good enough and you can make money with even lower number of win rate if your R/R is very high. For example trend followers have success rates of  just around 30%, yet  they make money as they  have high R/R.

In order to calculate how much share to buy for a given R you can use the following calculator:


Let us say this is the stock I want to buy and I want to risk 1% on this stock which showed up in Stockbee Dollar Breakout scan. Let us assume entry at close of Friday at 95.67 and stop at low of entry day at 91.41. If you plug in these values in the free Stockbee Trade Size Tool , you will see that you need to buy 234 shares for 1% risk. At 1% risk 22457 or approximately 22.5% of your portfolio will be invested in this one trade.



Let us say this stock makes a 10% move from here. Then you will have a profit of 2245 USD on this trade. Which gives you 2.2 /1 risk to reward.

In above example closer is your stop to the entry more of your capital will be invested in single trade. Let us say instead of 91.41 you put your stop at 94 then with 1% risk you will have 57% of your account in one position. As shown below:



This is one of the ways to size your trade. The advantage of this kind of position sizing is that you will control your risk efficiently.

Some people use fixed position sizes. Say they might decide to hold 4 positions at any time and will allocate 25% each to it. That may be convenient way to do it but can be inefficient way to do it.

Another rule which many people follow is to restrict the maximum amount you would put in a trade. So they will not exceed any position amount above 25% of their capital. That is a very sound rule from a risk management point of view. So in above example even though the risk calculator shows 57% you should invest in the trade, you will override that and put only 25% of your capital. As a result your trade risk will be lower.

Every trader has different risk tolerance. Some are heavy risk taker and put big chunk of their capital in single trade. If it works they will have less number of trades to achieve their objective. At other spectrum some trader focus a lot on reducing risk per trade and as a result need to have more trade opportunities to make same returns.



Are you serious about your trading?

If you are serious about your trading and want to build an enduring edge the Stockbee Member site might help you. Members tell me they have tried lot of things before coming to my site and it has offered them the most extensive and detailed methods to swing and position trade.

It is only for those who want to develop their own self sufficient trading method. It is not a stock picking service. It is service for you to build your own scans and trading method to have your own daily pick based on your method.

Be warned it will take you time to learn to trade. Learning to trade is difficult art and unless you are willing to spend months or years to perfect your strategy and also develop your mental edge you are unlikely to succeed in this game. Unless you understand that no site, no service, and no mentoring is going to work.

Why traders come to stockbee?

The member site is one of the most recommended site for learning to trade by other traders and bloggers. You will see no advertising, no hard marketing, no promotions, no free offers, no affiliate marketing, no incentive to other bloggers to promote the site, no constant twits self promoting the site, no free trial  and no tall claims of making you instantly wealthy, and yet the site attracts new  members everyday. Members come from all walks of life and all kinds of trading size and trading styles.

You will see that many trading bloggers have been using my market timing methods, scans , stock ranking lists and chart templates. They have developed their own methods based on my methods. Many paid newsletter site recommend my site to their subscriber for learning about trading and market.

Over the years thousands of traders have been members and those who benefited from the learning talk about the site to others or talk about the methods used and that is how new members learn about the site.





What will I learn in the members site?

The members site will give you in depth understanding to develop your own trading method. The emphasis is on making you self sufficient and confident of your own trading method and style.

As a member you will learn the basics of swing trading, momentum investing, growth investing and risk management.

You will learn about Stockbee Trend Intensity Breakouts method that uses momentum based swing trading to find 3 to 5 day swing trades for 8 to 40% profit.

You will learn about Stockbee Episodic Pivots Breakout method which uses Post Earnings Announcement Drift (PEAD) to find stocks that had a game changing earnings and that are likely to rally for 3 months to 12 months.

You will learn about  Stockbee Dollar Breakout method that uses momentum, range expansion and swing trading approach to find 5 to 40 dollar moves in high priced stocks.

You will learn about  Stockbee Lemonade Strategy for 401k which uses market timing and momentum to invest in 401k. You will get weekly update on how I am using the strategy on our 401k to do allocation decision.

You will learn about Stockbee Market Monitor method for market timing using breadth. It allows you to avoid risky periods in market and allows you to identify market turns. It is used for 401k allocation decisions.

You will learn about Stockbee Double Trouble method to find stock with confirmed upside momentum using anchored momentum and that are likely to continue their up move.

You will learn about Stockbee Night Time is Right Time method to find news catalyst based trade ideas for short term day trade and swing trade.

You will learn about Investor's Business Daily’s IBD 200 list and how it can be used to find swing trading candidates for explosive moves.

You will learn about Telechart 2000 and how to use it effectively to scan for swing and position trade ideas and to set up your 401k strategy.

You will learn about Jesse Livermore Range Breakout, Darvas Box setup, and many other member shared methods.

You will learn how to set up your own scans, select right kind of stocks, how to set up stops, when to enter , when to exit, how much to risk, how to track your trades and all other details about trading. You will learn about developing your own methods and not relying on others for trade ideas.

The site has hundreds of videos and trading methods and variation of methods. Members help each other in developing the methods and share actively their research and finding. A collaborative spirit allows you to get input from others on your trading ideas or problems.

The site gives you opportunity to interact with some of the most successful traders and learn from them about their trading methods. It is a vibrant community with members from different background and experience willing to help each other. The emphasis is on continuous learning and up gradation of market knowledge and setup knowledge. The members range from hedge fund employees, financial advisers, active swing traders, investors and new traders.

If you are looking to develop your own trading strategy the membership site might be for you. You have to be willing to put in the effort to build your own method. There are no silver bullets offered on members site. Every method, every scan, every nuance is detailed and all possible help is offered to design your own method.

Do you have a trial?

If you are just looking for trial you are better off trying thousands of other trading sites that offer free trial or one month trial and offer you promise of riches.

It is for those who are ready beyond the trial phase and ready to put serious months or years  of efforts to learn to trade on their own. It is for those who want to learn to find their own fish.

The free blog has all the details about the methods I trade and if you go through the posts highlighted in the sidebar you will learn about them.



How can I become a member?

To sign up go to www.stockbee.biz and follow the sign up process. The site uses Paypal for payment processing.