The three basic vehicle selection strategies

The three basic vehicle selection strategies that have historically withstood the gyration of markets for last 100 years or more are:

1. growth investing
2. value investing
3. momentum investing

if you study the history of the market each of these core vehicle selection strategies is capable of producing big returns in long run once you understand them in depth.

For explosive returns (defined as triple digit plus returns in a year or less) growth and momentum investing have been proven strategies.

Most big fortunes in short period of time are built in the market based on growth investing....

and in next 20 to 50 years or more that is not likely to change.

These are the core three vehicle selection strategies you must focus on before selecting one of them to be your area of focus....

Focus on vehicle selection

Most successful investors focus on vehicle selection. Vehicle selection based expertise is what most traders who have built big fortunes in their life time starting with small trading account have focused on

Market is a composite of many stocks (vehicles). While in some small windows of periods vehicle selection has not been very helpful in most of the years your vehicle selection makes a difference to your returns.

Currently due to Fed dominated moves all stocks tends to move up or down together but that is not how market traditionally behave. In normal markets there is wide distribution of returns on individual stocks. Some stock will be up 1000 % or more in a year and some will be up just 25%. Which offers opportunities for explosive returns to shrewd vehicle selectors.

Focusing on vehicle selection has been time tested method to get explosive returns. So instead of putting bulk of your effort in market timing , put your effort in vehicle selection.

If you know commonly used vehicle selection strategies you will not be reinventing the wheel. You can build on the knowledge and wisdom of people that came before you.

Look at history of the market for last 100 years look at traders who started with small account and built big fortunes, what vehicle selection strategy did they use.

If you know that you will not be digging in wrong place...

There is lot of emphasis in trading on indicators and timing tools and chart patterns . That kind of a approach skips the basic foundation skill of vehicle selection.

Vehicle selection answers the question of which stocks or futures or etf or instruments to trade.

Very little effort in most cases is put in to this vital are compared to other tactical areas. If you go through bulk of the trading blogsor trading courses or books or training programs, there is little emphasis on vehicle selection.

For a short tern trader a vehicle selection may or may not be critical because holding periods is small and profit expectation is small but for intermediate to long term periods holding vehicle selection is key. If you are working person or position trader the most critical skill you need to build is vehicle selection skill.

Since the birth of speculation speculators have experimented with various vehicle selection strategies and have found some strategies are better than others.

If you know what has worked you will not spend time chasing wrong things...

So look at historical evolution of thinking and expertise in this field .....

What is your vehicle selection strategy?

If you can not answer that question, then you do not have one...

Follow through

Markets followed through on downside negating the minor bounce attempt. Breadth was high on negative site. This confirms the recent weakness in market.

Number of factors lined up for this reversal. Sentiments became excessively bullish. Mom and pop investors returned to market near top. Major newspapers had stock market news dominating the front pages and Barron's screamed Dow 15000.

But above all market breadth based models screamed risk of pullback is increasing. Whether it is the Worden T2108 indicator or $BPNYA or Stockbee Market Monitor . Extreme bullish readings on breadth indicators tend to lead to reversals in next 2 to 6 weeks. All the breadth indicators had reached extremes in recent weeks. Breadth based timing strategies are the most reliable strategies for overall market.

The weakness will play itself out and at some stage the market will stabilize and set itself up for another rally this year. In recent 3 years pullbacks have been sharp but of smaller magnitudes and have also been of shorter duration. Each pullback or bearish phase has resulted in massive action by Fed worldwide or by policy makers.

As of now our Lemonade Strategy for 401k is in cash. It went in to cash couple of weeks ago after market breadth reached extreme. It will remain in cash till fresh Market Monitor long signal shows up. The active trading account had open long positions which were closed yesterday, but if a long with good catalyst shows up , I will still be a buyer for trade. The Working People Portfolio still has 2 open positions. The Working People portfolio focuses on position trades so it will continue to hold positions unless stop is hit. In active trading focus is on finding good risk reward shorts at this stage.

Every market correction offers growth investors and momentum traders time to upgrade their skills and research markets and methods. One of the areas of focus should be vehicle selection. While many novice traders spend lot of time on chart patterns and indicators, they pay little attention to vehicle selection. Many lack basic understanding of key vehicle selection strategies. This is the right time to focus on this key skill of proper vehicle selection.

On members site we are kicking off multi week vehicle selection education and collaboration effort to refresh key understanding of vehicle selection strategies. 

Buy younger trends

At any given time in the market there are young trends and there are old trends. Young trends are trends that have just started in last few days to weeks. Old trends are trends that are well established and in later stages of their trend.

Old trends near market correction zones like we might be going through are susceptible to reversal or sharp reversal. If you are primarily holding old trends you can have sharp drops in many of them at same time during correction.

Because markets are rotational in nature, while old trends break down or correct or go in to range, they are replaced by young trends . New trends start on new set of stocks, they gain speed and go on to gain leadership.

If we focus on finding young trends we can ride them for longer duration. We can add to positions. Younger trends also give you more time to research them. The young and old refers to how many days since a stock established a new uptrend. A stock like say TVL has old trend

The first or second swing in younger trend is better than entering old trends. Older the trends more vulnerable it can be to reversals. So look for young trends.  

Damaged but not broken

The much anticipated pullback has come after several days of creeping moves in indexes. It took out gains of several days and many stocks experienced shakeouts or reversal. But beyond that it is too early to declare the rally dead. There will be bounces and attempts at recapturing the high.

A 3 to 5% correction or several weeks of range bound action might be good. As of now let us see how aggressive are the dip buyers at these levels.

Overheated market gets a pullback

This has been a atypical rally from its start in terms of breadth trends.

• The rally started without breadth reaching extreme
• The rally started without a big 300 plus up day on Market Monitor
• The secondary indicators never moved much during the rally.
• It reached extreme with only 910 stocks up 25% plus

Bulk of the gain in the indexes in the rally happened in just 2 days. After that the daily range contracted and the market slowly crawled up.

In recent days some hints of froth started showing up. IPO started flooding the market. Large buyouts started happening. Merger activity picked up. And handful of stocks started making big one or two day moves e.g czr, trla, Z, spwr, angi etc. But we did not see much of Lottery Ticket moves.

Yesterday marked the first 300 plus day to downside on breadth . As I said in last few Daily Market reports that the benefit of doubt is in bulls favor till we see a big negative day. Yesterday was first of those.

Typically such down move leads to dip buying and another attempt at retaking the high, if the attempt fails and we get another 300 plus day then that will be confirmation of more downside.

The underlying setups on individual stocks as of now look good on large number of stocks. There are only handful of stocks showing topping patterns. The implication of that is we might get a shallower 3 to 6% kind of pullback at this stage.

Bulls in control of the market

Bulls in control of the market. Dips are aggressively faded. Even though the indexes are not managing to make much progress the vast majority of stocks continue to show sideways patterns rather than breakdowns.

The breadth as measured by T2108 has deteriorated but so far we do not see much of that in $bpnya and Market Monitor.

A series of  down days will change the current condition. Till you see first down day  , the benefit of doubt is to bulls.

How you can be successful market timer

Today morning there was article about mutual fund timing and how it leads to under performance. Every week you will find similar kind of articles.

When it comes to timing there are two schools of thoughts. Some people are vehemently against it and they show variety of statistics to prove their point. There are others who fervently believe in market timing.

Obviously market timing is not for average investor. Average investor lacks the skills, knowledge , and inclination to learn timing in depth. But if you are not one of those person and willing to put in effort, you can find strategies which can beat the market.

The trick in market timing is in finding indicators which work best in finding turns. Market breadth based indicators are the best way to time the market. Breadth flips and breadth thrusts are very reliable signal both near bottom and top.

If you are really serious about market timing and your returns, study market breadth in detail and you will find several ways to build reliable timing techniques. In our 401k I have been using breadth for timing for last 12 years and have developed Stockbee Lemonade Strategy for 401k for that. It is extensively used by Stockbee members and past members. For example last year our Lemonade Strategy for 401k was up 17.6% using timing and fund selection using very limited number of fund choices.

For motivated investors there are always ways to enhance your 401k returns.

How to make money in stocks: Success Stories

How to make money in stocks :Success Stories is a new book by Amy Smith based on the Investor's Business Daily method for investing in growth stocks. In recent years IBD has focused on its social media strategy and as part of its effort it has been encouraging IBD readers to meet regularly through Meetup. This book is an offshoot of that effort.

How to make money in stocks :Success Stories as the name suggests focuses on success stories of IBD readers and subscribers. It offers several stories of how the readers use the CANSLIM strategy in their own unique way. Each of the person highlighted in the book has taken the IBD approach and philosophy as a template and built on it.

They have fine tuned the idea for their own  investing and life style constrains as many of them are busy professional who invest in spare time. Many of those criteria are at times focused on further reducing the universe of stocks that show up in IBD 50 to just few good candidates. You can pick up some nice pointers and tactics from the experience of some of the featured readers like Stephen Cole, Stuart Auvian, Ted Staub, Ashish Dave, Bharani Ramamothi, Brian Gonzales , Jason D'Amore, Kevin Dai and several others. The book talks about their daily or weekly process of identifying trade ideas and managing trades.

How to make money in stocks :Success Stories weaves these stories around the basic IBD philosophy of growth investing . The IBD approach primarily relies of marrying growth investing and momentum investing. It looks for growth stocks with relative strength and sector momentum and then looks for several quality of growth and earnings criteria like earnings stability, ROE, margins, and so on. The process is aimed at finding growth stocks that can make explosive moves.

How to make money in stocks :Success Stories is easy to read and well written. It offers followers of IBD good insight in to how others are using the approach and what kind of success they had with the approach. If you are growth investor you will find this book well worth the price.

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.

Lots of swing setups

Bulls control the tape. However it is not wildly bullish environment. It is slow crawl kind of bullish move.

Stocks breakout make small moves and then goes sideways or in some cases reverse. But by and large they are going sideways.

Sector focus is in home builders and construction related industries and finance . Technology stocks are by and large laggards.

The kind of things that normally you see at this stage in bull move are absent:

• no wild big explosive moves in stocks
• no major junk movers
• my other indicators like are  also not near levels which indicate top
• extremely muted secondary breadth figures
• no flood of IPO

All in all very different kind of bull move  is underway.

Slow grind is leading to sideways moves and that shows lot of setups. Following stocks are showing up in our swing trading scans either as breakouts or pre breakout candidates.

WST C TUP OCN BKD ABR MENT ENB BAC ENR DHR POL BLK RJF BECN MDU WOR WYN STT RAS FITB SLRC JDSU BRKB PACW ITT ADBE AVY GEO KMX RPM PLL TRI AVT LINTA DRQ HAL TSCO TRAK AEGN LLY KBH WPP ENTG PRIM KAR SHO PCYC MON ODP CRAY NRF IPG DHI JEC HSNI GE EEFT SLB MDCO VRNT CELG VRSK A ASTX DCI SWFT TA HTZ FCEA FSS URBN KORS MR RIG TRIP GNW DLLR ENOC ANF KMI GA PNK ACHC AEGR PETS ERJ SFUN IDTI F WGO GPN CLB DGI ISIS EXPD QIHU RDC IRE ARUN CA MKTX MOH JCI WLP ACAD OMG CLR IHS B ACHN ANAD WIN NBR CNDO HMSY IRDM GFA EJ YPF

Slow down

The indexes have settled down in to slow crawl with bullish tilt. The up trend continues to be intact. Volume has sharply dropped.

The underlying breadth still continues to be extremely positive. In line with index action the moves on individual stocks are muted and breakouts have not had vigorous follow through. Many stocks post breakout have just gone sideways.

However there are some good setups for swing traders. 

How to become good at trading

Every day I get emails from readers of this blog asking how should they learn to trade. They ask about some newsletter, or site or course and what do I think of it. Over the weekend there was lot of discussion about trading sites and courses. In the novice stage I spent over 250k buying various books , courses and subscriptions, so I have some experience of this field.

The most important thing you have to do from a setup idea is to convert it in to trading method. Lot of sites, newsletters, trading rooms can give you setup ideas but not necessarily the complete picture. And they can not make you successful trader unless something crucial happens. And that is you narrow your focus to setup and spend significant effort on it.

Distilling the essence of a setup is key. Having survived in this industry profitable for last 12 years and studied methods of hundreds of traders, I see same setup ideas packaged in different manners. Everyone gives their own setup variation of basic idea a new label, new name and new illusion of secret sauce. Basic setup ideas like breakouts, pullbacks, fading extreme strength or weakness, volatility expansion and contraction, and event driven breakouts or breakdowns have been around for ages.

If you are new to trading or get easily excited by marketing claims, take a step back. Try and understand the setup idea first. Follow a reverse engineering approach. Every time a Ipad or any other new electronic device is launched you will see a bunch of people who will systematically take apart the product and try and understand how it works and why it works and they also estimate the cost of the product based on component prices.

That is the approach you should take to any setup idea you come across. Take a setup idea , study it, if it makes sense to you and you want to trade it then spend significant effort and invest in the setup idea.What do I mean when I say invest in a setup idea.

It means go in to significant detail of the setup idea. In order to make a setup work you need to really internalize the setup and make it part of you. The setup needs to move from just an idea to a instinctive reaction and behavior for you. It has to become "your' setup.

In order to do that you can study historically how it has worked. Some people do that by backtesting. Some do it by manually checking history. That means studying historically how the setup worked. Studding 1000, 5000, 10000 past instances of the setup ideas. And then from that derive leanings. That process is what is the key to building a long term edge in trading a setup.

Expertise is developed by extensive study of narrowly defined field. When you spend significant effort and time on the setup there are permanent changes that happen in your brain. It alters the way you think or act when the same setup situation happens next time.

Such extensive setup study is common theme among traders biographies.

When Livermore had a setup idea, he would go back in to his price records and see how it worked in past. He would always have a pad and pencil next to his bed according to his biography. If some setup idea hit him in the night , he would write it down and then next day he would research it. Near the end of his career Livermore wrote a book about setups that made him big money and how he discovered them. It is a good summary of what worked for him.

Darvas did same thing, he extensively studied the market and tried styles ranging from day trading, scalping, penny stocks, to newsletters and the work. Once he found his setup idea he extensively studied it and then setup his own rules to trade it.

Richard Love in his book Superperformance Stock also explains how he studied every stock that tripled in last 30 to 40 years. Then went back to see what factors lead to super performance and then formulated his own setup ideas. He was an expert on his setup idea.

William O'Neil built on the work of Love and built his own model and setup based on study of historical best performers.

Every trader who makes it in the market and survives decades in the market goes through similar process consciously or unconsciously.

They take a simple setup idea and spend time , effort , and money to perfect it. Then the setup becomes part of them.

If you invest significantly in setup idea you will find unique patterns and nuances that others have not found.

The effort makes you expert on their setup and when trading the same setup in current market you can instantly in their mind compare the setup to 20000 or 50000 past setup.

This is like chess grand master. Scientist have studied the brains of grand master and what they found is a grand master when making a move can compare the current state of the game to 50000 or more past games.A grand master in his mind instantly can look at a move of opponent and see how the game will unfold over next 20 to 30 moves, while novice looks at only 2-3 possible moves.

As against that most novice traders will abandon a setup if it does not work for 2 to 3 trades. Instead of investing in one setup idea for long period of time they flirt from setup to setup.

Significant investment in setup ideas is a recurring theme in every successful traders biography.

Most of us are not born traders.There are some who can instinctively get a setup idea in few minutes or weeks but most of us are duffers when we get in to trading. The solution to us duffers is to put in significant effort and then our game will improve.

Unless you understand that you will continue to chase others ideas or recommendations and never have confidence in your own setups..... You will get excited by every newsletter email, or video, or marketing scheme...

Narrow your focus to one setup idea and exhaust all your effort on it before flirting with other ideas. and when doing that first select ideas that have worked for 100 years or more.

Swing trading and overall market direction

Swing traders operate in the context of overall market direction. Trending markets are good for breakout based methods. In trending markets there is constant buying pressure. One set of stocks or sector breakout and then follow through for couple of weeks and then pause. During these pause some reverse, some have low volume correction and some get in to volatile range.

The stocks that get in to low volume correction also in most cases go through range contractions. Once sufficient time of a week to 4 days has passed the equilibrium between buyers and sellers changes and there is another breakout as fresh set of buyers enter the market. That is where the second opportunity is for swing traders. This dynamic happens over and over till it stops working and stock reverses.

Swing traders who understand this dynamic try and focus n the first or second breakout once trend gets established. As trend in individual stock matures, the overall market trend also matures and at some stage breakout buying stops working. Also at this stage stocks start forming wider ranges as against orderly corrections.  This results in failed breakouts.

Sometime markets make big multi month or year moves. In those kind of moves individual swing traders also find bigger swings to play with. Bigger swings in markets tend to happen in first year of bull market after market had a big 30 to 40% plus kind of correction. As the overall market trends mature and we get in to third or fourth year of long running bull moves, the moves are often short lived. Which is what we have experienced in last year or so. The market moves in duration term are just few months. This often creates only one or 2 swing opportunity in stock for intermediate term swing trader.

Traders start reacting to these kind of markets by becoming shorter and shorter duration swing traders and some eventually become day traders. Some give up on swing trading all together and search for other methods. That has been the way market has been for over 100 years. It is like farming , some year give you bumper crop and in some year you just have to scrape through.

The key is to survive the difficult periods for your style without taking big losses. And also to not completely abandon your style. You can develop new methods to supplement your style but often your original methods work best after the underlying market circumstance change. 

Swing trading using strength and weakness

As a swing trader you want to find a stock with strength or momentum. But for entry purpose you want to find a weakness on smaller time frame. In other words you are looking for a trend pause. Think of it like a train that is moving at 100 miles per hour that for a brief period slows down to below 3 miles and hour to allow you to hop on it.
The technical analyst call such trend pause as bull flags. You can scan for them easily in many software. The site www.chartmill.com offers a handy scanner for bull flags. If you run the scan today it gives you  handful of candidates like these :



CATM, EBR.B, CPA, DNKN, ET, ENOC, FRAN, GNW,

HERO, HUN, LVLT, MELI, MOV, NCR, OIS, QIHU, SM,

STEI, TSS, RIG, VRNT

One of the better looking candidates out of this scan is GNW. 

GNW  has been in momentum phase since December and is ranked 71 among Top 100 stocks by momentum. It has been going sideways for last 10 days. That is the trend pause in fast moving trend. A breakout might be a buy for swing trade. Aggressive trader might buy in anticipation. 

Is this the start of correction

In last 4 week we experienced a low breadth rally. The rally started with very low breadth and persisted with very low breadth.

 In last 5 sessions there have been 3 negative breadth days, but none of them above 300.

 As of now the breadth continues to be in good health. If we get follow through selling and breadth deterioration then time to worry at this stage it is still too early to say.

 A 5 to 10% correction would be good and it will help remedy the overheated sentiments.

Top 100 momentum stocks

SNFCA is the top ranked stock by momentum. The stock has been in uptrend since April 2012. It has remain in uptrend since then. Every dip has been bought.

These are Top 100 stocks ranked by 260 day (one year) momentum. In last 260 days they had had some of the biggest moves. Some of them had recent breakdowns but many are still in uptrend. Some of them are setting up for possible breakout in next few weeks.

ACAD ACRX AEGR AHS ALJ ALNY AMCC APOG ARMH BCEI BDBD BIOS BONT BRP CBK CCUR CLSN CLWR CONN CPSS CRAY CSU CVI CYMI DDD DEXO DGI DK DYAX EGHT ENOC EXH EXP FBC FBR GASS GNMK GNRC GTN GV HEES HERO HIMX HOV HW IBCP ICA IN INFI JKS KBH KERX KKD LL LPX LYG MHO MPEL MWA NLS NMR NTE NXST OCN ODP OMX OSTK PCYC PERI PHM PPHM QIHU RDN RJET RNF RPRX RYL S SFUN SGMO SNFCA SNTA SNTS SRPT SSYS STC SYRG TASR TEAR THC TUES TVL TXI UNXL USAT USG WAC WGO YMI ZQK

TVL (Lin TV Corp)  is another top ranked momentum stock. It has been in steady uptrend from August onward. Along the way it has had some consolidations and breakouts. 

Finding momentum stocks at or near the start of their momentum phase is important. That gives you early entry and ability to pyramid. Once the trend becomes extended and apparent chance of failure and shakeout increases. 

For swing traders daily monitoring of Top 100 stocks by momentum can help find good trading candidates along the way. In Telechart it is easy to setup your own momentum lists depending on your trading time frames.

Shorter term traders use short term momentum indicators and scans while people with less time and working people should use longer term momentum scans. 

How is this rally different from other rallies

The rally so far has been a bit of slow going compared to historical tallies. Most of the gains in the market happened in 2 days between year end and New year.

This is also reflected in stocks. As of now we have 1560 stocks meeting our 65 days momentum criteria. At similar stages in other bull moves this number tends to be around 2500. At this stage only 54 stocks  are up 25% in a month, in comparison in other rallies the number approaches 200 by this time. Number of stocks up 50% in month is very low at 5 stocks, in other rallies numbers can be 50 plus or even more at beginning of the rally.

The rally has been characterized by low number of breakouts on daily basis. Our daily tracking of breakouts database shows only one 300 plus breakout day in this entire rally. Compared to that the first 10 to 15 days of rallies have series of 5 to 8 high number of breakout days. Most rallies start with 1000 plus breakout days and in recent years these numbers have been even higher at 1500 plus. That is followed by series of 500 plus days. In short rallies start with a bang.

This lack of aggressive buying is a distinct characteristics of this slow grinding move up. Breakouts have been few and the post breakout follow through has not been of high magnitude. The other characteristics has been the domination of stocks breaking out from 52 week low and making moves as against stocks near 52 week high making big moves. This kind of behavior has been a hallmark of rallies since 2009 bottom. the biggest moves happen on most beaten down stocks.

For momentum players this require adjustments in their momentum indicators and calculation and a bias towards anchored momentum is better approach in this market. Momentum anchored to recent lows used to rank stocks is better approach. Momentum trading requires such nuances in changing market.

In recent years overwhelming theme in the market is about Fed action and economic recovery as against growth. Every time the market has dipped there has been aggressive market intervention by worldwide Feds. This creates this kind of anchored momentum effect. In comparison growth stocks have been few and have not made big moves.

Historically momentum players have relied on growth stocks for explosive moves. The IBD kind of stocks with explosive growth characters and explosive price moves of 1000% plus in a year or two have been rare in this market. Many are giving up on growth approach due to frustration. Everyday I hear about this frustration from many long practicing growth investors. But as is the historical precedent, most of the time when a style of investing goes out of fashion and many people  give up on the approach, it keeps roaring back.

I am extremely confident in few years the growth stocks will again make big moves , the likes of which people have not seen in recent years. That is the nature of markets and trading.

However the first leg of rally has created number of possible breakout setups on stocks. The list below shows stocks that are at various stages of setting up for possible breakout. Some of them had breakouts yesterday.




Stocks with 65 day momentum that are good setups :

CRI
GNRC
CELG
GCO
LAMR
SIMO
RNDY
EMKR
ALR
INFY
CAB
ZOLT
ACAS
TEAR
STON
AWI
BYD
TFSL
COG
CASY
DAKT
HUM
VPHM
AIT
DF
JBT
OCR
VVI
CLDX
VRSN
GEF
MDLZ
WLL
TROX
SPWR
WMB
TDW
CLR
CEB
FF
PKY
BLOX
IM
XPO
ARCO
NUAN
DIS
ACHC
KR
RTEC
B
FORM
PNC
IRDM
FGP
WBS
XIN
OMEX
WIN
ANH
SIRI
MFA
FITB
GPN
BIDU
STE
CCJ
DD
ACHN
CIB
BERY
NUVA
CA
BMS
EGOV
ROST
CHUY
WST
SINA
JAZZ
CMG
FFIV