Study of last 7 bottoms

How do bottom form. What kind of patterns form at bottom . If you study that you can make proper decision near bottom.

If you want to make millions trading be a well informed trader.

Bonus 1987 bottom


Free Money= Earnings surprises

There are always some stocks that have significant earnings surprise either to upside or downside. Such earnings surprises lead to rallies in such stocks.

PEAD (Post Earnings Announcement Drift) is a very well known and extensively studied market anomaly. Ball and Brown first documented the PEAD phenomenon in 1968. Since then hundreds of thousand studies have confirmed their findings across world markets. 

As its name suggests, the PEAD is the tendency of stocks that beat earnings expectations to continue to drift upwards after the announcement, or likewise for stocks that miss earnings to continue to drift downwards. 

Everyday during earnings season number of companies surpass earnings expectations or miss earnings. When earnings is announced it is compared to existing expectations. Iif the earnings is a major surprise to the market then the stocks reacts immediately to that news. Most of the time the stock with significant earnings surprise  will make 40 to 100% move on earnings day itself. Depending on market conditions these stocks can go in to multi week rally. In uncertain market conditions, they tend to pullback and go sideways or form range and then breakout nearer to next earnings.

When looking for PEAD candidates , stocks with first or second significant earnings surprises and significant earnings growth lead to big moves. After a few quarters of earnings acceleration, everyone notices it and the reaction is more muted as the earnings get discounted. Very few stocks can consistently surprise on upside for more than few quarters. 

There is a cockroach effect in earnings trends. One earnings surprise is typically followed by many more earnings surprises. When you focus on first earnings acceleration there is good chance your stock will have more such earnings. So effort spent in researching stocks during earnings season can pay you off for many quarters. The structural factors which contribute to earnings acceleration do not disappear in one quarter. That is why earnings trends persist and price trends persist.


How to improve 401k returns

Easiest way to improve returns in 401k is to select funds based on relative momentum. One easy and free way to do that is using Yahoo Finance site.

As the comparison above shows barring 2 or 3 funds in this 401k choice it is not worth looking at other choices. All other funds are underperforming for many years.
The Stockbee lemonade strategy for 401k use both Market Timing and Fund selection to invest in 401k . Near the bottom selecting a fund or funds with history of long term relative outperformance is good strategy.

After that on ongoing basis ranking fund choices by TI42 will help you outperform the markets. 


All the scans to make money

All the scans I use to make money . If you set up a well thought out trading setups and process , it is very difficult to not make money in this market. Stocks are making big moves. Big volatility = big money.


Extreme breadth day

One of the rare big down days in last few years. Days above 1000 typically happen in corrections. 


How to scan for momentum stocks

Momentum is stocks tendency to move in the direction of prevalent trend. You can use momentum to select stocks to swing trade or position trade.

Momentum can be calculated in many ways and the period and specific method used to calculate momentum depends on your goals and holding periods.

Momentum is often used to rank stocks and then top 25 or top 50 or top 200 stocks are selected for swing or position trades. This kind of momentum is relative momentum or relative strength.

Momentum can also be used to identify when a stock has entered momentum phase and when the momentum has ended. This kind of momentum is called absolute momentum.

Momentum based trading strategies have big advantage as they allow you to put your money to work in fastest moving stocks.

The momentum scans shared here can help you find momentum stocks on your own and profit from them.

In Telechart  you can create a layout with multiple momentum sort criteria. This kind of momentum sort allows you to rank stocks by momentum quickly.

YTD Momentum

This sort criteria comes in pre built in to Telechart. It finds momentum from 1st January to today. The scan parameters are:

100 * (C / C'12/31/2017' - 1)

MDT Momentum 

This is six month momentum ranking sort. It is useful for intermediate term hold and long term hold. 


TI65 Momentum

This is 3 month momentum ranking sort criteria. It is good for finding swing trades opportunities. If you know how to use it profitably you can find thousands of trades in a year.


21 day momentum

 This is one month price percent change ranking. Short term momentum often mean reverts so this can be used to find extreme momentum moves vulnerable to reversal and you can fade them. It can also be used to find consolidations or pullbacks on recent big breakouts.


10 day momentum

This is one 10 day price percent change ranking. Short term momentum often mean reverts so this can be used to find extreme momentum moves vulnerable to reversal and you can fade them. It can also be used to find consolidations or pullbacks on recent big breakouts.


5 day momentum

This is one 5 day price percent change ranking. Short term momentum often mean reverts so this can be used to find extreme momentum moves vulnerable to reversal and you can fade them. It can also be used to find consolidations or pullbacks on recent big breakouts.


One Year Momentum

Longer duration momentum moves can be used to find position trades. A stock with long term momentum can often spend months forming a base near top of its range , such stocks on high volume breakouts can go on to make further big moves.


DT momentum

DT (Double Trouble) momentum sort is anchored momentum sort. It is based on the Darvas and Richard Love books . Itcalculates momentum from 52 week low. This kind of momentum is good for finding longer duration swing trades.


TI 42 Momentum

This is a 42 days momentum sort. It is used for mutual funds in 401k investing. 


All above scans are for ranking stocks. But many of these momentum indicators can also be used as absolute momentum indicator. The advantage of that is , it tells you when a stock has entered momentum phase.

Above chart shows TI65 Momentum used as absolute momentum . The Pink period indicates stock was in downtrend and when the downside momentum started and ended. Green portion tells you when the bullish momentum started. 

Absolute momentum is good for signalling trend transitions . The signal depends on period you use. If you are aggressive trader using faster signal will get you in early. Longer period momentum of 6 month is slower in identifying trend transitions but can help you avoid whipsaws.

Same MNK chart with MDT as absolute momentum indicator will show you that.

TI65 Absolute momentum Bullish


TI65 Absolute Momentum Bearish


MDT Absolute Momentum Bullish

MDT Absolute Momentum Bearish


DT absolute Momentum Bullish


Once you understand momentum and nuances of using momentum you can find many creative uses to momentum. 

If you are serious about making money trading learn about momentum and how to use it to extract money from the market. Once you learn the details of momentum it is life long money extraction tool.

If you want to avoid correction periods proactively study breadth

Breadth based timing models will keep you out of trouble. They will help you protect profits. They will help you proactively identify periods of trouble. They will help you identify low risk opportunities.

Study Market Breadth if you want to make millions in market. 


Two insights from study of 20% moves

Your first priority and only priority is to become profitable

If you are new here or to trading

And struggling or not making enough money , then your first to hundred priority should be to start making money fast.
First step in that is to in the beginning use readymade setup templates and make it work for you.
Get the right software , right broker, right tools.
Setup 4% $ Low Threshold breakouts ., anticipation and Episodic Pivots scans published here and use guidelines I have provided multiple times to select right setup. Everything required to be profitable is in archives on this site posted multiple times. 
Understand NTRT (Night Time is Right Time) and MTRT (morning time is right time) This will help you find the most explosive earnings moves in market. If you are active trader and if you concentrate on NTRT and MTRT , you will feel like having ATM machine to daily withdraw money from the market. 
Setup a daily process. Stick to it . Refine it
Make your first $1000 , $5000, $10000 dollar
Find successful traders and network with them. Most traders who make it build alliances with other traders. 

Do not just seat there and wait for divine intervention
4 to 6 weeks of intense effort will put you on path to profitability.
It will allow you to identify good NTRT or MTRT , it will allow you to understand how to trade momentum moves
It will allow you to come daily with 1 to 3 ideas in your pocket and profit from them.

Your first priority and only priority is to become profitable by following an approach and finding and managing a trade on your own.

That is if you are serious about making lots of money trading and willing to put in effort and not just try it for fun. 


Active Traders and partial profits

The most common advice in trading world is let your profit run and cut your losses short.

Yet most of the active traders who do very well (I am talking of top traders who extract large chunk of money month after month) use partial profit taking as their main strategy.
What is the reason for that ?
Profitable active traders think very differently from the other traders. As a active trader I want to make money every month and not lose money at all or lose as little as possible.
Partial profit taking helps in that. By putting on large position and then booking profit on part of it and letting the other part run reduces risk and smooths the drawdowns.
When I have opened a trade and it is in the positive territory, my objective is to not allow that open profits to vanish. While trailing stops can help they still do not protect you against sudden reversals.
The advantage of partial profit for me is that I have reduced my risk completely. For example in NFLX I have already booked 10k profits so now whatever I get is extra. My risk is zero.
Partial profits also help in turning around the capital frequently. In 200k account I had 373k position open on NFLX by partial profit taking I reduced the position to around 38000. Partial profit taking allows me to aggressively use margin but at same time reduce risk.
Partial profits in swing trading allow you to do more trades. I could have let my capital get blocked in one trade . Instead by taking partial profits I freed up buying power and did other trades during the day to add more profits.
The disadvantage of partial profits is when you find that you would have made more money if you hadn’t closed the trade.
Not a bad decision though. The advantage of letting it run is that there could be more upside to the trade. The disadvantage is that there could be a reversal that will lead to your profits being squeezed. This is the biggest risk in letting your profit run.
That is why those who use let profit run strategy often have big ups and downs in their account.
The advantage of partial profit taking is that it secures your account in such a way that even when there is a downside, you will still have the money you took.
Unless you have selected stock with significant catalyst and have very high conviction and willing to seat through reversals or failure of the trade, letting profit run or just waiting for stocks to hit stop may not be best strategy.
When you are swing trading moves of 3 to 5 days and 8 to 40% magnitude you always want to protect your money from a reversal.
Remember that reversals happen all the time in trading. That is the main reason why no chart is ever a smooth line. There are tops and dips. Therefore taking partial profits will help you limit your losses in case of a reversal.
The second reason why it is important to take partial profits is that it allows you to open other promising trades. This is particularly useful for traders with limited amount of money or buying power.
When you open a trade and while it’s still on, you spot a new opportunity. If you don’t have enough money, chances are that you won’t be able to open a new trade. Therefore, by partial profit taking, you will be at a position to open new trades.
By choice I trade the swing move and by choice I do partial profit taking . By choice I do aggressive trade management. By choice I do very tight stops. Because I want to make money without taking much risk and I want to make money every month , every week and if possible every day.
But you do not have to do the same things.