Monster Stock Lessons
Monster Stock Lessons

Monster Stock Lessons

One way to see if an uptrend fails is to see if the first stocks that come out turn and quickly fail. (Location 199)

2020. On that day, the indexes fell hard again, but some of the stocks showing early promise bucked the selling. Figure 1-4 is an example from that day. (Location 200)

William J. O’Neil and many other legendary traders started with weekly charts to begin their analysis and research. They all mentioned that weekly charts give a better indication of the bigger picture. If they noticed something forming on a weekly chart, they would then check the daily chart. (Location 243)

The year 2020 turned out to be a very strong year for growth stock traders after the carnage from the quick bear market ended after Q1. That’s why it pays to always stay attuned to what is happening in the market. Many times throughout history, the market has changed direction when most people didn’t expect (Location 301)

The first lesson was about being observant to all the negative signals that were becoming prevalent in early spring of 2020. COVID-19 was one of those events that threw nearly everything into uncertainty and panic, to some degree. Stocks started topping, the indexes were experiencing distribution on increasing volume, the H/L/G was going negative, and IBD had downgraded the overall health of the market. (Location 535)

The next lesson learned was about having the ability to wait out a market decline until clear signals show that the decline may be ending. That is a skill of patience learned from experience over time. Being patient adds to capital preservation, which goes a long way in protecting your capital and, more importantly, your mental capital capacity as well. (Location 545)

Stocks that declined the least and held up and showed relative strength (RS) during downtrends are typically the best candidates to become leaders when the market begins a new uptrend. (Location 556)

Many top traders think a cash position in a downtrend is as important as being in leading stocks during an uptrend. And if conditions change, they are ready to pounce and get involved. (Location 559)

Getting engaged and involved when the market turns around, especially after a major correction or bear market period, no matter how long it lasted, is the next lesson. Many times (most people won’t believe it) that is when the best early opportunities will present themselves. Trending lightly at first helps to get a feel for any ensuing uptrend. (Location 562)

No one knows if a new attempted uptrend will last, which is why you make test or pilot buys to check its validity. (Location 566)

beneficial. If the H/L/G starts to rebound and trend positively after a big market decline, that can be the sign of a market turning. But most important is the quantity and quality of strong fundamental stocks that resisted the decline, the best with rising relative strength (RS) lines, and solid bases that were built during a declining market. (Location 568)

If lessons one through four were adhered to in the spring of 2020, and you’re back in the market, the focus then turns to your strategic risk management control and trading strategies in handling any leaders that were purchased along the way. (Location 576)

To adapt to changing uptrends as they age, one could tweak the strategy outlined in Monster Stocks (summarized earlier in this chapter) that has worked for decades and that worked so well in 2020. I would call this Maximum Monster Stock Strategy (MMSS). (Location 688)

runs. Each one then tweaked the system (added to it, adjusted it, etc.) to fit their own personality and style. They all discovered similarities in how great stocks became great percentage return stocks. (Location 693)