Sell Rules Keep it Simple 4/2/2016
Disclaimer I am not an agent, broker, stockbroker, broker dealer or registered financial advisors I am not employed by IBD or any of its affiliates I do not recommend stocks, any stocks I mentioned, they are only for illustrative and educational purpose I do not accept any responsibility for loss occasioned to any person acting or refraining from acting as a result of material contained in the presentations I do not guarantee any results Your success as a trader is dependent upon your experience and ability to conduct due diligence and apply correct strategies
Disclaimer This presentation is for educational purpose only I am not recommending any stocks for buy or sell All investing has substantial risk of losing big money CANSLIM is a registered trademark of Investor s Business Daily
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Ashish Dave Attended Level II (3 times), Chart school (2 times), Masters Program IBD Meetup organizer for Sunnyvale, California for 9 years Work full time as an Electrical Engineer 14 years with CANSLIM I only want best and I am willing to work for it Recently I am enjoying providing one on one mentorship
Assumptions The top quality Liquid Leaders stocks are bought at the proper pivot, once established and the breakout happened in > 100% volume Stock is bought within 1-2% from pivot Account does not use margin
It is OK to chase If stock breaks out with a gap or you missed the breakout It is NOT OK to chase If stock already gave you a chance to be bought within 1-2% of the pivot but you passed and now you think you made a mistake so to compensate the first mistake you are making a second mistake
Do not chase stocks There is always another one Take the pain of missing the stock so that in future you will not make the mistake of not buying when you were supposed to be buying
I missed this one GOOGL Sell Buy 16 months
I made up on this one KORS -> 219% in 18 months Sell Good bye pain Buy Frustration Bored from waiting for the stock to go up About to sell Hope Miserable
How could I hold KORS through all the pain points??? Missing GOOGL was more painful than holding KORS
GOOGL VS KORS Both were IPO breakouts Both formed similar looking patterns though each subsequent bases Both had accelerating earnings and sales growth, high RoE Both gave > 200% returns
Bottom line Don t miss the right stocks Especially when your friends are in that stock
SELL RULES KEEP IT SIMPLE
First Week The first week is the week you bought the stock even if you bought it on Friday that week is your first week
Week 1 Sell Rules Rule 1 (applied on daily basis) Sell the stock if stock is giving > 5.5% loss at the closing of the trading day Rule 2 (applied on Friday) Sell the stock if the stock is closing below the pivot
Week 2- Week 8 Sell Rules Rule 1 (applied on daily basis) Sell the stock if stock is giving > 5.5% loss at the closing of the trading day Rule 2 (applied on Friday) Sell the stock if the stock is closing below the pivot
Week 2- Week 8 Sell Rules Rule 3 (applied a day before earnings) Sell the stock if stock has < 5% of cushion going in to earnings
Week 8 th Sell Rule Rule 4 (applied on Friday before closing of the 8 th week) Sell the stock if stock is < 8% in profit
First 8 weeks Only 3 Sell Rules to follow Rule 2 will almost always never let Rule 1 to trigger after first week Rule 3 does not apply if there are no earnings in first 8 weeks
End of 8th week Only 1 Sell Rule to follow Keep it Simple
Rule 4 should not be applied 1.) stock has accelerating EPS and Sales 2.) stock has 5+ weeks up in a row 3.) stock is up 20% in 3 weeks 4.) stock never closed below 10 week line on Friday 5.) you are in love with this stock
Rule 4 MUST be applied From 9 th week onwards stock must have 8% cushion at least at the close on Friday to continue to hold going forward, every week
Week 9 Week 18 Rule 4 (applied on Friday before closing) Sell the stock if < 8% profit
Week 9 Week 18 Rule 5 (applied on Friday before closing) Sell the stock if stock is closing below 10 week line > above average volume
Week 9 Week 18 Only Two Rules apply Rule 4 and Rule 5 Rule 4 replaces Rules 1-3 Keep it Simple
Week 18 on wards Continue to use Rule 4 and Rule 5
Week 18 on wards Rule 6 (applied on Friday before closing) Sell the stock if stock goes up or down with highest volume in the move including breakout week volume
Week 18 on wards Only 3 Rules Keep it Simple
Rule 5 Exception Buy Back the stock if stock recovers and holds the 10 week line at the closing of the very next week
In Summary: Total Six Rules to remember At a time only 2-3 Rules may apply Tiptop CANSLIM stocks may retest the pivot but it should be supported by Friday Always ride the earnings if you have cushion and no other sell rules have applied
Rule 1 Daily Basis Sell the stock if stock is giving > 5.5% loss at the closing of the trading day
Rule 2 Friday Close Sell the stock if the stock is closing below the pivot
Rule 3 Day before Earnings Sell the stock if stock has < 5% of cushion going in to earnings
Rule 4 9 th week onwards Friday at close Sell the stock if stock is < 8% in profit
Rule 5 9 th week onwards Friday at close Sell the stock if stock is closing below 10 week line > above average volume Buyback Next week Friday if false trigger
Rule 6 9 th week onwards Friday at close Sell the stock if stock goes up or down with highest volume in the move including breakout week volume
Simulation applying Rules 1-6
Nasdaq: 2014 Oct -2015 Oct Shakeout and reversal below 40 week Nasdaq FTD 10/21/2014 Climax Selling is over after flood gates are closed on the index
Nasdaq: 2014-2015 Pink Rally Day FTD on the 5 th day
10/21/2014 (FTD) Watch List from IBD news paper a week before Follow Through Day: CELG ILMN MANH ORLY EA LEG
ILMN: 0.2% profit Buy Rule 2: Fri closing below pivot
MANH: 60% profit Buy Rule 5 Rule 5: Fri closing below 10 week but low volume hold Rule 5 Exception and Buyback
CELG:15.4% profit Buy Rule 5: Fri closing below 10 week Rule 5 Exception and Buyback but since the same day another stock broke out and this one did not show true leadership power, did not buy back
ORLY:26.5% profit 28% profit lost in sell and buyback Buy Rule 5 Rule 5: Fri closing below 10 week Rule 5 Exception and Buyback
EA:53% profit Buy Rule 5 Rule 5: Fri closing below 10 week but low volume so hold Rule 5 Exception and Buyback
LEG:17.6% profit Buy Rule 5
SBUX:19.8% profit Buy Rule 5
SKX:104.6% profit Buy Rule 5
MANH, EA, SBUX SKX ILMN CELG LEG EA SBUX CELG, ORLY, LEG SKX MANH ILMN
Stats 8 total trades Only two sell rules triggered (Rule 2/5) Average loss 0%
Portfolio Performance Stock Buy Date Sell Date Profit Days Held ILMN 10/21/2014 11/14/2014 0.20% 24 MANH 10/22/2014 8/21/2015 60% 303 CELG 10/23/2014 2/13/2015 15.4% 113 ORLY 10/23/2014 10/23/2015 27% 365 LEG 10/23/2014 4/17/2015 17.6% 176 EA 10/29/2014 8/21/2015 68.4% 296 SBUX 1/23/2015 8/21/2015 19.8% 210 SKX 2/13/2015 9/11/2015 104.6% 210 NASDAQ: 16.6% Portfolio Performance: 52.2%
Final Words Rules are set in such a way that minimum trading or in/out is required Rules are set such that there is no judgement/art required to execute them Rules are set such that they will help you hold the right stocks through the move
My Philosophy I always want home runs. I am OK to let go lots of singles because I know I have a good track record to find and hold the right stocks I just do not know which one are these right stocks and therefore I have to hold them all as far as they behave
Thank You
Questions???