AMZN

AMZN is one of the most iconic stocks -- and it must be studied to understand how it ran, where to buy and how to own it.

Infant Stage:




How I would have traded First IPO base



The Breakout of that First IPO base:




Exiting the IPO base breakout buy:

AMZN
Got really extended from the entry and well above the 10ema - That's an exit for me.




Round 2:



Exit:




Next entry and exit:






Next entry:
Slingshot, but likely would be stopped out with small loss.








AMZN Next Breakout




AMZN blow off run:

January Trading review

January:

 Assessment: B+

I did a very good job of managing my downside.  My biggest loss was only about 800 < than 1% equity -- and given I got up to nearly 200% long at times,  so that's saying a lot.  My biggest winner (COUP)  is over 5X my biggest loss (and still riding).

My mistakes were selling too early in some of the earlier trades I took this month.  Indeed one of my early positions was $CGC (Jan. 9) with a $32 entry.   I was out entirely by $37.  I go both ways on that trade, on one had that gave me some gains which provided the foundation to be able to spar with the market as it consolidated and moving averages in my stocks were tested.

I made it it a point to trim positions as I had gains on spikes.  And, I executed that plan-- although it would have been nice to have the types of gains that a full position in COUP would have provided, I have no regrets.

My absolutely worst trade- and biggest mistake was selling covered calls on TWLO.  That stupid decision cost at least $2k.

My Win rate was at 65% which is historically well above average so that's a warning for me, the correction is coming- don't get complacent. 


Feb. GOALS

Manage expectations,  Don't try to do to much,  use opportunities and rips to step off the gas.  Key into AMZN, GOOG, NFLX

Earnings Gapers to watch: XLNX, NOW

How I Trade IPOS -- The Infants

As a follow-up to my review of "The Lifecycle Trader," I thought I would share how I personally trade IPOs.

Track New Ipos

The first, and arguably most important thing, is to actually track IPOs as the come public. I put each one on a watchlist for that particular year because many will run together.

My favorite Site is Ipo Boutique for IPO research.  which lists IPOs month by month and  year-by-year.  It is a great historical resource, which I've used for my studies.

The IPO Infants  1-8 Months from trade date

IPO infants are very temperamental.  They very rarely make for a successful buy and hold. But they can make incredibly powerful moves.  Better yet, on the whole, the majority will make at least a +30% run, so they give great opportunities.   It's important to treat these like swing trades,  Trim on the rips. 

AAOI was a very tradable infant. - Largely ignored by the crowd vol came in, which gave you a 30% move though the IPO day close and then another move from 13 to 16.  

Another common pattern:

An IPO, that holds its IPO price and then has enough vol. come in to hold a gap, is a great sign of strength 

The "Hype" Fade

It's pretty common for IPOs that are hyped products to fade over the next week or so.  Also, a big opening day trading range is a caution.  But that doesn't mean that the stocks don't show them self for profit opportunities. 

SNAP for example was considered a loser IPO by most,  I did well on it, trading it exclusively on the long side.

It faded hard from the opening, but notice the range contraction right at the 13 days in after it hammered the day before -- That should put it on the watch list. I bought the next day as volume came in but perhaps.  It worked ok.   It then gave another opportunity finding support at the previous level.    I didn't have any confidence to take it in to earnings so I sold the day of and missed the carnage. 

PI:

Like AAOI - held the initial range. So basically the buy signal is range expansion + Vol. 

BE:

Buy signals, narrow range follow pull back then expansion. Vol came in above the average days. 

TME:

One I'm holding now,  the initial Dip could have been bought but wasn't crazy about the vol. at that point.  I waited until it moved above IPO close price and took the position. I got lucky on my trim as it turned out because it looked like it was going to go a lot higher.  Sell in to strength in these. 

QTT:

Volume comes in as price picks up through IPO open and day 2 close. 

The Lifecycle Trade -- Book Review

Alright! I got my copy of the "Lifecycle Trade" How to Win At trading IPos and Super Growth Stocks. As many know, IPOs has been a topic that I have extensively researched. So I was excited to see how the book would compare to my own findings.




Overview.

The book is short--its only about 100 pages but it is a good resource.  It went over 1,679 stocks and categorized them into six categories:

1. Late Bloomer
2. Pump and Dump
3. One- Hit Wonder
4. Rocket Ships
5. Stair Stepper 
6. and Disappointments. 

The books then categorizes the different phases:

IPO - Advance Phase

Institutional Due Diligence

Institutional Advance Phase.

I've  personally talked about the phases as "Infant" and "Toddlers."  Infants can make big runs but they are not sustainable: TLRY  ACIA, SHAK, GPRO. Toddlers make the most epic moves. ESPR, AAXN (TASR) and become true market leaders.. 

Praise & Criticisms

One of the stated goals of the authors of the book was to find the "next Amazon."  I think that misses the point of IPO trading.  An Amazon is a 1 in a 5,000 stock and its not necessarily the best buy point to get it right from the IPO breakout move and ride it forever. -- AMZN had a 90% drawdown from 2000 -2001  The buy/sell rules aren't necessarily that effective for the majority of IPO trades and there is a lot of survivorship basis. Can you ride out a 50% drawdown? I'm not interested in trying.  Also, hundreds of IPOs have either gone belly-up or have gotten bought out. 

The book has some very nice chart examples of the different phases and provides nicely written explanations of the different characteristics of IPOs.  Some of the Stats were particularly interesting 20% of IPOs. Within a year 20% of IPOs will make a 100% run.  While a 100% is a great goal, 80% don't get there so are they worth trading?  My research shows that 80% will make at least a 30%+ run which is pretty easy to identify when it its coming and that, in my opinion, is the advantage of IPOs

 I agree with their conclusion that buying on the IPO day is a not a good strategy. 

Point being, I think you need to have different "trigger" rules for different phases. Until an IPO has gone through a basing pattern or wipeout its not a long term hold.   The institutional Mark they talk about is very real, but it generally occurs past the point where I would call a stock an IPO.  -- and the True Market Leaders will tell you who they are by the volume pattern.   There will be many, many other buy points in a TML that aren't necessarily as what I would call an IPO.

The trade examples and Q and A were very good.  The Authors point out trades they mismanaged as well as ones they got right.  

Recommendation

Buy it. -- its a great little resource to provide a framework for the various stages. 

That said, the book is a good resource but no substitute for going through the charts one-by-one and noting buy points. -- that's the only way to really gain conviction. 

New Year

Let's put it out there right away +19% and change.  Sure, I  "beat" the market but that doesn't say much.

Coming in to this past year, my weakness was not being able to hold my winners long enough. So I set a goal for myself to take on the year with a "home run" mindset:

Regardless of the end result, I feel that approach was critical for my development as a speculator and I've said it at various points this year that I feel that I'm still 3 years away from being very good at this game.

I needed to teach myself what it felt like to be in big winners, what it felt like to manage the trade, what emotions I would deal with along the way, and what the ultimate exit signals would look like.  I also needed to teach myself what it felt like to take a big position and to hold that position, and to get out of that position when I was wrong. Obviously, that's a lot to learn and at times, I got it right, and at times I got it very wrong.

So the good:

I hit some big trades:
AAXN:

NFLX: Between my positions made about 70 points

MDB:

The Bad:

My worst stock of the year.  This was a culmination of many attempts to get  pull back entry (with size). The most disgusting part about this stock, was I started off with a huge profit.  Within 3 days, the calls I bought for $2 were trading for $15. 

What I failed to realize was this was the blow off to the upside. Instead I was convinced that it would resume on the uptrend after pulling back to the 10 ema.   So I was adding shares and size.  Ultimately not only did I give back the entirety of my options gains, I through big losses on the 3 or 4 times I tried to enter on common stock.

TWTR:

I was in early, and first entry worked but didn't give the cushion for earnings.  OF course, it gaps and I got fomo and bought with size and got my butt kicked.  

HEAR:
Another one multiple attempts, my time was never good enough:
I knew this would be a big winner, and I constantly stalked it but my timing was off (or at least stops and position size.  Got knocked out with interlay reversals.

The UGLY

The Ugly had to be my equity curve through out the year.

At times I had massive surges in very short periods. But the backside was awful.   The last quarter was ugly for several reasons.

First, I was right on the market, I suspected when we were putting a top in during October and even moved all my stops up into the gap. 

How can I be so right:

I saw the signal, moved my stops up to the gap-- yeah I gave up some profits but that's the cost of doing business. 

I went to cash

Recognized the start of the bear

And still got my butt kicked.

The problem was I didn't realize that the character of the market had changed, and I was trying to trade the way I did at the beginning of the year, where I would get into positions, get big gains, and ride the trend.

The buy signals in Q4 were pretty much the same as the rest of the year and they worked. 

My problem; however, was after a massive rally -- and notice that throughout Q4 I had big spikes in my equity only to give up more over the next sessions.-- was that the character of the market had totally changed and I was still trying to trade the same way as I did in May.

I had several massive up days only to be holding a lot of stock and then have the market turn on me the next giving back all those gains and more. 



Lesson No. 1.
Holdable Trends arise out of low volatility environments.  The buying pressure is heavily in favor of the bulls so volatility dries up.

Lesson No 2
After an extended rally and the market gaps up.  Sell into it or raise stops.  Sell into quick spikes-- they will need a lot of time to re-set-- look at DBX chart


Lesson No. 3 - Recognize character change.  When the market goes from calm and orderly markup to wild distribution don't expect to hold for the big trade.  Recognize the situation,Volatility is character change of the market.  I must shorten my swing and profit goals. 

Lesson No. 4
When market volatility returns.  Sell into spikes hard and  don't rush to get back in.

2019 trade goals:

1.Situational Awareness -- expect chop, rising interest rates will have an effect on corporate earnings, political environment etc...  Don't marry a position, don't marry an opinion.

2. Recognize opportunity - don't fall asleep at the wheel, there will be sectors and stocks that do well -- watch them - but you don't have to be the first in the water.

3. Manage risk,  -- get your position sizes right.

4. Manage emotions: Fomo No mo'

Review of Trade with Mr. X .com

I've been a member of www.tradewithmrx.com for several months now and I was one of his earliest followers on twitter.  I was very impressed by first the quality of his tweets and then his free youtube videos and I encouraged other traders to check them out.

I joined his paid site the second month it came out and I've gotten a ton of emails / twitter messages from traders asking me whether I thought it was worth the $200 a month.  For that reason, I thought it would be helpful to provide a review of the service and my experience with it.

Initial Skepticism  

Experienced traders are naturally suspicious of big claims.  We've all seen so many charlatans pop up at every bull market with bold claims.  Despite the quality of the videos and tweets, by nature, I'm skeptical of big claims and  displays of what I call "trader porn" e.g.  big houses and huge trades--  Tim Sykes, Jason Bond type characters.  That said, the initial videos were excellent and thought provoking so I brought them to the attention of some trader friends in the spring of last year-- you can see I expressed my skepticism in doing so back in April 2017:

"@[] did you watch the Mr. X videos I posted?  https://www.youtube.com/watch?v=D-54yBOmCMw He claims to have made a 100 Mill as a hedge fund manger . Obviously, internet claims are suspect, but it is fun to watch him work, he is in the "right stocks." He's repeatedly been saying he's 200% long right now with 100% in TSLA. He'll only be in 5 to 6 stocks at once."

As another trader recently asked for my opinion put it:

"Now I’ve been around the block for some time(35 years) as a trader and in the markets, so like @[], my radar goes off when I see an anonymous promoter in shades, with a black shirt with one too many buttons unbuttoned, producing YouTube videos from a glitzy Vegas condo and touting that he’s one of the 1% who has figured out the mysteries of the market.  Add to that the fact that he was reportedly a successful hedge fund trader and has a large personal bank roll, but now he is selling retail investment services.

...Having said that, I’ve watched his public You Tube videos and he seems earnest and open. The trading information and market observations described in the public videos seem congruent with my beliefs about and experience with price action and volume. So I have been intrigued to join his site, if just for a month or two, to have access to more of his hopefully in depth videos on supply and demand and institutional sponsorship, but I have been hesitant to do so."

After being a member of his site, I can honestly say that Mr. X. is the real deal. This is some of the best education a trader can get in the market.. and I say that as someone who spent a year at the CBOE and had formal training in trading.

I think a lot of the skepticism of Mr. X's is because some traders have a misimpression about what Mr. X was actually saying and incorrectly interpreting tweets as believing that Mr. X's was suggesting that he always right. Quite the contrary, Mr. X is wrong a lot and he will freely admit that. The best traders in the world are-- they are just better at realizing when they wrong and correct much quicker than the rest of us.  Mr. X cuts his losses  and reverses his mistakes very quickly.

But he Made So Much Sense

Despite my initial skepticism, Mr. X's approach was very logical and made sense to me.  I was probably 65% of the way there in my own thinking and I had developed setups that would put me in the same stocks and even with similar entry points.  However, I didn't really understand the market forces which caused my setups to work sometimes in a big ways and other times not at all.  Mr. X explained it perfectly with the concept of maturity.  You can see how it worked out very well in the trades he shared on his public twitter feed such as AAOI $60s to $100 in just a couple of weeks and why he sold at the highs at that time.

The Tradewith Mr. X Service

At $200 a month the price is higher than most services directed towards retail traders.  Mr. X has stated that the price is a filter to steer away less serious traders so that he would have the ability to give specific and personal feed back to his members.

 My initial thought was that I would join to check it out and figured that $200, at worst, was worth it to watch the 10 + hours of the crash course videos.

I'm pleased to say the service has exceeded my expectations in every way.

What you Get

In addition to the crash course videos there is a library of market cycles and historic winners.

Library:

In these sections, Mr. X explains how the evidence of supply and demand would have allowed us to buy, hold, and sell the stocks.  I personally do a ton of chart research in historical winning stocks and love the library.  X typically covers 1 or 2 stocks a week.

He also has an "Advance" selection where he covers other tactics such as how to identify and trade shakeouts, gaps and other material that is extremely helpful.

Watchlist

Every week Mr. X updates a watch list A and a watch list B.  In all honesty, most experienced growth oriented traders will have the many of the same stocks on their watchlist.  The big difference is how he analyzes the watch list and points out all the fine details of the stock where the danger points are, how to trade it, where it could pull back and still look normal.

Portfolio
Mr. X lists his positions as well as the % of his portfolio each one holds. After reading everything thing there is to read on trading and swing trading, this was a game changer how someone could hold some positions so large with such conviction. ... and then if it didn't act preciselylike it should cut it without a second of hesitation.

Trader Alerts

Mr. X has a private twitter feed which member get alerts when he enters or sells a position.  These alerts are timely as he will often indicate before the market is opening that he plans to buy XYZ stock at the open.  In other words, he is not front running an alert to move a stock like some other services do.  Moreover, the stocks that X is trading are not the type of stocks that our buying will move.  Rather they tend to have large floats with institutional support and not some low float garbage.

After he takes a trade, X will usually put up a video of the reasons why he took the trade and the fine points of the chart that most traders overlook.

Emails

Mr. X invites member questions about stocks and I have pretty regularly taken advantage of that invitation. I have always gotten prompt and detailed responses to my questions.

What it Tradewithmrx.com is and is Not

Trade with Mr. X is not a stock picking service where he runs some scans and calls out xzy stock is breaking out.  There are 100s of such services out there but I doubt any of those traders have much conviction in their trades.  I've seen X go up to 70% of his account in a single stock but explain in excruciating detail how he will manage the risk.  I recognize those types of numbers will cause most retail traders's heads to spin.  This not  a swing trading service.  I've seen him take position and cut it because for 10% gains the next day because of risk management and essentially toss the trade aside when other services are publicly bragging about nailing an 8% gain in the same stock.

Trade with Mr. X is an educational service that is aimed to teach us to be great traders.  The service is directed at getting 100% gains in stocks.  I knew that before I joined, what I did not realize was how much work goes into hitting the right entry.  I've seen Mr. X go after the same stock 5 or 6 times to get an entry right at the boiling point.  He did it with SQ-- which he took down nearly a 100% gain on a large position.One member had over 300% gains last year so its working.  I personally did about 25% in the two months I've been a member despite this being a pretty rocky period in the market.

Conclusion

I highly recommend the service.   Despite the higher than average price tag, it delivers more value than other services.  Tradewith Mr. X has improved my anywise and my eye for charts has gotten much better, I've improved my mental game, and I'm hitting the long ball.

Ode to the Home Run

This year I've made the following trading plan to guide me this year.

2018 resolutions: 
A. Possible outcomes for trades (1) small loss; (2) push; (3) huge winner. 

I can't be a home run hitter If I'm content hitting singles so I've taken the small win off the table I am perfectly willing to take a break even trade after I'm up 10 or even 20% on a stock to get a 50% or bigger gain.
B. No partial sales: If I'm in a huge winner, I'm not going to minimize it because I'm insecure in my trade.

Taking partial profits turns a home run into an average trade. The psychological comfort of "locking in" some profits is too costly. Every year only a few trades will account for the vast majority of the return. The other small wins and small losses cancel themselves out or are insignificant so I need to make sure that my big wins make as much money as possible.  
C. Build positions at pullbacks to moving averages.

I need to think differently than everyone else and not be positioned with the crowd. The crowd buys obvious breakouts.
D. Target 100% + moves.

A truly leading stock should be able to at least be able double from its base. If it can't do that, it is an also ran. I will be in leading stocks based on price and volume and I must give them a chance to work.

I recognize that there will be times when I may need to step aside in a stock to manage risk, I will view a re-entry as a continuation of the original position.

E. Aggressively Manage Risk.

There's no point to hit home runs if I give up runs on defense. A break even trade after being up 20% is acceptable. A .01 loss after being up 20% is not. I've had "wins" this year already that other traders would brag about, but I've taken the position off not to lock profit, but to manage risk. For example, not enough cushion for upcoming earnings.

Why I shifted my philosphy and trading plan

2017 was a successful year for me as I posted decent profits mostly from swing trading. I also realized that there were limitations to my approach that would keep me from being a great trader.

The approach I had used in 2017 was to identify strong stocks buy the breakouts using a fishhook setup or a slingshot (on the pullback and then swing those for gains on) Take profits on the way up.

For example, my most profitable trade (or series of trades, which combined according to my brokerage statements was a 108% return) was in AAOI:

I hit the entry perfectly (Fishhook entry) , added size and phased out. I got tons of "atta boys" from my trading friends which include some of the very best swing traders (guys that are asked to speak at national seminars).  Yes, I made quite a bit of money on this trade, and on the original  position I took at 63 as well that I took another $9 out of but I realized that in some ways this was a terrible approach  for several reasons.

The biggest mistake was I treated this as just another trade.  An AAOI type stock will come around only 4-5 times a year,  had I traded it better, this stock alone should have given me triple digits on the year $30 to 100 in a liquid and holdable stock. But I only had a normal position, which I minimized by selling on the way up with partial sales.

The second problem was I fell victim to my own psychological needs. At the time the position started running, I remember thinking that I was doing a great job because I was up over 10 points and I would usually start selling with a 10% gain and now I'm up 30%+.   This type of thinking is flawed. It was the fear of losing my paper gains that caused me to sell when there was no reason to.

I, like many traders, had (yes I'm using past tense) a problem holding our winners.  For me, it was this need to constantly hit winning trades.  We talk about our win rate, average win, average loss, % of R.  I used to track that shit religiously.  I would sell a stock (like AAOI and some others) simply because the numbers would look really good on my spreadsheet.

You know what looked good on my spreadsheet? A $7 point gain like this:

But the spreadsheet would not reflect how terrible of a trade my $7 point win in TREE was:

Nonetheless, many traders talk about how important it is to hit singles.  Bullshit!

Every baseball fan know that Giancarlo Stanton was the home run champ with 59 homers but who hit the most singles? --  Crickets.  That's because no one gives a shit.  It's the long ball that makes legends. 

So while the singles hitters are going keep celebrating their "wins",  I'm swinging for the fences this year. I'll foul off dozens of pitches in the process, and I won't care.  My defense will be excellent and I'm going to continue crush the damn ball when I get my pitch.. 

I'll let the other guys count their singles, this year I'm tracking only my home runs. 

Here's number 1:
I recognize this is a gambling type stock but wow did I like that chart. I sold through the $30 break for a big gain.

Good speculation,

Scot1and