Mark Minervini: How Discipline And Sacrifice Made Him A U.S. Investing Champion

welcome to investing with ibd podcast sponsored by north coast i'm justin nielsen your host and it's wednesday september 29 2021 and as always i'm joined by arusha paris o'neil global advisors portfolio manager welcome back arusha thanks for being here hey great to be here justin and and we have a really special guest today mark minovini uh talk about someone that just really knows his stuff this is an author of uh books on stock market trading like trade like a stock market wizard and think and trade like a champion he's also the founder of minervini private access he's a us investing champion on his way to maybe getting another championship under his belt and oh i'm checking my notes and it also says he's a generally nice guy that just got added so uh mark minervini welcome back to the show thanks for being here now you got three out of four of those right so that's okay and people can do their own research and figure out which one was the uh one that didn't belong so on today's show we're going to be talking to mark a little bit about the market how he's been handling it and specifically how he's been not only reducing his drawdowns but still making progress in a market that has been very difficult and really what kind of leads to his success and that's really discipline and sacrifice you know two things that are very hard to do easy to talk about but hard to do and of course we'll be talking a lot about stocks um this one's going to be a little bit more chart heavy uh so for those of you that you know are maybe listening to this on your car ride uh maybe you want to check out the show notes afterwards and and see some of the charts that we're talking about uh because mark is going to be uh leading the charge and showing charts to us arusha gets a break from flashing the charts himself so let's get right into it mark where do you want to start you want to start with the market and talk a little bit about uh the the difficulties i guess uh that the indexes have been having lately you know are we in a correction you know the indexes have been going up but it hasn't necessarily translated to a lot of portfolios yeah yeah well i think we're in a correction at least in individual stocks at least in you know some sectors in some areas in the market and depending what you look at first of all you have s p 500 you've got s p stocks more than 80 percent of them have already corrected 10 percent or more and more telling is the percentage of stocks below their 200 day or i should say above their 200-day moving average and the nasdaq which is only at about 36 percent so you're looking at you know two-thirds of the market is already or at least the nasdaq is already below its 200-day long-term moving average so right there that would tell you that you're in somewhat of a correction in nasdaq stocks uh as far as the individual stocks are concerned but you're just so yeah you're not seeing in the indexes yet so yeah go go in a little bit more into that where you have the indexes still kind of slowly trending higher underneath the surface two-thirds or below the 200-day what's so important about that divergence well of course the you know you're looking at an index when you look at the s p 500 there are 500 names they're capitalization weighted so really there's just a handful of names that are affecting that when you look at the dow they're selling 30 stocks and they're price weighted um so you know queues of course are you know all these uh big mega cap companies account for a big portion of these indexes so you're not really getting a really fair representation of the broad market um so when you look at the individual stocks are equally weighted and you look at the percentage of stocks above their 200 and the index is far above the 200 but you've only got 36 percent above the 200 day that tells you that the ice is melting beneath your feet right and that kind of seems like it's a do you feel lucky punk you know i do you think that you're good enough to get the 36 that are still above the 200 or uh are you finding yourself in the other you know the majority at this point um but you know looking at the s p 500 i think one of the things that's again as as we were talking about that's been a little bit deceiving is it seems like there's been this buy on the debt mentality you know the s p 500 keeps on coming back to its 50-day moving average line getting support but after like the eighth or ninth time you gotta wonder how long can that go and it certainly seems like it's for the first time spending some time below that 50-day moving average line now this is a similar situation that happened in 2018 where the market had very little volatility for a long period of time and just kept meeting support on every little pullback i i think you know justin you know the statistic better than me uh just a couple percent right it went along how many days yeah it was like i think 3.4 was the biggest correction for like 400 days or something like that yeah uh it's starting in 2016 and ending uh at the beginning of 2018. yeah yeah and then it rolled over pretty hard you know and that's what usually happens when you get that lack of volatility for extended period of time uh eventually you pay the piper um and and it conditions everybody to you know keep buying those dips and then before you know it you know of course the dip that keeps on dipping comes so so i the question is you know are we there you know have we have we played this out and is this going to be the pullback that pulls back even more uh it start it's looking more and more like that might be the case this time and as you mentioned i mean it's it's also a seasonally weak you know time period we're right in the middle of volatility and very similar to the q4 of 2018 you know fast forward to after that uh low volatility period you know at the end of 2018 we kind of had a a little bit of a uh a fed concern you know what what was going to be going on with the fed and that seems to be rearing its head as the 10-year treasury yield has been you know jumping pretty pretty spectacularly lately um so there's those issues too right yeah well two things one i think it was kept i think it was kevin martin that recently said i'll i'll paraphrase but when you've been doing this for a while you'll learn to respect the september october november period um and and you know this is definitely a period where you have volatility and going into it it's a seasonally weak period um so that's you know seasonality i don't trade on seasonality but i am aware of it um as far as the fed is concerned i'm pretty surprised that and i think maybe the markets maybe the reality is starting to set in here i thought the fed news of talking about tapering you know sooner was not great news so market handling it well was definitely something that i i i want to see but again i'm going to wait to see if we get a hangover from it and now it looks like we are and and the tenure as well is starting to uh to surge a bit so that that could you know be where we uh and then maybe we'll blame you know evergrand or something that'll be the you know that'll be the scapegoat but i think it's more based on interest rates and uh and and the fed well that's a lot to cover uh right now just with the market um we can go ahead and take a quick break and then when we come back we're gonna get a little bit deeper into your discipline your sacrifice and everything that's making you a great trader and u.s investing champion stay tuned we'll be right back to help alleviate some of the pain that comes from bear markets we recommend investing 20 to 25 percent of the equity portion of your portfolio in a tactical strategy if you're especially risk-averse we recommend a higher percentage in 2008 the market declined 37 yet our portfolio was only down 12 why because the conditions for investing were poor so we held a lot of cash visit northcoastam.com tactical all investments involve risk including loss of some or all of an investment may not be suitable for all investors past results do not guarantee future performance okay welcome back to investing with ibd podcast sponsored by north coast we have arusha peeras along with myself justin nielsen as your host and our special guest mark minervini so mark you were talking a little bit about how there really has been a correction kind of in place for a while now and maybe if we start by just pulling up the s p 500 or the nasdaq either one and maybe you can walk us through a little bit about how you've been handling your own portfolio because at least on the us investing championship uh what what you're in the the money manager division uh million plus right right now yes yes yeah so you really haven't been giving up any ground whatsoever even though uh you know the nasdaq was basically you know in a in a little bit of a correction for mid february for months and months um just a correction through time the s p 500 it's been doing its pullbacks getting to new highs but now it's trading below the 50-day moving average line how have you been handling this market yeah so i should just point out i'm in the money manager division the one million dollar plus but i'm not managing other people's money so it's it's my own personal account i put up my own personal money just to make just to make sure to make that clear clarification yeah but but um you know how i've been handling it back going all the way back to january february-ish um i started noticing that we were getting you know one two three days of rally out of these breakouts and then they would fail and they'd come crashing in and either you know they were stopping me out at break even many times or even you know hitting hitting stops and i was losing money on trades so i just i made an adjustment i said you know i'm just going to sell these stocks right into this first rally and it it worked so perfectly that i just i kept doing it and kept doing what's working since i think there's been a real opportunity here and some people um you know have have uh on twitter and and social media have asked me many times if i changed my strategy or um you know what i'm doing uh differently i'm i'm not really doing anything differently except i'm selling sooner and i'm adjusting my stop accordingly uh based on that that risk reward profile but i should point out that i'm not like i'm not like day trading from you know one minute or five minute charts and and changing anything i'm still buying the breakouts from bases that i'd be buying if i was buying for a swing trade or even if i was going to hold it for a year or more um the unique situation that's taken place for the last i'd say you know eight months now has been you just keep getting set up after setup after setup of these fairly good-sized bases and you get these breakouts that you that you would think would be great for a swing trader or or long-term hold but they don't they they come back in very quickly and there's volatility around the pivot point but the opportunity is is that they do rally for a couple days and they're giving you these short-term opportunities over and over and over so i just been capturing them and and compounding the money rolling it over now if there were no setups if there were no setups on the daily charts i'd be flat right now i mean i wouldn't be doing anything so i i don't switch and if you know swing trading is not working and those setups aren't there i don't switch to day trading and start using intraday charts that i'm using the same daily charts mark uh yeah so talk about a period or just uh where you were flat for a while where you just didn't see setups and you had to discipline because most people listening to this they're not going to have the discipline right when you're not doing well your timing's off and it could stay off for a while and or the market might be just entering a correction or it could be a stealth correction like we have now and you're looking at the indexes going wait a minute everything's fine but in fact the market's correcting beneath the surface and the the signs are there so um what what i do you know is if i'm having trouble i i go i come down to very small trading i take my position sizing way down my exposure down and if that's not working i just go to cash and then i and i watch and i wait till things start working so i'm always i'm like a caboose and the market's the engine i'm i'm always following i'm never trying to guess and uh you know when you're doing this for 37 years and you've had a degree of success it's very easy to get cocky so you have to be careful that you don't get arrogant and start thinking that you know something and they start guessing uh and and in front running your research so but you your question you asked was you know period where i stayed out and this is what i call sit out power this is the real actually sit out power is probably takes more discipline than being disciplined to buy and and institute a lot of the rules to trade stocks because most people they're dying the trade you know they want to get in there and get that action but sitting out is really what's most important and we we talked about this before the show that you know o'neill i met bill o'neil uh many many many years ago and and he i'll paraphrase but he convinced me about one thing he said you know when you're doing nothing the undisciplined and the unskilled are laying the groundwork for your success and and that it was a fortune in that statement um and i took that to heart and 1993 mid 93 i didn't make mo but a couple trades all the way until almost nine april of 95. wow i went yeah it was like two years of just doing almost nothing because just nothing was setting up and nothing was working um then when the market rolled over in 2000 and went into 2001 it really start got nasty i i was out pretty much with the uh exception of i was actually short on 911 which uh um um fortunately for me but it was sort of a a a as what was it in wall street uh uh sir larry wildman going off of a cliff in in my new maserati it was sort of you know that because it was such a horrible time and and i had friends that you know perished in the in the world trade uh but um back then the only stocks that were setting up were defense stocks and the market was rolling over and i was short and i was actually thinking about going long defense stocks which again that just tells you about the intelligence in the market the defense stocks were setting up and the market was rolling over just before 9 11. something to think about um i probably if i was i always said if i was short defense stocks and long the fbi would have probably showed up i know something about this um so you know that was a period where i was out for for another you know it was like two year period where i did very little uh some shorting and uh there was just no longs that were setting up um then 0809 you know when we rolled over into 08 going even after we bottomed an 09 it was treacherous i think that's probably the most difficult market that i've ever traded was coming off the 09 bottom it just wasn't like most bear market bottoms where the leader set up and you get it right and you're off to the races that was like wow it was just all over the place volatility and it took a while before you could get your footing well growth growth it seemed like it took months to catch on uh after that bottom it was really the the value plays because i mean remember i mean bank of america and ford and citigroup i mean they were all trading like around a few bucks so it was it was those bounces um from the things that were beaten down so hard that was really driving the indexes for a while and uh yeah i'd absolutely agree with you that was a very different market environment during that period i had to actually make a little bit of an adjustment to my parameters because i don't buy stocks below 12 and at that particular time like it was like everything until they started reverse splitting like some of the biggest most well-respected companies in the world were were trading like you know penny stocks and single-digit numbers uh uh prices so it was yeah it was a very strange environment back then yeah well and really it sounds like what it comes down to just to kind of wrap this up a little bit is you're listening to the market you know you're you're not trying to do those revenge trades when the market tells you something very clearly you don't get that sense of well i know better and or you know i'll show you type thing it's it's really just you know paying attention to the statistics that you have the you know what's happening in your trading what's happening in the market and you know letting the market be your guide there's two words that if you don't come to know and love and live uh you're going to have a tough time in the market and probably not a very good career those two words are respect risk so you have to respect risk at all times and and that and again like i said after a while you know you have success and you start getting sloppy and you think it's easy and that's when things can go really really bad you usually get your your your biggest or your worst beatings come after your biggest successes so you just that's when you really got to get your guard up and in terms of cutting losses you know what what is it that you do to to make sure you're always minimizing your risk um i mean a lot of people look at you know ways in which they reduce risk by oh i'm not going to trade right before earnings or i'm not going to um you know be buying you know breakouts because you know breakouts are failing what what is your best way of reducing risk and i know you've wrote a couple books on this so it's not something you're necessarily going to be able to say in a few words but uh anything that sticks out to you well i mean as far as reducing risk is concerned you know i'm always losses are a function of expected gain so i'm always trying to get a handle on what i can expect on the upside so for instance in this most recent period my upside has been a lot less because stocks are just not giving us that upside so now i've got to make up for that i've got to now truncate or or shorten my my losses to make up for that so i'm always measuring what i'm pulling out of the market on average on on the gain side and then i don't want to risk any more than i i want to have a two to one so i want to be risking 50 cents for a dollar i prefer even i'd like to have a three to one that's what i'm really shooting for but at a bare minimum i want a two to one so if if i'm pulling eight percent out of the market i can't take eight percent losses the eight percent max stop rule is going to be off the table at that time and i'm going to have to average uh less than that if i'm averaging eight percent and even if i'm right you know fifth let's say 50 percent of the time now if i'm right less than 50 of the time you know this is a period where i'll bet most of the viewers here if they went back and they looked at their trading in the last six or eight months their i bet you their batting average is really low even if you're maintaining that uh that ratio and you're cutting your losses in relation to your gains it's probably a period where your batting average is low and probably in the 30s and and and that's because of the whipsaw that's the whipsaw environment which the other thing about managing risk is you have to realize that people think a bear market is is you know it's dangerous to go into a correction actually no the sideways market is the most dangerous market for a breakout trader that uses tight stops because that's where you get whipped in and out in and out and you get death by a thousand cuts when you roll over you go into a bear market everything stops you out nothing sets up and that's it you're in cash uh you know that's you know we'd love to have it where it just the market rolls over knocks you out everything and then has a big correction that would make it real easy but it's these whip saw markets that are really the ones that you have to survive and what i do is if things aren't working in those m and if if my trading's not working and i'm not producing uh profits i sit out and i wait it out um and i'll go in with little pilot buys and just put to keep my finger on the pulse and put my toe in the water until that's working i don't get aggressive i never get aggressive until i'm having those pilot buys and those smaller buys work and then i'll start increasing my exposure so one of the things about managing risk is to work with profits and before you get aggressive if you're not profitable at 25 there's no reason to go to 50 exposure if you're not profitable at 50 exposure there's no reason to go to 75 or 100. there's no intelligent reason whatsoever to be raising your exposure when you're not profitable and one of the ways to to look at that is to just look at your last five trades i've had of your last five trades made money on balance and if not maybe you try another four or five trades have those trades made money on balance if you if their answer is no and you came into the market a couple times and took three four or five trades and you're not making money then right there that gives you all the information you need to know about whether things are working or not and you should be getting aggressive but you know another thing that i think is interesting about uh the the math involved and and there is some math here you know that you you have those ratios of your risk reward setup to such a point where you can be wrong a lot and still make a fortune so how is it that you do that and and you know maybe share some statistics because i think people would be surprised with how many losing trades uh you can have and still come out so far ahead yeah i have lots of losing trades only but my losses are very small in relation to my gains right so as far as the math is concerned you know we talked about this a little bit uh earlier um i what i did back when i first started trading i i i wanted to figure out how all the trading rules and uh and i went to o'neill seminars and and so forth and even david ryan who now you know trains with me at the master trader program i was going to see david ryan 30 years ago and learning um so but once i got that and i started i started understanding how to apply the buy rules and the stop losses i wanted to really dig in and and get behind the actual mathematics of and i started using a lot of techniques or or a a lot of an approach like futures traders did where they really got mathematical about it and i just started getting obsessed with my statistics and measuring everything how many days i hold my winners how many days i hold my losers what's my maximum drawdown what's my you know what's my average drawdown from peak what i'm giving that's my give back uh what my average gain is my average loss you know my ratio adjusted for batting average all the statistics and i just started what happened was is as i started trading i realized that when you do that it makes its way into your trading i'll give you i'll give you an example this is like really key once you start doing your numbers and you're aware so let's just say you've done your average you you know what your average gain is you look at your last 100 trades your average gain is eight point nine percent let's say okay so now you're in there you're making a trade stock starts going against you it's down four percent it's down five percent it's down six percent you know the little bell that goes off in your head you start thinking wow my average gain is 8.9 i can't let this trade go bigger than 8.9 or i'm losing right right and that's if you're right 50 of the time so and if you're having trouble and your batting average is lower than that that number is even lower so now you're thinking you're you're you're trading and you're thinking based on the math you're letting the math come into your trading and you have this awareness and it improves your trading and that's where things really started to change for me where i started making decisions all my decisions became mathematical decisions just like in a poker game you know you you've got fifty dollars into the pot you don't bet five hundred dollars into a fifty dollar pop now you're you're laying ten to 1 odds but if there was a 500 pot and you bet 50 in it now you're getting 10 to 1 odds so you have to always be thinking risk versus reward and the the main rule that i have is always get odds on your money one thing is and you started the the whole episode out with this where early this year you were taking quick profits and you learned okay that's the strategy now there's something about sacrifice right where you're taking those quick profits but you're giving up those big gains talk a little bit more about that because a lot of times people want both things they want both the quick profits but then they want to hold on to the big winners okay so two things one how this actually started was i wasn't taking quick profits and i'm holding them and then i'm giving it all back so that's how it actually started where yeah so now i'm i'm holding the stocks trying to play for a swing move and then i'm realizing whoa i could have captured a nice eight percent 10 12 move in three days and i started noticing that stock after stock up their stock were breaking out but they they the natural reaction that some of you who know me you can read about this in in my in my books then going through that first natural reaction wasn't natural it wasn't the stocks weren't pulling back and then going back into high ground they were pulling back and then pulling back more and then stopping me out so that was the first observation so then i switched over and i started i changed now to your point um there's the word is sacrifice you have to you have to be willing to sacrifice in all things i mean uh uh you know if you were to become a you know a sports player you're going to play baseball you're certainly not going to be a great baseball player and basketball player and hockey player right you're going to put your life into a particular sport and that you love and and or or profession or business and specialists get paid really well if you become really great at something so again you have to sacrifice and it's probably a good time to show maybe some charts of some of the stocks that uh you know i bought and it sounds great that you know okay you bought these stocks and they went up and you made and you capture those quick profits but there's a lot of times where i took that profit in two days and the stock went up and doubled right so i so in order to capture that small profit you've got to give up the big move right um and so and to get the big move you might have to go through pullbacks that give you know you're up you're up eight or ten percent and now you're playing it for a bigger move stocks stock comes all the way back stops you out and now you could have taken the eight or ten percent so this leads into that monday morning quarterbacking right you know regret uh i should have should have could've right you have to go in with a plan execute that plan and then realize that that is at the cost there's always a cost you know every plan is going to have a cost so it can't be everything so make a decision you know i made a decision that i'm going to go with this until the market tells me that there's a better option on the table yeah so a couple of the ones that we were talking about i mean like moderna you yeah you brought that up uh ticker symbol mrna um you know this has been one of the the darlings of the vaccines um yeah so go ahead and walk us through uh how you handled this one so materna i bought right here on the 29th let me just make sure that's right yeah 29th i bought this right here on the 29th i sold it on the 30th the very next day i sold it on the 30th now again for a couple days i i guess i was right but then look at this look what i left on the table then it went up a hundred percent all right so but but i'm up i'm up 200 and whatever it is 63 right now for the year i think it's a little more now 270 for the year so you're doing okay so i'm doing okay but but again so but see i got there with sticking to a plan yes you can get there you know you can get there by having a big mover or you can get there by trading and having a lot of trades that you compound uh but you know my plan was to capture the those this this is an aberration first of all because most of the stocks that i've been trading you know if i didn't sell in two or three days they just come back down and stop me out and and i've been losing money it's just the batting average was just too low on the swing trade side uh to you know again every now and then you're going to get these moves but does the reward pay for the risk that's the key is the reward paying for the risk how much risk are you taking and that's that that's just not with stop losses that's with how many trades are working and there just weren't enough trades working to justify uh trying to get this type of move but this is of course certainly painful to watch after yourself right right well and i think you know you recognized that this was an aberration you looked at all your trades and you're like okay this is what's working for me yes i left you know money on the table in this case but if if you would you know i think what happens with a lot of people is they switch because of the aberration and it ruins their entire trading plan yeah well you're always going to get a reason to switch yeah oh every day the market will justify just about anything i i used to say if you were to watch beetles scurrying around long enough and and you'd probably figure out some pattern that would correspond with the market you could say you know when they do this the market rallies and you know the football indicator and all these oh yeah yeah yeah i think i think chris gessel came up with like a laker indicator uh back in the early 2000's when the lakers were you know hey when they do a three-peat i mean that's that's hilarious you can back into just about any rationalization in the market on any one day that's why discipline is so important i know people have been saying you know they'll say oh if everybody reads your books and i heard them say this to o'neill by the way and i'm sure they said it to jesse livermore too in the 1930s i remember you know people saying to o'neill and this is you know 30 years ago if everybody does this wouldn't it make it not work you know and then of course i made an entire career on those on on those principles going forward for the next 30 years and now they say the same thing to me you know if everybody reads your book and they do it trust me everybody's not going to do it and even if everybody wants to do it very few are going to have the passion to be able to really stick with it and and and even fewer are going to have the discipline to actually do it and do it correctly and to have the discipline so so again you know there's you can rationalize so easily in the market uh but you got you got to have that discipline well when we come back we're going to take a look at some of the charts that have major year or what you've learned from them and what you can share those lessons with our audience so stay tuned we'll be right back to help alleviate some of the pain that comes from bear markets we recommend investing 20 to 25 percent of the equity portion of your portfolio in a tactical strategy if you're especially risk averse we recommend a higher percentage in 2008 the market declined 37 yet our portfolio was only down 12 percent why because the conditions for investing were poor so we held a lot of cash visit north coast am.com tactical all investments involve risk including loss of some or all of an investment may not be suitable for all investors past results do not guarantee future performance welcome back to the investing with ibd podcast sponsored by north coast it's justin nielsen your host along with arusha paris and our special guest mark minervini so mark uh before we get into some charts and you've got a lot of charts to show us um you've got a master trader program that's coming up and arusha i know you've been there so maybe you can start talking a little bit about your experience and we can have mark fill in some details for us yeah no so i was the director of marketsmith for many years and a few years ago we were we were proud to support mark and the master trader program and so i had a chance to go to the live events uh the last two times they did it live and uh it's an amazing amazing program uh it's uh it's mark's life work and i'm taking some of your lines mark here but uh three days we were there and i was just amazed that mark would stand up on stage for 10 to 12 hours and just answer every question walk through every step of his process and go over example or example it was a it's an amazing amazing experience now the cool thing is you know because we would have tons of people coming to myrtle beach now you can just watch it online get immersed online and still get the same experience so mark talk a little bit about it because it really is your life work yeah well it again it was a three-day event live but now it's actually five days there's four days of curriculum there's a day of live trading with myself david ryan mark ritchie you've read in momentum masters a whole bunch of us are there and we're also adding mid-week we're adding in some days for some special guest and a q a session so it's actually going to be seven days um and the really the coolest part of this and i've said this many times but you know working with david ryan has just been amazing he's been with me now for like eight years but you know i went to o'neill seminars and and went and saw david when you know 30 years ago but what's even more just great for me this year is that we've added in uh larry height is going to be speaking he's a special guest and he was in of course the first market wizards and he is really uh was instrumental in being a a a a mentor that he didn't even know but the market wizards books were like my bibles at the time um and then of tom basso who's also he's a guest uh going to be a guest speaker um and uh he's in market wizards too of course stan weinstein who wow yeah and stan i met stan in 1990 and uh met him in new york city and had lunch with him and he explained to me about the four stages and that's how i got into the stage two uptrend and i started adding some you know elements and turned on my computers and studied that and found that he was absolutely correct that the the big moves happened in that in that stage two um so yeah and then of course uh mark ritchie as well who uh is in my opinion a modern day uh market wizard uh he's featured in momentum masters so it's just this is really this is the biggest event that we've ever had so it's uh really going to be special and it's online so anybody in the world can attend so mark when okay so when is it and how do people find more information about it okay i always i always don't know i think it's november 13th it starts in november 13th um it's either 13th or 14th and it goes for two days and then in midweek we have this those guest sessions and then it's the next weekend um which would be two more days of curriculum and then that monday we do a full day of live trading and then of course you're going to be there russia and going over market smith and uh and we what we do with market smith is we actually show how david and myself how we screen uh and using market smith and then uh and arusha always teaches us something new about using market smith every year i learned something more about how to utilize the tool itself so minority.com they can just go to the what that's called information for the workshop it's uh the the letter for stocktraders.com okay yep perfect yeah and that that's just again a lot of people don't realize that hey look this takes work it's take takes educating yourself and uh what makes it easier is when you can learn from people that have been very successful at it and it sounds like you have a whole host of people to kind of offer uh your attendees in addition to yourself and david ryan so let's get into some of the lessons um you know and again it's not going to be seven days we're gonna you know try and pack as much as we can into our remaining segment here um but maybe you could share your screen and talk about some of the stocks that have struck you as you know giving some good lessons about this market and uh maybe what's on your radar right now do you see anything setting up currently well i mean as far as currently not really uh no not not a whole lot there's maybe a few things i mean i'm right now we're long uh tesla um that was just bought just a couple days ago it came this is a pretty large base here uh i don't know this you know stock is starting to look uh late stage here but they seem to you know they keep resetting and and uh and going higher here so i tried to play this coming out right here um but again you know i'm also short the s p uh from uh 9 13 uh september 13th is when i uh put that short on and even with this most recent rally i actually added to it um so i'm short and i'm mostly in cash just long uh just a couple names here um but on the one that we we bought recently um and has really worked quite nicely and if again if we were coming out of a bear market this would be like the absolute quintessential setup it's virtually perfect in all ways so i think this is a really good model even if it failed it would be a good model of something that you know looked perfect and then failed um but again this uh penske automotive uh i actually bought it right here um and you can see that's on nine one so it tightened up quite nicely had my v my my signature vcp characteristics which are just uh uh within a cup with handle um so for people that don't know what does vcp stand for so volatility contraction pattern and this is sort of i pretty much have made my whole career on on this volatility contraction uh approach but again this this just a perfect couple handle um but it actually it came off for a couple days you see here one two three four days down but that wasn't enough to have us hit our stop so so it held in there and then it came back and it actually tightened up and actually improved yeah this is something that you have to realize about a stock it could you know you could have a stock that that's moving sideways and and actually as time goes by it gets even better you know and it morphs from maybe you know a pair of queens using poker analogy to kings or aces and this really started to look like aces right here and and uh i've recently made some comments on this uh stock but it broke out and you can see one two three days up it only came down for one day and then boom right into new high ground and that's a term that i call tennis ball action from a natural reaction and it's just holding up like a champ i had sold this and i the we actually scaled out of it a bit i think the the largest profit that i took was about maybe 17 or 18 on this little move here but still holding up real good this has total cancelling characteristics you can see here earnings are accelerating you've got sales accelerating and you've even got margins here that are improving in the most recent quarter um which is another thing i definitely got to give some market smith some props here because putting this information the earnings the sales and the profit margins where you can compare them like this for four quarters is absolutely key this is really all you need with growth stocks is earning sales and margins and it's all right here um so that that's the benefit of using market smith and i've been using it for 30 years now um so this this looks good you know it's it's definitely extended i would not buy it here uh but this is this is one that has worked and so mark let me stop you there for one second now there are a couple of things here now that where you first purchased it on that day it was down and then you were down three or four percent but you didn't sell out because you had a plan talk a little bit more about that because that is something that a lot of people are going to say you know what i'm out of this and and they they're going to miss it and they're definitely going to miss the next part of it talk about calling an audible and and uh sticking to your plan so i think the audible side is really the the best part of the point you know that you're making here is that okay if you go into it and your plan is to cut your loss at say i don't know the previous day's low or enough two percent okay that's your plan then you've executed your plan but if you go in there and you're you're saying okay this is the technical level that i'm going to set this at in this case it was this 8348 level that's where i i would have deemed that this chart soured if you will um so if that risk is acceptable when you make that decision originally well then you should stick with that plan and carry that out an audible would be to let your emotions come in and all of a sudden you say ah this is going to stop me out i'm going to get out anyway and then look what happens turns around bang takes off uh you know just a quick story i've told this before but uh i had one of my first assistants uh that i had back in the uh the early 90s um we were in striker and i had bought it breaking out and it had pulled back and it was back then we were in eighth so that was the smallest that a stock move we were eighth of a point away from getting stopped out and so he said to me i'm gonna sell i'm gonna sell stryker here it's gonna stop us out i said well it hasn't stopped us out yet he says yeah it's gonna stop us out it's one tick down it's an eighth of a point down i said well i'm gonna wait until it hits that eighth i waited all this time why would i circumvent it now with only an eighth of a point more so he sold the stock the stock never hit that eighth turned around and i i made a double on it yeah we've talked about this for i'm still friends with him to this day 30 years later we still talk about it so so you know again are you going with that plan stick with that plan and then execute it and then reevaluate it later on and see if it was a good plan or not if you have to adjust it do you ever do uh kind of a stop over time like if if it just it it's a number of days that have gone by and you're not making progress so maybe you don't reach that level but it just didn't do what you expected is that another aspect to this uh a stock not doing what i expected is that i do stop out with if it's not doing what i expected but it's gonna the chart usually is gonna have to start looking abnormal so if it doesn't do what i expected but the chart still looks it's still healthy and i'm not seeing what i call violations this is another thing you can read in my second book think and trade like a champion i i show in there the violations and the confirmations once the stock breaks out there's a number of things that i look for that are telling me that this is normal or this is abnormal so as long as it's acting normal and this was acting perfectly fine coming off for a couple days there's nothing wrong with that this is perfectly fine it's still actually tightening if you see it's the the you know pulling back it's of course inside uh this 8348 so you're tightening even more so that's fine as long as it's tightening up on the right side and and you're not breaking down then i would stick with it and what about a tempur-sealy tpx as a symbol you kind of had a similar situation i think with this one if i remember correctly very similar will it where it pulled back so i bought this to make sure i got the date right we bought this one on 8 12 which is right here so that that right there and similar to a pag it pulled back right on the day where it broke out it came in which i call a squat um i i don't usually let that squat uh knock me out unless unless you know their markets something's going on everything's breaking down i'm having a lot of trouble uh but normally i'm even if it squats and comes all the way back down i'm going to give it the full stop so this this pulled back you can see it went inside for a couple days and then one two three comes in for about three days but not enough to trigger my stop and then it actually turned it came back up and then on this day right here which is uh 825 i believe right yeah 825 i actually added to it right there um and then since i sold this stock we actually sold the last piece um uh i believe yesterday and any any stocks that have kind of done that action where it broke out and then it just didn't work and and there's there have been plenty but maybe you could show a few of those yeah what you can kind of learn from them uh and and i guess this is the difference between hey you know the stocks that you just showed didn't break a rule so they didn't get their time out you know and get sold as opposed to these where hey you did you did a violation you know you're you're out yeah well i mean the the of course the first violations if it hits you your your mathematical stop your dollar stop and then you're out that's the ultimate violation all right so my violations i'm looking for to see if maybe there's violations before the stop gets hit and it's showing me it's not acting normal and then i might reduce the position or i might sell it if there's some ominous signs um and and but normally i'm waiting for my stop to get hit unless i'm seeing those ominous signals and in this scenario here of course um you know this broke out right here i i bought it right here this is a pretty obvious one you can see big cup with handle tighten up right here this has really perfect vcp characteristics you had a really nice move right here where it came up that right side and then it quieted down and it was really just looking great the oh i mean it didn't have earnings you know and the mars you see it doesn't have the the uh the fundamentals so that right there you know tells you it's of lesser quality um so so my i'm always on guard but that immediately squatted um and then i see the next day bag comes in comes in and then it just gaps down on earnings and it went right into earnings so you know it got out before even the earnings came out the hope was for this stock to break out some people ask if i hold into earnings uh we've talked about that earlier but i didn't i didn't discuss it as far as risk is concerned if the stock broke out and i had a cushion let's say this stock broke out and now i'm up 10 15 then i'll go into that earnings report and then i have some cushion uh um to to to withstand a you know a decline or a gap on the earnings report um and maybe you could talk a little bit about fedex because this is one where uh you you really kind of shifted uh your thinking on it from you know something that was looking okay to something that needed to be sold to maybe even something that needed to be sold short sometimes we're in a name and we'll be long a name and then not too long later within a matter of you know a couple months or so it'll be on the shortlist and we'll be looking to short the same stock fedex was one of those we're right here uh let's see the date on that that was 527 yep 527 right here i was buying it right here on 527 as it's coming into new high ground uh got this was you know just buying a little pullback this was a little this was a little sketchy to begin with because it wasn't coming out of a big base right here although uh um you did have some some price action to the left here but uh this is a little uncharacteristic for me um and then it within a couple days it came right in and just stopped me right out but then you see it it can't rally and then it breaks right here on pretty good volume and now it's trading below the 200 day and then it can't rally there it just goes straight sideways um and then on uh it was 913 which is right here we put it on a short sale list right here on 9 13 and that's where i actually shorted the s p was on this it was at 9 13 and since then it rolled over and you can see here's the real key the earnings come out now right so you see the stock rolled over and it discounted this earnings report this was smart money getting out of the stock before the earnings came in and now you get the negative you hit the negative quarter so mark on that 913 why at that point did you uh you know start thinking okay maybe now this is not now is the time as far as the market as far as the fda fdx to just short it there yeah well this is i didn't actually short this we put this on our short alert list and just put it as an idea okay i didn't actually short this stock but um i was seeing if it could i was hoping it could actually bounce and it could spend a little bit more time and really start to get top heavy um and it didn't it just kept going down but uh but yeah i mean just the fact that i just saw the continued weakness and yeah and it it broke down the relative strength what i look for on the short side is when you break below the 200 day and you can't rally and then i look for the relative strength line to be hitting a new low and that's where i start getting interested and especially when you get an rs that you know maybe it started off as 85 and now just a couple months later you know the rs is 22. yeah that's something that you should be starting to consider for a short sale well mark i really appreciate it it just seems like there were so many lessons so this might be one of those podcasts that people have to listen to over and over again and if they want more of you of course you are sometimes a guest on ibd live i think your next appearance will be october 27th and then of course there's the master trader program that's coming up in november so they can have seven days of you and a lot of your special guests so mark thanks again for being with us today absolutely it was it was great being here it's always a lot of fun thank you okay okay on next week's show we're going to have nina deca back on the show she's a senior research analyst with robo global and i remember listening to arusha uh interview her last time and i was just absolutely fascinated by a lot of the stuff she was talking about with ai and machine learning and everything so we're really looking forward to having her back on the show we hope you join us for that and thanks a lot for listening we'll see you next time and for this week's notes and charts make sure to go to investors.com podcast where you'll find details for each episode in the podcast episode section and make sure to subscribe rate and review our podcast if you haven't already we'd really appreciate it you can also send us your questions and comments to investingpodcast investors.com we would love to hear from you and may use your comments on an upcoming episode hey everyone thanks so much for watching investors business daily on youtube if you want to watch more videos make sure you hit that subscribe button so you don't miss a thing

Channel: Investor's Business Daily

Views: 27,574

Rating: 4.9444957 out of 5

Keywords: investor's business daily, investing podcast, Investing With IBD, Mark Minervini, FedEx, Penske Automotive, Tesla, Moderna, Tempur Sealy, Sierra Wireless

Id: udPPiLIQJhU

Length: 51min 16sec (3076 seconds)

Published: Thu Sep 30 2021