Takeaways from IBD Webinar – The Stock Market’s Next Move

Just watched a webinar on hosted by IBD Founder and Chairman William O’Neil and Executive Editor Chris Gessel. Chris highlighted that there were 12,000 people listening in, wow. Some interesting points written below (these are not verbatim, but hopefully capture the essence).

Bull Market Expected in the next 6, 12, 18 Months

  • A chart was shown on how the market moves through periods of essentially side-ways ups/downs over ~10 to 20 years, followed by a huge bull market over ~10 to 20 years, rinse and repeat again.
  • We are currently in a 12-year sideways market starting from year 2000.
  • WON expects a new bull market to start in the next 6, 12, 18 months. The catalyst can be a new administration, or a new technology, product, etc.

You Need to Get Ready to Pounce on a FTD

  • Follow-through day (FTD) is where the indices go up 1.4% or more, with heavier volume.
  • The biggest leaders break out within 2 months after a Follow-Through-Day (FTD). Some leaders break out a few days before the market FTD. You need to be there to pounce on the leaders when they break out because they can shoot up very quickly after break out.
  • Most people don’t believe a FTD, they wait, and they miss the opportunity on the leaders.
  • WON always likes to buy something on a FTD. Even if it does not work out, you usually are able to get out with minimal loss in 2-3 weeks. If a day is likely to be a FTD, he is looking for something to buy late in the day.
  • It is a lot worse to miss a FTD than to buy into a failed FTD.

Track Distribution Days over a 5-week Period for Warning Signals

  • Distribution day is a day where market falls more than 0.2%, at a higher volume than the day before.
  • WON tracks distribution day over a rolling 5 week period (25 days). If we have 6 distribution days within a moving 5 week period, the market is going to roll over and go down. Start really paying attention when you get a 4th distribution day. When you have a 4th or 5th day, you better start selling something. By the 6th day, you are too late. The threshold used to be 3 days but as the market gets bigger and bigger the number of days required increased.
  • Pay attention to any distribution days after a FTD. If there are any distribution days within 5 days from a FTD, it does not auger well.

Market Corrections are Opportunities to Get Into Leaders

  • 90% of bases are formed because of a market correction. You don’t want to get discouraged because the leaders will be back up in 3 weeks or a 1 month later.
  • Don’t get upset with the market. There are new ‘Apples’ that come out of each correction.

Analyze Your Mistakes and Make New Rules

  • One of the most crucial mistakes is that you buy into a leader, and you sell out with a small gain, and the leader goes ahead to double, triple, etc.
  • You need to analyze why you made that mistake and write a new rule such that you would have held that stock, and you would not have blown it.
  • That was how WON came up with the rule that if a stock goes up more than 20% within 3 weeks of a proper 1st or 2nd stage base breakout, such a stock has potential to be a big winner, and must be held for at least 8 weeks so as to make sure you hold the stock through a sharp correction (which happens often).
  • If you go by how you feel, you are going to blow it at some point.

You Have to Buy Exactly Right

  • You gotta start right. If you start right, you can take a hit. If you are late, you can’t.
  • You have to buy exactly right if you want to pyramid.

You Have to Cut Losses

  • If you get very experienced, you may cut losses at 3-4%.
  • If you see heavy volume selling, you cannot just sit there and sit and sit. If you were slow in selling, that doesn’t mean you can’t sell now.
  • Some of them do go back up, but that does not mean you were wrong, you were taking insurance policy to protect yourself.
  • WON’s average loss is probably 3-5%.
  • If you pyramid, the 7% sell rule applies separately and individually to each buy.

Market Cup-with-Handle Works

  • Every time a cup-with-handle forms on the market index, the market goes up.

Accumulation/Distribution Rating is More Important than Up/Down Volume

  • Acc/Dist rating is more important than Up/Down volume but we look at both.



2 thoughts on “Takeaways from IBD Webinar – The Stock Market’s Next Move

  1. Well, do you personally believe there would be a bull mkt, soon?

    Posted by KL | July 12, 2012, 3:36 am
  2. My sense based purely on price-volume action is that the market is going down in the short term. A number of growth stocks have seen selling pressure over the last week and this week, some experienced outright dumping. Some of the safer growth stocks (those that goes up on an up day, is resilient on a down day, and overall keeps going up) have started to see selling pressure impact the stock, rather than being shrugged off.

    I don’t have a sense on the longer term though. That would require research and awareness of more macro issues which is an area that I have not put enough time / effort into.

    Posted by whatheheckaboom | July 12, 2012, 5:03 am

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