Below are some instances I’m sharing with you in how I disregarded and how I listened to the IBD, and how I both made quick money – and how I missed out on making a lot of quick money.
Even though IBD has solid rules in place, there is still wiggle room and situations that are open for interpretation. So as you read columns in the paper, just know the reporter’s or editor’s view is what you are reading, and it isn’t always a crystal ball.
A case in point is the current uptrend. The market had just sold off over 7% and was in the process of rebounding. During the turnaround ascent, which we are still in, stocks quickly began breaking out. TZOO is perhaps the most dramatic example. I didn’t even consider it at the time because we were not in a market uptrend, but were in an IBD designated “market in correction” phase. Therefore, I did not buy the stock.
The date was March 22 when TZOO broke out and the S&P500 was just below its 50 day moving average. The next day, BIDU broke out; the day after, OPEN broke out. These were each high quality stocks I very much wanted to get in if the market resumed an uptrend.
I have found it very profitable to only trade break outs when IBD determines if we are in an uptrend, and unprofitable when IBD determines we are in a market correction. Their methodology is sound and time-tested.
This time, however, with top rated stocks breaking out of sound bases on strong volume all over the place, I had to act, despite the fact that IBD still wasn’t calling the market an uptrend. They were noting the break outs, but without turning that all-clear switch of “market in uptrend” on.
I bought OPEN the day it broke out and also got a position in BIDU. I didn’t want to push my luck and chase TZOO (too bad) because I had been burned in January and February buying stocks3% or more beyond their buy points.
Three days later I decided to take profit in OPEN, and I sold BIDU at no gain/no loss because IBD still hadn’t pulled the trigger and I felt they knew something that I didn’t. I didn’t want to push my luck. I was able to double my option in OPEN on that strong little break out, so I was happy.
However, this same day LULU broke out, but finished just below its buy point. In a normal uptrend, I’d had bought it because LULU is a top notch stock that I’ve been watching a long, long time. But again, IBD scared me out of this one.
It wasn’t until two days later – the night of our stock group meeting – that IBD decided to retroactively put the market in an uptrend based on the prior Thursday’s action on the NASDAQ in particular.
So while I ignored IBD and jumped on one of my favorite stocks, I also dumped it out of fear, and I missed out on TZOO and LULU, just to name a couple of stocks.
Since their breakouts in the rally that IBD didn’t call, here is how much each of these top quality stocks are up:
BIDU: 8.6%
LULU: 6.5%
OPEN: 13.3%
TZOO: 42.9%
The lesson here is to go with what you know, not what someone else knows. If you see it, you like and you have conviction behind your thoughts, act on it.
So while IBD was late to the party and the train had already left the station for some top quality stocks, there are still stocks worth watching for break outs in. I will post those shortly.
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