Palo Alto Networks (PANW); Why price is the true north star

Palo Alto Networks is a super high flying stock. It is a sector leader, it is in IBD 20 big cap growth stock, and in the top 50 growth stocks in the USA.

It jumped on earnings 20 dollars on 2/25/2019. By yesterday by 4 trading days it lost about 20 dollars. Why?

there was no bad news, market was not overly selling away. So we do not know. But price does have all the info that we need to trade!

We do not know why sometimes. But what does that matter!

Cut your looses short and move on. I did that and sold on March 1st and went long on QLD. Why? because the market is in uptrend.

Screen Shot 2019-03-06 at 12.30.59 PM

Past one month Feb 2019

when market is topping and breaks down, then the top sectors and  top stocks begin to breakdown. The small stocks in Russell 2000 breaks down

But as of now this is not the case and it is the 10th week in a row the NASDAQ has gone up.

Russell 2000 just crossed the 200 days SMA. Now all indices are above their 200 days SMA!

Screen Shot 2019-03-02 at 8.48.25 AMScreen Shot 2019-03-02 at 8.45.53 AMScreen Shot 2019-03-02 at 8.40.49 AMScreen Shot 2019-03-02 at 8.18.56 AM

why cutting losses quickly is good

Screen Shot 2019-03-01 at 10.00.16 PM.png

Delta news letter has some comedy with insight i love.

“Investors just experienced what it is like to be down 20% and then right back up 20%.  It equals a 4% loss.

This is explained by how percentages work.  Percentage down is calculated from a large number (SPX 2,940.91).  Percentage up is calculated from a smaller base (SPX 2,346.58) which means a smaller absolute rise in the market still equals 20%.  For investors to recover all of the losses from the high, their portfolio would have to appreciate by 25% from the low.

The percentage math gets worse as the loss grows.  For example, if a portfolio starts with $100 and loses $50, it is down 50%.  For the portfolio to return to its original $100 amount, it would have to appreciate by 100%.

Percentage math helps explain why losses are so painful and why avoiding major loss should be a top priority in an investment portfolio.  Delta specializes in risk mitigation to avoid major loss.”

pause in the market

In the previous post  i had confidently declared that there would be a 100 + points jump in NASDAQ. The market remains irrational as long as i remain solvent. 🙂

NASDAQ fell yesterday ending an eight trading streak.

So, i cut my looses. Closed Options positions on ANET and TWLO. exited from NQH19. I am still long QLD because the market is still in uptrend. But i reduced my exposure to prevent further losses.  The reason i am long ETF QLD is that, instances of extreme professional selling remain sparse. As the Market Pulse shows, the S&P 500 shows just two days of distribution. And neither down day (Feb. 7, down 0.9% and Feb. 14, off 0.3%) was especially strong. (IBD)

IBD says this “The current stock market rally ran into some resistance Thursday, with the Nasdaq composite sinking 0.4%, back below its 200-day line. The S&P 500 index lost 0.35%, staying above its 200-day line. The S&P 500 index, Nasdaq and Dow Jones, which slid 0.4%, are all struggling around their short-term peaks of Dec. 3. High-level China trade talks resumed Thursday, with more reports of progress. But the current stock market rally has run up for nearly two months, in part on China trade deal hopes. The Nasdaq just ended an eight-session win streak.

It wouldn’t be surprising to see the current stock market rally pause or pull back for more than a couple of days. So watch your overall portfolio exposure. Don’t let double-digit winners turn into losses and be ready to cut losses short.”

Happy trading !

I have started posting on seeking alpha also

here is the article

https://seekingalpha.com/instablog/194086-larrry1/5273849-pause-market

The BEAST has acted (and thus speaks)

  • NASDAQ about to breakout.
  • Conservative estimates 100-200 points imminent in the next few days.
  • UBNT Ubiquiti Networks. TWLO Twilio. TTD The Trade Desk. PAYC Paycom Software, Inc.  Leading growth stocks.

When a Godzilla or KingKong is moving and running, it is common sense not to second guess what you see.

There is a trading maxim i learnt a few years ago – trade what you see and not what you think. at present it looks like its going to take off! 2 days the KingKong the beast called NASDAQ closed above its 200 days Simple Moving average

MV5BMjYxYmRlZWYtMzAwNC00MDA1LWJjNTItOTBjMzlhNGMzYzk3XkEyXkFqcGdeQXVyMTQxNzMzNDI@._V1_

you see in the following charts – the first chart is OBV – On balance volume of QLD – DOUBLE NASDAQ 100 ..when on 10/04/2019 it was 53 million shares. Just yesterday we are 12 points below the close on 10/04 and we hit 53 million shares. Accumulation.

Secondly, look at the second chart of NQH19 futures contract. Incredible ascending triangle! Breakout imminent on NASDAQ.

other signs – Both S&P and DOW Jones have easily surpassed the 200 day SMA recently which just acted like token resistances (according to IBD)

Screen Shot 2019-02-20 at 11.54.38 AMScreen Shot 2019-02-20 at 11.37.19 AM

process trumps results all the time

  • NASDAQ Composite’s closing day’s price is the most important price.
  • Market index itself will tell us the conditions of market.
  • Trend reversals or transition points is where maximum ROI is made.

I have heard that from FT 71 

Futures Trader 71 aka Morad Aksar. He is a well established day trader but i am not a day trader but i have learnt some tit bits from him.

Another important truism/maxim i have learnt in theory and practice is this : Preserve your capital at all costs. In theory i have learned it at Options Express 2 day courses with George Fontanills. Practically after losing much of my profits i learnt to add this : Preserve your profits at all costs too!

why? When we transition – right at transition times is when we hit Gold mine.

Let me explain : Now you see the NASDAQ daily chart. On December 24th 2019 we hit 6190 and 50 days Simple Moving average was 7164.  The difference of around 1000 points.

Since we know at this blog that the price is the only true North Star and we would have been in short position for this long. We expect the price to continue trending down till it does not.

Now next day we have December 26th, and we also know that the closing price is very very important and significant. All the billions and billions of dollars and savvy money managers and hedge fund gurus and Mutual funds all fight it out and finally come to the days end and a closing price. The most significant price for the day. December 26th it closed up around 361 points.

Has the trend reversed? We don’t know, but the wonderful big green candle catches our attentions since we are attended the heart beat of the market which is nothing but the index like NASDAQ Composite.

that is the first day of attempted rally. why ? the closing price was higher than the previous days closing price and by a whopper!

we wait and see and by Jan 4th after 7 trading days it is alright up by around 525 points from the low of the first day of attempted rally. It was day 7th follow through day of the attempted rally

System developed by William J. O’Neil to identify an important change in general market direction from a definite downtrend to a new uptrend.

A follow-through day occurs during a market correction when a major index closes significantly higher than the previous day, and in greater volume. It happens Day 4 or later of an attempted rally. Leading up to a follow-through day, an attempted rally takes place during a downtrend when a major index closes with a gain. The rally attempt continues intact as long as the index doesn’t make a new low.

Follow-through day variables include: an index closing sufficiently above 1% on increased volume, positive behavior of leading stocks, and improved market action regarding support vs. resistance levels. The most powerful follow-through days often happen Day 4 through Day 7 of an attempted rally.

In the wake of a follow-through day, the market should continue to add gains in strong volume, with breakouts by top stocks. This is further confirmation a new uptrend is underway.

Now we enter the market always always with a stop and right now the market is up 750 points from the entry.

happy trading!

 

 

 

What to make of the market?

This site’s philosophy is very simple. I feel (I hope I’m humbled by this ..or rather i hope I’m humbly starting this): This site’s philosophy is sublimely simple : Price is the only true north star. I want to simply mimic the price. Price is rising and i am buying. Price is falling and i am selling.

what i mean by that is this ?

Let me put it in a different way. Say you are conservative. Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole.

QQQ or the cubes which track the NASDAQ – 100 has a beta of 1.10 ..roughly it mirror the NASDAQ – 100. AMZN , Amazon has a beta of 1.71.Netflix NFLX 1.53.

there are ETFs dedicated to High Beta or it’s implications – momentum stocks!

Now QLD , which daily doubles the NASDAQ – 100 has a beta of 2.25 !!

Say Jan 4th 2019 when the market started its rally you bought 100 shares of QLD for 68 dollars.  On Feb  6th 2019 it hit a resistance at 200 day SMA and then next day you sell at market open (it confirmed because there was a gap down). You sold at 79.

So you went in with 6800 dollars and now you have 7900 dollars.

Now if you look at market and it is dropping on high volume end of the day prices you know the market is in downswing. Say it drops down to 70 USD, and you get in based on simple end of day price action. Now you have 112.8 shares!!

See you accumulated assets slowly! In QLD or for that matter NFLX or AMZN wealth is accumulated by accumulating shares by being in cash when the market is falling!! and getting in when the simple price volume actions says the trend is reversing from going down to going up.

Buy at the top sell at the bottom.

Profit in assets are only made at the price you buy not at the price you sell. So you go long (buy) at the beginning or there about of an uptrend or go short (sell) at beginning or thereabouts of a downtrend. Since price is the only true North Star. One ‘exits’ at the top or bottom to make true profit and to accumulate assets. In both cases – long or short – you are buying low and selling high. THIS DOES NOT MEAN YOU ARE ACCUMULATING ASSETS AS PRICE IS FALLING. In fact it is exactly opposite to it. Accumulating assets as prices are falling is buying high and selling low ( you sell low because you can’t bear the pain of loss). You always accumulate assets when price is rising.  You exit assets when it’s price is falling.

Happy trading folks!