Stock Guide

[Pages:32]Stock Guide

2019 Q4

Riding Out

Volatility

Having Steady Hands in a

Shaky Market

Interview: David Saito-

Chung

Good Trade/ Bad Trade

Ask a Portfolio Manager

THE NEW WEEKLY PODCAST

Sharpen your trading skills, improve your returns and stay on top of the market action with IBD's new podcast!

LISTEN ON

Google Podcasts Stitcher

For more info, go to:

podcast

Stock Guide // 2019 Q4

There's an old saying around the MarketSmith offices: "The trend is your friend." Trading with the market trend is one of the best ways to improve your investing batting average. But what happens when it feels like the trend changes almost daily? That's right: volatility was back in a big way in Q3. We're dedicating this issue of Stock Guide to breaking down volatility and asking market experts how they deal with whipsaw action and hedge against uncertainty. Check out our feature article for some pointers on how to handle volatile conditions strategically and psychologically.

For this quarter's Q&A, we talked to David Saito-Chung, a senior writer and Deputy Markets Editor for Investor's Business Daily. As a key member of the Markets Team, he's knee-deep in IBD's day-to-day stock coverage. That makes him uniquely qualified to speak on recent market volatility. David shares how daily news can affect the market in the short- and long-term, and gives his take on where we might be heading in Q4.

In Good Trade / Bad Trade, MarketSmith Senior Product Coach Scott St. Clair opens the books on two of his recent trades. His foray into a gold mining stock paid off when he hedged before earnings and sold into strength. However, he got burned by a big e-Commerce stock when he broke his own rules and bought too many shares too quickly. Scott will break down his buy and sell points and what he learned from each trade.

As always, if you have any questions or comments about your investing research or any MarketSmith features, please call one of our product coaches at (800) 831-2525 or email us at reachus@. We're here to help you make more money in the market.

Best Returns, The MarketSmith Team

2019 Q4 Stock Guide 3

Market Chart Nasdaq Composite 4 2019 Q4 Stock Guide

Nasdaq Composite

Table of Contents

Market Chart........................................................................4

Having Steady Hands in A Shaky Market ................ 6

Q&A: David Saito-Chung............................................. 10 Stock Screen: Less Volatility, More Profitability*............................. 14

Kirkland Lake Gold Ltd (KL)........................................15 Topbuild Corp (BLD)....................................................16 Veeva Systems Inc Cl A (VEEV)................................17

Having Steady Hands in a

Shaky Market

page 6

Good Trade/Bad Trade: Scott St. Clair........................18 Stock Screen: Weekend Research Routine*..........................................22

Paylocity Holding Corp (PCTY))................................23 Kinsale Capital Group (KNSL)....................................24 Paycom Software Inc (PAYC)....................................25

Ask a Portfolio Manager: Mike Webster.....................26

Resources............................................................................. 27 Connect With Us.................................................................29

CONNECT WITH US

*All screen results are computer-generated and were run on September 30, 2019 2019 Q4 Stock Guide 5

Feature Article Having Steady Hands in a Shaky Market

Having Steady Hands in a

Shaky Market

USE YOUR RULES AND FORGET YOUR FEELINGS. The recent story of the market has been volatility. Massive price swings in both directions gave investors whiplash. Headline-making news like tariffs, trade wars and interest rates caused whole indexes to rise or fall almost in unison. At times like this, it can be difficult to

make smart decisions when your money is on the line.

6 2019 Q4 Stock Guide

Having Steady Hands in a Shaky Market Feature Article

The number one way to keep your portfolio strong during high volatility is to hold fast to your buy and sell rules. William O'Neil's buy and sell rules are the basis for MarketSmith's buy/profit/loss zones in Pattern Recognition, so we are big believers in taking profits at 20-25% and cutting losses at 7-8%.

Aside from using clear buy/sell rules, here are four more ways to fight back when volatility rears its head.

1. WATCH FOR OUTLOOK CHANGES

Buy and sell rules cover individual stock trades during uptrends, but what about when the market is highly volatile? Remember, three out of every four stocks follow the overall trend of the market. If high volatility drags the market into a correction, all the fundamental strength in the world won't protect your portfolio.

One solution? Check the market outlook in MarketSmith every day and focus your buying during a Confirmed Uptrend. You can find the current market outlook under the "Market Snapshot" box on the main member page. There are three

possible outlooks: Confirmed Uptrend, Uptrend Under Pressure and Market in Correction.

During periods of high volatility like we saw in Q3, a growing number of distribution days in the market will often force the market outlook to Uptrend Under Pressure or Market in Correction. These trend changes are warning signs that you probably want to modify your sell rules and either start taking profits off the board before 20-25% or set your stop-losses tighter (think 3-4% in a correction vs. the standard 7-8%).

What if the market is in an Uptrend Under Pressure with high volatility and you're not sure which way the market is going to trend? First of all, don't force a trade at times like this. You may like a stock, but you can always wait to buy it until the market stabilizes. Remember: cash is a position--and a good one when stocks are getting hit.

2. KEEP YOUR EMOTIONS IN CHECK

What do emotions have to do with investing? The market doesn't have feelings, and neither do the big institutions that drive the market. But retail investors are real people who can feel emotions and act irrationally when their money is on the line.

2019 Q4 Stock Guide 7

Feature Article Having Steady Hands in a Shaky Market

Four big emotions can get in the way of good investing decisions. It's especially crucial to keep these emotions in check when volatility is giving your portfolio sudden gains and losses that feel out of your control. Don't invest with your heart; invest with your head by recognizing and controlling these four emotions.

FEAR and GREED work together to drive bad buy and sell decisions. You're afraid of missing out on a big run, so you buy a stock too early or too late. Or you're feeling greedy and want 100% gains on every trade, only to end up roundtripping a nice 25% gain back to zero.

market conditions. They can give you early insights into when the market is nearing a top or a bottom. With this knowledge, you can tune out some of the day-to-day volatility and keep your focus on long-term trends.

You can find MarketSmith's Psychological Indicators from the chart interface. Just pull up an index like the Nasdaq (0NDQC) or S&P 500 (0S&P5) then open the Related Information panel at the right. Select the "Climate" button to see a partial list of Psychological Indicators underneath a calendar of upcoming events that could affect market volatility.

PRIDE can lead you to rationalize losses on bad trades by telling yourself that you were right, and everyone else was wrong. You'll never learn from mistakes that way.

HOPE can make you hold on to "pet stocks" that you should have sold. You can pull down your entire portfolio by trying to "hope" a stock back up.

Three important indicators to watch are:

? CBOE Market Volatility Index,

commonly called the VIX or "Fear Index." When fear rules Wall Street, volatility surges in the stock market, which is typically the time the major indexes will hit bottom and rally higher.

3. TRACK PSYCHOLOGICAL INDICATORS

Psychological market indicators are

important to watch during high-volatility

? NYSE Short Interest Ratio is

the ratio of all short interest on the NYSE exchange divided by the average daily volume. As it

For more about controlling fear, greed, hope and pride, check out Scott O'Neil's videos on investor psychology at MStutorial.

8 2019 Q4 Stock Guide

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download