Ep. 320 How To Find Winners Without Risking Too Much
55:25 Share

Unlock tomorrow's potential with PGM Active ETFs today. Our ETF solutions meet investors' evolving needs, leveraging 150 years of active investment experience and deep institutional knowledge across asset classes. With a diverse range of over 50 low-cost ETFs, we help investors navigate today's changing market and position for the future.

PGM. Our investments shape tomorrow today. Visit us at pgm.com forward slash ETFs. Hello and welcome to another episode of the Investing with IBD show. This is where we talk about stocks, markets, and everything in between. It is May 14th, 2025, and we've got a show for you today because we've got Arne Gutierrez coming back to the show. He, of course, is one of the premium product coaches over at Investors Business Daily. Uh,

been there for 20 years. You've seen, you've seen some stuff. Uh, so I grew up here, Justin. Yeah, I'm, I'm with you. So we were just kind of talking about it. I mean, I can't believe that I've known you for 20 years at this point. It's, uh, you know, um, but it's,

it's been a good 20. So what we're going to get into a little bit today is, look, this has been such an interesting market, but I feel like we have to go kind of back to some basic principles because we had such a violent move down and almost

almost as violent to move back up in some ways. And I think, you know, when you're, when you're doing market timing, um, the, the big thing that people say is, well, you can't time the market because if you aren't in for the biggest 10 days, then, you know, you're, you're, you're not going to outperform buy and hold, but,

We kind of take a different tack, right? We're like, oh, hey, if you can chop off some of that volatility, get out when there's a correction and get back in, not at the bottom, but close enough, you can really give yourself some outperformance and protect not only your physical capital, your cash, but also your mental capital. So with that kind of introduction, Arnie...

Can you talk a little bit about, you know, since you've been doing this for a couple decades now, how you do that and why you do it, why you think it's worth it? You know, it comes down to two things when it comes to this type of market or any type of market. You've got to exercise discipline and patience. With the volatility that we've been experiencing the last couple of months,

You know, you definitely have to have some type of rules. We are rules based as well as you just mentioned. You have to protect that mental capital. The psychology of everything can have an effect both on the upside and the downside.

Uh, so take the big picture, uh, and then always know that you can, you can always buy back as a retail investor. Um, you want the market to prove itself to you and you really don't have to capture all of the move, right? Everyone's like, can I buy the perfectly on the very bottom? That is very difficult to do a nearly impossible. We don't know where the bottom is going to be at, right? We do have rules that give us some,

idea of where the bottom is right as long as we get that follow-through day but to pinpoint exactly that's going to be that one bar that's going to be the low only you can see hindsight right so we start mixing in price action and volume action uh to really incrementally jump into a market as it starts proving itself to you uh and you're also looking at your portfolio looking at the leaders list you're looking at a lot of different factors here but this like you think

Thank you for making me feel a little older. I'm 20 years. And it's, you know, one thing I've learned is exercising patience, being very disciplined and looking at the big picture, right? Capturing. I tell myself all the time, you know, because when everything starts moving and quickly the bottom starts coming, you know, you start getting that lift off. We've been seeing that last couple of days in the market. A lot of these stocks are acting right. A lot of these leading stocks are acting right. And you want to get in. But again,

Stay in control. You know, one of the things that probably not a lot of people know about you is that you spent a lot of time with Scott O'Neill. Of course, the son of the founder of Nestor Business Daily, William O'Neill. I mean, I got to spend quite a bit of time with him. I was his assistant for a little while after I was Bill's assistant. And we would be on the road together a lot. And you were right there with me at Smokey Bones a lot of times.

You know, one of the restaurants that Scott really enjoyed going to multiple times sometimes. But can you kind of share some of the things that you learned with, again, you know, kind of

hanging out with Scott for a long time. And of course, you got to hear secondhand a lot of stories from his father and what he saw growing up with Bill. Can you share some of those? Yeah, absolutely. So, you know, I was fortunate enough at a very young age to travel the country with Scott. We'd go around doing the level two seminars, get on stage with him, talk about the market. I'd get on stage and start talking about MarketSmith, which

is now market surge. But one of the things I really captured, I was able to really digest and learn from Scott was the psychology part of investing, right? Because this whole thing is like, well, you know, market surge is going to do the work for you, right? Market surge is going to bring up the best stocks for you. I can tell you the 10 best stocks right now, but can you manage it correctly? Can you control your emotions, hope, fear, greed, right? And one of the things he said is there was a

a method to this, right? Where I would just want to plunge in, you know, being young and aggressive and, you know, you get a little greedy kind of thing. Let me just go in there, put a hundred...

rather than incrementally going in, you know, making it prove itself, testing the market out, because the market is not always going to be on your side. It's going to humble you very quickly. And one of the things I realized that he really drove it is my opinion does not matter, right? You want to go in, clean slate, every market is different, but the rules stay the same, right? And incrementally he would go in and show over and over again how...

Bill's system, his father's system was rules based, right? So we would cut our losses at 5% to 8%, take profits at 20% to 25%. If you have a big winner, we call it a 10-bagger, one of those model book stocks, give it a little bit room. You've earned the right to have that room. But know that you have to take some profits eventually because you can never go broke taking profits.

But big picture, as we traveled around the country, Justin, with yourself as well, one of the things was the psychology was everything. Controlling your emotions was huge.

Yeah, absolutely. And, you know, in that vein, so I got two parts here. The first part, because I just have to acknowledge the folks that are watching live on YouTube, and one of them was specifically asking about your Giddy meter. So we'll go into that. You know, it's already coming out. Oh, yeah, it's coming. Hopefully.

We'll get into that. But also, I wanted to just kind of circle back to one of the things you said that, interestingly, a lot of times when you are taking those profits into strength, you know, you mentioned the 20 to 25% rule. And again, you have your ones that you're holding for the bigger gain, hopefully. But there's a lot of these that you're taking at 20 to 25%. Sometimes that's a great way to signal that you're going to be getting out of the market because as you're kind of reducing your exposure by taking those profits, you're

Sometimes you can't find anything to replace it with and you naturally get, you know, a reduced exposure. You start reducing early sometimes because you just can't find anything to replace it with. Has that been your experience as well? Yeah. You know, what's funny is as you start doing this and you start experiencing different markets, you're going to be very picky with the stocks that you have, right? You're going to want these game changing stocks, these stocks that are changing the way we do things, changing the way we live. And,

Yeah, you take 20 to 25 percent. I take 20 to 25 percent. But then I reevaluate my position where it's at and I start using moving averages as a way of maybe maybe getting at a lower cost. Right. But another thing is, is risk management. That is huge. Right. That's one of the things I've learned over the years.

is taking that profit, understanding if I can, if we do get that weakness and it's still holding up nicely, I may want to add it at the 21-day moving average, the 20% to 25% that I purchase. If I have conviction in the stock, if I like the way the market's looking, if the companies are holding up, there's a lot of different ifs kind of thing. If A hits, I'm going to follow B, C, and D. Everything's in step-by-step correlation. But again,

One of the other things that it does for me, me psychologically, and I learned how to take profits, because it's always hard to sell, Justin. We all know that. You can be up 100% on a stock. Try selling. It's going to be difficult. It's one of the things I had to learn how to do. And then cutting your losses. It's an absolute rule, 5% to 8%, however you want to look at it. And I'll repeat that every day as the coaching goes on and so forth.

And just to make sure people know, that 5% to 8% is from your purchase price, not off your high. A lot of people get that confused. They think, oh, stocks are going down 5% to 8% off their high all the time. That's not what we're talking about. We're talking about when you first get in, 5% to 8%, that's your capital. You don't want to lose money on your trade more than 5% to 8% because you don't want to dig yourself out of that hole. Absolutely. The odds are against you. If it goes down 10%, 12%, 15%, you're in trouble.

you've got to make it up statistically. You've got to go up 25%, 30%, 35% just to break even after that. But just looking at it from a 5% to 8% standpoint and then taking the

You cut your losses. But here's the thing. We are retail investors. We are everyday investors, right? And this is one of the things we can do. We can always buy a stock back if we're wrong, but we always cut our losses, right? But getting back to the profit-taking, 20% to 25%, it does something for you psychologically. It feels like you're winning, right? It keeps that momentum, that mental capital. You have to protect that mental capital.

Because there's been some markets that I myself am very guilty of learning the system and coming up and, you know, you got to test things out and you got to experience a lot of this. There's some PTSD happening, like during the Great Recession. You think you're better than the market. Oh, we're getting that route. The market's going to want to draw you back in and, you know, and then, you know, pull the rug off.

pull the rug out, but you got to be making sure that the market is always proving itself to you. Prove to me that you want more of my money. Prove to me that you want to go up. Prove to me that this trend is for real.

Yeah, absolutely. Now, since we're talking about psychology, again, it got brought up, so we've got to address it. The Giddy Meter, you know, so this is something I should have mentioned at the outset that you are a frequent panelist on IBD Live every Thursday. Usually people can see you on IBD Live. You know, they know your mantra, weeklies first, but they also know about the Arnie Giddy Meter. I think the last one you did was the Giddy Goody. The Giddy Goody, right, yeah, or the Goody Giddy. Yeah.

So maybe you can describe that for folks that aren't on IBD Live and maybe not familiar with that. Yeah. I know my wife's going to watch this, but she probably recorded it. And you know you can use this to keep my kids get older. But basically when you start getting giddy, there's something wrong. Meaning that when I start getting giddy, I'm at home and my kids are making a mess. I'm being loud, obnoxious. Usually I'd be like, what's going on kind of thing. And when I start ignoring little details like that at home –

something is wrong. Because you're just focused on how much money you're making? I'm looking at the P&L. I'm looking at the P&L and just kind of like, okay, no one can do anything wrong. You're walking around. And when I start feeling like that, time out, time out. Wait, wait, wait, wait. Let's slow it down a little bit. Go back, start looking at my portfolio and seeing where I can start taking some profit. And that's one of the things I look for when I start feeling a little too...

I don't want to use the word just, you know, you know, it's just things are not everything just sliding off things that you would really kind of look at and pay attention to. It's just no longer an issue right now because you're in a zone. You're making money. You're PNL. You're already thinking about your summer vacation. You're already thinking about you're going to do with this kind of that kind of thing. So you're preoccupied thinking about a lot of other things. But that giddiness, you got to be careful with. Right. And it's that emotional side, that psychology side, because.

When you start getting goody, it's kind of like, okay, we've all been there. There's a different way of describing it. Everyone feels it because unless you're a machine, you're going to have to be disciplined with managing that emotion. Right. No, absolutely. And again, it's hard, right? This is one of those things that comes from experience. It's a little bit harder to...

quantify that giddy meter. You know, you just kind of know it when you feel a type thing. So it's hard because we talk so much about a rules-based system. And I guess for me, when I start feeling that level of excitement and, you know, maybe a little bit too much, what it does is it makes me focus on my rules a little bit more. You know, hey, are there things that

maybe I'm ignoring these things that are triggering cell rules because I'm just thinking I'm too hot and everything I touch is gold. So yeah, there, there, it doesn't mean that we're going away from rules. It just means, Hey, at least for me, sometimes it tells me focus on your rules a little bit more, especially those cell rules. Absolutely. Yeah. You know, you definitely have to go back and always challenge yourself and do a post analysis, right? Yeah. That's one of the things I really believe in. It's like in any,

It's like when a major league baseball player goes back and starts focusing on the basics again, but they go back and start instead of hitting off the tee, right? This is a person that's been doing it for the last 25, 30 years, just really taking, working on his swing again, doing an analysis. Maybe he's going through a slump or maybe he's doing a great job, just wants to make sure he doesn't get carried away, right? The psychology part of it. But again, the analysis part will help you still establish those rules and

But no, there's a specific rule that fits my personality. This is what works for me. You have to know yourself when you start getting into a certain range, whether it's you're up a certain amount in your position, you're down a certain amount because you know thyself kind of thing. And it makes things a lot easier when you have rules based like we do. But at the same time, I have specific rules for myself, kind of like, okay,

When you start getting like this, you start smiling, you start like picking up the phone or you start talking to people. You're like excited kind of thing. The last couple of days has been a lot of excitement, right? Yeah. You know, that Giddy Mirror has been going, you know, it's been taking off. And, you know, you just got to stop, pull back a little bit.

Re-evaluate what's the situation. What could possibly go wrong? Defense first. What are the possibilities that we can get a pullback? What are the probabilities that the market can sell off? You just never know, right? So you always want to be prepared. Right. But the rule, the giddy rule for me specifically is when I start feeling that way, I'm just like, wait a minute. And it's funny, Justin. I go back and...

I go back and mark it up on the chart, and I put a little G next to where I kind of started feeling this way. I went back and did analysis, and it's been pretty good. I'm not going to say it's like a secondary indicator, but it's pretty good. Yeah, maybe it's something we can put in the market search charts going forward. A little G that shows up like the ants indicator. Let's shift gears a little bit because I want to talk about

Want to quickly create and execute trading strategies to help keep up with the markets? With Fidelity Trading Dashboard, you can access live data, advanced charting, portfolio insights, and automated alerts, all on one screen. We streamlined the trading experience so you can build and place trades better. Your Fidelity Trading Dashboard is ready now for free. Visit fidelity.com slash trading dashboard.

Investing involves risk, including risk of loss. Fidelity Brokerage Services, LLC. Member NYSE SIPC. I want to also talk about the other side. When you get to a point of almost despair, like this market will never turn around or the volatility is so high, it's just like...

maybe I need to find a different job or maybe I just need to give my money to someone else type thing. So there is kind of that psychological element too when things get so bad and that often is near a bottom but

There again, you kind of go back to your rules, right? You don't just say, oh, well, you know, things are so bad. It's got to bounce from here. It can't go any lower because we've all seen that it can go lower. So what what kind of helps things turn for you say, OK, this is it's now worth me giving it a shot. And again, you already explained that.

how you learned not to go all in, you know, at one time. So how do you do that? What signals do you look for and how do you increase that exposure? Okay, so with the system that we follow, increasing the exposure after we've had a correction, correct? Yeah. Okay, so I'm looking, we're all looking for a follow-through day. I'm looking for buyers to start coming in.

Okay. And the only way we can gauge that in real time is through volume, right? The NASDAQ or the S and P 500. We're looking for that volume. So that power to come in. Uh, and that's what I'm looking for. Uh, I was fortunate enough to be in cash as we started getting the distribution of the clustering distribution days. And we had that once the S and P and the NASDAQ broke through that 50 day on huge volume, uh,

It allowed me to get on the sidelines. So I started closing out a lot of my position, limiting my exposure. You can see that there. That's a rule of ours right there. You can see that it had problems making new highs. One.

two or three around 20 the third time and then finally it broke off right you get that type of action you know it's it's something's wrong all right it had three tests there was some resistance there and then it broke through the 50-day a rule of mine for those of you you know look at look at the time of whether it's an index or a stock is when you have a stock that breaks through that 50-day moving average on above average volume

Be very careful. And we're using the 50-day average volume. And Justin right there just highlighted that little skyscraper, that pink skyscraper, which we like to call. That's above average volume. There's a lot of selling pressure taking place. Okay? Now, am I going to automatically dump all the stocks? No. I'm going to incrementally get out. Right? Right.

Slowly but surely. So we had that break, and now we're at the bottom here, okay? Justin mentioned something that I've learned throughout the years with all the corrections, whether it be a small correction, medium correction, or a pretty big correction, right? It's the volatility. When I started seeing the volatility, the swings that we're having, that gap down, gap up, big swings. You can see these price bars here kind of thing on the very bottom of the follow-through day that we just had on April 22nd.

you have this here, that huge volatility, I knew possibly, possibly there was a high correlation that we were close to a bump. That whole situation there, it was getting, you know, we had buyers coming in, buyers coming out. So I was really trying to gauge are the institutions coming in? What I mean by institutions, are the mutual funds coming in, buying the stock, looking to support a lot of these stocks. Now,

It happened. We're seeing that now. This is a lot of buying taking place. Okay. So once we had that follow through day on April 22nd, I had my watch list ready to go. Okay. I had my watch list ready to go. We had that volume because we had, it was on the fourth day. We never undercut it. The, the, the bottom there on the very first day there on the 22nd. So I'm sorry, not on the 22nd. Uh, what's this day here? 21st. Yeah. Yeah. Okay. No, the, the,

The one to the left with the huge 14. Oh, that big, yeah, April 9th, right. Okay, you had that huge day. That's the low, and you can see there's power coming in. That's the type of action. Huge volume coming in, right? But we need to have four days of consistency, right? Four days of it holding up and wanting to go up, right? So you had the shares were being bought.

Right. And as you're looking at this here, I had an idea. Okay. Volatility is there. We're having a follow through day. You want to buy something when you have a follow through day. Okay. It's small position. Uh, you should already have your watch list ready to go, which I already had my watch list ready to go because I kept running different screens, seeing what was holding up, what was not holding up. Uh,

But the problem is there wasn't a lot of setups, right, Justin? There wasn't a lot of patterns out there. There was four bases forming, but it wasn't convincing. So I started buying the Qs, right, the QQQ. And I was buying the Qs just to get a feel for it. I call it a pilot position there. And I kind of wanted to have a feel. I wanted to be exposed to this market because I just didn't know how it was going to react. And a lot of it was...

The volatility in this market, and we were talking about this just every Sunday. We would hear news with President Trump talking about tariffs, this, tariffs, that, for a couple Sundays after that. I'm just like, wait a minute. There's a lot of stuff going on here. And we were doing a lot of swings on Sundays. So that was throwing me off a little bit as well. This was going to be a new type of market, and it was very news sensitive, which sometimes –

when it was negative news for the economy, it was really negative for the market. But sometimes you get negative news in the market, you get a reversal, but you just weren't getting that. So you just were trying to figure out maneuver where we get, like what type of stock, what type of industry groups are going to take place.

I didn't know. You know, I didn't want to predict, right? I wanted to keep interpreting what are the leaders doing? What are the strong industry groups? Is there a rotation taking place? But I just didn't have a feel for it yet because I'm looking at the growth to 50 near pivot report and I'm still seeing 2015 stocks, but I like seeing a lot more bases being formed telling me that there's a really strong market. Now, if you open up that open stock ideas button there, Justin, and we dive in, the near pivot's at 32, right? There's 32 stocks within 0% to 5% of breaking out.

But if you go back into that open stock ideas button, again, you're going to see in the last 15 trading days, we've had 78 stocks break out of a list of 300 names.

That is not my opinion. That is the market giving me feedback. My opinion doesn't matter. Stocks are breaking out, right? And a lot of these breakouts started happening, right? So as we started going from April 26th, I started looking at it. Okay, I'm in the queues. Then I started looking for stocks that are breaking out of bases. And I started exposing myself to some of these stocks as well. One of the stocks I was holding up really nicely until you heard the keyword tariff again was Netflix, right? We were looking at Netflix and it came back.

and it looks nice. It's nice consolidation, but it had a nice breakout. You can see that there. And I do have a position in this myself, so we always have to disclose when we have positions and stuff. So, yeah, go ahead. I don't have a position on Netflix. Yeah, so you're looking at this here, and it held up. It's a leader. It's

Very nice. Nice consolidation. Broke out of the pivot price. There's a redirection right there. Price trend. And that's why we like buying the way we buy. But look at the volume, you guys, as you have stock like this. Look at the volume coming in. When you see that type of volume, above average volume, as it's breaking out, that's real-time telling me that there are some big buyers here.

buying this stock. This is almost $1,100. This is $1,100 stock. And the 50-day average for this stock on volume daily is 5.4 million shares.

There's blocks coming in for that. So that gives me an idea that institutions, when leaders like this are coming in and buying it, right? So, okay, institutions are coming in, buying it. I'm running different screens now. I got my watch list, and then there's a watch list that I have that I call. Basically, I organize my watch list in three different sections. I have a ready-to-go watchlist.

up on deck kind of thing. And then like, just kind of like more of a universal kind of, I don't want to forget about them kind of thing. Keep adding and adjusting. And then on the weekends, I may go home and, you know, make some changes to them. Some will fall apart and so forth. So, you know, you start seeing the leaders come up and then I started paying attention to earnings.

Earnings started coming out. I was paying attention to guidances. And a lot of these stocks were breaking out on earnings. You had the earnings gap up. So the market was showing a lot of strength. But there was so much uncertainty in this market.

It was like, you know, when we come in and start talking about the market, every Thursday, IBD Live. And I just, you know, I was just like, there were so many different hurdles because we were living under the 50-day. We're living under the 200-day. And we're at inflection points right now where you want the market to start trading up. Like, if you pull up the NASDAQ. Mm-hmm.

So right now, there's a couple hurdles here, right? So prove to me you're real. Well, the market's proving to me it's real now, okay? You can see that you have this here. It's trading above the 50-day, Justin. We were talking about it last week, a couple weeks ago. Can it trade above the 50-day? Yes. Check. Can it get above the 200-day? Yes. Check. Okay. It's real, okay? We have a strong trend. Look at the volume.

A lot of buying going on. That's a lot of power, right? Now, what I'm looking for now is that 21-day. That's going to be key, Justin, as we talk about the power trend. Once that 21-day starts trading above the 50-day and the 200-day, but the 21-day is stacked on top of the 50, the 50-day is stacked on the 200-day, that gives me even more conviction that I'm looking for that we are in a strong trending market, right? Mm-hmm.

So, again, I'm looking at this now. There's different hurdles still. You know, we can have a pullback, you know, and it's going to happen. You got to expect pullbacks. Markets aren't made to go straight up. And if they do, something's wrong. So we're due for we need it. I need this market now to cool off. Look what it's done the last four days.

Or the last three days. Or even just the last three. The last three days. And you can see that there. It's almost like now I just need the moving averages to catch up. Take a breath. Slow it down. Let everything digest. That's what I'm looking for. Let everything digest.

and see where we go with this market, right? Because I keep hearing tariffs, and I keep hearing 90 days, and I keep hearing this and that kind of thing, which is perfectly fine. I try to stay away from the news, but the market's telling me that we should be, you know, the market is shaking off a lot of things. They're pretty optimistic about this economy right now, and I'm not going to argue against the market.

Yeah, just to go to the weekly chart, which, again, I know you love. At the bottom here, we were up 7.3% on this week, came down 2.6%, then up 6.7%, 3.4%.

basically flat last week as we just kind of digested those gains once we got over the 10-week line. And now here we are over the 40-week line. Big gap up. This week we're already up 6.8% and we're still at hump day.

I want to go back to something that you mentioned, the power trend. I want to just remind folks of the rules here on the power trend. We got the 21-day above the 50-day moving average line. We want five days of that, really, but that's going to happen tomorrow. It started on Friday, getting the 21 above the 50-day. We also want 10 days above the

with a low above the 21 day, we actually got that today. So if you just count these one, two, three, four, five, six, seven, eight, nine, 10, today was the 10th day this Wednesday here as we're speaking. And then one of the final components that we want as well. And again, that five days could happen tomorrow.

We want the 50-day moving average line to turn into an uptrend. And that just happened yesterday because the time period that we're losing now, if you look at what was 50 days ago, well, you're in this kind of range right here. This is 50 days ago. And so as long as you're above that,

uh, these things that are dropping off, you're going to have an uptrend, uh, for, for your 50 day moving average line. Now I also, because again, we're using the 21 and 50 day here on the power trend. Um, do you ever use the death cross or the golden cross? I mean, here's the 50 day below the 200 day moving average line. I mean that, that they call it the death cross as a, as a time to get out. But I mean, that was almost right at the bottom. Yeah.

Actually, I don't. I'm looking at price and volume. You have the death cross where you're seeing it now. It's funny. A colleague of mine was talking about that the other day. And then you may have the golden cross happening when the 50-day goes to 200. But do I use it? No, absolutely not. It's not something I really follow.

I mean, there's a lot of technicians out there. They love looking at that. Me, personally, I look at price and volume. If it breaks through the 50-day, I have specific rules that I like to follow that make it easy for me to follow. It just fits the way I look at the market. Another thing is I look at the weekly charts as well. So, you know, the Golden Cross, the Death Cross as well, it's a lot easier to work with on a daily chart. But when you're looking at the weekly chart, it's a little different. Right.

So for those of you that haven't seen me on IBD Live, I use weekly charts first, something I was taught by Scott O'Neill and Bill would also talk about as well.

As well, I use the daily chart to time my buy. So I get a macro perspective on the weekly chart, and then I use the daily chart to time my buy when I'm looking for the price trend. And the other thing is, in this day and age, with high-frequency trading, you guys, with so many different trading platforms and everyone able to do it from the smartphone, iPhone kind of thing, and buying options, you want to protect yourself. You want to be careful getting shaken out of positions. That's why we look at the weekly chart. It smooths everything out. It removes all of that volatility. It takes...

five days into one single bar. And it removes all of that commotion. And then I use the daily chart to really come in and see, okay, where can I come in and buy this stock when it makes an all-time high on above average volumes? My rule is very simple, Justin. I try to keep them very simple. Now, what I did with the exposure when we had a follow-up today is, look,

All right. And not every market is perfect. Not every, you know, there's sometimes you got to look at the different rules, but I just want a little bit exposure in the market. It's kind of like a pilot position with the QQQs because I didn't have any real setups happening in the market. So I wanted to be, I wanted a little bit exposure on this market and I wanted this market to prove itself to me. So I knew something was going on, but I just couldn't really plunge in until I saw more setups happening. Yeah.

So, again, just to kind of recap here, that's such a great point because the reality is a lot of stocks were still below their 50-day moving average lines. A lot of stocks were still below their 200-day moving average lines. It was really difficult. And not only that, but you had this increased volatility that was still going on. And so now, when did you start saying, okay –

I've got some individual stocks that are setting up. We talked about the signals, getting above the 21-day line, getting above the 50-day line. When was it, would you say, that you started seeing stocks that are like,

Oh, now I can go shift a little bit from my QQQ to individual stocks. It's when we tested the 50-day moving average on the NASDAQ. So we pierced through it. You can see that there, a gap up. You see that reversal day? Yeah. We had that reversal day pull up, and we tested around that area there, that consolidation. That's when I knew, okay.

This is a good sign, right? It went straight up. When I see that straight up, that straight coming in, I need a pause. I need to go sideways. I needed to digest what's happening. I need investors to go in and like, okay, let's take a break. Let's realize, let's see what's happening. Right.

And I'm trying to figure the chart and price and volume action for me specifically tells me a story. And I'm trying to decipher that story, right? I'm looking at the price action. I'm looking where the consolidation's at. But when I saw that tested and then started taking off again, that's when I knew it was game time. It was kind of like, okay, listen.

Let's start getting in there a little bit more. Looking for little setups. I like buying at the pivot price. Just FYI. But sometimes I may get in a little earlier, maybe a percent or two. Slightly. If I feel I'm not going to get filled at a specific price. But

In the end, I need it to prove itself that it wants to go up higher and make all time highs and then jump in. Yeah. And as you mentioned, you know, one of the places where you can get ideas is that breaking out today, you know, seeing things that are right at the right around the pivot or, you know, breaking above the pivot. And then, of course, that near pivot. This IBD podcast is brought to you by Directions Daily Leveraged and Inverse ETFs. Whether you are a bull or a bear, you choose the direction. Visit Direction.com.

Thank you.

That you mentioned. But I also, because you are a market surge coach, you know, if we could just transition over to some of the screens that you use. And again, what we're going to start with is your rally screen. So when a rally starts happening, and I'm just going to open this real quick. So if, you know, any market surge users want to kind of use this. First of all, you start with the market.

market surge growth 250 database. So you've already narrowed it down to 300 stocks right there off the bat. So, um, describe a little bit of these other components that you put in there for your rally. So,

First, when I'm looking at the... What type of stocks I'm looking... I'm looking by the best of the best. I'm looking for the Michael Jordans. I'm looking for the Mickey Mantles, the Ted Williams, the Kobe Bryants. I'm looking for the best stocks within the best industry groups, right? And one thing about the Market Surge Grow 250 report, it's a proprietary screen. It runs 44 screens. Like you said, we're taking about 7,500 stocks. And you can correct me if I'm wrong about that. Stocks, not ETFs, stocks. And...

We're running these 44 proprietary screens, and the results are the best. In my opinion, some of the best growth stocks. A pretty good list of growth stocks. Some of the best, if you ask me. It's a very powerful report. I like simplicity.

Okay. I like it keeping it simple. Right. So we take 75. We've narrowed it down to 300 names. You can see that there. There's 300 names in this report. Then I'm taking RS. And one of the things I will just just about in real quick. One of the things that was interesting is, you know, it's capped at 300. And when when we were at our lows, we couldn't even find 250 names there.

Because, I mean, that's just the reality. It's not like that was us making that decision. The computer runs the screens. It couldn't find 250 stocks that met the criteria, the basic criteria. And so I think at its lowest, I think I saw it down at 220-something. Absolutely. And the thing about these stocks is they have the highest probability of potentially being the leading stock.

Because as I start breaking it down, now I'm looking for the RS three-month rating of 90 or better. What does that mean? Well, we're looking at the top 10% based on price out here. That is our relative strength rating. But instead of the 12-month perspective, we're taking a 90-day perspective. So I'm looking for strong price action. I'm looking for liquidity.

And me personally, I like using the 50 day average volume, a minimum of a million shares being traded. Beta, I'm looking for fast movers, high movers. You know, there's an opportunity cost associated with the market. And we're all guilty of this. When we have 10, 15, 20, 25 stocks in our portfolio, or some of us may have four or five stocks, again, different personalities, different risk management, different risk appetites out there. You're going to have a couple of like, why aren't you moving? The market's up 3% and you're only up a 10th of a point. Yeah. And just look at it like a

I go back and I'm like, oh, look at the betas at like 0.2, right? Or it's just, it's not a moving stock. So again, you can't always have the Ferraris on your watches. All of them cannot be microjoured. But again, you want some kind of movement in the charts. So as you see it here, we start adding different criteria and the list gets smaller and smaller and smaller. And then I'm looking at the up-down volume ratio there. The up-down volume ratio basically

It's a ratio that gauges the last 50 trading days, up days versus down days within the last 50 trading days on above average volume. That tells me there's a

demand that tells me there's within the base there's there's some skyscrapers there that i'm looking for where there's support okay now i can't narrow down if it's happening but i've never that list down to 43 names justin 43 names very manageable okay because you know my attention span is not like oh let me just sit here and you know uh do all this research the thing about market surge and i'm just not saying this just because i've been here it

does two things. Saves you time, period. Saves you a ton of time, right? It helps you make higher probability trade decisions. I want to focus on the best stocks. So right here with Justin, Justin, do we sort this based on? Yeah, so I sorted it based on comp rating and Amphenol, you know, came at the top here. That's another good one. You can see it broke out. That blue shaded area, that's our pivot area. That's what we suggest you may want to, no, that's exactly where you suggest you want to purchase the stock. Zero to 5% in range.

It is within that place, within that framework, that 0% to 5% that you want to develop maybe 70% to 80% of your position, in my opinion. That's what I like to do. So as a stock like this that gapped up and hit the pivot price at 79.30, can you –

Our pattern recognition is recognized at 79.39, correct? Yeah. As you do that there. So let's just, this stock broke out, right? And this is one of the stocks I was looking at. I talked about it in IMD Live. Broke out, consolidated. So you would have initially, and what I like to do is when I pyramid into a position, I go 50, 30, 20. Okay? So what does that mean? So whatever I allocate for a specific stock, I'm going to add, go 50% of that.

Prove to me now you want my other 30%. As it goes up, you add another 30%.

20, uh, the 30%. Now I'm 80% invested for what I allocated for that stock. Now I'm looking to add that 20%. I'm a big fan of the 21 day and the 10 day moving average. Okay. But I mean specifically 20. So I'll wait and see how it reacts as it starts pulling back. I want to see when it, I'm looking for this to go sideways for the next couple of days and pull back, uh, as well and see what happens. Um, I'm going to just show you the list real quick. Any others that you want to just, uh, let's go with a Palantir. Okay. Yeah.

I do have a position in this myself. I have a position in this as well. Okay. Okay, so looking at Palantir here, it's had a nice, nice move. Let's go to the weekly chart now. I was waiting for you to say that. We've got to go weekly, but...

But, you know, I was so excited looking at this chart here and, you know, the market's going. So looking at the weekly chart here, you know, you get that nice consolidation, right? And you see, so again, when we're looking at bases and you asked me one of the things that I learned from Scott O'Neill is when he was on stage and he'll start talking about these, you know, model book stocks, he will look at the base and look at the volume.

And you'll be up there with the pointer. Look at it. One, two, three. Start pointing out all the skyscrapers, we call them, above average volume because it's around there that's being supported because as the price is dropping, here comes institutions coming in and buying. Here comes institutions coming in and buying. Here comes institutions in and buying again, right? So they're developing their position. The average time that it takes –

for a mutual fund to purchase, have a full position in a stock, it's about two, maybe three months. They just can't come in and start buying whatever they want to buy kind of thing. They have to incrementally come in and slowly, incrementally start buying. So that's the story that it's telling me, and that's what I'm looking for. I want the weekly chart, the price action, along with the volume to tell me the story. Is this being bought?

That's the question. Are they supporting it? As they started getting close to that 40-week moving average line, they bought it, and you see that upside reversal there, that one blue spike. And guess what? When you're looking at a price consolidation and you're looking at the pattern, institutions are the ones that are creating that right side of the base.

That's what it's telling me as well. So doing my analysis here from the technical, I know it's a quality stock. It's in the grill 250. I know it's a quality stock. It has an R rating of 90 or higher, three-month R rating of 90 or higher. Up down, it's above a 1.1. So it's there. And just looking at the fundamentals here, look at the fundamentals on the number of funds.

We know it has a strong composite rating, R.S. rate. It's almost double the number of funds buying the stock, supply and demand. Less amount of shares out there, the higher the price. Who has all the money? Who's 75% of the ballgame institution? 75% of the ballgame is institutional buying. That's what we're doing the analysis, and it's how I develop this conviction.

I need to see the data. I need to see the chart. And that's how I, you know, that conviction to actually hold a stock, initiate a position, I have to develop from a psychological standpoint, the psychology of it, right? Because I'm just not going to buy a stock just like I would just want to buy it kind of thing. No, I need the data and the chart to prove to me that it's worth my attention, my money, my hard-earned money, and we go from there. Now I'm going to use the daily chart to time my buy.

Okay, like I did earlier. Let's go to the daily chart real quick. And you can see this here. That's the pivot price as well. You can develop that position. As it breaks out, you buy it, 50%. And it starts going up a little bit. You may want to add the other 30% to each their own, right? But the position is being developed, right? And, again, I'm always paying attention to that 5% to 8% section there, right? So it gets a little complicated.

There's other rules I have in place as it starts making its run up. I'm going to be looking at how it trades around the 21-day moving average. But again...

With the market, the way it's been, look at that cup with handle. I mean, just look at it. It's a very nice cup with handle, nice consolidation around there, which is a very popular pattern that we talk about all the time. But again, there's no such thing as a perfect pattern. It's just, again, it's price consolidation. But I do like seeing the handle part, which attracts me because that's a nice little shake out there. Yeah, no, absolutely. I'm going to just go ahead and pull up. Let's maybe take a look at one more thing.

One more from this list. I'll scroll down a little bit, and if you want to just tell me where to stop anywhere, if you can see those. Yeah, one that's been catching my attention. Let's go to Hood. Okay. I'm just going to type it in. I trust you that it was there. Yeah, let's go to Hood. Okay.

I'm looking at this here. This was also in a different screen that I follow. But since we're running short of time, I like this consolidation. Let's go to the weekly chart. Mm-hmm.

Okay. You can see that, right? Grab that there. Now, yeah. So our pattern recognition is not following the rules. But again, it's never going to be perfect, right? So this is a stock that I do have a position in. I like the market. It's catering to a different generation of investors, if you ask me. You know, the crypto investors, younger generation. What were you getting in? Was it like when it was crossing 50 here or?

Where were you getting in? As I'm getting in, it was... Let me go to the daily. Yep. I developed this position. Okay. So it looks like it kind of... I got in two days ago, a little earlier. Okay. Yeah. No, not there. I got in when it broke that 60 mark. Oh, okay. I got in a little earlier. Because of that...

I just felt there was a lot of strength coming in. That right side of the base started coming in. When I started seeing that volume there, I started getting into this position. Now, instead of going 50, I went 20. I wanted a small position because I just didn't, I was expecting maybe a pullback or the handle being formed. So,

I like doing the 50, 30, 20, 90% time. But if I find a stock that hasn't made any high, hasn't really broken out that 66, 91 mark yet, you can see that there. I may go in and put a smaller position in for 20%. Let it prove itself to me and then come in, add the 50 and then the 30. So that's what I started looking at. But earnings were out of the way as well.

And I started seeing these volume spikes as well. And when I saw this, I said, there's a lot of power going up. And especially when you get that earnings gap up there. When you see the average volume go straight up like that, that does tell you something. Because it's not just one skyscraper. It's like you've built a downtown at this point.

Yeah, it was all over the place, right? But when it had that earnings gap up, you see that little gap? It had that earnings, and then it gapped up on price. There was a lot of buying coming in. And when I saw that, it had earnings out of the way, and then it gapped up in price there. You can see that there. I knew there was some action going in there. So I incrementally came in at $2.

start developing that position as well as far as when looking at a stock like this. Yeah. Now, I wanted to also, because look, the reality is right now you look at the NASDAQ, as you mentioned, we're up

almost 7% already for this week in just three days. Things are looking a little bit more extended. So you have another screen. It's got all of those same elements that we just talked about in your rally screen. It just has a

couple more things. Oh, I forgot to open the edit. So you just added one more thing and that is the price versus the 21 day moving average line being less than 3% extended from that 21 day moving average line. So right now there's zero stocks that are coming up with this, but explain a little bit of what you're looking for on this pullback screen and what kind of makes you pull the trigger. Okay.

So we have a rally screen, right? Everyone likes to buy. We're going to buy. We're going to initiate our position, right? So now I'm looking, I'm pulling back to the 20. There's going to be stocks, and I'm going to say this, you know, sometimes there's going to be stocks that are going to be pulling back to the 21 day. I want to see the type of stocks that are going to be pulling back to the 21 day.

Because I may want to add to my positions, and I'm looking for some type of conviction, right? When we do go to pullback, we get that strong, nice pullback, and it's coming. The pullback's coming, Justin. However you want to look at it, whether it's 5% pullback or 9%, it's here. It's going to happen. Just waiting for it, right? You want to be ready for this type of screen, right? Because a lot of these stocks are going to be overextended.

Now, for the individual, and again, that feels like they want to get into this market, but they missed that initial...

a high, a nice, a great place. If you miss that initial breakout from the pivot price, or you just one or two or 3%, uh, below the initial price, uh, you may want to use the 21 day moving error as a place. You may want to initiate a position, right? My batting average is, is it's 50, 50 with adding, uh, initiating at a 21 day moving average. I like adding to my position, right? At the 21 day moving average. Uh, I've,

When it comes to developing a full position, I like adding that extra 20% or sometimes 30% at the 21-day moving average. But if you feel like you missed a stock, it broke out, and you missed it because of earnings gap up, wait for it to pull back to the 21-day, but keep running that screen. Keep running that screen daily or every other day, seeing if there's any stocks within that 21-day that you missed out that are showing strong fundamentals that has a great story that you wanted to own.

So you can test that out, see if it works for you, if it fits your risk tolerance. But again, I want to let you know, my batting average is not great initiating a full initiating position at the 21 day. I like adding to my position at the 21 day moving average.

And then I should also mention that, again, this is a guideline that sometimes you might be tweaking your things here, right? You might tweak, okay, I'm going to maybe use a larger database than just a market surge, maybe the growth 250, maybe use a larger one there.

Or maybe you tweak this and say, okay, there's things that are getting a lot more extended. I want to maybe loosen this up and see things that are a little bit closer to their 21-day. There's a lot that you can play with here to either expand that out or contract it if you're getting too many names. Yeah, absolutely. The beauty behind our earnings, our screening criteria is you can get, depending on what you're looking for –

One of the most important things when it comes to investing, and I've been doing this day in and day out, is you have to know your personality. You have to know what type of stock works for you. Some may not like these high-flying stocks. In the end, we all like to make money, though, right? But you also have to protect that mental capital. You've got to look for what works for you. The research routine that you have is very important. You want to make sure you're looking at the market. You may not look at it every day. You may look at the market three, four times a week or two to three times a week.

But again, you want to be looking, running your screens, and you also want to get a feel for the market. That's another reason why I run these screens is I want to feel for what stocks are coming up. Let me know, did I miss something? You want to pay attention. You want to set up the price alerts. You want to see what industry groups are working as well. And that's probably one of the reasons why I love the Grow250 because it's always focusing on strong stocks within strong industry groups. And it takes a lot of the guesswork out of it, and it saves me a lot of time.

Yeah, no, that's great. Um, Arnie, uh, any last, any last thoughts, one of your favorite trips with Scott or, uh, any, any final thoughts you want to give? I don't know. Smoky bones was great, but I think we did, uh, for those of you that want a little bit more deep, I think we did like three or four, uh, restaurants in Florida, uh, different cities, smoky bones. So it's a nice little chain there. Uh, final thoughts, the market's showing a lot of strength. Uh, uh, um, um,

The GID emitter was pretty high the last couple of days. I'm not going to lie. So I'm looking for a pullback. Let's see if we can find support. Let it digest everything. It is still very new, sensitive. Be very careful out there. But two things I always want to mention. I always talk about it lately. I've always tried myself to exercise and approach investing with be patient.

with your positions and entering a position and be disciplined with your exits. You just have to. And if you can do those two things and you allow the market to prove itself to you, you're going to be okay.

But, you know, right now, we got over a couple hurdles right now. But this market looks like it wants to keep going. Let it keep going. Let the market prove itself to you. But at the same time, know defense first as well. Have an exit plan. Look at your positions. If you're already starting investing, where are you going to get out if the market goes against you? Are you going to close your position? Are you going to incrementally get out? Are you going to start taking profits? And have those rules in place.

Yeah, no, absolutely. And I should say hello from YouTube. Jim was saying that he met, I guess, the both of us in Greenville, South Carolina, about 10 years ago at a meetup. Or maybe he just met you with a meetup of Greg Morton. So, yeah, we did a lot of meetups to Scott. So, yeah, yeah. So very

Very good. Well, hey, Arnie, appreciate it a lot. Again, folks can catch Arnie on IBD Live every Thursday. So if you haven't gotten a trial for that, go to www.investors.com slash IBD Live. And also for those of you that have a market surge and need a coaching session, Arnie is one of the guys that is doing that. So you can always trust him to walk you through and teach you something new about that product if you're just starting out or even if you're pretty experienced. There's always more to learn. So thanks, Arnie.

Thanks a lot, Arnie. Appreciate it. Thank you, Justin. Okay. That's going to wrap it up for us this week. Next week, we're going to have Charles Harris back on the show. Of course, he goes into a lot of psychology and he's a great swing trader with a lot of technical analysis chops. So it'll be great to kind of get his thoughts on the market and some of the things that he's been doing in order to take advantage of this rally. So we will see you then. Thanks a lot for watching. Take care now.

Discover what's driving the fastest-growing cities in the U.S. with Empowering American Cities, a collaboration between Fifth Third Bank and the Kenan Institute of Private Enterprise. Access advanced local economic data and insights for 150 metropolitan areas. Explore the interactive dashboard and compare your city's growth characteristics with others.

From GDP growth to industry productivity to labor supply, tap into local economic data at empoweringamericancities.com. Fifth Third Bank National Association, member FDIC.