Ep. 313 Get Rally Ready With These Market Analysis Tools And Methods
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Good afternoon, everyone, and welcome to the Investing with IBD podcast. It's Wednesday, March 26th. And no, I am not Justin Nielsen. Our awesome host is out this week on vacation, but I'm filling in today. It's Allie Corum here, executive editor, Multimedia at IBD. And joining me this week is my colleague, Scott St. Clair.

Claire, he's Senior Manager of the Premium Product Group at IBD. Really looking forward to today's discussion, Scott. So thanks for joining me.

Yes, thanks for having me. It's been a while. This is my first live one, so hopefully I don't put my foot in my mouth. Well, it's not like you don't go live every week on IBD Live. I do have some practice on IBD Live, but I also have some practice putting my foot in my mouth on that show. Well, I think, you know, judging by the comments that we get online,

On IABD Live, the audience loves your perspective and so do I. So I always have a great time chatting with you on that show. So we'll bring more fun and learning to this show today. And I think it really is a good week for us to have this conversation and to get your perspective as your trading style unfolds.

coming in handy, I think, in this market. It's requiring us to be really nimble. There's a lot of uncertainty out there. It's a topsy-turvy kind of market out there right now, Scott. Yeah, it is. I mean, I love the markets. They're so fascinating to me and they're ever-changing and they're never boring, that's for sure. So it's a very uncertain time, but

We'll get through it. I don't know if we're going to get through it next week or next month, maybe next year, who knows, but you know, we'll get through it. And the key is just to, in times like this, I think just kind of persevere and survive.

Yeah. And so in terms of a roadmap for today's show, we are going to talk about why it's important to pay attention in these uncertain conditions. I think a lot of times traders, they can get defeated or feeling whiplashed, you know, seeing comments about, you know, Monday was so exciting today, you know,

turning the other direction in a big way. So it can leave traders feeling confused, defeated at times, you know, just having to shift the mindset so quickly. So we're going to talk about tools to help you not only with your mindset, but I'm all about practical tools and app

application versus just talk about concepts. So we'll talk about practical applications for how to handle conditions where you're going to be able to take advantage of shifts in market conditions. We've got some precedents that we want to take a look at with some personal experience that you've had in prior markets, Scott, as well as me too. And then we're also going to talk about the

Current market. We'll wrap up with that. Get your outlook and take a look at a couple of stocks and learn some lessons from that. So how does that sound? All right. We're going to do all that in 45 minutes. We're going to try. We'll do our best. Okay. So to sort of paint the picture here, Scott,

But the market moves fast, as you talked about. So I feel like sometimes there can be these blink and you miss it moments. And that's not to say that if you don't go all in on X date, you're going to miss out. But it really is important to stay in step with how the market is acting every day. So you can make those portfolio adjustments. And ultimately, when market conditions are in our favor, you can score those big wins.

I think so. I think you don't have to be glued to the screen, but I think you should be putting in at a minimum weekend research, weekend work, work.

an hour or two, sometimes more if the market's better, but sometimes even less if there's not really a lot to do. And just stay engaged in observing. If you're just constantly observing, I think you kind of get a feel for the market. I always use that word tape. And I know some people don't know what's the tape. It's the ticker tape. It's an old adage on how the old traders used to look at stock prices. What you used to use.

Yeah. Well, I sort of...

I sort of did, you know, I sort of did. But I guess if you fall, if you're on financial news, you'll see across the bottom that that's kind of what a ticker tape would look like. Right. So you can just observe and see like the market's bad. Sometimes you can see, OK, the market's bad, but X, Y, Z is it's not down today. I wonder I wonder what's going on there. And you just get this these little little hints along the way on on what the market is doing that that will help you in the long run.

Right. And I feel like that's one thing that you're really good about discussing on IABD Live. You have a list of tickers that you're sort of keeping your finger on the pulse of the heat or the leaders. How are they acting versus the major indexes? Because you...

you do look at the indexes a little differently. That's not your end-all, be-all in terms of your portfolio exposure decisions. It's a factor, but you also really want to get a sense of, okay, what's happening underneath the surface with the leadership and with sector rotation too, right? I think so. For me, anyways, I feel like in the last 10, 15 years, the indexes have really done a very good job of fooling you. And when I say you, I mean me.

So, any decisions that I made based on the indexes, I've almost always come to regret. And so, I've just kind of stopped doing that. If you get out of stocks because the indexes are bad, but it's really hard to get back those really good ones if the indexes change their mind quickly, which can happen. So, I'm more about like...

The stocks I own, what are they doing? That's most important. And it's important to look at the indexes for a comparison, like a relative standpoint. So today's a good day when I say that. It was a lousy day in the market. So I will compare. How did I do today versus yesterday?

um the overall market so maybe i was down a little bit but um i i definitely wasn't down two percent today so i feel like i'm positioned correctly for one day and then we'll just you know i'll just keep doing that day by day day by day by week by week by month by month so um you have to kind of compare them so stocks that i own stocks that i wish i owned those are important so i follow

the NVIDIAs of the world or the Teslas when they were the leaders and how are they acting versus the overall market? And then...

for me anyways, is the indexes. Was it a distribution day today? I don't know. I don't know if the volume would be up. Where's the index in relation to the market? Like what you told me today, it kind of stopped at a natural spot, ran up to the 200 day and kind of got pushed back. So that would be on my list of evaluating, but it would be a third. Right.

Right. Okay. So we do know that markets can turn when we least expect it. And that can swing both ways, right? It can turn higher when we least expect it, it can turn lower. Of course, there are those macro factors, right? And when it comes to the market right now, the last couple of months, 2025 has really been dominated by the tariff discussion. A lot of concerns around that. We do have the upcoming reciprocal tariff deadline of April 2nd.

Also added to the mix, continuing concerns about inflation and the Fed's path. Are they going to cut rates? How are these tariffs going to impact things like consumer spending and inflation? So a little bit of those things tied together. But if you look at past market cycles,

Market uncertainty is nothing new, right? And even if you're not someone who's looking at precedents on the index level tick by tick as your roadmap, you can look at, okay, how did you handle past markets when there was uncertainty and what did you learn from it? So you actually have a really great lesson, Scott, from the late 1990s that's on this sort of topic.

Yeah, it would be the Asian financial crisis. I guess we always use that word crisis. At least in my career, that's been the key word. And that would be like in the September to October period.

A lot of Asian currencies were devaluing the Russian ruble issue where the Russian debt, they defaulted on the debt, long-term capital. And all of that is going on in this time period.

And the market acted very poorly. You can see it got hit really hard in August, tried to rally. And a lot like today, look at it, it rallied almost to like the perfect spot where it should stop.

from 14.70 right there. And then the next one is even better. So you get a really good rally. Right. Because now we're below the 200 day. At the moving averages. Yeah. And then you had a waterfall decline and the news is bad at that point. And then all of a sudden out of nowhere, the market just kind of, for lack of a better term, changes its mind. Yeah.

And you have to be willing to change your mind if you're bearish or neutral or out of stocks, or you might get left in the dust. And I do remember this period because I was convinced that this was going to be the big bear market that the market was due for. Because we'd been since the 87 crash, there had been maybe a bear market in 94, but it was very short lived. It had been a really good bull market for a long, long time.

And, you know, the Greenspan rational exuberance speech was years before. So everybody kind of knew the market was a little bit, for lack of a better term, overvalued. And so I kind of had it in my mind that, okay, this is the bear market that's coming. And, yeah.

So I was unprepared for that snapback and it took me a while to get back in. I know I was telling you earlier, I remember in that time period is when AOL and Schwab broke out. And those are two stocks that I didn't own because I was, it perished. I thought the market was going to go down. So I didn't really see that signal. Look at that. And that's one like Bill O'Neill, the founder of IBD was all over that year.

Right. And then what makes this tricky is then, you know, you could rationalize, oh, well, the market's been so strong, it's got to pull back. It's got to rest at some point, right? Instead of incrementally adding exposure when you do get those signals, again, whether it's on the index level or leaders breaking out, right? If you don't act, it makes it a lot harder to get properly positioned later.

Yes. The first step is the easiest step. Just take one step, just buy a 5% position. And I didn't do that back then. That's something we hear about a lot now in house and on that, where that, you know, if there's a follow-through day in the market, buy one stock, buy something. I didn't have that kind of rule or mentality back then. So, but once you get some exposure,

Then it's easy to get feedback like if you were if I were to buy Schwab and Schwab is going up almost every day I might say boy I probably should buy more Schwab or maybe I should buy XYZ or ABC and it the market will just pull you in but it's always that kind of first First step and in the easiest way to if you have a hard time doing that I think is just do the math and

If you just put 10% of your portfolio into the market. Yeah. What do you mean? Let's say, yeah, let's say the market turns on a dime and you, you just bought the absolute high and it goes down 10% the very next day. Well, what, what is 10% of 10% portfolio? You've lost 1% of your whole portfolio. Yeah.

You have to think that's I can survive that I can I can overcome that with the next try and the next try. So that helps that helps you. And it definitely helps me to to to get in. I'm big on incremental. I'm I'm probably too big on it. I do a lot of incremental. Yeah. Incremental in incremental out constantly. Yeah.

balancing, you know, with trimming here, adding there, etc, etc. And honestly, I do too much of it. But I would think

My instinct is based on talking to lots of people when we used to go on the road. Most people kind of have the opposite problem with me. They don't do enough of that. Right. And I think it helps so much with the mindset. So this is something I think I was talking about or alluding to a little bit earlier, that if you are able to make those incremental decisions, say you are –

super bullish. We're in a power trend. You're super bullish, but you start seeing some signs of weakness. Whether you're a swing trader or position trader, maybe you have different levels, whether it's a moving average or a percentage threshold that you're willing to withstand a pullback. But once you do get your signal and

it really is important to take action. And I know when I started doing that, I felt not only a sense of relief and confidence in my trading, even if it wasn't the perfect sell, because a lot of times it was a pretty good sell. It prevented me from damaging my portfolio even more. And I think it goes both ways. So if you are trimming...

you know, when you do start seeing the signs of a pullback, it puts you in a much better space mentally to take advantage of those market turns to the upside and really press the gas when you do see those opportunities. And so whether it's 1998, I also think

That 2023, that was another time period that reminds me of something that comes in handy. A little bit of a different setup in terms of the indexes, but what I wanted to talk about here is we did have a couple of failed follow-throughs, right? But it's...

I acted right incrementally and had to back away. And yeah, that's frustrating, but I think that's way better than the alternative of just bought, you know, going all in on that first signal and then holding and hoping for months and months and months. And then I, cause I feel like that leads to poor decisions down the line. If you're not in a good head space. Yeah. The markets are skewed in your, to the upside and you're in from a,

Risk reward. So the risk is you can identify your risk. So you can get hit 1%, 1%, 1% here. Let's say, you know, I go down 8% or 9% off the highs off my account. But if I catch a big move, if the market goes on a really long trend and the names that we're able to identify with the tools we have,

They go up a lot more than the market. So I can go from down 9% to up 9% in a month or two easily. And then if it's really good, then I can start putting on more. And that's what gives you those really good years. So you're risking a little to potentially make a lot. And you don't have to be right all that often. Like a baseball player. Imagine a baseball player, how often they're wrong, right?

You know, if you're, if you bet 350, you're one of the best baseball players on the planet. Yeah. You're going to the hall of fame at 350, but that means that you go back to the dugout 65% of the time, uh, has having failed or, or lost. And so, um,

it's the 35% of the time where they get on base, they steal second, they hit a triple, they double, they drive in three runs, et cetera, et cetera. So that's a lot like investing. You're risking a little to make a lot and you just, you just got to kind of,

Yeah. I love all the baseball analogies with trading. Give me all the baseball analogies. I love it. Yeah.

All right.

Before investing, carefully consider a fund's investment objectives, risks, charges, and expenses contained in the prospectus available at direction.com. Read carefully. Distributor, Alps Distributors, Inc. So Scott, now let's talk about some practical tools. You already mentioned some making those incremental decisions. So talk to me a little bit more about what exactly that looks like for you when you do see a market turn.

Well, for me, it could be fast. I could make seven or eight incremental decisions in the same day, you know, or it might be a handful over a number of days, but it's,

What I'm looking for is on a simplest level is the price going up. Sometimes I think I should write a book and I'll call it caveman trading, you know, 27, 28, 29, which number is higher? You know, if I pay 27 and the stock's 28, that's good. If I pay 28 and the stock's 27, that's bad.

And sometimes you can keep it just that simple. So if I buy something, it goes up. I want to buy more of that. And then if I buy another stock, it goes up. I want to buy more of that. And I buy another stock, it doesn't go up.

I don't buy more of that. I just let it do its thing and eventually it takes me out. So rather than you picking the stocks, they kind of pick you. The leaders will pick you, the Palantirs, the NVIDIAs. Think about all the times that they've gone up and then they've gone up and up and up and up and up again. So they kind of just...

pull you in and drag you in. So that's really what I'm always looking for from the long side is just show me, show me something that's moving. That's, that's acting well. Ideally it's acting better than the market. For me, I want, I want relative strength because otherwise just buy the market. You know, if I'm going to buy an individual stock, there's, there's more

risk. So I want more potential reward if I were to get it right. Yeah. And I know you said the caveman thing, which definitely has a point, but there is a little bit of an art to it, right? You're not just looking at an RS line sticking straight in the air or a rating of 99 and, oh, it's up on the day. There's a little bit more to it than that. But what would you say are some of those factors that really help you

find that leadership, because I know you also are about looking for trades that perhaps not all the eyeballs are on, right? You want to look at areas that perhaps are not too much in the focus of the broader trading environment.

Yeah, I tend to get out of the really crowded trades way too soon because the really crowded trades last a lot longer than you ever can imagine. So like to me, NVIDIA was a crowded trade for a long time. And now it's starting to show signs of being tired. But I exited much too soon. But you want some institutional sponsorship, but not too much.

It's hard to gauge exactly where the sweet spot is because you need those institutions to add to their positions, to support those positions when they're coming in. But at some point, like NVIDIA, for example, I think it's the Norwegian Sovereign Wealth Fund is like the 10th largest holder of this stock. And so...

Anecdotally, I just think, well, when the sovereign wealth funds or the Swiss National Bank owns NVIDIA. Yeah, I mean, I guess there's nobody on this planet that has enough money to go in there and create a new position. So these are all potential sellers and the stock becomes over-owned. And that's kind of what's

going on in my humble opinion with nvidia as the stock is over owned and all it takes is let's say they want they want to reduce their position from you know ten percent to five percent you know who's who's going to take that off their hands they got to bring the price down and down to to create that that demand so um it's it's the other is an art to it and i i don't

I haven't figured it out. And honestly, I'm very aware I'm not going to figure it out. What's the saying? Don't let good be the enemy of good is the enemy of perfect or perfect is the enemy of good. I just totally butchered that. But look it up. Do a Google search.

In other words, you don't have to be perfect. You don't have to get this completely right. You know, if you bought NVIDIA, like I think the first time I bought NVIDIA, now this is split adjusted, so I'm having a hard time thinking about it, but I think it was around $40. Well, gosh, I'm talking about this cycle. I bought NVIDIA way before. But in this cycle, I think it was somewhere on that really, right before the big gap up. So maybe it was 26 or two. Yeah, somewhere in there.

was my first purchase. And I basically wrote it off and on with certain size all the way up until about 80.

And then at that point, for me, it became too obvious, you know, the cover of Fortune magazine, et cetera, et cetera. These are all anecdotal evidence that I use to influence me. And I just kind of walk away from it. I don't want to short it. I don't want to do anything like that.

Because my experience is I give up on them a little too soon. And that was too soon. It went from 80 to 140. So it made another 80% move or something like that. But now it's kind of been a bit waterlogged. Yeah. And this was my biggest winner last year. And folks can check out my podcast episode from the start of the year if you want more details on that trade. But I...

don't care about this stock anymore. I didn't fall in love with it, right? And I think that relative strength line is really helpful for determining, okay, what is still a leader? Maybe there are some things that you can be patient with, but if you are just seeing continued weakness and

While other stocks do take on that leadership crown that are breaking out and have those surging relative strength lines and the fundamentals that you want to see, all the whatever ingredients, the institutional sponsorship that you like seeing. Why still have your heart set on NVIDIA? Because it did well in the past. It's not doing well anymore. It could get back on its feet, but right now it's just out of favor. So I don't want it taking up any of my mental space.

or space in my portfolio at this point. Yeah, I mean, today's NASDAQ was down roughly 2%, I think, and NVIDIA was down almost 6%. So...

Yeah, these stocks are going to, they're not going to, historically, they're going to go down a little bit more than the market because they go up a little bit more than the market. But that's almost a threefold move. And historically, that's well outside the parameters. Normally, it's like one and a half to two times more.

the market that they're going to react. So it's just one day. It's just one day of evidence, but it performed worse than the market today. It's below all of the moving averages. So you're below the 200-day, you're below the 50-day. So another signal that other people can use.

And you're right, it could ride itself. But that might be a while from now. NVIDIA has had a couple of big cycles. But in between those big cycles, I think it went down, gosh, maybe 60, 80% in the 2020, 2021 bear market.

Or the 21, 22 bear market. How much did it go down there? That looks like nothing now, but. A lot. From it's a split adjusted, of course, just shy of 35 down to just shy of 11. So yeah, 34 to 11. That's a big haircut. Yeah. So about 70%, 60 some percent. So you have to ask yourself, could I stomach that type of pullback?

And still be profitable. That's how I think about it. Well, unlikely. Yeah. The math is cruel, right? Because if the stock doubles, how much does it have to go down for you to get back to even? Yeah. If it goes from 50 to 100 and then it goes down 50%.

It's back at 50. It doesn't seem fair. I don't know. The math is it went from 50 to 100. It doubled. And then it goes down 50 percent and you're back at even. So the math is pretty cruel on the way down. So which is why we we try to protect from that as best we can. I mean, it's it's it's an imperfect science for sure. This game.

Right. Okay. So Scott, you mentioned how relative strength is important to you. We looked at the lagging relative strength for NVIDIA. So do you have a screen? Do you have screening parameters or how are you finding these stocks? This is again, more of this practical application stuff that I love for traders out there. So in these conditions, how are you screening? What are you screening for? Or are you just taking a look at a

lot of socks, looking at as much as you can to just really get a feel. And how do you move something from an, oh, that's has relative strength. That's interesting too. Okay. If we do get, you know, the market back up on its feet or these perfect setups, all the stars are aligning, all systems go kind of thing. How do you know which ones to act on?

Well, at the easiest level, just screen for relative strength. And that's, you know, in market surge, you can screen for RS line new high. You can screen for RS line within 5% of new highs. It's a relatively new feature we added, which is kind of cool because RS line is not always going to be a new high. It's going to come down, you know, a little bit. So RS line within 5% is very strong screening criteria there.

stocks at or near 52 week highs is a great way to look for ideas, especially coming out if they haven't been there for a while, coming out of long bases. I'm a bit of a junkie, so I tend to look at a lot of stuff, but I think at the bare minimum,

You're running three or four relative strength screens, and you're on top of the market if you're doing that. Three-month RS, you can screen for the three-month RS. The RS for NVIDIA on the chart is 32, which is the...

That's the, you know, the 12 month. It's not a perfectly measured 12 month. It is weighted, but it is a 12 month rating. But like a three month rating is 30. The six month rating is 26. So it's been underperforming in the short term as well. So it just wouldn't be something on your radar if you're using relative strength.

Okay. So for example, so you can set up your own custom screens, but Market Surge also has these different lists that you can pull up. So say we want to look at the all RS line new high list. How would you then go about sorting this list, Scott, to make your way through it?

I probably would start by composite rating, which is kind of an all-encompassing rating that IBD has. It's like your overall GPA is the best way I like to describe it. You have five classes in school. You get four A's and a B, right? You're a 3.8. Your overall GPA. So what the comp does is...

If you had a bunch of really good ratings and then one that was just okay, you could still have a pretty good comp rating. So comp rating would be a good way to do it or average trading volume or market cap. If that's something like you prefer liquidity, some people prefer that. I don't, I don't do that. I don't really worry about market cap. I might,

I might adjust my position size accordingly if the company's smaller than and the liquidity is a thing. I will do that, but I would never pass on a stock, I don't think, because of the market cap. It never is a strong word, but rarely.

Yeah. See, that's where I'm a little different. And we have different trading styles, which I think is great to talk about on this show. You are very fast, very nimble. You can get aggressive really quickly. You can short on a dime. I'm more of your traditional position trader. Maybe I'm

sneak in there a little bit earlier than the orthodox uh trader but i i try to go for longer holding times i would say for something that i am trying to get a big move out of i am a stickler for the fundamentals and i love liquid leaders because i feel like that does help me get uh conviction but yeah if you're looking technicals first and and maybe uh

the sponsorship secondarily, sprinkling the fundamentals here a little bit. You are a little less concerned about the market cap and things like that. So we have this all RS line new high screen up.

We're sorting by comp. And then practically as you're going through, what are you flagging, Scott? What are you looking for to put stocks on your list? Okay, again, if we get a good turn in the market, this is or whatever day that you're looking at and you want to be adjusting your exposure, what makes a stock go from this list to, okay, here are my top ideas right now.

Yeah, there's a handful of factors that I think about. I like a story. I like the narrative. What's the industry? If there's a buzz about the industry, like EVs or solar panels or AI, I tend to give that a little bit more weighting. Right or wrong, I do, because I feel like it's got more chance to really move.

And our line is a strictly technical screen. So the next step for me is I do look at the fundamentals. I don't have to have the fundamentals, but if I have the fundamentals, then that could move the stock higher up the food chain of potential ideas.

And then when I say fundamentals, like earnings, sales, margin, ROE, et cetera, et cetera. And last but not least is sponsorship. So which mutual funds have a position? Does Fidelity Contra have a position? Does T. Rowe Price, New Horizons? And then I do look at hedge funds.

Stanley Druckenmiller is everybody's favorite, including me. I'm no different. So I always look at his holdings. And there's other – David Tepper is kind of – he's nailed the whole China trade. So if I'm going to buy Chinese stocks, honestly, he better have it. Otherwise, I'm not going to be in something that he's not in because he's really positioned himself well in front of the –

what I think, right or wrong, is the new bull market in Chinese stocks. And so that sponsorship is a big deal for me too. Because I want the smart, big money to have vetted these companies. I'm not going to trade it like them, but I know that they've kicked the tire, so to speak. And so that gives me a little bit more confidence in owning the name. Right. And Scott is talking about his...

stocks that he's looking at, trades that he's making every week on IABD Live. So,

So make sure to join us on Mondays, Monday through Friday. But Scott is usually on on Mondays starting 10 minutes before the opening bell. Investors.com slash IBD Live for those details. We'll talk about a China stock here soon, Scott. But one more little piece in this segment, if we could, and that is how do you approach position sizing when you have...

more volatile stock versus something that is a bit steadier. And I know you love looking for stocks that have that high alpha, that you're going to get something out of it. You're not looking at slow and pokey, sleepy stocks out there, right? But there is a difference between

a strong and steady outperforming leader and some of the more volatile speculative, like an Oclo kind of comes to mind. That's a, that's a story stock or maybe some of the quantum computing names. How do you adjust for that in terms of, you know, entries and exits and how you're sizing those? Yeah.

It's a great, great question. I'll quote Stanley Druckenmiller again because he says stock selection is, I don't think he worded it this way, but I'm going to say it. Stock selection is a bit overrated. Position sizing is everything. And I can't, I apologize. I can't remember exactly how he said it, but what sticks in my mind is position sizing. You have to have enough of the stock that it makes a difference if you get it right.

but not too much that you can't handle it correctly. So if you have too much and it goes down 50 cents one morning and you panic out of it, that's no good either. And I'm speaking from many, many years of experience. And Oklo is a great example of a stock that I had the conviction in. I had the narrative. Sam Altman was an investor. I had it all lined up. I was right there. You were early. Yes. You were early too. And I just was...

It was in the September, October timeframe, I believe, that you were talking about it on IBD Live. I was buying it when it was a teenager, like an early teenager, not even a teenager, but...

And I just was so aggressive with the position size. And that stock traded so crazily, like 5% intraday, open up 5%, open down 5%, open up 3%, be down 3% 20 minutes later. And it just wore me out because my position size was incorrect. So I did not do as well in Oklo as I should have, to be honest with you, based on

identifying the idea and how far that stock went. So position sizing is very, very important. And so I, I sometimes I'll just, what I'll do a lot of times is if I have this urge to really go get more shares, let's say I have a thousand shares of a stock and, and sometimes I'll, I

Just like my spidey sense tells me that that stock's going higher, Scott, you need more of that. I might, but I'll know that I'm not buying. There's no buy point there, Scott. I'm just buying emotionally. I will satisfy that emotion, for lack of a better term, by buying 100 shares or 200 shares, sometimes maybe even 300 shares. But I won't go buy 1,000 shares like I want to.

Because I'm seeing that that sucks going higher. And I want to go from a thousand to 2000 or 3000 to 4000. I might go 3000 to 3500. And it relieves that pressure on me. And it doesn't hurt me so much. It doesn't usually help me all that much. But if I do that a number of times.

Then it can help me. So if I buy something at 50 and it runs to 80 and I've bought it at 55, 58, 60, 62, 65, 67, even if it was 100 shares each purchase, you know, that really adds on to that initial 10, 12, 15.

15% position that I like to have to build into. That's usually my core position is something around that number. So some great practical advice there. And I feel like

Position size goes hand in hand with having buy and sell rules that you use. Like you said, there's always some adjustments. There's always some exceptions. But having rules that you rely on, I think, is so important no matter what your trading style is because that's what's

of trading is all about, right? And it's so interesting to communicate with our trading audience, whether it's folks watching this live on YouTube right now and commenting or on IB Live in the Q&A, looking at the mindset of some traders and things that we all have done at some point or another. Maybe a

believe too much in a story and, you know, had a big round trip in a stock and still holding onto the hold and hope kind of thing. But I would say that in my trading, as soon as I really started believing in my rules, like you said, going back to batting average, whether or not it was a hundred percent right decision at the time, I feel like over time, you know, there is a method to the madness, right? And so I think that that's really what's going to make a difference in

in your performance over the long run is to add those rules with the position sizing into, you know, what makes a leader? Is it that story? Is it the fundamentals? Is it the sponsorship? Is it that relative strength? All of these other factors that we're looking at.

Yeah. And ideally, well, I would say most importantly, the rules should be on the protective side. In other words, I don't have a problem getting heavy in a stock because I have rules to get me out if it goes against me. I very rarely will allow the market to, when I say get me, like I've had some bad days in the market in my career. And, but yeah,

It's very rare I'll have two or three bad days in a row because if I have a really bad day, I'm going to get lighter. I might wait all the way to the end of the day just because I'm stubborn. But by the end of the day, you know, the writing's on the wall. I need to reduce my exposure. So I'll reduce, come in the next day and let's say they get me again. Well, whatever.

they're probably not going to get me as much because I've reduced my exposure. And then, okay, I have rules for this. I don't want to let them get, I don't want to have two bad days in a row if I can help it. So I'll get lighter again. So I might, I might be completely out in two or three days if the market got hit really hard, kind of like what's happened here. I think this was the second fastest 10% correction off of all time high for the S and P if, if,

It was a fast one. And it's a great... 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.

Investing in the funds involves significant risk and should only be utilized by investors who understand the impact of leverage and actively monitor their portfolio. They are not designed to track the underlying index for more than a day. Before investing, carefully consider a fund's investment objectives, risks, charges, and expenses contained in the prospectus available at direction.com. Read carefully. Distributor, Alps Distributors, Inc.

transition Scott into our last segment would love your outlook on the current market. You mentioned earlier how we were discussing the news driven element to the current market, but also the S and P 500 getting rejected right where you would expect right at the 200 day line. So I think we're at a very delicate spot here, right? Are we going to write ourselves or are we going to roll over here? Like we have seen in past, uh,

market environments? What do you think? So I technically, like if I was in a vacuum and you only gave me this chart, I would be short. I think this technically looks like a market that's going lower. And I do have some short exposure. I am short some stocks with

short ETFs or reverse ETFs in cash accounts, IRAs, et cetera. So I look at that and I said, that's a market that looks bad. The tape is very heavy. There's that word again, tape. But like today, we talked about the market. If you watch the market at all, and I didn't really watch that closely, but I have like maybe a 30-minute tick chart on Thinkorswim. And when every bar is red,

Right. It's just to the very, yeah, it just cannot, there's just no support for stocks. It's like a constant offer. Somebody out there is always lowering their price to get out and they have, you know, stock du jour, you know, all day long. So the tape feels very heavy. Technically, the market looks very poor. So it looks like a market that's going lower to me, technically.

The problem I have with why I'm not like really aggressively short or moderately short, and I don't mind being aggressively short. I know that's not for everybody, but I will be aggressively short in certain situations. I think that's because in 2000, I made a lot of money being short. So I have this...

I love-hate relationship with being short. So that's kind of why I think if I were to sit on the couch with Charles Harris' therapist, maybe I need to get the therapist's number sometimes. Get the number. I think so, yeah. But I think that that might be why I'm attracted to the short side sometimes because of the year 2000. Yeah. Anyways, sentiment is...

is so poor, like consumer confidence is very poor where people see the stock market is like the lowest that's been in years and years and years. And historically,

uh that is that's when you get that type of sentiment that occurs at at or near stock market bottoms right as a contrarian yeah people get bearish they they they don't get bearish and the market goes down they get bearish because the market got went down yeah and they get even more bearish the more it goes down so at some point it it it it kind of gets capitulatory a little bit so it

there's a dichotomy in the market here that's very strange to me. I find it very strange that people have gotten so bearish, so close to all-time highs. S&P is what, maybe 8% off of all-time highs? Let's check. 7.3%. Yeah. This is a very unusual period for me when I think about sentiment in my career and

Which is like 30 years long. Yeah. And how usually when you get this kind of set, it's like the 1998 example we talked about. You know, the market's down 20, 25% and sentiment at that point was really negative, including me. I was really negative too, right? Right. I was right there with everybody at that point. So-

A little bit different in comparison. Yeah. A lot of cross currents. Yeah. So I would say...

what's the right word? Um, a lot of it depends for me, Ali on how, how well you're doing. So like if you're, if you're up, if you're down two or 3% for the year, I think you need to play it really close to the vest. If you're up 22% for the year, for whatever reason, and you want to risk a little bit, then I think you've kind of earned that. Right. So, uh, but

In a vacuum, technically, I'm not a big fan of the action. Yeah, I mean, I think today's high becomes very important. If you are shorting, you know, just like how we look at reversal lows as a stop on the long side, here would be the level short.

for shorting, I think. And also, if we can write ourselves, I think we want to see the S&P getting back above the 200-day line, staying above that level. So today's high, the recent highs last couple of days feel pretty important here. I would say same for the NASDAQ, right around that 21-day line. So we'll have to see how the next couple of days and weeks play out with the tariff

situation continuing to unfold. So we'll be nimble. We'll put into practice what you said, Scott. I think quickly, let's get your lightning mode take on a couple of stocks. We did mention you would cover a China name and that is Alibaba. So why don't you walk us through the thinking here with Baba? So technically it's broken out, right? It's up 28% from the cup of handle. But what was happening was

As the US was starting to come down, it was like the money had to go somewhere and it was slowly starting to creep into these stocks. You can see that move up from 80 to 100 and then it builds the handle. That's where you were engaging. Yeah, somewhere in there is where... I also like the fact they've been in a bear market for a long, long time. Now, the whole macro story...

You drive yourself crazy trying to trade the macro. So you don't even want to try to trade the macro. The macro is fun to read and all that. But to trade it is I don't find that would ever be profitable. It sure hasn't been for me. So technically, it started to set up.

You'd been in a bear market for a long time. And then the sponsorship that we talked about earlier with Tepper and other funds that I follow had a position in it. So, um,

I had a handful of them. There was JD, Futu, Baba were the three that I tried. And slowly but surely, this one acted the best. And so it kept me in, whereas the other ones... Right. JD never really went. And Futu went pretty good, but Futu got a little... It just became very aqua-like to me. It just was too hard. So I kind of gave up on that one. And JD really never moved. So...

So that's, I let the market pick. And so this has been the best one. Now it kind of, yeah, it kind of broke out of a, you know, like this, this little mini pennant here and it should have kept going and didn't. So normally that would be a sell signal for me. And I did reduce into that.

Um, but I do have, I do have a, this is my, I think I have two longs. This is, this is one of them. And it's probably, uh, I would have to look at six or 8% positions, something like that. Yeah. From a really good cost basis as well. Uh, so where do you get out and where do you add?

Um, so I actually thought about adding today from that relative strength standpoint, there was a time today where the stock was blue and the mark us market was red. And so I really was tempted to, you know, in fact, I think I did add like, like I talked about, I think I'd put a hundred shares across all the accounts.

know boom 100 100 100 and just because it was blue it was up and the market was red it wasn't there wasn't any buy point but that type of relative strength and it turned out to be a a bad buy but it didn't hurt me that much there's only 100 shares across the accounts and

And I tend to do the same thing across all my accounts. I'm all in in this game, Allie. Most of us at IBD, if not all of us at IBD, we eat our own cooking. Absolutely. I have it in my IRA, my Roth IRA, my kids' Coverdales, my wife's Roth IRA, my margin account, et cetera, et cetera. So if it can get above these last few highs, what's that, maybe 137-ish, I think I might try.

try again and take it to like a 12 or 15% position.

With the idea that if it undercut those lows again, I'd probably have to move on. I'm hoping it can just sit here. And I really would love that 50-day to... Yeah. I want them to meet. Yes, that would be ideal. I don't know if that's going to happen because the market doesn't always listen to what I want. But that would be ideal scenario. Yeah. Okay. And then lastly, let's check out Hood. This is Robin Hood. It is...

a stock that can move a lot day to day. So, you know, when that works in your favor, that's great. It also has strong fundamentals, but the setup needs a little bit more work.

Yeah. So this is like, okay, so if you're a traditional O'Neill IBD methodology, you're looking for a base. And this isn't much of a double bottom. I think you could maybe make something up on a double bottom on a daily, but it doesn't really qualify. But you could.

So sometimes how bad I want to own the stock, I might manufacture something like that. But reality is that if the market writes itself and this company keeps hitting on all cylinders, what's appealing to me across the bottom of those quarterly earnings and sales, those are tremendous, right? Triple digit sales, triple digit earnings.

They seem to be doing everything right. I don't have an account with them. I did try them many moons ago when they first were an app. So I haven't kind of kicked the tires, so to speak. But on the surface, the numbers look very good. So you'd be waiting for some type of cup with handle. And that could take weeks to months. And so you just have to be patient. Mm-hmm.

Patient, nimble, incremental. Any other words to end on here, Scott? Patient, incremental, nimble. No, those are all good ones. Flexible. Is that the same as nimble? You know, it's related. Yeah. But I think that's a good one too.

Yeah, I think you really want to be... Because of the mindset, right? You have to be flexible with your mindset. Don't want to get too bearish. Don't want to get too bullish. I couldn't agree more there. From experience, you don't want to be on either side of the fence. There's another famous Wall Street saying, there's no bull side or bear side. There's just a right side. So let the market tell you which way is the right side. And if the right side is down...

For 89.9% of the people on this call, that just means just don't get hurt. Just be as lightly invested as you can. If you're, you know, you're...

Stay mostly out so that when the time does change, you're ready for it. Because the big money is made on the long side, those bull cycles. If you want to be short, you might make a little bit here and there. But honestly, the big money is made in the next bull cycle. So be prepared for it.

Great words to end on. Scott St. Clair, Senior Manager of IBD's Premium Product Group. Check him out on IBD Live on Mondays, starting 10 minutes before the opening bell. Thanks, Scott. Great chatting with you. Thank you. We did 55 minutes. Yeah, under an hour. We'll take it. Good stuff. Thank you, Scott.

And thanks so much, everyone, for tuning in. Next week, we've got Brian Shannon. He's a trader at CMT of Alphatrends.net. Always love hearing from Brian. Love his perspective. He's just sort of a, you know, no messing around. Don't buy stocks and downtrends. Look for the short-term trends. Love the way that he looks at stocks. So that is what's coming up next week.

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.

Investing in the funds involves significant risk and should only be utilized by investors who understand the impact of leverage and actively monitor their portfolio. They are not designed to track the underlying index for more than a day. Before investing, carefully consider a fund's investment objectives, risks, charges, and expenses contained in the prospectus available at direction.com. Read carefully. Distributor Alps Distributors, Inc.