Advice please from those with more experience on using the Mark Minervini strategy

25th Feb '21 by Corringham

51 comments 4068 reads

Hi All,

I’m hoping to get some advice if anyone would be so kind! I have posted something similar in the “Trading U.K stock market using Mark Minervini strategy” thread but it looks to have been archived.

I’ve historically been an investor vs trader, but having read a lot of books, the Mark Minervini trading style (influenced by Weinstein and ONeil whose books I’ve also read) seems to make the most sense to me. I like his combining of technical analysis (triangulating price trend, high probability chart patterns, and volume analysis) with traditional fundamental analysis (picking strongest performers in strongest industries with improving results), with strict risk control.

I have therefore recently started trading the UK market using the Minervini approach. My initial performance is poor (I’d use expletives if I could – but guessing a moderator would block this post if I did!).

Most of my stock selections have been Small Caps and AIM stocks, thinking they would offer greatest upside (a £100m turnover company can double it’s turnover quicker than a £1billion turnover company), however the Market Makers seem to whipsaw me out of trades frequently. Then there are the spreads to contend with, which turn say a 5% stop loss into a much larger loss.

Based on my recent experience I have some specific questions if anyone with experience with this approach would be so kind to help a newbie out!

Are there particular UK stocks that you flat out avoid, i.e. based on average trading volume/liquidity, based on industry, based on size i.e. market cap no less than X, based on exchange, i.e. no SETSqx Market Maker stocks, based on spread no larger than X?
Do you use the Minervini strategy on UK stocks as your main trading strategy or are setups too infrequent?
Do you trade as soon as breakout occurs intraday using volume confirmation by extrapolating volume during the day so far. Or do you trade at the end of the day when you are sure the breakout has held (but not extended by say x% from the buy point) and volume has confirmed the move.
Do you place stop losses into the market on stop orders good till cancelled, or do you monitor the market with alerts to tell you when to sell out.
How strict are you at applying the Minervini selection criteria?

I feel that the trading style should work…

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Corringham

1st Mar '21

Great, thank you very much for elaborating, makes perfect sense!

Awesome, thanks very much, I'll check those options out!

Wurdoomed

5th Mar '21

Hi Gus, I am a new convert to Stan's work, and wondered how you sieved Stocko to identify potential Stage 2. I am ploughing through multiple screens now and would really appreciate any screening advice you might have,

thanks

gus 1065

Hi WD.

Re. my Weinstein screen, this was created in the “old” version of Stocko which had the benefit of including a lot more moving average indicators than the ”new” version. Given his method relies heavily on price/volume patterns, these are quite key. I don’t think it is possible to recreate the same screen/set of rules in the new Stocko version. Not sure if you can access the old version, but if you can here is a screen shot of the rules I used:-

The list goes on a bit further to add some non-Weinstein metrics that I use to refine further the potential pool for a short list to do more research into. If you’re interested, here is a screen shot taken just now of today’s stage 2 candidates. You may want to have a look at these to see how they stack up with your own view on what a stage 2 candidate should look like. Good hunting.
Gus.

Rusty2

Hi Gus, Thanks for that screen, I only use the old site, do you have a link for that screen, please?

Warning if you go into edit on the new site, you may lose your screen, it happened to one of mine, I did not even change anything, the rules are still there but it won't select any shares anymore. Fortunately it was not one of my main screens.

Hi herbie47.

Here is the link - simply a cut and paste of the address. Hopefully it will work for you.

https://www.stockopedia.com/sc...

Gus.

Thanks Gus, that worked for me.

jouke

6th Mar '21

Hi Corringham, I am also a trader/Investor who follow Minervini’s methodology, with the differente that I online invest in U.S. stocks. It would be nice to share experiences. I have made this screener based on his Trend Template: https://www.stockopedia.com/sc...

It has been about three months since I started with this method, so I am also still learning. The last couple of weeks have been tough since momentum trading seems to have taken a downturn. Overall I am still on a small profit. If you decide to take up US stocks as well I would gladly like to hear about it.

Best, Jouke

7th Mar '21

Thanks Gus, very helpful.

I am trying to stick with the new layout, but as you say there are gaps. I am trying to supplement the charts with other data, predominantly AJB YouInvest, but it remains far from ideal. All in all my (albeit amateurish) findings so far seem to be that there are not a huge amount of St 2 breakouts out there, and that would tend to align with the narrative that we are currently in bubble territory....or at least all hanging on trying to work out what the effects of covid will be when it eventually gets reflected in Stockranks.

thanks again,

ricardomontalban

I have been trying to make a version of this screen, thanks for sharing, mine was much more rudimental than yours!

Hydro31

I also tried setting up a minervi style screen (see below) It returns quite a concise list of about seven stocks, you can widen the search by taking of EPS estimate upgrade in last 3 months.

I then sieve through the stocks on the hunt for stocks that are delivering profitable growth consistently and select these for further research. I'm wary of stocks that are operating at a loss. Some examples that it returns that I like out of the seven or so it suggests included are (march 2021) -

SLP - Global trend towards EV and mining

SDI - Global trend in healthcare

Historically both have a good history of earnings growth and the share prices have been in the minervi style stage 2 for some time. This doesn't mean they are not about to reach the top of the cycle but I think the future looks good for both, so I opened a position with SLP and im watching SDI looking for an opening. One of the problems is that they just seem to go up, so they are always looking quite expensive. But thats a minervi stock for you.

Over 3 years all of the stocks it returns seem to provide a steady share price increase, but research needed to understand where they are and where they can go.

11th Mar '21

Thanks for this Hydro31! For UK stocks I've been using Sharepad Pro to do the initial screening using the Minervini stage 2 template (lacks the IDB RS rating), and I've then been combining with a stocko quality rank to give me the fundamentals, I'm noticing a lot of the same stocks come up as your review, however I'm finding the majority of spreads rule them out, and then of course the chart needs to be displaying a viable pattern. Means I'm finding hardly any UK candidates. I'm getting plenty of Powerplays and new IPO low cheats, but again the spreads are prohibitive. I've therefore now turned my focus to the US market, while keeping an eye on the UK. I did have SLP when it broke out 16/02, however I failed to realise earnings were released 4 days later so I sold out 4 days later as Miniervini doesn't hold into earnings unless he has a profit banked... since gone up 10%... oh well... I liked SDI also but the spread is too high. Thanks again for sharing!

Hi Jouke thanks very much for commenting and sharing your screener. I haven't got US stocks unlocked on Stoko yet, but I'm experimenting with different platforms so I might buy the US package on here and then I can use your screener. As I just mentioned to Hydro31, I've now turned my attention to the US over the last week or so.

I took the 3week introductory trial with Marketsmith which means I can use the full MS trend template using the IDB relative strength indicator. It also has chart recognition patterns, and displays the fundamentals and fund accumulation info. I'm only a week in, it's expensive going forward but I'm using it as a learning tool at the moment. The recognition pattern is great for training the eye, although it doesn't track VCP very well so could lead to lots of false buys if followed blindly I'm sure.

I might do another post on here explaining what I'm doing in more detail and seeing if I can get more pointers. For example I've been experimenting with volume analysis on the breakout day and am intrigued how others are getting into trades. My latest thinking is perhaps to setup tiny pilot buys when a breakout is triggered (using STOP market buy orders good till cancelled) to focus the mind, and then I can monitor volume on the day and if it looks above average I'll scale into the position assuming the price does not run away and extend plus 3% past breakout. I did this with ESI a few days ago, I setup a pilot buy which once triggered, I checked the volume of the day and the intraday chart, once I confirmed volume was looking big, I setup further stop orders at 1% and 2% past my buy point, as the stock trended higher and the move looked more and more validated I ended up scaling into the position at an average of 1% past the buy point. So I effectively gave up 1% on the price, but in doing so I was able to validate the volume and that the move up was more likely to hold.

Also interested to know how people are positioning initial stop losses. I'm looking out for the Minervini violations post breakout, but given I'm not experienced yet I'm trying to automate some of the process where possible. I know a lot of this is more art than science, but given my "art" skills are lacking at the moment I'm tending more towards the "science". I've been identifying a SL that gives the trade a good chance, so like 8%, but I don't want an average loss of 8%, so I've been doing a staggered SL, so 1/3rd position with a 3%SL, 1/3rd with a 5% SL, and remainder at 8%, so my average loss is 5%. I did this with GPI this week, got stopped out on a third but the remaining 2/3rds position is heading the right direction.

I've also been wondering about how people deal with market volatility. Minervini says let your individual stocks tell you when to increase and reduce your position sizing and get into/out of the market rather than the indexes. But, given the recent decline in the US markets, surely it would be sensible to avoid trades on some days? I've heard some traders review the VIX volatility index and if it's too high they sit out of the market or trade small.

Any pointers you or anyone else might have would be much appreciated!

unwise2

Mark says the pattern recognition isn't much use for his method. I think Marketsmith offer a cheaper subsciption ($1000 a year) without pattern recognition. I nearly always set a stop based on a technical level, rather than a fixed percentage stop. An example of this would be BARC, if I bought on 15th Feb at 150 my stop would have been just below 144.

With GPI the logical place for a stop for me would be $144.5, since the breakout was at $160 that would be too wide so I wouldn't have taken the trade.

Thanks for that, re GPI, I think it was a VCP 9w 20/13 2T, is the rationale that the 144.5 is at the bottom of the last contraction, and therefore the 13% wouldn't have been tight enough to trade. Does the last price contraction need to be say at least 5-8% so the stop loss can be within 5-8% of the breakout? Do you trade 2Ts or do you require more contractions? What was the pattern you traded off for BARC, on the daily looks like a 3C Cheat but the bowl only formed over 5weeks with the handle in the middle third? Sorry for the questions, but I'm thirsty for all the knowledge I can get!

12th Mar '21

GPI had 3 contractions, the final one was approx 9.5%, see attached. The last contraction doesn't have to be 8% or less, you can use a fixed percent stop but I prefer to use technical stops. I will trade a 2T if it looks right.

With BARC it's a matter of opinion whether the base starts 25th Nov or 24th Dec. Either way it broke above the cheat on 15th of Feb, that's long enough. I didn't actually buy it but I should have. All the U.K banks setup similar bases at the same time, to my eyes BARC was the best one.

sam19

I position my stop just below logical support or if the price has really tightened up I'll place my stop just under the low of the previous day (Peter Brandt's Last Day Rule).

If I'm looking to trade a stock that has wider price action and the logical place to put a stop is 10% away I position size smaller or buy in a couple of stages. Other options are to use the 4hour chart to find a tighter stop or probably the best option is to develop the Minervini sit out power and wait for better opportunities.

The placement of my stop then determines the size of my position. I risk no more than 1% of my capital on a trade. If my stop is 8% my position size is 12.5%. (1/8=0.125). Personally I find 15% position sizes are where I feel most comfortable but occasionally if I can get a 4% stop I will position size to a max of 25% (1/4=0.25).

I have been sitting tight the last couple of weeks building a watchlist of stocks showing relative strength. You can do this by screening for stocks that have held their 50ma or stayed within 20% of their highs. Stocks like DKNG and PENN though I haven't been able to find a low risk entry in either of them yet!

Heres a link to using the MarketSmith RS indicator for free on Trading View https://www.tradingview.com/sc...

Heres a link to a playlist of interviews with traders who have been heavily influenced by O'Neil and Minervini. https://www.youtube.com/playli...

I can see that clearly now with GPI, I was missing the third contraction, thanks very much for providing the marked up chart. I'm trying to train my eyes and slowly getting there! Thanks also for explaining BARC in more detail. Really appreciate you taking the time to help!

This is absolute gold, thanks for sharing! I think position sizing based on SL/equity risk makes total sense and I will adopt that mechanism for sure. I'm going to experiment with Trading View, that's awesome you can build in the MarketSmith RS indicator and rating! I'll work my way through those vids also! By the way I read Market Wizards, excellent insights, including those from Peter Brandt! I ordered the rest of the Market Wizards books last week, will be interested to read the Minervini interview when he was featured in one of the earlier books! Many thanks again for taking the time to provide further guidance, really appreciate it.

16th Mar '21

I think MS have something called volume run rate that might help with confirming volume at a breakout.

Advice please from those with more experience on using the Mark Minervini strategy

Hi All,

I’m hoping to get some advice if anyone would be so kind! I have posted something similar in the “Trading U.K stock market using Mark Minervini strategy” thread but it looks to have been archived.

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Corringham

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