Trading U.K stock market using Mark Minervini strategy

Friday, Dec 14 2018 by
53

Mark has been interviewed by Stocko a couple of times and from some of the comments on various threads there appears to be a few of us using his methods to trade the U.K stock market. I thought it would be useful to have a dedicated thread where we can discuss how well its working.

Personally I have been in cash at least 50% since the end of May and at 95-100% since early October. Getting out of stocks as they roll over has protected me from any real damage.

I'm struggling to find many setups I want to buy so I am developing my "sit out power"

How is everyone else doing?


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As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. The author may own shares in any companies discussed, all opinions are his/her own & are general/impersonal. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested.


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647 Posts on this Thread show/hide all

HumourMe 6th Jul 628 of 647
1

In reply to post #489796

I do hold Kainos (LON:KNOS), bought at 497p 14 March, 2019, the problem with screens is you don't know when the shares would first qualify and it is quite difficult to work out. I think it is a bit extended now, be interesting to hear some other opinions on it.

I entered a few days later, however, exited 1st May for around break-even as I'd moved my stop up and it was hit (the green and red dots). Initially looking at the candle chart everything looks healthy, but adding volume shows a spike with little price movement which could mean supply/distribution. So that is a warning sign. Large volume without price movement in any direction is suspicious.

5d20cfc320177knos.jpg

Looking at a point and figure chart (log based, full range of OHLC price information, 2.5% boxsize, 3 box reversal - unfortunately Stockos version can't replicate this) shows a brief (healthy) reversal with a current 'demand' column. A new low would be made at 617 (unusually, for the same horizontal space less time is shown reflecting intra day volatility). I justify this as Minervini mentions them in passing on p192 of 'Wizard'!

5d20d266e683apnf.jpg

Moving back onto more standard approaches and looking at its relative strength everything seems OK, although over the last month it is flattening (I used a FTSE 250 ETF as the benchmark). However, it has done this before, but on lighter volume and weakness is post spike.

5d20d59beeaa6rs.jpg

Personally, if I were still holding, I would have moved my stop to around 590-615 depending on how the rest of my portfolio was doing. I tend to be too aggressive with stops which I'm attempting to address, so take that with a pinch of salt.

I didn't intend to comment on the other mentions but was on a roll so ...

AVEVA (LON:AVV) is similar in my opinion. Entered 15/3. It has hit my target and my stop is just below its last reaction low. Volume spike on 21/6 a warning. I'm happy to hold or sell .

Ab Dynamics (LON:ABDP) looks like it is consolidating.  Certainly some tight days and volume drying up. Ah - AIM. Knocks it out for me. Otherwise I'd be interested.

Games Workshop (LON:GAW) is on my PnF breakout list, although it mostly qualifies for this due to price action on the 21/6 on heavy volume. Prior to this and the subsequent reversal it would have been 'high pole warning'. I'd like to see more congestion in a range, before considering a potential buy on a new high (compared to KNOS much more time is captured).  

5d20ddf82a56bgawpnf.jpg

Is the volume spike a warning? There does seem to be some heavy days with little price movement when candles are used for illumination (recent heavy days illustrated with vertical red lines):

5d20e427d06b7gawc.jpg

 Greggs (LON:GRG) doesn't currently offer a safe congestion based entry. I got thrown out on 2/5 for a loss, so my timing was very poor on this one. It is steadily climbing though, so I could understand if a trade plan was to buy with a tight stop and lots of hope, before trailing a stop. I'd suggest that this isn't very SEPA though.

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cidunn 8th Jul 629 of 647

In reply to post #488681

Solid State (LON:SOLI) - again forgive me noobness, but did this just breakout today on huge volume?

All the best,
CID

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HumourMe 8th Jul 630 of 647
1

In reply to post #490841

Solid State (LON:SOLI) - again forgive me noobness, but did this just breakout today on huge volume?

Not quite. It reached its previous high and it looks like a lot of people took the opportunity to exit.

5d23a715a6634solid.jpg

I think a breakout would need a convincing close above the previous high.

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HumourMe 10th Jul 631 of 647
2

In reply to post #489576

Just as a quick follow up to this comment:

I then tried adding to the screen the additional criteria of Spread < 100 bps and Risk Rating = Conservative, and that gave me about 14 candidate stocks, all of which look to me like stocks I might seriously consider for my portfolio.

For my holiday (re-)reading, I've been slowly going through Minervinis books again. I've picked up several things that I'd previously missed. One quote from Think & Trade Like a Champion, p47 concerned volatility...

If a stock is highly volatile, with dramatic gyrations up and down, it's going to be a difficult issue to trade using a relatively tight stop loss to control risk. ....
A risk-first approach would tell you to find another candidate.

So your thinking is in perfect alignment with Minervini :-)


On p39 of 'Champion' under the summary of 'violations soon after a breakout' the 4th bullet reads:

More bad closes than good closes.

I may have missed it, however, I don't think that these are defined, except with reference to two charts. I've interpreted these as determined by proximity of close to high/low. Does anyone have a formal definition or can anyone point me to the Minervini one?


Another thing I picked up (which may be important if we see a bear market) is the need for patience. So while waiting for the perfect set up I thought that I would throw in an additional question for anyone:

Does the trend template definition change materially between the two books?


Finally, I thought that I would take this opportunity to comment on the relationship between the two books. They are complementary and due to repetition of key parts; also standalone in that reading 'Wizard' is not required to understand 'Champion'.  If you got value from one of them I would recommend the other. Choosing just one though, would be a difficult recommendation as it depends on where you currently are on the journey. If pushed though I would recommend them in the order published, i.e. Wizard first. 

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HumourMe 10th Jul 632 of 647

In reply to post #490226

Having written all that it sounds like I know what I'm talking about :-) - but actually I'm still learning all of this. It is one thing to know the theory and another to successfully put it into practise. These are my thoughts, others may have a different view, especially on the interpretation bits.

100% agree with this sentiment. I don't think the learning ever stops. I'm not even sure that, apart from risk management, what I think I know about technicals is relevant. Balanced against that I similarly doubt my 'knowledge' of fundamentals.

The 30week MA was promoted by Stan Weinstein and Bill O'Neal, both of which MM used as inspiration for his style. 30 weeks are roughly 150 trading days, so very similar to a 150day MA (but as it's a weekly chart you have to make the translation to weeks).

Stan Weinsteins was possibly a Mansfield 30 week weighted moving average link. This approximates to a 21 week exponential moving average. I've no idea how to equate this interpretation to days. However, the broader point stands, in that for trend following, make sure that the longer term trend is up, determined by some measure.

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unwise2 12th Jul 633 of 647
5

The U.K continues to be a "hard penny" environment. Over the past 3 months my win loss ratio has been 33.3%/66.6%.  My gains have been bigger than my losses and my position sizing has been small so I am effectively at breakeven.

Avast (LON:AVST) has broken out of a 2 month base after setting up a handle, it has also created a 9 month ascending base. It's not an ideal situation because volume didn't contract very much in the handle (volume was half 50d average the day it made it's low in the handle).

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herbie47 12th Jul 634 of 647

In reply to post #492236

I agree about the UK market this year, although I have missed quite a few, I'm finding the US market easier with more opportunities.

I have looked at Avast (LON:AVST) before, debt is still too high for me.

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llwydiaid 12th Jul 635 of 647
1

Avast (LON:AVST) I've been stopped out a couple of times in the past year so I'm staying on the sidelines. Not the easiest of charts to read.

5d28430a3b938AVST.png


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unwise2 12th Jul 636 of 647

In reply to post #492271

Agree Avast (LON:AVST) is a bit tricky, I bought some yesterday and I am using staggered stops.

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herbie47 12th Jul 637 of 647

Any views on IG Design (LON:IGR) that I think a few of us bought a while ago, I see it is now below the 50MA, it's down about 6%, is it worth holding or not?

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unwise2 12th Jul 638 of 647

In reply to post #492296

Tough to call on IG Design (LON:IGR), it appears to have bounced off support around 574p, its 2019 EPS growth was good but it appears to be stuck in a trading range after very briefly breaking out.

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nicobos 12th Jul 639 of 647

In reply to post #492271

Avast (LON:AVST) popped up on my watch-list as well. Just so many fake-outs and been quite volatile so I don't feel comfortable with this breakout.

Would feel better buying it on 30 MA week support line as it is in a nice stage 2 !

It's been slim pickings in the UK market for MM breakouts...macro uncertainty after the summer also means it's likely to be a challenging momentum market for a bit longer.

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llwydiaid 12th Jul 640 of 647

I agree about the "slim pickings" and "hard penny" comments about the UK smaller companies market. I've had more success with international investment trusts e.g. Montanaro European Smaller Companies Trust (LON:MTE) which shot out of a lovely cup and handle accompanied by a closing of the NAV discount.

5d286b4301819MTE.png


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unwise2 12th Jul 641 of 647

In reply to post #492331

Just so many fake-outs and been quite volatile so I don't feel comfortable with this breakout.

I've been stopped out a couple of times in the past year

To my eyes Avast (LON:AVST) has only formed one handle (end of Feb) that has failed in the past 12 months, the break out in May never formed a proper handle and failed immediately.

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Edward John Canham 12th Jul 642 of 647

In reply to post #492366

Avast (LON:AVST)

I think this is simply moving up as and when positive news comes out. The market is still cautious given it's short quoted track record.

I bought some on the trading update in April, and to date I can't complain.

Phil

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Glorenfeld Thu 1:27pm 643 of 647

One I've mentioned before, but Trans-Siberian Gold (LON:TSG) is possibly setting up a Power Play/High Tight Flag.

Up 100% since Feb, or again since mid April. Flag starting at Jul 12th. No evidence yet that the pattern will complete, but if it gets back to the 85-87 range in short order, then I'd say it's looking pretty good.

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andrea34l Thu 2:20pm 644 of 647

In reply to post #494076

Sorry to be such an ignoramus, but what does "a Power Play/High Tight Flag" mean? I hope it's positive, as I've just bought them :-/

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cidunn Fri 8:36am 645 of 647
2

In reply to post #494101

Hi Andrea,

I came across this thread
https://www.stockopedia.com/content/minervini-power-play-242073/

"Essentially they are pure momentum plays with little regard to fundamentals.

To qualify the following criteria must be met:

1. Stock price up 100% in less than 8 weeks, usually after a period of dormancy.
2. Stock usually moves sideways 3-6 weeks with corrections of max 20-25%
3. Days before the breakout volume will contract considerably."

All the best, CID

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Glorenfeld Fri 10:07am 646 of 647
1

In reply to post #494341

Which just shows that you should refresh your memory from time-to-time, as I had extended the initial doubling period in my head! Now not sure that Trans-Siberian Gold (LON:TSG) qualifies, as the doubling took longer than the 8-weeks allowed.

I would also say that in the case of Trans-Siberian Gold (LON:TSG) , I think the fundamentals also look good (assuming gold doesn't tank).

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unwise2 Fri 11:10am 647 of 647
2

In reply to post #494426

Now not sure that Trans-Siberian Gold (LON:TSG) qualifies, as the doubling took longer than the 8-weeks allowed.

Mark frequently says trading is an art not a science. The rules* he has written in his books are slightly fuzzy. If a stock moved up 95% in eight weeks or 100% in ten weeks that doesn't completely rule them out, it's up to the individual trader to decide how far they are willing to stretch the rules.  The most successful power play I have traded so far took 13 weeks to double.

I don't really have an opinion on Trans-Siberian Gold (LON:TSG) as a power play, it's success is tied to what happens to the gold price.

* except maximum 10% loss and buying under the 200dma.


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