Trading U.K stock market using Mark Minervini strategy

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14th Dec '18 by unwise2

1516 comments 108970 reads

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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About the Author

Unwise2

Premium Member

1516 comments

Rusty2

14th Dec '18

I agree not many shares are coming up on my screen. There have been 3 UKL ones, Ab Dynamics (LON:ABDP), Sopheon (LON:SPE) and Persimmon (LON:PSN), Ab Dynamics (LON:ABDP) has dropped off due to the spread being too wide according to Stockopedia figures, around 6.6%, actually this morning it's only about 2%.

After a market correction what does Minervini say about going back in, does he wait until the 50MA has been overtaken? Many shares have fallen about 25-50%. It's quite tempting to buy some. I note Stockopedia's 90-100 SR have fallen back considerably since June, gone down from 156% to 119%.

unwise2

14th Dec '18

I watched SPE for ages, it created a base/VCP but the final contraction was too wide for me before it broke out above 1030p.

Why would Persimmon appear on a Minervini screen? It's way below the 200DMA.

Rusty2

14th Dec '18

Sorry it's not Persimmon it's Pearson, Pearson (LON:PSON), must have been a typo.

Howard Adams

14th Dec '18

Hi

My MM screen which has some quite testing EPS forecasting tests is not getting any hits for UK, Europe or US at the moment, unsurprisingly.

If I suppress my EPS forecast tests however, UK returns one hit Colefax (LON:CFX). Then three hits in US £PG £CLX £CHD (US tickers do not do a full display, I'm afraid).

I worked with my screen from about November 2017.

In general I perceive MM's work is much better suited to the US market whereby volumes are much larger and quarterly reporting the norm. I sense some aspects of his work is less transferrable directly to the UK market.

Clearly though many of his wisdoms about investing are very transferable, extremely sensible and useful. I have benefited greatly from his simple rules about exiting a trade which is going against you.

With regard to my portfolio I went 100% cash a few weeks ago, krept back in to 25% invested and retreated again to 12% invested. YTD I am -3.60% against the FTSE 100 (which I track against) which is -10.54% as of last night. I invest UK, US & Europe in general but I am not holding any European stocks at present.

Regards
Howard

Rusty2

14th Dec '18

Colefax (LON:CFX) does not have any EPS forecasts, this is a problem with screening, if some of the information is missing or incorrect it does not get selected. Also on my screen it fails because it's within 30% of it 52 week low. I have more in Euro, 8. I don't have USA.

ISAallowance

14th Dec '18

From monitoring his twitter feed for a while, my impression is that he scales back in as setups meeting his criteria occur - i.e. he is largely guided by his setups and stop losses rather than the wider market.

Given that he often says that the new market leaders often emerge early from the remains of a bear market or correction I very much doubt that he waits for the market to regain its 50MA if good individual setups are occurring above their individual 50MAs.

Howard Adams

14th Dec '18

Hi Herbie

Yes missing data is an issue I agree.

As per your point about the MM's rule of within 30% of 52 week low that is one of the MM rules I think is too harsh for the UK market whereby price swings are generally less than those in the US with their huge market caps and huge volumes.

I use with 15% of the 52 week low.

But I also test for also being with -2.5% of the 52 week high to verify that I have picked out a price which is 'up there'. With experience I sense -2.5% is a little harsh and I often suppress this to see what comes up and look at options manually.

Having looked at Colefax (LON:CFX) I have just bought a very small toe in the water holding. But it has a big spread on HL. According to IC two institutions hold 44.70% of the shares.

Regards
Howard

Rusty2

14th Dec '18

Colefax (LON:CFX) does look quite interesting I will have do some more research. Do you why the shares shot up recently, I can't see any news?

I would have thought the price swings would have been greater in the uK with smaller more illiquid companies? It's true Minervini does mostly invest in US mid caps, which if in UK would be considered large caps. I use within 25% the 52 week high.

Howard Adams

14th Dec '18

Hi Herbie

Ref Colefax (LON:CFX) recent price swing, I am surmising it's because they are doing better business in US and Europe and the value of sterling has dropped so much that these revenues will give a lift to results once they translate. I think the results are Feb.

Just my conjecture.

Regards
Howard

Benson212

14th Dec '18

"After a market correction what does Minervini say about going back in, does he wait until the 50MA has been overtaken?"

Minervini answers a host of similar questions in his book https://www.amazon.co.uk/Momen... This book is like a bible to me, every question that I have on momentum trading and investing is answered in this book. I would highly recommend. In Chapter 6, he was asked similar questions which might help answer yours.

In summary, he believes you should always be looking at individual stocks. Stocks which are holding up or breaking into new 52 week highs are set to be the next market leaders in the subsequent bull market. However, he will gauge whether the overall market trend is under pressure and will scale his postion sizes accordingly. During market corrections he will scale down to 5% postitions per trade and in bear markets he will be in cash.

"Many shares have fallen about 25%-50%. it's quite tempting to buy some".

Don't force trades which don't meet the entry criteria. Discipline is so important. Remember, the market leaders are the growth names which break out into new 52 week highs. Sopheon (LON:SPE) , Ab Dynamics (LON:ABDP) and Bioventix (LON:BVXP) are on my watchlist as both technicals and fundamentals align. When market conditions improve, I'm likely to scale into them aggressivly.

Rusty2

14th Dec '18

Thanks, I don't own his book yet, that link is only for a Kindle edition, I don't know why his book is not available in the UK as a book, I have asked Minervini but did not get any response, others have also been asking. I see on his latest tweet he is doing what he calls pullback buying, so it's not all 52 week highs.

I do own Sopheon (LON:SPE) and Bioventix (LON:BVXP), I missed Ab Dynamics (LON:ABDP).

unwise2

14th Dec '18

The main aspect of Minervini's method that doesn't translate well to the U.K is him very rarely buying shares under $12, in the U.K that would limit your selection pool heavily.

I personally restrict my screens to a minimum Mcap of £20m and I won't trade any shares that are very illiquid. I usually buy a maximum of 10% of the last 50 days average volume so I can get out quickly if things go wrong.

I once asked Mark (via MPA) what the minimum MCap he screens for, his reply was $25m.

Mechanical Bull

14th Dec '18

It is true that Minervini does not always buy at the 52 week high, but he does always buy into a long term upward trend and with the price moving upward through a 'pivot point'.

The ideal set-up is where the price action is contracting over some months or weeks within a chart base and daiy volume is declining (especially on any pullbacks). The buy signal is when the price moves up through the most recent resistance level on higher volume. The theory is that this process of contraction shakes out any weak holders. Once all the weak holders are out, then the stock is primed to move up on any demand. If the price then moves up on volume it means that institutions are accumulating the stock. This is the safest and most profitable time to buy because this institutional buying will tend to drive up the price further over subsequent days/weeks.

However, it is important to say that Minervini would never buy a stock thinking "this stock price has just gone down 25% for no obvious reason and therefore it must be good value." His reasoning is simple - If you buy a stock on this basis and then the stock price falls further then you will feel compelled to average down because your initial buying logic means that the stock is even cheaper. If the stock falls again you will want to average down again (an so on). In short, he believes that buying falling stocks makes it difficult to admit mistakes. He always buys when the overall movement is up.

I have read both his books (on Kindle) several times and I highly recommend them. Initially I found some parts of his writing to be a bit too "self helpy" for my taste but I've come to see that he views success comes from more than just having the right knowledge, but also have the right mind set and a determination to succeed.

mmarkkj777

14th Dec '18

I've recently read Mark's book and I use aspects of his principles now in my approach, plus influences from others (e.g Jim Slater) and some of my own.

I also went mostly to cash in October and am now only around 17% invested. I have 1 European stock, 3 US and the rest UK (I also have 5 funds).

I'd like to invest more and although there are a number I'm interested in, I've been stopped out a couple of times, so I'm rather reluctant to really commit until the market really picks up. Still waiting for the Santa rally too, but I guess the Bexit fiasco may have put paid to that for this year.

I'm also interested in Colefax and have it in my fantasy fund, which I use as one of my watchlists.

One I have bought is T Clarke (CTO), which has been covered on Stocko and a good Video by PI World.

theFireEscaper

15th Dec '18

Great idea to start this thread. Thank you. Would you be able to share your minervini screen publically? It would be most helpful to try and build a consistent approach/discussion. I have two of his books and they are superb. Now looking at the momentum masters book with a view to purchasing it.

unwise2

17th Dec '18

I have tried to build a Minervini Screen on Stocko but the screening tool doesn't have the right parameters. I have gotten around the problem by building a basic screen that looks for any share over it's 200DMA and the 130DMA (I would prefer 150DMA but it's not available) over the 200DMA. I exclude sub £20m Mcap and collective investments. I then manually look at all the charts of the companies to see if any are setting up. I then look at the fundamentals of any of the companies that have made it to the short list.

I also check any new IPO's from the LSE website to see if any are setting up an IPO base. A good example of an IPO base was AVST earlier this year.

I would caution about screening for EPS growth on Stocko, the normalised figures reported by Stockopedia can be very different to what is reported by the companies themselves. A good example of this is ACSO, Stocko currently has EPS growth for 2018 as 291% but if you check what ACSO reported for 2017 forecast EPS growth is actually 30%.

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Trading U.K stock market using Mark Minervini strategy

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Unwise2

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