AAII Columbus Chapter

I admit I am ignorant so be kind to me.  I am also fairly new to individual stock investing/trading.  The advice of the Masters is to invest only when the market trend is up.  In particular Eric Wish, Bill O'Neil and Stan Weinstein have been clear about this.  I have also heard from many others who lament that in 2022 all the breakouts they have tried fail quickly.  I have listened carefully to their advice.

My question is this...O'Neil teaches that 75% of all stocks will travel in the direction of the market.  Don't fight the trend.  Others have said, The trend is your friend..  That said, if 75% of stocks are following the downtrend, what about the other 25%.  Is there anyone doing well by taking long positions in the 25% of stocks that are bucking the trend and doing okay to well in this down market....and I am wondering about more than just energy stocks.  Is anyone investing long in this way, looking for stocks that are generating positive returns and trending above their short, medium and long term moving averages.

I wonder if gains can be made in this way by avoiding all the failing breakouts and just taking conservative positions in stocks like this? 

Any comments would be appreciated.  John

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John Robie
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Hi John!  Yes, in my opinion, there are others who invest (or trade) in a down market.  Are they doing this by being long or net long?  In my opinion, yes, long if they are buying or adding to good businesses stock holdings.  In my opinion, there are those who are net long situationally if they are a technical trader.  If you are holding good businesses in your portfolio, have you considered cover call writing?  O'Neil's book(s) you will notice include 10x or higher big winners with their charts in the back of the book.  In my opinion, the common theme in these charts is the level of patience the early investor needs to have before the breakout and the momentum investing approach kicks in for that individual stock.   Most of these big winners have a period of running flat with no major up or down swing before they finally breakout and start shooting upwards.  My point is, O'Neill advocates buying on confirmed breakouts in momentum, but these stocks already had early investors who, for some reason, bought early and simply waited.   Which is better?  I really don't know.  But in my opinion, both ended up just fine.

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DAVID ROSS
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Original Message:
Sent: 01-01-2023 12:48
From: John Robie
Subject: Investing in a bad market

I admit I am ignorant so be kind to me.  I am also fairly new to individual stock investing/trading.  The advice of the Masters is to invest only when the market trend is up.  In particular Eric Wish, Bill O'Neil and Stan Weinstein have been clear about this.  I have also heard from many others who lament that in 2022 all the breakouts they have tried fail quickly.  I have listened carefully to their advice.

My question is this...O'Neil teaches that 75% of all stocks will travel in the direction of the market.  Don't fight the trend.  Others have said, The trend is your friend..  That said, if 75% of stocks are following the downtrend, what about the other 25%.  Is there anyone doing well by taking long positions in the 25% of stocks that are bucking the trend and doing okay to well in this down market....and I am wondering about more than just energy stocks.  Is anyone investing long in this way, looking for stocks that are generating positive returns and trending above their short, medium and long term moving averages.

I wonder if gains can be made in this way by avoiding all the failing breakouts and just taking conservative positions in stocks like this? 

Any comments would be appreciated.  John

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John Robie
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