Great Charts prioritises chart breakouts, which means leaning into strength when making recommendations

June 22, 2021

I am starting to become more excited about the immediate stock market outlook. There willl be more to say about that below but first I want to talk about what I see as the primary role for Great Charts in the Quentinvest ecosystem.

Great Charts for Quentinvest is the new name for Chart Breakout, which gives you a strong clue to what the publication is mainly about. I am looking for stocks with 3G characteristics – that requirement will never change – which are making chart breakouts.

Beauty is in the eye of the beholder. Your idea of a chart breakout may be different to mine. In Great Charts you get to see my selections.

Great Charts has become a part of what I am starting to think of as the Quentinvest ecosystem. This also includes Great Stocks, QV Share Alerts and for subscribers who take the full package QV for ETFs alerts.

Within that I have also broken QV Share Alerts and QV for ETFs into alerts for shares and groups of shares that I like for whatever reason including being new additions to the portfolio, which I am continually refreshing with new ideas.

It also includes buy signals based on my programmatic strategies and what I call buying the green. Programmatic buy signals are primarily based on moving averages. I look for golden crosses where monthly or weekly moving averages cross higher after a period wen they were falling.

Buying the green involves monitoring candle stick charts and issuing buy alerts when a green candle follows a red one.

If this all sounds impossibly complicated the good news is it works for me and there is no need for subscribers to become bogged down in the details. The whole strategy could be summed up as (a) selecting shares to go into the portfolio and (b) monitoring the price action to identify subsequent timely moments to buy the shares. This could be either adding to an existing holding, sometimes called pyramiding or opening a position for the first time, which I sometimes call climbing aboard.

As I keep saying the strategy works in part because of its one decision core. We only buy. We almost never sell. I see sell signals on the charts all the time. These could be programmatic, when the moving averages turn down or selling the red, when a red candlestick follows a green one. Sometimes the signals work very well but overall my judgement is that they lead to a trading mindset and in the long run that does not work.

The Quentinvest strategy is totally pragmatic. Investors who never sell do better, I believe much better, than those who do. The underpinning for this is good stock selection but that I believe is the forte of Quentinvest and the best thing I can do for my subscribers. I pick most of the shares that over time go up a lot, the Amazons and the Netflixes and most of the stocks I pick go up. Allied to a never sell approach and where possible a policy of adding to holdings on subsequent buy signals it is a powerful strategy for building a portfolio that over time delivers large capital gains and often works well on the income front as well.

So, back to Great Charts. As subscribers know I have various tables of past recommendations, which form the heart of the QV strategy and enable me to monitor performance. I use my tables to tell me that I am doing a good job for my subscribers and don’t need to retire yet. I even have a master table to which I add shares in companies that look to have 3G characteristics but have not yet been recommended. These so often end up being recommended at a higher price that I am considering having a section in the QV eco system for new entries to the table.

When I am about to write Great Charts I go through the master table looking for chart breakouts. I am influenced by what already I know about the shares in the table. For example, the most recent issue of QV for Shares featured 10 of the world’s biggest technology companies. My impression is that they are still full of running like the technology revolution they are spearheading and I expect their shares to keep climbing.

I also suspect that they are like an early alert system telling us that technology shares generally may be about to head higher. This is exciting because technology shares form the heart of the QV portfolio, which is stuffed with fast-growing technology companies. It is amazing how many of these companies are delivering supercharged growth in some key metric, often as high as 100pc or even more. Indeed, I am also running a series in QV for Shares looking at some of these explosively growing businesses, which are exciting for their founders, their managers, their investors and their employees. There is a horde of super-exciting companies quoted on global and especially North American stock markets but also elsewhere. I want subscribers to own as many of them as possible.

These shares are volatile. Early investors have huge profits. They benefited from lockdown which sent digital transformation into overdrive. Profits are deferred into a distant future so they are vulnerable to rising discount rates when interest rates rise and investors are always scared that even a slowing in growth or a cautious statement will make the shares collapse.

Investors should remember that these are classic ‘win in the end and win big’ stocks. You have to hang in there, have faith and ideally use that volatility to add to your holdings. However I never advocate buying into weakness because you never know when a business is losing the plot. I prefer always to buy on buy signals, what I sometimes call leaning into strength.

This is important because Quentinvest is all about backing winners and allowing losers to fade into obscurity. It is a form of capital allocation rather like what we see in the broader economy. I always want may money to go where the action is even if this upsets my subscribers.

A lady cancelled her subscription the other day partly on grounds of age but also because she didn’t like the fact that I recommend so many US shares. This is a perennial complaint and one with which I have very little patience. Come on guys, which would you rather hold, Netflix, up 1,500 times in the 21st century or Barclays, down by 66pc on its level in 2000. The answer is surely so obvious that no-brainer hardly does it justice.

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All trading involves risk. Losses can exceed deposits. Quentinvest provides information only and subscribers should seek financial advice before acting on any recommendations.
Past performance is not a guide to future performance.