Book Reviews

Book Review — The Wallstrip Edge

The Wallstrip edgeI just finished reading The WallStrip Edge by Howard Lindzon co-founder of StockTwits and creator of the WallStrip video blog — and honestly, I have no idea why I didn’t read it sooner.

If you love trading new all time highs and looking for multi-year trends in tomorrow’s hottest stocks, then check out it out as soon as you can because it’s a great, fast read.

To be honest, I’ve picked this up about 100 times at the bookstore over the years, and probably read most of it crouched in the bookstore aisles.  But I’ve never taken it home.

Until today.

Sick as a dog, laid up in bed and looking for something to read — I downloaded it to my iPad. Good call.

It’s a quick, funny read filled with golden nuggets that make a lot of sense.

Plus, the dude is uber freaking successful and I always say that nothing else succeeds like success. That’s why I like to look at winning charts.  That’s why I immerse my brain in them.

So I can spot a potential winner  — before I even know that I’ve spotted it.

Yeah, that’s deep.

Anyway, even though I don’t always trade all time highs like Howie, I do subscribe to the general tenants of trend following.

Namely:

  1. Price is king
  2. Ignore the news/noise
  3. What looks overbought will most likely become more overbought
  4. Keep it simple
  5. The trend is your friend until the end

Normally, a big winner for me is 30-100%, like this FFN trade, but those can seriously add up if think about the time spent in one of my trades as opposed to the years spent in those massive monster winners.

Plus, trends are fractal. Meaning that a trend on a  60 minute chart looks like a trend on a weekly chart. The only difference is scale.

To give you an example of what I’m talking about, here are a couple charts…

First, a weekly Ross Stores ($ROST) chart that spans 2 years…

the wallstrip edge

Awesome move for Ross — over 2 years.  And that’s a pattern I love trade.  Only I like to trade them on lower priced stocks.

Like this one:

the wallstrip edge

Look at this — a 254% gain in only 3 months. How awesome is that?! Also, this move takes place in a much shorter time. That’s what I like.

Now, to be fair, let’s pull back on the Ross chart and see what the entire move was really like…

the wallstrip edge

1500% in 15 years.  Say whaaaat????

And that’s not even one of the biggest movers in that time frame.  There have been some seriously massive movers in the 3-5 year time span.

1,000’s of percent that make my 30-100% moves look like child’s play.

And I don’t like to play like a child.

5000% Gains Anyone?

So what am I going to do about about my The WallStrip Edge inspired epiphany?  Look at all time highs, of course — for longer term plays.

Like the CMG trade I mentioned in this post, one that was also brought up in Lindzon’s book…

the wallstrip edge

And what about this one:

mnst 5900 2014-01-19 22-38-34

Amazing. Lindzon says (and I believe him) that the natural place to find these monster stocks is on the all time high list. He suggests we check it daily, take note of the general market trend, and make a note of the names that show up repeatedly.

Do this and you will be far ahead of the game for finding the next big thing! He also suggests to stick with the recognizable names as these will become societal trends as well as stock market trends.

Sounds good to me!

So that’s what I am going to do.  I am going to keep a pruned list of all time highs that I think are worth watching and see if we can get the hang of this.

New Highs on the Internet

After reading The WallStrip Edge I did some hunting around online (and on my hard drive) and I found a few awesome resources for trading new highs and the research that goes along with it. Here they are:

Why Can’t Most People Buy the All Time Highs by Thomas A. Vician Jr.

This is a great little white paper detailing the emotional experience of buying an all time high and why most traders freak out at the notion.  If you’re one of those traders you might want to check it out.

Does Trend Following Work on Stocks? by Cole Wilcox and  Eric Crittenden

This white paper is mentioned in TheWallstrip Edge and it’s a great read.  It details why trend following works and backs the premise up with TONS of data.

The All Time High List Barchart.com

This is a great list.  It tells you who’s cracking new highs, along with price, volume and charts.  A good thing to check daily.

So what are we waiting for?  It’s time to get cracking on the hunt for all time highs.

I personally can’t wait!

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