Trade Like a Stock Market Wizard_ How to Achieve Super Performance in Stocks in Any Market ( PDFDrive.com )

28–29
age of company, 37
annual earnings, 134–135
AIG, 42, 47, 117
anticipation, 120
Amazon, 167, 232, 261
Apollo Group, 49–50, 62, 128,
America Online, 101, 193
134–135, 173
American Power Conversion,
net margins, 146
177–178
Apple Computers, 98, 105–106,
American Superconductor, 223,
181
225
net margins, 146
Amgen, 76, 81, 128
Arena Pharmaceuticals Inc., 256
321

322

I N D E X

averaging down, 305
category killers, 98
vs. scaling in, 307–308
chart patterns, 30, 192
Avon Products, 284
3C pattern, 243–247
deep correction patterns,
Bank of America, 86
210–211
Bannister, Roger, 26
pivot points, 223–226
base counts, 80–83
saucer-with-platform pattern,
base failure, 249
242–243
Bebe Stores, 242
shakeouts, 213–216
Ben-David, Itzhak, 281

velocity pattern, 253
Berger, William “Bill” M. B., 237
charts, 190–191, 192–194
Best Buy Co., 255
contraction count, 198–200
Blockbuster, vs. Netflix, 102–104
detecting overhead supply,
Body Central Corp., primary base,
204–206
264–266
identifying consolidation
bottom picking, 68
periods, 196–197
breakout years, 136
showing prevailing trends,
breakouts, 247
195–196
failure of, 232
technical footprints, 201–203
broken leader syndrome, 57–58
time compression, 211–213

brokerage houses, opinions, 89
using as a filter to screen
building on success, 306–307
investment candidates,
bull markets, 184
194–195
“buy weakness” mentality, 29
using as a tool, 191–192
volatility contraction pattern,
capitulation, 74–76
198
catalysts, 33
cheap stock, 43
categories
cheat area, 245
cyclical stocks, 107–108
Chipotle Mexican Grill, 89, 180
institutional favorite, 104
Circuit City, 267–268
laggards, 108–110
Cirrus Logic, 222, 228, 244, 247

market leader, 96–100
Cisco Systems, 97, 128, 284
overview, 95–96
Citigroup, 85, 117, 118
top competitor, 100–104
CKE restaurants, 48, 49, 55
turnaround situation, 104–106
Coca-Cola, 284

I N D E X 323
cockroach effect, 121–122
Dell, Michael, 13, 105–106
Code 33, 158–159
Dell Computer Corporation, 13,
commitment, 5
138
to an approach, 39–40
build-to-order business model,
company-issued guidance,
155–156
150–152

demand, evidence of, 216–221
consistent success, 272–273
Dendreon Corp, 168
consolidation, 66–70
Dick’s Sporting Goods, 152, 214,
identifying consolidation
218–219, 257
periods, 196–197
primary base, 265
price spikes preceding, 222–223
differential disclosure, 158
technical footprints, 201–203
disaster plan, 296–297
contingency planning, 293–297
discipline, 292–293
contraction count, 198–200
Disney, 98
conventional wisdom, 22–23
distribution, 72–74
cookie cutter concept, 98–99
diversification, 311–313

considerations when investing
Donchian, Richard, 29–30
in cookie cutter model,
downtrends, 246
99–100
Dyer, Wayne, 8–9
cost cutting, 143–145
countertrend volatility, 248
early day reversals, 233
Craft Brewers Alliance Inc., 251
earnings, 119–120
Crocs, 51–52, 87–88, 90, 91,
acceleration, 131–132
129–130
annual, 134–135
cup-and-handle pattern, 30, 198,
attracting attention, 125–127
242–243
breakout years, 136
cyclical stocks, 107–108
deceleration, 138–140

getting on the table, 127–131
Davis, Ned, 64
major drivers of, 143–145
deceleration, 138–140
supported by revenue, 132–133
Deckers Outdoor, 82, 216, 220
earnings estimates
declining phase, 74–76
analysts’ revisions of, 124–125
declining stocks, 42–43
beating, 122–124
market leaders, 183
earnings per share (EPS),
deep correction patterns, 210–211
momentum, 125–126

324

I N D E X

earnings quality, 141
F5 Networks, 77, 133
analyzing inventories, 153–154
Facebook, 261, 262
analyzing receivables, 156–157
failure, building into the system,
Code 33, 158–159
300–301
company-issued guidance,
failure reset, 249–250
150–152
fair disclosure, 123–124
comparing inventory with sales,
Fama, Eugene, 189
154–156
financial stocks, 85–86, 184–185
cost cutting, 143–145
collapse of, 117

differential disclosure, 158
FLIR Systems, 167
long-term projections,
Foster Wheeler, 234
152–153
FSI International, 198, 199
massaged numbers, 142
fund managers, investing like,
measuring margins, 145–147
20–22
nonoperating or nonrecurring
fundamentally sound, vs. price—
income, 141–142
ready, 256–257
one-time charges, 142–143
fundamentals, 33
stock price reaction, 147–149
annual earnings, 134–135
write-downs and revenue
anticipation, 120
shifting, 143

beating earnings estimates,
earnings surprise, 121, 148–149
122–124
Eastman Kodak, 284
big earnings attracting
eBay, 98
attention, 125–127
efficient market hypothesis,
breakout years, 136
189–190
checking the trend, 133–134
ego, 16–17, 287, 290
cockroach effect, 121–122
Elan PLC, 221, 235, 243
earnings, 119–120
EMH. See efficient market
earnings acceleration,
hypothesis
131–132
emotional attachment to stocks,
earnings supported by revenue,

290
132–133
Emulex, 170–171
earnings surprise, 121
Encore Wire, 153–154
getting earnings on the table,
entry points, 33–34
127–131
exit points, 34
growth, 118–119

I N D E X 325
revisions of estimates, 124–125
Humana, 168–169
spotting a turnaround situation,
hype, tuning out, 86–87
136–137
surprise, 120, 121
Illumina Inc., 93, 94
Impax Labs, 225
GARP. See growth at a reasonable

indecisiveness, 24–25
price (GARP)
individual investors, vs. fund
General Motors, 117, 285
managers, 20–22
goals, 23
industry groups, 110–111
Google, 101–102, 245
group cycle dynamics, 113
Green Mountain Coffee, Inc., 88,
group leaders as indicators,
128
113–114
gross margins, 145
See also technical themes
group cycle dynamics, 113
innovations, 112
growth, 59, 118–119
institutional favorites, 104
cycles, secular, 173–174
inventory

high, 44–45
analyzing, 153–154
scalable, 96–97
comparing with sales, 154–156
See also PEG ratio
write-downs, 143
growth at a reasonable price
involuntary investors, 282–283
(GARP), 60
Irises (Van Gogh), 53
iRobot, 266–267
habit, 17–18
high growth, 44–45
Jensen, Edward S., 29
high P/E stocks, 43–44
Jiler, William L., 30
See also P/E ratio
Juniper Networks, 266
high-price stocks, 47–49
highs and lows, 46–47
Kenneth Cole Productions, 233

Hirshleifer, David, 281
Home Depot, 61, 62, 101, 128, 132
laggards, 108–110, 162
deceleration, 139–140
Landy, John, 26
housing stocks, 184–185
large-cap companies, 38
How to Trade in Stocks
Leadership Profile, 29, 34
(Livermore), 14, 30
defined, 32
Human Genome Sciences, 168
Levy, Robert A., 29

326

I N D E X

lifestyle habits, 292–293
market leaders, 96–100
line of least resistance, 203, 224
Amgen, 175–176
liquidity, 121
declining, 183
Livermore, Jesse, 14, 30, 161, 224,
as forecasters of trouble,
262
183–185
Livermore System, 248–249
identifying, 185–186
lockout, 164–165
lockout period, 164–165
long-term projections, 152–153
and market corrections, 168
long-term trends, 195–196
as opportunities, 166–172

losing streaks, 303–304
overview, 161–162
See also losses
price strength before advance,
Loss Adjustment Exercise,
165–166
277–279
secular growth cycles, 173–174
losses
spotting turning points,
allowing loss to exceed average
162–164
gain, 299–300
technical themes, 176–178
as a function of expected gain,
which to buy first, 178–182
297–298
market saturation, 114–115
limiting, 276–277
massaged numbers, 142
losing streaks, 303–304

McDonald’s, 100, 284
when to cut losses, 299
MCI Communications, 101
Love, Richard, 28–29
media, tuning out, 186–187
Lowe’s, 101
Mercadolibre, 224–226, 228,
Lucent Technologies, 284
250
luck, 12
Meridian Bioscience, 201, 215,
Lululemon Athletica Inc., 148,
217–218, 241
235, 240
Microsoft, 128, 209
Lumber Liquidators, 179
Monster Beverage, 159, 209
Morgan Stanley, 43
Magna Intl. Inc., 212, 220, 231
Moscato, Jack, 275
Mankind, 210

margin metrics, 145–147
natural reaction, 237–242
market corrections
naysayers, 13–14
and market leaders, 168
neglect phase, 66–70
secular growth cycles, 173–174
net margins, 145

I N D E X 327
Netflix, 84, 132, 148, 226, 238
no common denominator,
vs. Blockbuster, 102–104
54–55
new highs, 206–209
overuse of, 41–42
New Oriental Education, 227
superlow P/E, 55–56
newly public stock. See primary
PED. See postearnings drift
base

PEG ratio, 59–60
nonnegotiable criteria, 63–64
perception of value, 53–54
nonoperating income, 141–142
persistence, 5, 25–26
nonrecurring charges, 142–143
Pharmacyclics, Inc., 163, 164
nonrecurring income, 141–142
pivot failure, 249
Novell, 78
pivot points, 223–226
volume at, 226–228
O’Neil, William, 30, 83
waiting for the stock to pivot,
one-time charges, 142–143
229–230
Opentable, 92
Possibility Thinking (Schuller), 8
opportunities
postearnings drift, 121, 148
created by new innovations, 112

power play, 253–256
market leaders as, 166–172
practice, 17–18
opportunity, and preparation,
preparation, and opportunity,
5–6
5–6
overhead supply, detecting,
price action, 83–84
204–206
price maturation cycle, 76
price shakeouts, 213–216
pacing yourself, 305–306
price spikes, 217, 218
Panera Bread, 173–174
preceding a consolidation,
paper trading, 18–19
222–223
See also trading
price strength, 165–166
passion, 7

price/earnings to growth. See PEG
pauses, 246
ratio
P/E ratio
price-ready, vs. fundamentally
as a barometer of sentiment,
sound, 256–257
58–59
primary base
conclusions, 61–62
overview, 259–261
deception, 56–57
time to develop, 261–262
gauging P/E expansion, 60–61
probability convergence, 35–36

328

I N D E X

protecting profits and principal,
determining risk in advance,
273–274
301
disaster plan, 296–297
Quality Systems, Inc., 254
discipline, 292–293
quantitative analysis, 38–39
diversification, 311–313
and technology, 31
ego, 287, 290
emotional attachment to stocks,
Rambus, primary base, 263–264
290
receivables, analyzing, 156–157
feeling stupid, 289
records, breaking, 26
fundamental principles, 275

red flags. See warning signs
handling volatility, 308–311
reentry, 295–296
involuntary investors, 282–283
regret, 24–25
knowing when you’re wrong,
Regulation FD, 123–124
280–281
Reinganum, Marc R., 28–29
limiting losses, 276–277
relative prioritizing, 34–35
losing streaks, 303–304
The Relative Strength Concept
Loss Adjustment Exercise,
of Common Stock Price
277–279
Forecasting (Levy), 29
losses as a function of expected
Reminiscences of a Stock Operator
gain, 297–298
(Livermore), 30

mistakes, 288–289
research, doing your own, 15–16
pacing yourself, 305–306
revenue-shifting, 143
protecting profits and principal,
reversal recoveries, 230–232
273–274
reverse factor modeling, 29
reentry, 295–296
risk management
scaling in vs. averaging down,
accepting the market’s
307–308
judgments, 280
selling at a profit, 296
allowing loss to exceed average
so-called safe stock, 283–285
gain, 299–300
sound principles, 274–275
averaging down, 305
stop-loss, 295, 301–302

avoiding big errors, 281–282
stop-loss slippage, 303
being selective, 288
when to cut losses, 299
building in failure, 300–301
when to move up your stop, 308
building on success, 306–307
risk-first approach, 4

I N D E X 329
Roediger, Henry L., III, 18–19
declining phase, 74–76
Rosetta Stone Inc., 151–152
neglect phase, 66–70
Ryan, David, 13, 83, 270
topping phase, 72–74
Starbucks, 100
sacrifice, 23
stochastic oscillator, 56
Sarbanes-Oxley Act of 2002,
Stock Market Blueprints (Jensen),

123–124
29
saucer-with-platform pattern,
Stock Market Wizards (Schwager),
242–243
274–275
See also cup-and-handle pattern
stock price reaction, 147–149
scalable growth, 96–97
stock screening, 38–39
scaling in, vs. averaging down,
See also quantitative analysis
307–308
stop-loss, 295, 301–302
Schuller, Robert, 8
slippage, 303
Schwager, Jack, 274–275
when to move up your stop, 308
Schwartz, Martin “Buzzy,” 270
Stryker Corp., 82, 239
Secrets for Profiting in Bull and

success, building on, 306–307
Bear Markets (Weinstein), 65
Sun Microsystems, 57–58
secular growth cycles, 173–174
superlow P/E, 55–56
selling into strength, 296
superperformance, 2, 11–12
SEPA strategy, 28
age of company, 37
commitment to, 39–40
and luck, 12
key elements of, 32–34
and P/E ratios, 54–55
objective of, 32
size of company, 37–38
ranking process, 34–35
and stage analysis, 65
shakeouts, 213–216
traits, 36
size of company, 37–38
Superperformance Stocks (Love),

small-cap companies, 38
28–29
Southwestern Energy Co., 252
surprise, 120
Specific Entry Point Analysis. See
earnings surprise, 121
SEPA strategy
squats, 230–232
TASER, 46–47, 207, 253
stage analysis, 65
technical analysis, 191
stages of stocks, 65–66
See also charts
advancing phase, 70–72
technical footprints, 201–203

330

I N D E X

technical themes, 176–178
uptrends, 246
technology stocks, 184
timing, 80
tennis ball action, 237–242
Urban Outfitter, 122
time compression, 211–213
U.S. Investing Championship
timing uptrends, 80
(USIC), 269–272
top competitors, 100–104
US Surgical, 112
topping phase, 72–74
USG Corp., 204
traders
vs. investors, 24–25
Valassis Communications, 221,
short-term vs. long term, 25

241, 244
trader’s cardinal sin, avoiding,
value, 52–54
299–300
Value Line, 54
trading
Van Gogh, Vincent, 53
as a business, 19–20
VCP. See volatility contraction
See also paper trading
pattern
Travelzoo, 211
velocity pattern, 253
trend following, 30
Vicor, 86–87, 130–131
trend reversal, 84–85
volatility, handling, 308–311
Trend Template, 34, 79
volatility contraction pattern, 198
trends, 32–33
and contraction counts,

and charts, 195–196
198–200
checking the, 133–134
technical footprints, 201–203
countertrend volatility, 248
what volatility contraction
downtrends, 246
tells us, 203–204
stage analysis, 65

volume

stages of stocks, 65–66
intraday, extrapolating, 229
timing uptrends, 80
at pivot points, 226–228
the trend is your friend, 64–65
uptrends, 246
Walmart, 97, 182
uptrends supported by strong
warning signs, 90–94
earnings growth, 127–131
of a bottoming market, 169–170
waiting for the turn, 247–248
deceleration, 138–140
Troy Group Inc., 213
inventory and receivables
turnaround situations, 104–106
growing faster than sales,
spotting, 136–137
156–157

I N D E X 331
watch lists, organization of,
write-downs, 143
236–237
Weight Watchers, 77
Xerox, 284
Weinstein, Stan, 64
whisper number, 123
Yahoo, 45, 101, 208
Whole Foods, 108–110
primary base, 262–263
Wild Oats, 108
W.R. Grace & Co., 172,
Zadeh, Norman, 269
200
Zweig, Marty, 64
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About the Author
Starting with only a few thousand dollars, Mark Minervini turned his
personal trading account into millions. To demonstrate the effectiveness of
his SEPA® trading methodology, in 1997 Minervini entered the U.S.

Investing Championship posting $250,000 of his own money; he won with a
155 percent return, a performance that was nearly double the next nearest
competing money manager.

Using his SEPA trading strategy, in a five-year period Minervini generated a
towering 220 percent average annual return with only one losing quarter. To
put that in perspective, a $100,000 account would explode to over $30
million with those returns.

Mark Minervini is a 30-year veteran of Wall Street. He is featured in Jack
Schwager’s Stock Market Wizards: Conversations with America’s Top Stock
Traders. Schwager wrote: “Minervini’s performance has been nothing short
of astounding. Most traders and money managers would be delighted to
have Minervini’s worst year—a 128 percent gain—as their best.”

Currently, Minervini educates traders about his SEPA trading methodology
through a service called Minervini Private Access, a streaming
communication platform that allows users the unique experience of trading
side-by-side with Minervini in real time. He also conducts a live Master
Trader Program, which is an investment workshop where he spends two
days teaching his SEPA strategy and techniques.

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Document Outline



Cover
About The Author
Title Page
Copyright Page
Contents
Foreword
Chapter 1 An Introduction Worth Reading
Chapter 2 What You Need to Know First
Chapter 3 Specific Entry Point Analysis: The SEPA Strategy
Chapter 4 Value Comes at a Price
Chapter 5 Trading With the Trend
Chapter 6 Categories, Industry Groups, and Catalysts
Chapter 7 Fundamentals to Focus on
Chapter 8 Assessing Earnings Quality
Chapter 9 Follow the Leaders
Chapter 10 A Picture is Worth a Million Dollars
Chapter 11 Don’t Just Buy What you Know
Chapter 12 Risk Management Part 1: The Nature of Risk
Chapter 13 Risk Management Part 2: How to Deal With and Control
Risk
Acknowledgments
Index

A
B
C
D
E
F
G
H
I
J
K
L

M
N
O
P
Q
R
S
T
U
V
W
X
Y
Z

Table of Contents

Foreword
C H A P T E R 1
C H A P T E R 2
C H A P T E R 3
C H A P T E R 4
C H A P T E R 5
C H A P T E R 6
C H A P T E R 7
C H A P T E R 8
C H A P T E R 9
C H A P T E R 1 0
C H A P T E R 1 1
C H A P T E R 1 2 Risk
C H A P T E R 1 3 Risk
Acknowled gments
Index
175–176
9
67
243–247
71
73
75
158–159
70–72
stage 2, 68–69,
Unnamed
217
86–87
79
230–231
28–29
37
134–135
42, 47,

117
120
167,
232, 261
49–50,
62,
128,
Unnamed
101, 193
173
146
177–178
98, 105–106,
Unnamed
223,