Big Breakout for this Darvas Stock

by Darrin Donnelly on October 11, 2010

Click on chart to enlarge.

Click on chart to enlarge.

The key to successfully trading with the Darvas System is to find the four to six fastest-moving, biggest-earning, market-leading stocks and then buy into those stocks either right before or right as they break out into new-high territory.  

On Monday, WYNN became the latest such Darvas stock to break out.

In the Wednesday issue of Darvas Trader PRO, I showcased WYNN as a stock that was giving us a “pocket” purchase opportunity as it traded within a $95.88-$85.72 Darvas Box. 

A “pocket” purchase can be made when a stock that is still working on a sound base gives us such positive price-volume action that we feel comfortable EASING into an initial position.  This practice allows us to establish a new position before a Darvas stock actually breaks out, but it comes with added risk and you must adjust your position sizing accordingly. [click to continue…]

Earnings announcements can create chaos on Wall Street.

Earnings announcements can create chaos on Wall Street.

The market closed last week in typical “calm before the storm” fashion as the indexes trended sideways prior to some important earnings announcements set for the coming weeks. 

In particular, several leading Darvas stocks quietly finished the week flat or lower on decreasing volume.  This action tells us investors are waiting for more information before driving these leading stocks higher or lower.

As we approach the earnings season, a Darvas trader needs to be on his or her toes.  [click to continue…]

Nicolas Darvas’ 5 Rules of Stock Trading

by Darrin Donnelly on October 6, 2010

Nicolas Darvas, pictured above in 1959, had 5 simple rules for stock trading.

Nicolas Darvas, pictured above in 1959, had 5 simple rules for stock trading.

Billionaire investor Warren Buffett once famously quipped, “There seems to be some perverse human characteristic that likes to make easy things difficult.”

Nicolas Darvas made a similar statement when he wrote in 1977: “There is no human activity that I know of to which people have a more irrational approach than the stock market.  There seems to be something hypnotic about stocks that makes people behave in a manner which they would never do in any other field of activity.”

The point both of these stock market masters were trying to make is that investors have a tendency to overcomplicate concepts that are actually quite simple.  There’s a voice inside us that tells us the simpler something is, the less likely it is to actually produce exceptional results. 

But in fact, most times, the opposite is true. 

Simpler really is better.

With this in mind, I’d like to offer a simple overview of the Darvas Trading System boiled down to just five simple rules.  [click to continue…]

Is Apple Ready for Another Breakout?

by Darrin Donnelly on October 4, 2010

Click on chart to enlarge.

Click on chart to enlarge.

Despite the market indexes closing higher on Friday, several Darvas stocks look to be entering into a consolidation period. 

As mentioned previously, this is actually good news for Darvas traders as these stocks have shot up so far and so fast that they are now over-extended and priced WAY above support levels.  Nicolas Darvas taught us that support levels are crucial to the Darvas System’s success because they are what we use to establish our sell-stops. 

One particular Darvas stock that pulled back last week after a big run was AAPL.  This is the first pullback for AAPL since it broke into new-high territory at $279.11 (note the green arrow on the chart that accompanies this article). 

But here’s a question for traders to consider: is AAPL entering a healthy consolidation period or is it on the verge of another breakout higher? [click to continue…]

Darvas Stocks Pull Back, Good News for Darvas Traders?

by Darrin Donnelly on October 1, 2010

Here’s a quick market recap for Darvas traders as we close out the week and begin the new quarter…

The October 1 session saw the major indexes finish slightly higher as the S&P 500 led with a gain of 0.44% and the NASDAQ lagged with a gain of just 0.09%.

Volume was lower across the board and the indexes closed near the middle of the day’s tight range.

All in all, the indexes gave us a ho-hum closer to the week with no real conviction in either direction.

Individual Darvas stocks, on the other hand, gave us some clear signals of consolidation. [click to continue…]

Another Darvas Box Breakout

by Darrin Donnelly on September 29, 2010

Click on chart to enlarge.

Click on chart to enlarge.

Jinkosolar is a Chinese solar company with spectacular earnings growth and since its IPO in May, it has nearly tripled in value.  This is the kind of stock that Nicolas Darvas himself would have just loved. 

On Wednesday, JKS actually broke out of another classic Darvas Box.  That marks the FOURTH Darvas Box breakout since mid-August. 

However, before diving into this stock, there are two things to be cautious of. 

First, Wednesday’s breakout came out of a very short Darvas Box.  This box was just six days long (with the bottom confirmed on Tuesday, a day before the breakout).  Typically, the longer a base is, the better the odds of success after a breakout. [click to continue…]