6 Stocks to Watch

by Darrin Donnelly on September 9, 2010

As we near the end of the week, here are a few Nicolas Darvas stocks I’m watching closely right now:

NFLX – Solid profits so far on this Darvas trade!  I’m glad I bought “in the pocket” last week as volume wasn’t great when it finally broke into new highs.  Though the holiday week last week may have had something to do with that.

FFIV – Another stock that hit new highs last week on unimpressive volume, but it’s off to the races now.  Watch its action closely as it nears $100. [click to continue…]

How to Trade Stocks like an Idiot

by Darrin Donnelly on September 8, 2010

“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.” – Nicolas Darvas, 1977

Are irrational moves causing you to trade stocks like Homer Simpson?

Are irrational moves causing you to trade stocks like Homer Simpson?

When the stock market surges to life, it’s easy to get irrational.

Since last week’s follow-through, almost all Darvas Stocks have been powering higher and higher.  Even Tuesday’s market pullback barely impacted these leading stocks.

When this happens and you see your portfolio steadily growing each morning, it’s easy to start patting yourself on the back and behaving irrationally.  Even the longest and hardest bear markets are quickly forgotten when the newest stocks you’ve purchased start racking up fresh profits.

While self-confidence is certainly an asset to stock traders, I believe OVERCONFIDENCE is the single greatest detriment to trading success.

Simply put: the overconfident trader tends to trade like an idiot.  [click to continue…]

5 Reasons This Rally is for Real (And 2 Potential Roadblocks)

by Darrin Donnelly on September 7, 2010

Click chart to enlarge.

Click chart to enlarge.

On Wednesday last week, the NASDAQ notched an impressive follow-through day, signaling a new market rally was here.

As with all follow-through sessions, a trader has to exercise caution when approaching reentry into the market. 

A follow-through day OFTEN signals a major shift from bearish to bullish in the market’s trend, but a follow-through doesn’t ALWAYS lead to a new uptrend. 

Follow-through days can and do fail.

Having said that, I offer five reasons why I think this rally is for real. [click to continue…]

Follow-Through Day Signals Rally, Plus 3 Darvas Stocks to Watch

by Darrin Donnelly on September 1, 2010

Click on chart to enlarge.

Click on chart to enlarge.

The market roared to an impressive follow-through session on Wednesday, signaling the potential start of a new rally. 

A “follow-through” day is the term coined by Investors Business Daily founder (and Nicolas Darvas admirer) William O’Neil.  It occurs when one of the major indexes roars to life, typically between the fourth and seventh day of a market rally attempt.  “Roars to life” refers to an exceptional gain of 2% or more on volume greater than the previous session.

Wednesday marked a clear follow-through day for the NASDAQ as it climbed 3% on increased volume on the fourth day of a rally attempt.  (See the chart that accompanies this article.)

O’Neil’s extensive studies have shown that a follow-through day often signals the start of a new market uptrend. 

However, a follow-through day doesn’t ALWAYS ensure the start of a new rally.  Follow-through days can and do fail. [click to continue…]

Quick, Get Your Watchlist Ready

by Darrin Donnelly on September 1, 2010

I’m writing this quick article halfway through the trading day on Wednesday, September 1st.

As of right now, it looks like we COULD be seeing a classic follow-through day.  If the indexes end the day with this kind of strength and volume remains strong, this could mark the beginning of a new rally.

It’s not time to jump into the market just yet, of course.  How we end the day is MUCH more important than where we stand halfway through the day. [click to continue…]

How this Darvas Stock Made a 69% Profit in 6 Months

by Darrin Donnelly on August 31, 2010

Click on chart to enlarge.

Click on chart to enlarge.

Bought at $47.13 back on February 12th and sold on August 23rd at $79.90, BIDU gave Nicolas Darvas traders a gain of more than 69% in just over six months.  It was the prototypical Darvas stock and it’s been our best performer so far in 2010.

Now that the dust has settled and we’ve been stopped out of BIDU, it’s worth taking a look back and reviewing exactly what made this stock so powerful.

First off, it had all the D.A.R.V.A.S. fundamentals: huge accelerating earnings, great ROE numbers, exceptional relative strength, and it was a member of an aggressive growth group.

From a technical side, BIDU first shot to life on January 13th when it gapped up more than 13%.  At this time, it broke into new highs out of what would probably be classified as a “descending wedge” base. 

Because this upside move involved such an extreme gap and because it occurred after a sub-par base pattern, buying on January 13th would have been too risky. [click to continue…]