May Review

May was an interesting month for us in that we saw an anomaly: usually if one of our trade selections reverses and fails the break-out, then it stays down for the rest of the day. This month however we saw trade after trade reverse and hit our tight 0.3% stop, and then move right back up to yield profits.

We had 13 triggers: 11 out of the 13 achieved 1-3% day trade profits after triggering the selection but only 5 of them did so without triggering the 0.3% stop-loss first, with 6 losses and 2 scratch trades. For those using the wider 1% stop, 8 out of the 13 achieved greater than 1% profits, with 3 losses, and 2 scratch trades.

So where does that leave us? Overall a great win rate if you just held (not something we recommend) but mediocre win rate for traders using a tight stop. Personally speaking we had a good month in that we caught a number of base and break patterns in momentum stocks and caught some good trades from our own lists. However, the month of May clearly belonged to the swing-traders of momentum leader stocks.

Our conclusion is that the market in May was extremely benign (all dips were bought, breakout points eventually worked-- basically very good conditions for traders with wider stops) but exhausted. As you know, tired markets can keep going up for a long time and we're just trend followers, not traders who attempt to predict when the music will stop.