Self Note on Mark Minervini’s Book “Trade Like a Stock Market Wizard”

Figure 1 — Book Cover

Buy this book from Amazon
Buy this book from Tokopedia

I want to share my own perspective of a good book written by Mark Minervini titled “Trade Like a Stock Market Wizard” which change how I act on stock market currently. Wisdoms that he shared basically makes sense, after you’ve got so many loses on your portfolio. These wisdoms will not feels right if you are not yet performed any stocks trade. You needs to at least have one year experience in stock market to feel it. Learn from the champion.

Ok, just for brief notes I would put my own snapshots to emphasise any points that very important. These should be brief, simple and make sense.

1. Myth of Low P/E Ratio

Figure 2— High P/E ratio indicate how market appreciate of growth companies.

2. Trade with The Trends

Figure 3— How to pinpoint Stage-2 cycle

3. Identify Market Leaders

Figure 4— The key points of strongest stocks: best earnings & sales, closest to a new high, and price strength

Super-performance stocks will happen in cycle to each sectors which run first to the market leader. So many market leader definition out there, but this note give me a clear map to categorise stocks in each sectors to define market leader based on:

1. Earnings & Sales (can be simplify by monitoring EPS growth and Operating Profit)
2. Closest to a new high (new high indicate appreciation confirmation by market to the earning/sales report)
3. Relative price strength versus the market (this required technical approach such as stages identification, MA200 trend, Volatility Contraction Pattern-VCP, shakeouts and etc. which will smooth your entry point precisely)

4. Fundamentals to Focus On

Figure 5— EPS cycle on market stages

Figure 6— Why we needs institution? :)

Figure 7 — Profit sources of the company. Quality of earnings will be defined from this sources.

Good fundamentals of company will be appreciated by market. But not always. That is why we need confirmation from institutional market maker.

5. Follow The Leaders

Figure 8 — Always keep open your eyes, minds and ear for a new leader.

6. The Effect, Not The Cause

Figure 9— Technical approach use as a confirmation tools, there is no one can predict the future, period.

7. Look for Consolidation Periods

Figure 10 — If you missed the early phase of Stage-2, you could wait for consolidation for next train schedule.

8. Volatility Contraction Pattern (VCP)

Figure 11 — Continuation of the trends can be known with this VCP indication

Figure 12 — VCP pattern that indicate healthy contraction

Figure 13 — VCP cases for contraction 4 times before breakout 40 weeks consolidation, then advanced more than 100% over the next 15 months.

A short and narrow pullback of just 3% over two weeks on very low volume formed the pivot buy point. This told us that selling activity had dried up, profit taking had exhausted itself and meaning that incremental supply to the market has stopped.

Figure 14 — Clear explanation about what “line of least resistance” is which close related to the volatility contraction.

Figure 15 — Pivot buy point is the “area” when price has expanding volume.

to be continued.