Anyway, the Next Apple. What is Apple? In its 35 years as a public company, it has been a growth, value, momentum, and penny stock. This book is about finding Apple-the-momentum-stock.
How to find the Next Apple
1. Identify a trend.
Find something you love, whether it’s Shake Shack (SHAK) or Virtu (VIRT) or Comcast (CMCSA). Chances are that other people out there like it too. If you don’t love anything, look at what Chris Dixon is tweeting about.
It is important to understand the catalysts behind a trend so you don’t freak out on price pullbacks.
2. Find an entry point.
The synonym for early is wrong. It doesn’t help to buy a future breakout stock only to have it hide in oblivion for years.
The first stocks to make new 52-week highs after a six- to 12-week correction are usually the ones that will outperform significantly over the next two to six months.
The vast majority of big long-term trends start with a breakout to new 52-week highs from a proper base.
3. Don’t overstay your welcome.
If price gets you in a trade or investment, price should take you out. If you don’t know why you bought, you won’t know when to sell.
Start taking profits in overbought conditions, like when Weekly RSI goes above 80.
For exit points, look for sudden high-volume, large moves against the established trend. These include: New 50-day lows, closes below the most recent time consolidation, closes below 100-day or 50-week moving averages.
Lindzon also happens to be an investor in Robinhood, an iPhone-only brokerage for millennials. Much like Robinhood encourages millennials to take an interest in financial markets, this book encourages the uninitiated to take an interest in stock picking. Whether or not retail investors should be picking stocks is another matter. But it never hurts to be interested!
The examples in this book may suffer from survivorship bias, and you should probably talk to your financial adviser before trying the strategies described above.
The book doesn’t spend much time on charting tools or technical analysis. I like StockCharts for charting, FinViz for screening, and StockCharts’ ChartSchool for learning about technicals. I think a shortcut would be to subscribe to SocialLeverage50.