© 2022 by John Boik

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 Contents
Introduction

Chapter One – 2020

Chapter Two – 2021
Chapter Three – Lessons Learned

Conclusion
Bibliography
About the Author
Acknowledgement
 Introduction
Monster Stock Lessons will walk you through the years of 2020 and 2021 in
the stock market and analyze many of the leading stocks that reached
monster stock status. Just to clarify, that was defined in Monster Stocks as
follows:

A stock that at least doubles in price in a short time frame. A short

time frame in the stock market, as far as history with monster stocks
is concerned, usually lasts between 4 and 18 months. Most will land
somewhere in the middle of that range as the meatiest part of a fast-
advancing monster stock usually occurs between 6 and 12 months
of its major move. And many of the truly giant monster stocks will
triple, quadruple, or even move up a thousand percent or more in
those short time frames.

The year 2020 produced many strong leading stocks after Q1, which had
produced a steep bear market (defined as a decline of 20% or more from its
recent highs) in one of the shortest periods of time in stock market history.
But coming off that quick bear market was a handful of market leaders that
drove the market higher through the remainder of 2020 and into 2021. That
is why you should never give up on the market when it corrects—you will
miss out on some of the best opportunities when the market turns up. For
those who did give up near the end of Q1 in 2020, they certainly missed out
on some great opportunities when dozens of stocks reached top-notch status
in a short period of time. But many of the biggest leaders that became
monster winners in 2020 didn’t continue leading in 2021, even though the
market kept its uptrend intact. You will see why it is critical to adhere to
selling rules when they present themselves. You don’t want to give back
most of the profits you attained on the way up. We will analyze how and
why that occurred so the lessons learned can be remembered in future
market cycles. But while some leaders gave up their leading stock status
from the prior year, there were others that thrived in 2021, during a
somewhat choppy uptrend. We will see how the market generated new
leaders as sector rotation was more commonplace in 2021 than in 2020.
Studying history in the market helps us understand how cyclical trends
work and how new opportunities occur while also giving clues as to how
leading stocks top and begin downtrends. And continuing uptrends always
produce new leaders that take off and lead. One thing to note when
analyzing these two years—the monster stock status, measuring a stock
that’s doubled or more in one year, will be looked at on a calendar basis.
I’m only doing it that way so you can see some leaders that doubled in a
calendar year and how many times those opportunities arose. Of course,
many leading stocks will double over time frames that cross over yearly
calendar dates. But seeing it on the yearly calendar basis gives one a look
into how many leaders are produced that way and how they provided big
gains. And it only takes a few monster stocks a year, if handled correctly, to
produce index beating returns, as you will soon see. You will never get the
full move of a monster stock, and you never get them all. Your objective
should be to recognize which stocks show the characteristics of past
winners and trade them within their uptrend moves to garner a portion of
the profits they offer on their incredible runs.
 In analyzing the years of 2020 and 2021, I will provide you with several
guideposts used to gauge the action of the market in general and the leading
stocks. The main source of information I’ve used is Investor’s Business
Daily (IBD). Their decades of experience in analyzing the markets health
day-to-day is invaluable. Figure I-1 shows the Nasdaq chart where IBD
made market interpretation change calls during 2020 as the health of the
market changed (confirmed uptrend, uptrend under pressure, market in
correction, and uptrend resumes). These calls occur as the market changes
and most stocks typically will follow the market. There were three instances
in 2020 where IBD classified the market as “market in correction.” The first
was near the end of February when heavy selling was starting to hit the
market due to COVID-19 concerns. That was the start of the sharp but short
bear market. There were two others—one at the end of September and one
near the end of October. Both of those pullbacks in the market were short
lived, and soon the market regained its upward momentum. The strong
uninterrupted uptrend from April through August was where most of the
best stock gains occurred. The last two months of the year were also very
strong for leading stocks.
New Highs / New Lows
One of the other guideposts I use to check the overall health of the market is
the net differential between 52-week new highs and new lows. There are
many secondary market indicators out there, maybe too many. Some are
good, some not so much. After years of research, the one I found that
provides a guidepost to the market averages with consistent reliability is the
ratio of 52-week new highs to new lows. I call the differential between the
two the High Low Gauge or H/L/G. I track it every day and compare it to
what the overall market averages are doing. It’s important to point out that
this is still a secondary indicator. Nothing beats daily observations of the
price and overall volume action in the main market indexes along with the
stocks that are leading an advance or coming under selling pressure during
a decline. But the H/L/G has a solid history of matching or leading market
action. If you think about it, it makes sense. You can’t have a strong
uptrending market without more stocks making new highs than those
making new lows and vice versa. And there are different stages and degrees
of market uptrends and downtrends. Some may be stronger or weaker than
others. Some are choppy and much more difficult to maneuver through.
Many times, the level or trend of positive and/or negative days or weeks in
a row of the H/L/G helps determine the level of health of the overall
market. There certainly are trends to it and levels of excessiveness and
weakness within it have matched up to the action of the market with
surprising accuracy. I won’t go into all the details of those in this book. Dr.
Alexander Elder’s book (see below) describes many of those levels.
I’m not the first person to see this correlation by any means. The ratio
has been around for decades and is used by many stock research firms
regularly. Gilbert Haller wrote a book in 1965 called The Haller Theory of
Stock Market Trends. His extensive study of the markets focused on the
importance of the ratio of new highs to new lows. He states that he “quickly
charted a NH-NL Index covering several years, and found that it was indeed
an important factor in measuring technical market strength or weakness.”
Figure I-2 is from his book. He calculated his ratio on a weekly basis. The
year 1960 was mostly a down year for the market, with several large
whipsawing trends in the middle of that year. You can see how his NH-NL
Index correlated with that trend. The year 1961 produced a very strong
uptrend through most of May and then the market corrected hard starting in
late May, which lasted through late July. A strong bounce then led to
choppy trading until December when another strong correction hit the
market. You can clearly see in figure I-2 how his index of weekly net new
highs and new lows correlated directly with the actions of the market during
those two years, as just one example. He also followed the number of stocks
that advanced and declined on a weekly basis and calculated what he called
his Advance and Decline Index.
Dr. Alexander Elder, an author of many excellent market books, wrote
one of his books dedicated to the study called The New High – New Low
Index (that I highly recommend). A few key points from that book include
his discovery of how the index can be a leading indicator of the stock
market by days or weeks. His research shows that certain timing of buying,
selling, or doing nothing with stocks, can improve by following the trend
and level of the index. Also, based on the level and activity of the index,
one can gauge how strong or weak a trend in the market is likely to
continue in either direction. You will see how accurate this has been during
the two years covered in this book.
Gerald Loeb, who in my opinion was one of most successful traders
ever for over five decades, covering the 1920s through the 1970s, used the
ratio regularly as well. Many top traders today track the ratio daily and
compare it to the action of the overall market. I use the daily new high and
new low numbers that IBD produces on its subscriber website. They take
out stocks selling for under ten dollars per share and stocks that trade under
ten-thousand shares per day. The IBD numbers, therefore, take out the
insignificant stocks in the market. The IBD numbers will then vary from
other sources that include all stocks traded. The tracking of this has been
remarkably accurate in relationship to the health of the general market, just
as Haller discovered back in the 1960s. Figure I-3 is a chart of the Nasdaq
for 2020 and under that is a chart of the net New High/New Low gauge
differential that I calculated daily from the IBD site. One can clearly see the
correlation between the two. (The chart below, due to its framing
correlating to the market, doesn’t line up perfectly, which is why I draw the
arrows from one to the other, connecting the same time frames.) In Chapter
Two, I show the same information for 2021.
MVP Stocks
When tracking leading stocks that become monster stocks, there are certain
traits that nearly all historic big winners shared. Keeping it simple helps as
well. This short book won’t go into the fundamental statistics for each stock
analyzed. Suffice it to say that all monster stocks throughout history had
strong fundamentals during their upward moves. If they didn’t possess the
earnings or sales growth power at the prior or immediate time, it was
anticipated that strong earnings growth and solid sales growth were soon to
become significant factors in the stocks’ continued rise. If the numbers
disappointed during the run, that would often mark the end of a stock’s
uptrend. And since many of the stocks analyzed here come from IBD lists,
you can be assured that the fundamentals play a big role behind or ahead of
a stock’s performance.
Many top traders run screens to sort through hundreds of stocks,
looking for setups in bases, support areas, climax runs, and so on. Relative
Strength (RS) is a great measure of the strength of a stock as it relates to all
other stocks and is a favorite measure to track for many successful traders. I
use IBD for my screening tool, as they perform a highly selective criteria
for stocks to make the several lists they produce weekly, and they update
them daily, based on current price action. IBD has strict criteria for a stock’s
fundamentals and relative strength, so you can be assured that the stocks
they list are leaders from a current or perceived earnings and sales
standpoint and from a price performance standpoint.
When doing research for Monster Stocks, which came out in 2007, and
being active in the market, I found that simple critical criteria have
remained the same over the years and over different market cycles. That is
not surprising given the market hasn’t changed much over history due to
human nature being the main factor. The key technical criteria I discovered
that was common to all were moving averages, volume, and price action.
When stocks possess action that relate positively to all three, I call them
MVP (moving average, volume, price) stocks. Just as in sports or business,
your MVPs are the standout performers. It’s the same in the stock market.
MVP stocks tend to become monster stocks. And monster stocks are the top
leading stocks in all market uptrends.
Moving Averages
A highly successful, legendary trader once stated, “Nothing good happens
below the 200-day moving average line.” That area is used as a bottoming
area for many future leading stocks after a major correction and is looked at
as a long-term average. Many leading stocks will find support there and
start base building. But growth stocks that move up to monster status left
that area behind some time ago. As they rise up, they cross over the 50-day
area as they construct healthier basing patterns. The 50-day area is viewed
as a more intermediate-term moving average. William J. O’Neil and many
institutional as well as individual traders, have used this area as a metric in
measuring a stock’s overall strength or weakness. Rising 50-day moving
average lines indicate a stock is in an uptrend. The 21-day area (basically
one month of trading activity) is a shorter intermediate-term moving
average and has become more accepted over the years and is used by many
top traders. It was mentioned several times in Monster Stocks and illustrated
its importance during a monster stocks performance run. The shorter-term
metric is the 10-day moving average and is also used by many top traders. I
use a simple system for grading my stocks, which is similar to school
grading. This helps me categorize stocks in a very easy manner. I like to
own only A and B graded stocks.

A – above the 10/21/50/200-day moving averages

B – above the 21/50/200-day moving averages but below the 10-day
moving average
C – above the 50/200-day moving averages but below the 10/21-day
moving averages
D – above the 200-day average but below the 10/21/50-day moving
averages
E – below all the moving average areas listed above

For purposes of this short book, I will show the 21-day and 50-day simple
moving averages on the charts featured. As I stated, the 200-day area on
these charts had already been crossed and was in the rearview mirror for
leading stocks at this stage in their set up, breakout, and run up. I’ll mention
the 10-day moving average from time to time, but most of the action,
breakout, run up, and top will focus on the 21-day and 50-day moving
average areas. Those are your short to intermediate time frames that
typically produce the most monster stocks and the meatiest part of their
strong moves upward. The strongest stocks of all will ride and be above all
the moving averages mentioned.
Volume
Volume has been and continues to be a critical measurement of the demand
for a strong rising stock, and its correlation with price action is the most
definitive signal of how strong or weak a stock has been and could
potentially be. Volume activity has been a critical tracking component for
many of the best stock traders throughout history and many of the top
traders today. Volume is also a characteristic of liquidity, based on its
average daily trading volume. For purposes of this book, I analyze and
feature only stocks that traded, on average, one million shares or more per
day. Those are typically stocks that institutional investors favor. And if they
want to be involved in a stock, they leave footprints (in volume levels)
behind that are hard to hide. It is their involvement in a stock that accounts
for the major moves. And as an individual trader, it should be your
objective to find where the big money is placing its commitments and
follow it.
The charts in this book will consistently point out volume action and
how it played a key role in a stock’s price movement. Whether it’s green
(positive volume action on strong up days) or red (negative volume action
on strong down days), volume is a key determinant of a stock’s trend. Your
objective is to be on the same side of the trend in a leading stocks move.
Remember, the trend is your friend, and you don’t fight against your
friends.
Price
Price is the definitive measure that we all want on our side. Everything
concerning a stock (fundamentals, news, opinions, etc.) ends up reflected in
its price. Either to the upside or the downside, as a trader you are managing
your risk level by the changes in price, and those changes determine your
decisions to buy, sell, hold, or avoid a stock altogether. It’s your risk
management techniques, the proper timing of the price changes based on
the markets activity, and the leading stocks in your trading that will
determine how successful your results will be. We all want to maximize our
profits, and one way to do that is to invest and trade in the leading stocks
that perform the best and become monster stocks.
The Charts
The stock analysis charts included will point out key price action
characteristics of each stock. The main technical signals highlighted will be
breakouts from basing areas, volume signatures (both on the upside and
downside), and how the stock acted near the key 21-day and 50-day areas.
Notice I use the word areas many times instead of lines. Stocks that find
support at those key areas rarely just come down perfectly to touch those
lines and bounce right off of them (though you will see a few here). Many
great stocks undercut moving average lines and can stay under them for
several days or more without doing much damage. Volume levels should be
watched closely during those times as they can give off vital clues if the
stock recovers or continues to falter near those key areas.
Most of the gap-ups (and gap-downs) on the charts that you will see are
the result of earnings announcement reactions. Buying into gap-ups is a
strategy of many top traders. Many traders trim positions before an earnings
announcement due to the high-risk levels associated with disappointing
reports and the hard-negative reactions or gap-downs that can result from
disappointments. Solid earnings reports that exceed expectations can many
times lead to after hours and opening gap-ups that show institutions piling
into the stock with strong volume buying power.
With stocks that double and become monster stocks during their run,
you will typically find pullbacks soon after. Pullbacks occur many times on
the way up during a leading stocks run as they get extended in price and
traders take some profits. Many top traders sell portions of their position in
a leading stock into strength when stocks power up quickly. Implementing
sell strategies on the way up and buying strategies near key support areas
will be addressed in Lessons Learned.
I would encourage readers to study Monster Stocks to get more in-depth
descriptions of many of the concepts presented here. This book is also
intended to be a chart study book. It focuses on the best of the best
performers for the years featured. Studying the best MVP performers can
help one in future market cycles as patterns do repeat in the market. Please
make sure you view all the charts and study and understand the key points
in each—chart study is one of the best teachers of the market. Many of the
best stock traders throughout history became master chart readers. Price and
volume analyses are key—they have been throughout history, and they
proved it again in 2020 and 2021, both on the way up and on the way down.
How stocks behave around key moving average areas can also give vital
clues as to what big money investors and traders are doing. Do those areas
become support or resistance for a stock? Are they trending up or down?
These are all key components in an uncertain environment like the stock
market. All the charts featured here come from the app ©StockMaster. I use
that app daily, and I highly recommend it based on its ease of use and its
many features.
 Chapter One – 2020

T he new decade started off with a bang as the market continued,

following up on the strong Q4 uptrend from 2019. Chinese stocks were
some of the leaders at the time, including BABA, TIGR, EH, and MOMO (I
will use ticker symbols when referring to stocks most of the time in this
book). Other leaders were LITE and PYPL, just to name a few. January was
positive, but near the end of the month, we start to hear about and get a
glimpse of the early impacts from COVID-19.
By the third week of February, COVID-19 was starting to have a major
impact. A string of distribution days occurred in the markets, the first trend
of negative net New High / New Lows (H/L/G) since the beginning of Q4
in 2019 set in, and leading stocks were breaking down through key moving
averages on volume signatures. As the month progressed so did the selling.
Heavier selling was hitting the markets by the last week of February. IBD
changed their market outlook status to “uptrend under pressure” on
February 24 (see figure I-1). The next day IBD changed their outlook again,
this time to “market in correction” as heavy selling continued. March was a
panic sell month as the indexes tanked and COVID-19 concerns started to
make a big impact. As William J. O’Neil once stated, “When they raid the
house, they usually get everyone, and eventually all the leaders will
succumb to the selling.” That certainly seemed to be the case as the month
of March 2020 will go down as one of the worst in market history.
With the fear of COVID-19 spreading and its possible impact on
everything from health care, work habits, sports and entertainment to travel,
social gatherings, and so on, the market reflected it all in its downward
spiral. After four straight weeks of heavy selling through the third week of
March, the Dow Index was already down 33% YTD (See figure 1-1).
However, a few stocks bucked the heavier selling and began to show
some signs of life. With companies closing offices and a work-from-home
environment starting to take hold, some stocks that represented a new look
for work started to quickly halt the selling pressure and show promise. That
is why one should never give up or take their eyes off the market. Even
during the harsh selling downtrends that stocks will cycle through, it’s wise
to pay attention as an uptrend can always be right around the corner. And
stocks that hold up best during a downtrend will typically become the
monster stocks of an ensuing uptrend. It’s happened throughout market
history and it was no different in the spring of 2020. Here are a few from
the weekend of March 21, 2020 (figure 1-2). Here’s something to note:
when I include figures of watchlists from my IBD research that show
annotations, those are from my personal trading journal at the time.

Zoom (ZM) and DocuSign (DOCU) were seen as early stocks that
would benefit a work force that was forced to work remotely. Zoom had
already been rising throughout the four-week market route while DocuSign
fell hard initially but recovered quickly on huge volume. GSX pulled back
to its 50-day area during the selling but found support at that time.
Selling began to slow the last week of March, and the H/L/G, which I
calculate from IBD, while still negative, was now in the low two-digit
figures (see figure I-3) as opposed to numbers in the thousands seen just
weeks before. Excessive levels of constant negative readings in the
thousands rarely last longer that a few weeks based on market history. That
relates somewhat to the forecasting ability this gauge can show at times. In
the past, readings of excessiveness, both on the positive and the negative
side, often led to changes in market direction. On April 2, 2020, IBD
changed their market outlook to “market in confirmed uptrend” (see figure
I-1). More stocks started to rise, and some potential leaders were showing
positive volume action and key moving average support. On April 9, 2020
the H/L/G turned positive for the first time since February 21, breaking a
negative 33-day trading streak. Figure 1-3 is a list of some stocks showing
potential during the second week of April.

After such a dramatic drop in the market over a short time frame, when
an uptrend begins, there will be some rough days ahead, as all confirmed
uptrends don’t succeed. Many times the market will turn back to the
downside and the new uptrend quickly fails. One way to see if an uptrend
fails is to see if the first stocks that come out turn and quickly fail. One day
that may have stood out during this time was April 15, 2020. On that day,
the indexes fell hard again, but some of the stocks showing early promise
bucked the selling. Figure 1-4 is an example from that day.

By the third and fourth week of April, with the market doing better, the
recent uptrend continued on without failing. The world was changing in
response to the impact of COVID-19. Here’s a summary at that time from
IBD of how the market was adjusting and the stocks that were getting
attention from big investors.
 From figure I-1, you can see the strong uptrend from April through
August. That uptrend is where the bulk of the new leaders emerged and
many reached monster stock status in that short time frame. The following
charts will feature many of the liquid stocks that led that uptrend. Each
chart will point out classic breakouts, pullbacks to key support areas,
volume signatures, gap-ups, and activity at or near the key moving average
lines of the 21-day and 50-day areas. As everyone tried to manage and
adjust to COVID-19, there were changes taking place in the economic
environment that produced new opportunities for lifestyles and companies.
Some of the first stocks out of the gate were seen as benefiting from a new
work-from-home environment. Among those already mentioned were
Zoom Video (ZM) and DocuSign (DOCU). Both stocks were featured in
IBD’s weekly chart lists at the time, did very well, and offered up several
opportunities along the way to score nice gains.
Also benefiting from the work-from-home sector as early leaders were
Peloton Interactive (PTON) and Etsy, Inc. (ETSY), among others. Several
sectors that were also responding well in early April were data security
firms and e-commerce technology firms. Leaders from the data security
group included Cloudflare, Inc. (NET) and CrowdStrike Holdings (CRWD).
Some Chinese e-commerce stocks continued to lead as well. Several of
them were leaders during the latter part of 2019 and into the first few
months of 2020. Some of those leaders who came up again and broke out
with the new uptrend included Pinduoduo, Inc. (PDD) and JD.com, Inc.
(JD). As the uptrend was broadening out and showed little signs of failing,
more stocks stepped up as institutions put more money to work after the
intense selling that occurred in March.
 Those charts show how early leaders begin to assert themselves when
an uptrend starts and then builds momentum. A few struggled a bit in April
but found support at key areas and then resumed their runs. By the end of
April, more stocks were stepping up or building healthy basing patterns. As
the uptrend attracted more investors, the buying power increased. Many
times, the first ones out of the gate make the greatest gains and become the
true market leaders that become monster stocks. You can see on the charts
how most of them scored triple-digit gains during the year, including a few
that showed topping signals before the year ended. As the year progressed,
more stocks stepped up and some fell off the leader list. But that occurs
during every uptrend in the market. To show what was happening as it
occurred, I will show some watchlists throughout the year so you can see
what stocks may have been setting up at that time.
Figure 1-14 is a watchlist from that late April time frame with some
annotations pointing out some positive technical traits.
Included in that list was a solid leader Livongo Health (LVGO). The
stock continued climbing, and near the beginning of August 2020, the
company announced that it was being purchased in a merger transaction.
The price had soared to over $140 per share after an incredible run in four
months of over 400% (see figure 1-16). You will soon see how a few top
traders made big gains on that stock. This list again included ZM and
DOCU, as you can see them gaining leadership.
During May more stocks perked up and broke out or lifted up off key
support areas in strong volume and became leading stocks. Datadog, Inc.
(DDOG), Shopify, Inc. (SHOP), Twilio, Inc. (TWLO), PayPal (PYPL),
Fastly, Inc. (FSLY), Draftkings, Inc. (DKNG), and Futu Holdings (FUTU)
were some stocks making strong moves that led them to reach monster
stock status over the remainder of the year. Some doubled up in very short
order. The stocks made up a variety of technology and growth sectors that
included cloud-based commerce and technology, digital payments, and
online sports entertainment, as well as an additional Chinese leader.
 Figure 1-15 is a weekly watchlist from May 15, 2020. You can see a
few of the names just mentioned after they started their runs. There were
many others that also scored nice gains. Top traders were now in many of
these names, and they viewed this uptrend with more conviction as it went
on without pulling back hard. Note that the watchlists are weekly charts
(from my eIBD subscription), and the featured charts are daily charts (from
the StockMaster app). William J. O’Neil and many other legendary traders
started with weekly charts to begin their analysis and research. They all
mentioned that weekly charts give a better indication of the bigger picture.
If they noticed something forming on a weekly chart, they would then
check the daily chart. They used daily charts more for detailed timing
indications for trading. The use of both is needed, but weekly charts alert
traders first on what to pay attention to, and daily charts are used to dig in a
bit deeper. Many top traders today employ that same strategy. It’s not that
one is better than the other; they are used in conjunction with each other.
The market uptrend continued during the summer months with the
major indexes experiencing only minor pullbacks. Many of the leading
stocks already featured continued their runs. A few pulled back after some
quick, strong gains. Some then built new bases while others found support
at key areas and then bounced right back up to continue higher. There were
plenty of new stocks joining in too. In fact, as the months went on, it
seemed more leaders were coming out. That is a sign of a very strong
uptrend. And the diversity from different sectors of stocks leading was a
strong signal as well. Another show of strength was the string of trading
days in a row registering positive readings on the H/L/G. Since April 9,
when H/L/G turned positive (and the uptrend began), ending 33 straight
negative trading days since February 24, there were only 4 trading days of a
negative reading within the next 103 trading days until September 4. And
those four negative days were light (highest was -170), and they all quickly
returned to positive readings.
 Some of the new leaders that stepped up in those summer months
included Roku, Inc. (ROKU), Square, Inc. (SQ), Zscaler, Inc. (ZS), Farfetch
Limited (FTCH), Nio, Inc. (NIO), Tesla, Inc. (TSLA), Growgeneration,
Corp. (GRWG), Sailpoint Tech Holdings (SAIL), Digital Turbine, Inc.
(APPS), Pinterest, Inc. (PINS), and Fiverr International, Ltd. (FVRR)
among others. FVRR was actually an early leader in the spring, but it really
started to take off during the summer months. You can clearly see the
number of breakout leading stocks growing and representing prior leading
sectors like e-commerce, software, and digital payments and new sectors
contributing such as EV autos (the two featured offered up some of the best
gains of the year) and a marijuana grower. Tesla (TSLA) and Nio (NIO),
from the EV group, were big winners for many traders. TSLA was a
favorite, offered up many opportunities, and ended up supplying the bulk of
large gains for several of the top traders for the year. The rally in the market
was strong and gaining power. That window of opportunity was just what
monster stock growth traders wait for and then take advantage of.
 Near the end of August, with the market rally in full gear, figure 1-35 is
a watchlist from August 28 that show many of the leaders still going strong
along with additional names. But on September 4, the H/L/G went negative
(just slightly at -43) and broke an impressive 78 trading day positive streak.
The next day was negative as well. On September 8, IBD downgraded their
market outlook to “uptrend under pressure.” That was the first change since
the “market in confirmed uptrend” upgrade back on April 2. After a few
weeks of mostly minor selling, IBD then downgraded to “market in
correction” on September 23 for just the second time in 2020. The week of
September 21 was also the first time since early April that the H/L/G was
negative for at least five trading days in a row. But as soon as that occurred,
the market turned right back around, and on September 30, IBD upgraded
their market outlook to “market in confirmed uptrend.” Most leading stocks
just pulled back in normal fashion during the month of September.
October was a solid month in most regards. Some leaders who scored
very strong gains prior to the beginning of fall began pulling back. That is
not unusual after many months of solid gains. The last week of October
once again saw the H/L/G go negative for five days in a row, just like the
prior month. On October 30, IBD once again downgraded the market to
“market in correction” just after changing to “uptrend under pressure” on
October 26. But just like the month before, the market turned right back
around and gapped-up several days in a row. On November 4, IBD
upgraded their outlook back to “market in confirmed uptrend.” A few more
leading stocks started to really take off during the last few months, and
many others already featured bounced off support areas to finish the year
strong. Two other strong stocks at the time included Snap, Inc. (SNAP), a
social media camera and video company, and The Trade Desk, Inc. (TTD),
a cloud-based advertising services firm—both tripled in 2020.
 Figures 1-38 and 1-39 are two more watchlists. The first is from
October 23 and the second from November 27. You can see more rotation,
stocks that came off highs and started pulling back, and some new names.
The list is not all inclusive, but it helps to keep up with the weekly charts of
leading stocks as the clues are present many times in their price and volume
action. Support can be seen, extensions in price, base building, and so on.
Doing the homework on a regular basis keeps you in tune with the market,
so you can capitalize on opportunities when they arise.
November and December were strong months in the market with the
three main indexes finishing the year right at or near highs. And the H/L/G
was positive for every trading day during those two months, finishing the
year with a strong 42-day positive streak. The Dow ended up 6.9% for the
year. The S&P 500 was up 15.8% and the Nasdaq was the leading index
scoring a solid 42.6% gain for 2020. It was truly a window of opportunity
for growth stock traders that began in early April and continued for most of
the year. But several of the leaders featured in this chapter pulled back
during December as the indexes kept climbing. We will see if that was a
telltale sign for the coming new year.
The year 2020 turned out to be a very strong year for growth stock
traders after the carnage from the quick bear market ended after Q1. That’s
why it pays to always stay attuned to what is happening in the market.
Many times throughout history, the market has changed direction when
most people didn’t expect it. And many times, uptrends begin after sharp
declines when the news is still bad. In the spring of 2020, COVID-19
dominated the news, and the outlook did not look good. Throughout history
many of the best opportunities arise as the market comes up off a major
decline and begins and sustains a new uptrend. Those traders who protected
capital during the quick bear market and came back into many of the stocks
that setup early and then reached monster stock status did very well. Most
of the big movers were listed on the Nasdaq, but there were several sectors
that did well. There were twenty-nine monster stocks featured in this
chapter that more than doubled. Of those, twenty-two at least tripled in
price. That’s quite a bit in one year. No trader gets them all. But it only
takes a few big winners in a year, if handled correctly and losses are cut
short on your losing trades, to have a solid year.
Many top traders scored triple-digit gains in 2020 by getting into
several of the leading stocks featured in this chapter and riding them up
when the uptrend began in the spring. Then they sold many of them either
into strength or when they showed classic topping or selling signals. Each
year there is a U.S. Investing Championship contest. There are different
divisions, and George Tkaczuk had an impressive year leading the managed
account division with a 119% return.
 Here are the top five traders from the 2020 U.S. Investing
Championship in the individual stock division ($20K minimum).
Top Traders
Oliver Kell set a new record in the competition with his incredible 941.1%
return. Some of Oliver’s biggest winners included Tesla (TSLA, figure 1-
29), Fastly (FSTY, figure 1-21), and Livongo Health (LVGO, figure 1-16).
He got in LVGO early at around $25 in March as it held up well during the
heavy selling and was viewed as assisting people in a new COVID-19
world. He sold a portion of his shares when they were up 50% but he held
the core position. He then sold out completely at $135 soon after the merger
was announced in August. That core position returned 440%. He traded
FSLY several times with his best run on it from $29 to $95 for a 226%
return in two months. He swing traded it several other times and was also
caught (along with many other top traders) in the big gap-down in mid-
October. He quickly sold out his position then instead of hoping for a
comeback and did not trade the stock again. TSLA was a major winner for
Oliver. He swing traded in and out of that leader throughout its great run.
He started early, in March, while the market was still falling. He was
stopped out then but came right back in near the end of March when the
heavy selling started to abate. He then started building positions near $100
and pyramided add on buys up through $117. He ran those up quickly to
near $150 and then sold out on a negative reaction to earnings. He came
back in again near $145 and made additional pyramid buys near $170,
$200, and $205 as the stock was taking off on a strong run. He piled into
this leader with a huge position—somewhere near 70% of his total account.
That is serious concentration and something top traders throughout history
have done when they know they’re right. He ended up selling major
portions of his total holdings at $325 and then more at $300. He was
stopped out for a small loss in August as the stock pulled back and
consolidated its gains. But TSLA came screaming back, and Oliver
rebought it near $300 and held that position until he sold it near $475 and
$450 for a combined quick 55% return. In September and November, he
was stopped out for some small losses trading it again. But one loss hit him
hard—he bought on September 4 at $395 and sold it at the open on
September 8 for a 10% loss. That’s cutting your losses, but he was heavily
concentrated with 40% of his account in that position. Those losses can take
a toll, but he was up so much by this point in the year that he took that risk.
That trade didn’t work, but it didn’t deter him either. In mid-November,
TSLA started to take off again, and Oliver really piled in. He left that prior
loss behind him, and he still had conviction in this stock since it was really
starting to run. He went in heavily again and concentrated his position
(again near 70% of his total account). He took positions near $462 and
added positions up through $500 and then held those at year end when
TSLA closed 2020 at $705. He then ended up selling those positions out in
early 2021 near $875. Please review the TSLA chart closely in figure 1-29,
and you can then trace Oliver’s trades to that chart to see how a top trader
returns over 900% in one year! He also did well in TWLO (figure 1-19),
ROKU (figure 1-24), and DDOG (figure 1-17) just to name a few. Oliver
wrote a book called Victory in Stock Trading that came out in 2021, which
details his trading strategy. I highly recommend it. You can follow Oliver
on Twitter @1charts6.
Matt Caruso, who placed fourth in the stock division with a remarkable
346% return, landed several of the stocks featured in this book. Three of his
best trades were also in LVGO and FSLY, along with The Trade Desk
(TTD, figure 1-37). For LVGO, Matt started buying on April 3 at $28.50.
That was right near the beginning of the market uptrend. He ended up
selling his positions on August 5 at $144.00 when the buyout merger was
announced. That was a four-month average gain of 405%! He bought FSLY
on May 7 at $27.50. That was the stock’s first breakout gap-up. He sold his
positions on October 14 at $91.00. That was a five-month average return of
231%. He bought TTD on April 22 at $232.00. That was just weeks after
the market had confirmed an uptrend, and more stocks started to breakout
and lead. He sold TTD on July 14 at $430.00 for a quick three month return
of 85%. He had many other successful trades throughout the year, and he
always cuts short his losses when they went against him. You can follow
Matt on Twitter @Trader_mcaruso. Matt offers a one-time subscription
video service for all levels of traders from beginner to expert. It’s an
excellent course, professionally done, and quite extensive with video and
charts included. It’s well worth the one-time subscription price.
Ryan Pierpont returned an incredible 448% to place third in the stock
division. He also placed third in 2021 (please see Chapter Two). Ryan’s
strategy is a swing trading approach, so he holds positions for only a few
weeks or so. But he latches onto the true leaders and then swing trades
through and around them. It’s critical to suit a trading strategy to fit each
individual’s needs and personality. Ryan’s best trades in 2020 were in
TSLA. He bought shares in early April as the market was beginning its
uptrend and TSLA was coming up the right side of a base on volume. He
sold that position in early May for a quick, strong gain. He then came back
into TSLA in early July when the stock made a new high off the 21-day
area on big volume. That move led to a vertical spike (seen on figure 1-29)
for several weeks. Ryan sold his position right into that strength for a big,
solid short-term gain. He came back in again in mid-August after a short
pullback and then it ripped higher again for a few weeks. Ryan once again
sold that position into strength in early September for another strong short-
term gain. He did this type of trading one more time in 2020 with TSLA. In
November he bought it again and rode its fast rise into early December for
another strong gain. He did miss that last strong move throughout the month
of December and into 2021, but he scored major gains with TSLA using a
strategy that he has perfected for himself. As mentioned, Ryan came back
again in 2021 to place third once again in the stock division, using his
swing trading strategy of buying liquid strong leaders off key buy point
areas and then selling them into strength and repeating the process.
Jim Roppel, who I’ve written about before and who manages Roppel
Capital Management, had a triple-digit return in 2020. A few of his big
winners were ZM (figure 1-6), ROKU (figure 1-24), and TTD. Eve Boboch
is a portfolio manager and market strategist at Roppel Capital Management.
The fund Eve manages also earned a triple digit return in 2020. Her best
trade was also TSLA. She traded TSLA many times in 2019 as well, but in
2020 she really hit a home run with this stock. It was her largest position,
and she concentrated heavily in it because it was the true market leader, and
it was leading the market in 2020 during the uptrend. Concentrating heavily
in one or two stocks when the market is right and you’re in one of the best
leaders was a key strategy of William J. O’Neil. Back in 2003, O’Neil had a
highly concentrated position in eBay. He knew the company’s story, the
fundamentals were top notch, and he scored a huge gain on the stock. Eve
knew Tesla well, and she followed that same concentrated strategy. Her
initial position in TSLA was in early October 2019. She did very well with
the stock then but sold out completely in February 2020 due to both Tesla’s
parabolic move and the deteriorating market conditions. As the 2020
uptrend was gaining momentum, she came back into TSLA on May 18,
2020 at $165.86 (split adjusted). She swing traded around that core position
many times during the remainder of the year. She added, trimmed, and so
on when conditions such as earnings announcements were imminent or
other extensions or support targets presented themselves. By mid-January
2022, that core position was up 532%.
Eve’s next big trade in 2020 was Peloton (PTON, figure 1-8). Eve’s buy
and sell transactions on PTON are textbook monster stock transactions. Eve
started buying PTON on April 13 at $29.79 right near the beginning of the
market uptrend. She added or pyramided her position several times in June
and traded around that initial core position several more times as conditions
warranted it. She reduced exposure when her core position was up over
70%. Eve made additional buys in late September as the stock really started
to make a move. As it took off on a vertical run, she sold positions into
strength in mid-October. She made several other trades in the fall of 2020,
and she exited her remaining position in PTON on April 20, 2021 at
$105.55. That core position in the stock netted her a return of 254%. You
can follow Eve on Twitter @EBoboch. Eve coauthored The Lifecycle Trade,
which was published in 2018 and is a top selling book on IPOs and growth
stocks.
You can see these top traders made big gains on several of the same
stocks. That’s because those stocks were the standout leaders during the
year, and they offered several opportunities during their strong runs. And
leading stocks get the attention of top traders. Even though each trader’s
strategies differed, they all recognized these stocks and then applied their
strategy to each. Several of the traders would take a core position in a
leader, and as long as it kept working, they would then sell or trim a portion
of the position into strength. If the stock broke hard, like FSLY did, they
sold out the entire position. But many would swing trade around their core
position. And they cut their losses short on those swing trades if they didn’t
work. The successful swing trades added to their gains while keeping them
in their core positions for larger overall gains.
 Chapter Two – 2021

T he market started the new year where 2020 ended. As the uptrend
continued, many leaders from 2020 bounced off support areas that
were tested near the end of that year. A few other new candidates started to
make moves as well. But the best performers continued to be several of
2020’s monster stocks. But not all of them. Some broke hard and lost their
leadership status. Those hard sell signals need to be heeded to cut loose
when it’s time to let go. FSLY was one of the first to go back in October
2020 (see figure 1-21). That hard sell off caught many traders by surprise.
But the stock never recovered from that classic sell signal. ZM was another
stock (figure 1-6) that lost its leadership status in the fall of 2020. When
sharp breaks below the 21-day and 50-day areas occur, especially on big
volume, and then those areas become resistance instead of support, those
are classic sell signals. Typically, if the stock doesn’t recover quickly, those
breaks solidify a change of trend has occurred in that stock. We will view
many more of those in the next chapter—Lessons Learned. That’s why
when it’s time to cut loose, one does so. You don’t want to give back a
majority of the profits you earned on a successful transaction. There will
always be other opportunities.
January continued the uptrend, but by the end of the month, on January
29, IBD changed its market outlook to “uptrend under pressure.” But just as
quickly, the market turned around and resumed the uptrend on February 2.
That action was similar to 2020 when the uptrend went to market under
pressure but quickly righted itself. The weekly watchlist in figure 2-1
showed that many of the leaders continued providing opportunities with
very few offering up major sell signals, such as the ones we saw with FSLY
and ZM. The uptrend was gaining strength, and most of the leaders from
2020 kept their uptrends intact, and several new candidates were offering
new opportunities with healthy basing patterns.
 February kept the uptrend going but the H/L/G was registering net-
positive numbers in the +900 range by midmonth. Past history has shown
those levels to be excessive and unsustainable over the intermediate term.
By the end of February, IBD again put its market call at “uptrend under
pressure,” and on March 4 they went further by downgrading it to “market
in correction.” The market once again rebounded quickly, and on March 10
it was upgraded to “uptrend resumes.” But there was a subtle change going
on in the market. In mid-March we start to see clues of sector rotation
occurring. That change would end up defining the theme of the market for
most of 2021. Growth stocks that soared for much of 2020 started to lose
some traction, and new breakouts would begin to be short-lived. Follow-
throughs on classic breakouts started to slip, and it started to became more
of a trader’s market (more adaptable to swing trading, scalp trading, and
even day trading). Even though many leaders and the market indexes didn’t
correct much, many stocks started to trade in a choppy fashion. And
leadership was changing. More defensive sectors and economic recovery
stocks started to lead. Figure 2-2 is a watchlist of leading stocks from late
March.
Other stocks that were showing promise in early spring of 2021, that
eventually became monster stocks that year, included ZIM Shipping
Services (ZIM), Devon Energy Corp. (DVN), Nucor, Corp. (NUE), and
Diamondback Energy, Inc. (FANG) among others. ZIM was an IPO that
went public near the start of the year. From the watchlist in figure 2-2 and
the stocks just mentioned (with charts below), you can see the rotation to
other sectors taking place. From shipping to energy to steel, the expansion
in the market was growing, but it was narrowing for individual stock traders
that were used to the high-growth stock environment that 2020 offered.
Many of those high flyers were pulling back as rotation started to become
more prevalent. One stock that stood out, though, was Fortinet, Inc.
(FTNT), an IT security firm. FTNT looked like one of the monster stocks
from 2020 with its steady rise. Another high flyer from the start was Futu
Holdings (FUTU) that was featured in Chapter One. FUTU blasted upward
in short order but then succumbed to selling pressure after its climax run.

The market turned back around in early April, and many prior growth
technology leaders that pulled back found support and continued their runs.
Other sectors continued coming up but then pulled back as quick sector
rotation started to become more commonplace. But the market was
churning leaders—one week it was one particular group, and another week
the market was rotating to something else. Though the markets trend was up
and the H/L/G stayed positive the entire month of May, it was getting
difficult to hold leaders who came up and off basing patterns. Breakouts
occurred during the uptrend, but following up on those was becoming very
challenging. The market was showing signs of a very different environment
from the 2020 market. The months of May, June, and July saw IBD change
their market outlook eight different times. It went from “uptrend under
pressure” on four different days to “uptrend resumes” on four different days
as well, the last within that three-month timeframe being July 23. Scattered
throughout were nine trading days were the H/L/G went negative but with
no trend to those negative readings. Trends to the H/L/G typically start with
three to five days in a row going in either direction. Those key stats prove
what a choppy environment the market had become, especially when you
compare it to a strong uptrending market like the one in 2020. There were
still plenty of opportunities as the overall market kept moving higher and
making record highs. It’s just that the opportunities were more profitable to
a shorter-term swing trading approach.
 In late spring, a few new leaders began or added to their moves. Among
those were Continental Resources, Inc. (CLR), BioNTech SE (BNTX), and
Dick’s Sporting Goods, Inc. (DKS). Another energy leader, a COVID-19
related health company, and a leading sporting goods reseller added to the
sectors showing leadership. But as summer came, the market started to get a
bit more choppy, as figure 2-12 displays. I chose the S&P 500 Index to
include IBD’s market change calls for 2021 because that was the leading
index as far as performance. The market was still trending upward, but with
sector rotation becoming commonplace, it became more challenging as
prior leaders were starting to correct.
August was another somewhat choppy month as the market turned back
around after midmonth to resume an uptrend. The H/L/G was mostly
positive, but it did record five days in a row of negative readings right in the
middle of that month. When it turned positive again, the market resumed its
uptrend. Also, August was the first month of the year that IBD did not
change their overall market outlook—it stayed “market in confirmed
uptrend.” Figure 2-13 is a watchlist from August 27. You should notice that
some of the monster stocks from 2020 were still leaders and getting some
fresh attention after building bases from consolidating prior gains. A few of
the best were NET, ZS, and DDOG. Another was TSLA. A few more
leaders started to come out, including Nvidia, Inc. (NVDA), the graphic
processing unit leader. But as some prior leaders continued on, others
faltered. Some of those from 2020 that started showing selling signals and
started to trade in a more volatile, choppy fashion were CRWD, PYPL, and
TWLO. A few of them wobbled badly before breaking decisively to the
downside.
 A few other leaders started making moves in mid to late summer.
Asana, Inc. (ASAN), Moderna, Inc. (MRNA), Upstart Holdings, Inc.
(UPST), and InMode, Ltd. (INMD) were added to the leaders list. A
software technology company, another COVID-19 health firm, an AI
lending company, and an Israeli cosmetic health company were some of the
more notable stocks making progress. ASAN started moving in early June.
UPST, which was included on the watchlist in figure 2-13, built a very tight,
flat base across the summer months and then took off in early August on a
huge climax run. MRNA was mirroring BNTX in many ways as both firms
were fighting COVID-19 with vaccine solutions. MRNA broke out in early
June and basically ran straight up for two months in another stock marking
a climax run. Climax runs are great opportunities to sell into strength. The
best traders over history kept their euphoric emotions under control and
used climax fast runs as sell signals. Many amateur traders buy into climax
runs that are extended, which causes the climax run that the seasoned
traders use to sell into.
The fall months brought more choppy trading. September was a down
month, and within it, IBD changed their market outlook four times. The
fourth change was to “market in correction” on the last day of September.
The H/L/G had also gone negative for three days in a row by then. The
beginning of October was no better as the negative H/L/G stretched to
seven days in a row by October 6, the longest losing streak of the year up to
that point. But by October 14, the market was moving higher, the H/L/G
was positive five out of the last six trading days, and IBD upgraded their
market call to “market in confirmed uptrend.” Both the S&P 500 and The
Dow retook their 50-day moving average lines. The next day, the Nasdaq
did as well. And, most importantly, leading stocks started moving up on
volume. The watchlist of strong RS and fundamentally strong (either past,
current, or anticipated) stocks was growing too. Figure 2-26 is a watchlist
from October 15. Watchlists consist of leaders in price action with volume
accompanying that action, along with stocks setting up in bases or finding
support at key areas.
 As the market continued its uptrend, a few more leaders took off on
strong runs to finish the year. Builders FirstSource, Inc. (BLDR), ON
Semiconductor, Corp. (ON), and Arista Networks, Inc. (ANET) were a few
of those producing strong, short upward runs into the end of the year. A
housing market stock, a semiconductor firm, and a cloud-based network
technology company added to the mix of leading stocks. All three of them
had gap-ups at the beginning of November on strong volume, which is a
buy signal. And all three stocks had strong two-month surges from those
early November gap-ups through December that accounted for the best part
of each of their gains for the year. That shows that only getting a portion of
a monster stock move during the year can improve one’s performance and
returns for that year. And all three stocks were in uptrends and proved to be
leaders before those late year gap-ups occurred.
A nice six-week rally ensued that saw the markets rise from that
October trend change. That uptrend was basically uninterrupted, and the
H/L/G ran positive for twenty-five straight trading days in a row. But by
mid-November, the market started to show selling distribution and
choppiness returned. The H/L/G turned negative on November 17 and then
dominated over positive readings the rest of the year. On November 30,
IBD downgraded the market to “uptrend under pressure,” but the H/L/G had
already run nine straight trading days in a row negative, and leading stocks
had been selling off for a week or two by then. After that nice six-week run
where several breakouts began working, in December it was right back to
the choppiness that dominated much of the year. On December 3, IBD went
to “market in correction.” Many of the leaders from the mid-October rally
had been selling off, and sector rotation was coming back in play, but the
selections were limited (the three stocks just featured were a few that
bucked the distribution trend). On December 15, IBD switched back to
“confirmed uptrend,” but two days later they again switched to “uptrend
under pressure.” But one thing that stayed consistently negative was the
H/L/G. It then turned positive on December 23, the same day IBD upgraded
their market outlook to “uptrend resumes.” That was the fourth change in
the market direction call by IBD in December. The market then ended the
year with a decent burst the last week of the year.
 The S&P 500 Index was the leader of the major indexes with a return of
26.6% for 2021. The Nasdaq scored a 20.7% return, and the Dow Jones
Index ended up 18.7%. There were sixteen monster stocks featured in this
chapter that more than doubled (I did include ANET with a 98% return) in
2021. Of those, only three tripled or more. Those totals were much less than
in 2020 from the stocks featured in Chapter One. Even though the major
index returns were solid and close to each other in performance, the number
of monster stock leaders was significantly smaller. That’s not unusual after
a big year like 2020. But as an uptrend ages, it gets more challenging. We
saw that with the number of market call changes from IBD and the back-
and-forth reading on the H/L/G. You can see how many times the reading
went negative (below the median line in figure 2-33) when compared to
2020 in figure I-3 from the Introduction.
Top Traders
Top traders still outperform in more challenging markets. In the U.S.
Investing Championship contest for 2021, there were a handful of top
performers that produced triple-digit returns.
Mark Minervini took first place overall with an impressive 335% return
in the money manager stock category, which was a record for that division.
That was Mark’s second time winning the contest. He also won in 1997
with a return of 155%. Mark has been one of the most successful individual
traders over the past three decades. In 2020, he did not enter the contest, but
ended up producing another triple-digit return of 150%. Mark was featured
in Jack D. Schwager’s Stock Market Wizards book and is a best-selling
author who has written three top selling books. Please see my book
recommendations in the conclusion where I rank two of them among the
best stock market books ever written. You can follow Mark on Twitter
@markminervini. He offers an annual workshop that many of the yearly top
traders in the stock division have attended. Mark also offers a subscription
service where traders can follow his successful strategies in real time.
 Here are the top five performers from the 2021 Stock Division
(minimum $20K account).

Ryan Pierpont repeated his third-place performance again in the stock

division. Ryan’s swing trading strategy once again served him well in 2021
with an impressive 201% return. He swing traded several Chinese stocks
that were leaders in the early part of the year. EHang Holdings Limited
(EH) and Up Fintech Holdings (TIGR) were two of his biggest winners. He
bought Fluent Genetics (FLGT) toward the beginning of the year near $50
and sold it late in the month at near $90. Ryan bought TIGR at the
beginning of the year and sold it in early February after it already
quadrupled in a little over a month. He also bought FUTU (figure 2-8) at
the start of the year over $40, but he took a strong short-term gain near $60.
He missed that huge climax run that can be seen in the chart as it more than
quadrupled to $200 by mid-February. That climax run turned out to be the
high for FUTU as it then started a fast descent. Ryan bought EH in early
February near $70 and sold it a few weeks later after it quickly ripped
higher to just under $130. Other successful trades throughout the year
generated around 10% short-term gains. That quick trading with shorter
term gains reiterates how much more challenging the time period from
March to the end of the year 2021 turned out to be. Larger intermediate
term opportunities were getting scarce as the uptrend chopped its way
higher until year end. You can follow Ryan on Twitter @RyanPierpont.
Roy Mattox came in second place in the stock division with a very
impressive 214% return. Roy is also more of shorter-term swing trader.
Recall that the market in 2021, especially from February to the end of the
year, rewarded shorter-term traders over position traders. Roy traded many
of the stocks featured in this book including LVGO, ZM, FSLY, DDOG,
and UPST among others. Roy was trading in the leaders; he just tightened
up his time frames in order to take advantage of what the market was
offering. He scored many 20% gains throughout the year, trading inside
those leaders from that shorter time frame. It pays to trend with the market,
and Roy proved that by generating a great return in 2021. You can follow
Roy on Twitter @RoyLMattox.
 Chapter Three – Lessons
Learned

T he years 2020 and 2021 in the stock market—both up years for the
major indexes but very different in several ways. Many of the lessons
learned from both years can help one in future market cycles. Much of the
activity for each year was similar to other market cycles before. There will
always be differences, but some key measures do repeat themselves. It’s
been that way for many decades, and it will likely occur again in the future
due to human nature. The following are some of the chronological lessons
learned along the way during those two years.
Lesson #1
The first lesson was about being observant to all the negative signals that
were becoming prevalent in early spring of 2020. COVID-19 was one of
those events that threw nearly everything into uncertainty and panic, to
some degree. Stocks started topping, the indexes were experiencing
distribution on increasing volume, the H/L/G was going negative, and IBD
had downgraded the overall health of the market. When those four
measures go in those directions, it is time to play defense. It was time to sell
stocks and go to the sidelines with all the negative signals flashing. Those
more experienced could have shorted the indexes or the leading stocks that
exhibited classic sell signals. But more than anything, that short but
powerful bear market decline was a lesson in defensive selling skills.
Cutting losses short and not trying to go against the trend of a market in a
clear downtrend are timeless lessons in the market. It was also a lesson in
capital and mental preservation. Nothing is more important in the market
than preserving capital when the market begins and continues on in a
downward trend. That way, when the market turns around, which it always
does, you will be in a healthy capital and mental state to take advantage of
the next uptrend and the opportunities it will offer.
Lesson #2
The next lesson learned was about having the ability to wait out a market
decline until clear signals show that the decline may be ending. That is a
skill of patience learned from experience over time. Being patient adds to
capital preservation, which goes a long way in protecting your capital and,
more importantly, your mental capital capacity as well. Not getting
frustrated during a market decline or getting whipped up and down from the
volatility inside one goes a long way in keeping your emotions intact, so
you can be ready for the next market uptrend. Time out of the market gives
you time to review your past mistakes and read and reread excellent market
books to continually educate yourself, as the market is a never-ending
learning process. Patience is such an important part of the discipline
required that, when practiced and implemented, goes a long way, especially
if you plan to be involved in the market in the long term.
Lesson #3
If you followed the first two lessons in early 2020, then the next lesson was
about being prepared for a new uptrend when the time comes. Still doing
chart work and reviewing weekly watchlists keeps you engaged and on top
of the skills needed when things turn around, which they always do. Not
getting discouraged and giving up will allow one to take advantage of the
next opportunities that come along. And you saw how many opportunities
arose during that strong April through August uptrend in 2020. Stocks that
declined the least and held up and showed relative strength (RS) during
downtrends are typically the best candidates to become leaders when the
market begins a new uptrend. Homework is required no matter what the
market is doing. Top traders have a disciplined approach to their routines.
They keep up the research work no matter what condition the market is in.
The difference between their results and others is in executing on their
research. If conditions are not ideal, they don’t do anything. Many top
traders think a cash position in a downtrend is as important as being in
leading stocks during an uptrend. And if conditions change, they are ready
to pounce and get involved. It’s all in the preparation that comes from the
work required to stay on top of things, no matter what the current
conditions may be.
Lesson #4
Getting engaged and involved when the market turns around, especially
after a major correction or bear market period, no matter how long it lasted,
is the next lesson. Many times (most people won’t believe it) that is when
the best early opportunities will present themselves. Trending lightly at first
helps to get a feel for any ensuing uptrend. IBD has a very reliable record
for calling the beginning of uptrends. Just review the market charts to see
those (figures I-1 and 2-12). No one knows if a new attempted uptrend will
last, which is why you make test or pilot buys to check its validity. If the
attempted rally begins to fail, you bail. The one in early April 2020 is the
one that stuck. Also, tracking the H/L/G (along with the IBD calls) is very
beneficial. If the H/L/G starts to rebound and trend positively after a big
market decline, that can be the sign of a market turning. But most important
is the quantity and quality of strong fundamental stocks that resisted the
decline, the best with rising relative strength (RS) lines, and solid bases that
were built during a declining market. Those stocks tend to break out first
and lead when an uptrend begins and sustains. The key lesson here is to get
engaged in the market with pilot buys in the stocks you’ve researched
during the decline that begin to move. If you’ve protected your financial
and mental capital during the down market, then you will be in a better
position (both financially and mentally) to get involved. If you took some
hard hits because of hesitation or denial, which can happen to anyone, then
you won’t be ready in both capital capacities to perform at your best. And
that early time in an uptrend is when the best opportunities begin. All the
best traders in history that I’ve researched found that when markets turn up
from a correction and that uptrend persists is when they started to score
their best returns.
Lesson #5
If lessons one through four were adhered to in the spring of 2020, and
you’re back in the market, the focus then turns to your strategic risk
management control and trading strategies in handling any leaders that were
purchased along the way. Key growth stock trading strategies include strict
loss control when a trade goes against you, initialing pyramiding up on
strength, selling strategies from both the offensive and defensive side, and
buybacks up and off key moving average areas or within basing patterns.
Keeping your risk strategies to plan and keeping your mental processes
controlled are key traits. Each person should have their own strategic plan
that fits their personality. We saw differences at the end of Chapter One and
Two in some of the top traders. Their strategies differed to fit their
particular style, but their results were similar. Whatever your strategies and
defined edges are, discipline is the key. Having the discipline to stick to
your successful plan will lead to consistency.

We will look at a few of the monster stocks from 2020 while pointing out
some classic buying and selling points and also see how they fared in 2021.
Remember, two of the first stocks out in 2020 during the April uptrend were
ZM and DOCU. Their business products and models were in high demand
due to the new COVID-19 work-from-home environment. However, even
though they gave many top traders strong gains during 2020, those two
stocks also gave classic selling signals after their big runs. It’s important to
know how and when to sell in order to realize the profits you earned. The
following two charts will be replicated from earlier but with additional
areas pointed out for the best possible buy/add opportunities (in blue) and
sell/trim opportunities (in red) in 2020. You can go back to the charts in this
book and look for similar instances with all of them. That is actually a good
practice and research project for each reader. Later in the chapter, I will
show ZM and DOCU again with their 2021 daily charts as well, so you can
clearly see why selling strategies are key to retaining profits in big leaders.
The last thing you want to do is round trip a big gain in a leader you
handled correctly but then froze and ignored selling tactics to retain the
profits you had earned.
 Buy/add opportunities will usually be the following:
Breakouts from basing areas—preferably on big volume
Gap-ups on big volume
Power pivots within a base on volume
Bounces off support areas of either the 21-day and/or 50-day area—on
volume is best
Sell/trim opportunities will usually be the following:
Gap-downs on big volume
Climax runs
Extensions in price over 21-day and/or 50-day areas (offensive sell
tactics)
Breaks of prior support areas of the 21-day and/or the 50-day areas on
big volume (defensive sell tactics)

I’ll summarize the steps from Monster Stocks that historical big leaders all
had in common, that many of the stocks featured in this book followed, and
that match the two just discussed:

The Setup—waiting patiently for the market to confirm a trend. The

beginning of uptrends typically brings out the best leaders that set up
the best bases during a correction.
The Breakout—breakouts out of sound bases on increased volume
are clear buy signals.
After the Breakout—pyramid buys on the initial burst up often pay
off if the uptrend persists and the stock follows suit. Support moves
off key moving average areas after pullbacks are also additional buy
opportunities. Failed breakouts should be cut short to minimize
losses.
The Run-Up—selling into strength after extensions from key
moving average areas keeps profits in successful trader accounts.
Looking for the climax run and defensive selling strategies on breaks
of key moving average areas on volume are also prudent selling
tactics.

Remember the definition of a monster stock at the beginning of the book:

“The meatiest part of a fast-advancing monster stock usually occurs
between 6 and 12 months of its major move.” Many of the best leading
stocks in 2020 did make their moves in short order—some did it in only 3
or 4 months! Stocks don’t go up forever, so it pays to have sell rules to lock
in some of the big gains earned. Selling into strength is probably one of the
hardest rules to implement, but top traders throughout history have
discovered its importance to their long-term success. Figure 3-1 shows the
fast moves of ZM and a few opportunities to sell to lock in some of those
strong gains and not give them all back. ZM never reached those 2020
heights in 2021. In fact, for long term holders that hung on, they would
have given them all back and more (figure 3-3). Several of those big leaders
in 2020 did the same when they round tripped their strong advances.
It’s important to note that no one catches all the gains of a monster
stock. And no one gets them all by any measure. The objective here is to at
least latch onto a few of the biggest leaders the market offers up each year.
If you’re lucky or good enough to be in a few, then you want to be invested
in them for at least a portion of their big move. If your objective of being
active in the market is to make money, then why wouldn’t you want to be in
the biggest movers? Leading stocks increase your odds of success. And we
saw in the prior two chapters that some top traders who ranked at the top of
the annual U.S. Investing Championships for 2020 and 2021 needed only to
make some great moves in just a few of the leaders to score impressive
returns for their accounts.
 I encourage each reader to go back to each stock featured in this book
and mark up some buy/add opportunities and sell/trim opportunities to the
charts that would be similar to figure 3-1 and figure 3-2. Or mark up your
actual trades in those stocks to see how to improve in the future if you
missed some of the big moves. The more you study your past trades and
then compare them to past big winners, the more you will start to see where
you can improve in the future. There is no better substitute in the market for
being honest with yourself by studying what you did, the opportunities you
missed, and the mistakes you made. In the market there are no certainties,
so everyone makes mistakes—and plenty of them! It’s part of this business.
But the more you recognize your weaknesses and then correct them in
future transactions, the more you’ll start to see improved results.
Now we will look at several of the monster stocks from 2020 and
compare their price action to their 2021 results. You will see how they
topped and started to give warning signs. Many topped in similar fashion.
When the trend of a big leading stock starts to change, it’s prudent to
change with that trend. Having solid sell rules in place will help you act
when it’s time to act. There are many lessons on buying and selling that one
can learn from studying historical charts of past leaders. William J. O’Neil
endorsed the cover of Monster Stocks with a great quote: “Study past big
winners and you’ll buy future ones.” And he should know better than
anyone, as he landed plenty of them during his career. Studying past leaders
will help you in the future, both on the way up and on the way down. But
nothing beats getting in there and experiencing it as it happens. Make no
mistake, it’s not easy! Mistakes and losses are the best teachers of all. You
need to burn yourself many times to learn to stop actions that don’t work.
Study the following charts and you’ll see when trends changed.
 As you can see, the two years, though in uptrends for each year
following the sharp sell-off in early 2020, played out in different ways. The
following is from William J. O’Neil’s book How to Make Money in Stocks,
which I believe describes much of the markets in 2020 (first paragraph) and
2021 (second paragraph).

The really big money is usually made in the first one or two years of
a normal new bull market cycle. It is during this period that you
must always recognize, and fully capitalize upon, the golden
opportunities presented.
The rest of the “up” cycle usually consists of back-and-forth
movement in the market averages followed by a bear market. In the
first or second year of a new bull market, there should be a few
intermediate-term declines in the market averages. These usually
last a couple of months, with the market indexes dropping by from
8% to an occasional 12% or 15%.

While 2020 was more of “buy the breakout and hold on until classic sell
signals were fired off,” the bulk of 2021 became more of a shorter swing
trading environment that rewarded skittish trading as the year progressed.
Richard D. Wyckoff and Gerald M. Loeb, two very successful stock traders
from over 100 years ago who were active for many decades, both employed
a skittish shorter-term strategy when the market called for it. Flexibility and
the ability to adapt that flexibility into a strategy when the market calls for
it is a key to success. Mark Minervini, who was profiled in the previous
chapter and won the U.S. Investing Championship in 2021, reduced his
time frames by taking advantage of quick shorter-term trades starting in Q1
because that’s what the market was offering. He bought stocks setting up
that met his criteria, then sold them quickly into short-term strength. He
concentrated his positions heavily and nailed down short-term profits. And
he always cuts his losses short when a trade goes against him. He repeated
this strategy with high rates of turnover during the year and rotated into
stocks the market kept offering as the best opportunities. He then
compounded his returns month after month to break the performance record
in the managed account stock division and capture the championship in the
contest.
Mark proved that being flexible and nimble with a very tight risk-
management strategy in 2021 was the key to strong returns because the
market shifted from 2020. That shift in the market rewarded top traders who
bought stocks on breakouts, rode them up just a bit, and then turned around
and sold into that short-term strength. Breakouts seemed to work, but stocks
had difficulty following up on those breakouts. That was not the case in
2020. In 2021, the top traders rotated into the next sector stocks that were
offering those same opportunities and did the same thing. The longer the
uptrend seemed to go on, the shorter the time frames for follow-throughs on
breakouts got. That sector rotation in short time frames for breakouts is
more conducive to a trader’s market. In his book Studies in Stock
Speculation—Volume 1, Richard D. Wyckoff describes the elements of a
trader’s market (and that was nearly 100 years ago). In summary, his advice
for most traders is to stay out of trader’s markets until a more definitive
trend has been established, due to the more experienced reactionary
quickness needed to take advantage of a trader’s market environment.
Employing that shorter-term strategy worked out very well in 2021 for
some of the top traders covered in this book who had the experience to
recognize what the market was doing and execute based on the
opportunities it presented.
Also, Wyckoff conducted interviews with Jesse Livermore many
decades ago that were reprinted by Windsor Books in 1984 in a booklet
called Jesse Livermore’s Methods of Trading in Stocks. The excerpt below
relates to those times when uptrends get extended that don’t experience any
major corrections along the way but create choppy back-and-forth trading
opportunities. Several of the top traders in 2021 related to what Livermore
saw back in his day when the market started to experience this type of
activity in early 2021, just before the shorter-term trading environment
began.

As the market executes its series of intermediate swings and begins

to approach the level when an important turning point is likely to
occur, he looks for more frequent reactions, and, therefore, will very
often liquidate all or part of his line on some of the strong bulges
which occur in the upper stages of the market, or in what is known
as the selling zone.
He is an active trader, for long ago he cured himself of jumping
in and out of the market day after day. Next in importance to the
trades which he makes are the intermediate swings running from ten
to thirty points and from a week or two to a few months in duration.
Let us say that the market is getting into the upper levels and,
 although not at the turning point, becomes overbought and the
technical position is such that a reaction of ten to fifteen points is
imminent. He decides that under such conditions it is best for him to
reduce his line of long stocks in order that he may take advantage of
whatever decline occurs by replacing them at lower prices. He may
have twenty or thirty points profit in a certain lot of stock which he
believes will sell at a higher figure eventually, but if he can close
this out on the verge of a sharp reaction and replace it ten points
cheaper, he has thereby reduced the original cost by that much.

What Livermore describes seems to relate closely to that early part of 2021
when big gains from 2020 were getting extended in many leading stocks.
As the uptrend continued, we started to see sector rotation kick in by early
spring 2021. As the year went along and the uptrend extended, sector
rotation became much more commonplace. That’s when swing trading or
scalping seemed to work best. And that’s why Livermore adjusted his
strategy during an aging uptrend because he knew more frequent reactions
would occur as that uptrend kept creeping along. Applying that more active
trading strategy to the leading stocks as the 2021 uptrend moved along is
what we learned from the top trader section in the prior chapter.
To adapt to changing uptrends as they age, one could tweak the strategy
outlined in Monster Stocks (summarized earlier in this chapter) that has
worked for decades and that worked so well in 2020. I would call this
Maximum Monster Stock Strategy (MMSS). It should be noted that the
steps outlined in Monster Stocks come from the meticulous and historical
research of William J. O’Neil, Jesse Livermore, Richard D. Wyckoff,
Gerald M. Loeb, Nicolas Darvas, and other successful growth and
momentum traders from the past who studied how the best stocks acted
before, during, and at the end of their successful runs. Each one then
tweaked the system (added to it, adjusted it, etc.) to fit their own personality
and style. They all discovered similarities in how great stocks became great
percentage return stocks.
As discussed, when an uptrend continues on and matures, especially
after a year like 2020, the buying power typically begins to slow down.
That typically happens if very few major corrections (of between 10% to
20% off index highs) and bear markets (indexes off 20% or more) occur
during that uptrend. Also, there are several variations of market uptrends
(and downtrends). There are strong uptrends, weaker uptrends, choppy
uptrends, and so on. I use the H/L/G to get a sense of how strong an uptrend
is by its net-trend numbers. Strong uptrends have very healthy numbers, and
choppy uptrends have weaker, lower readings and can switch easily
between positive and negative readings within days. You can view the index
charts that relate to the net new high/new low numbers (H/L/G) for both
2020 (figure I-3) and 2021 (figure 2-33) to see those relationships.
Without a few corrections in the market during uptrends, buying power
simply gets weaker as an advance ages due to most investors and traders
being fully invested in strong uptrends. To combat that, one could tighten
up the typical monster stock selling strategies. The classic monster stock
growth selling strategies include sell signals when a big winner breaks the
21-day or the 50-day area, especially on larger volume. The other classic
sell signal has been the climax run. Employing MMSS would consist of
tightening that up a bit when the market environment changes. That would
mean one could sell or trim positions in those stocks when the moving
average for selling is moved up to the 10-day moving average area. Also,
selling or trimming positions more often into strength before a climax run
occurs is another tighter selling strategy. That type of selling calls for more
frequent offensive “scaling out” sell transactions, instead of holding full
positions until a classic break or climax run occurs. Selling then becomes
more commonplace in choppy market environments. Additionally, not fully
waiting for classic extensions off breakouts that reach 20% or 25% before
one starts taking profits in a winning stock (a classic selling technique of
IBD) is another offensive, tighter selling strategy. Doing that allows one to
also buy back positions when rebounds off the 10-day and/or 21-day areas
occur—similar to what Livermore mentioned above about getting back into
the leaders as they started up again after a pullback. Adjusting those
offensive and defensive selling strategies can be beneficial when the market
calls for it. It’s a more active approach than position trading but can reward
those who want to stay active in aging uptrends. Instead of riding out those
position trades in the strongest leading stocks through their pullbacks or
rebasing stages, that MMSS strategy, if done correctly, could compound
returns. All that means is one is reacting to what the market and leading
stocks are doing as the market cycles through its stages. Staying in the zone
and “the now” environment by tweaking strategies when it’s called for can
help one in future markets when conditions change.
 The lessons mentioned at the beginning of this chapter will need to be
repeated as the market cycles through its different stages and trends. As of
the writing of this book, which is January 2022, the market had peaked in
November 2021 and was correcting. During the month of January 2022,
selling was dominating the market. There were many signals given just like
there were in early 2020. Distribution days were piling up, leaders were
topping, IBD downgraded to “market in correction,” and the H/L/G was
mostly negative. In fact, from mid-November until the end of January, 78%
of the trading days were negative readings (40 of 51 trading days). That’s a
major trend change. Many top traders were in cash positions while some
have traded the slim leadership that was providing opportunities in energy
and just a few other select sectors. But for the time being, until the trend
changes, which it always will at some point, protecting capital becomes a
priority while keeping up the research work and keeping an eye on the
market for future possible opportunities.
 Conclusion
Observing something closely day after day gives one a keen eye to
whatever is being observed. The stock market is both complex and contrary
at the same time. But, as great traders discovered, observation, flexibility,
and control (both in managing risk and your mindset) can go a long way in
trying to stay on the profitable side of the market in a consistent manner
over a period of time.
Those observation and flexibility skills defined differences in the
markets in 2020 and 2021. Uptrends vary especially when they continue on
for extended periods of time. Sticking to a solid and proven trading plan is
critical. And that plan needs to fit the personality of each trader. But
tweaking it based on the conditions of the market can be beneficial too. Just
be sure not to constantly change from one type of strategy to another as the
market moves. It’s better to become an expert at one type of strategy versus
a jack-of-all-trades. Subtle changes can be adjusted or added to your chosen
strategy—the stock market is a never-ending learning process. Once your
strategy works and your risk management control is tight, you need to be a
strict disciplinarian. A disciplined approach is the key. Staying disciplined
will keep you in your lane and, over time, will make you more consistent.
Once you’re consistent in your discipline and your approach, your results
should start to consistently improve as well.
You can learn a lot about the stock market by having a basic
understanding of how the best traders over many decades succeeded. You
can learn a lot from their mistakes too. All the best traders studied the
successful ones before them. But that foundational knowledge won’t make
you a successful trader. The path to success in the market is long and hard
and often frustrating. But reading about and studying great traders is the
start. Studying charts is also critical. Reducing tips and noise from other
distractions is critical as well. Remember, everything ends up in price. Price
reflects everyone’s opinions, reactions, decisions, news, and so on.
Observation is the other key. Find a proven strategy that fits you, learn from
your mistakes, study the best traders and monster stocks from history, and
stay disciplined in your approach.
 Below I list some of the best stock market books ever written that have
helped generations of traders. There have been thousands of books written
on the stock market, but there are really only a handful worth studying. And
that’s not just my opinion. The books below are mentioned by many top
traders as being the key foundational knowledge to their learning and
understanding. Many are from decades ago and still stand as timeless
classics. My own books used many of them as references. I read hundreds
of market books, and though you will get something out of each one, the
ones below offered the best education and foundations of knowledge on the
market and trading.
Recommended works lists:
Top Market Books

How to Make Money in Stocks – William J. O’Neil – 1988

How I Made $2,000,000 in the Stock Market – Nicolas Darvas – 1960
How to Trade in Stocks – Jesse Livermore – 1940
The Battle for Investment Survival – Gerald M. Loeb – 1935
Studies in Tape Reading – Rollo Tape (aka Richard D. Wyckoff) – 1910
Trading in the Zone – Mark Douglas – 2000
Reminiscences of a Stock Operator – Edwin Lefevre – 1923
Tape Reading and Market Tactics – Humphrey Neill – 1931
Studies In Stock Speculation—Volume 1 – Richard D. Wyckoff – 1925
The Perfect Speculator – Brad Koteshwar – 2005
Trade like an O’Neil Disciple – Gil Morales and Chris Kacher – 2010
Think & Trade like a Champion – Mark Minervini – 2017
Trade like a Stock Market Wizard – Mark Minervini – 2013
Secrets for Profiting in Bull and Bear Markets – Stan Weinstein – 1988
You Can Still Make It in the Market – Nicolas Darvas – 1977

Stock Research and Apps:

Investor’s Business Daily

StockMaster
TradingView
 Bibliography
Boik, John. Monster Stocks. McGraw-Hill, 2008. All rights reserved.
Elder, Alexander, and Lovvorn, Kerry. The New High – New Low Index.
SpikeTrade.com, 2012. All rights reserved.
Haller, Gilbert. The Haller Theory of Stock Market Trends. Gilbert Haller,
1965. All rights reserved.
O’Neil, William J. How to Make Money in Stocks. McGraw-Hill, 1988. All
rights reserved.
Wyckoff, Richard D. Studies in Stock Speculation – Volume 1. Ticker
Publishing Company, 1925. All rights reserved.
———. Jesse Livermore’s Methods of Trading in Stocks. Windsor Books,
1984. All rights reserved.
 About the Author
John Boik is the author of Lessons from the Greatest Stock Traders of all
Time, which was chosen by Barron’s as one of the top 25 books of 2004. He
also wrote How Legendary Traders Made Millions and Monster Stocks,
both endorsed by William J. O’Neil and Investor’s Business Daily. You can
follow John Boik on Twitter @monsterstocks1.
 Acknowledgement
This book is dedicated to many of the pioneering growth stock traders who
paved the way. Richard D. Wyckoff, Jesse Livermore, Bernard Baruch,
Gerald M. Loeb, Jack Dreyfus, Nicolas Darvas, Peter Lynch, and William J.
O’Neil among others. They set the course and passed on valuable
knowledge to a new generation of traders.
A special thank you to several of todays successful traders for agreeing
to be mentioned and profiled in this book. Jim Roppel, Eve Boboch, Oliver
Kell, Matt Caruso, Ryan Pierpont, Roy Mattox, and especially Mark
Minervini. Your results are inspiring and motivating to others.
I’d like to thank all of those at Elite Authors who helped put this
together. It was a pleasure working with you. And thank you to all readers
of this work, I hope it can assist you in reaching your investment and
trading goals.