John Boik - Monster Stock Lessons: 2020-2021

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 correctsyou 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 didnt 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 dont 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 yearsthe monster stock status, measuring a stock thats doubled or more in one year, will be looked at on a calendar basis. Im 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 Ive used is Investors 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 othersone 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.