IBD Live: First Look

TL;DR

The speaker discusses his strategy for buying stocks and identifies Chipotle as a stock that is no longer in the elite category. He also explains the importance of monitoring earnings gaps and the overall market environment.

Transcript

a lot of times for those stocks that all right what i think are the elite stocks and i i don't put chipotle in that category right now 20 10 years ago it was but uh right right now i don't put it in but for those kind of elite stocks i'll take a chance and try to buy a little bit in in the morning just to start that position and then and then hopef... Read More

Key Insights

• 🧘 The speaker employs a strategy of starting with a small position and gradually building it over time for elite stocks.
• 🖤 Chipotle is no longer in the elite stock category due to its past growth and lack of potential to exceed market expectations.
• ❓ Rapid growth in stocks can create buying momentum and cause them to exceed investors' predictions.
• 📣 Monitoring earnings gaps and the behavior of stocks like Chipotle can offer insights into the overall market environment and its willingness to reward growth stocks.
• 🥳 Stocks that have repeatedly tested the 50-day moving average may not be as attractive for investment.
• 🧑‍💼 Adding to a position in a stock like NVIDIA, which shows strength during market sell-offs, can be a prudent move.
• 🧘 The speaker suggests starting with a 4% position and potentially adding another 2% to it.

Questions & Answers

Q: Why is Chipotle not considered an elite stock?

While Chipotle is a great company, it has already experienced substantial growth and may not exceed Wall Street's expectations. The speaker prefers to wait for a pullback closer to the moving averages before considering it for investment.

Q: How much should one buy when starting a position in an elite stock?

The speaker suggests starting with a smaller position, typically around 2-5% of the total desired position. This allows for potential gradual additions if the stock pulls back.

Q: What indicators suggest the overall market environment is rewarding growth stocks?

If earnings gaps in stocks like Chipotle hold up and show strength, it could indicate a favorable environment for growth stocks and risk-taking.

Q: What is the significance of a stock's position above the 10-week moving average?

If a stock reverses and closes below the low of the week while significantly above the 10-week moving average, it can be a sign of failure and may warrant caution.

Summary & Key Takeaways

• The speaker often buys a small position in elite stocks in the morning and then gradually adds to it over the next week. His exit strategy is generally based on the low of the day and a few percent below it.

• Chipotle is not currently considered an elite stock because it has already experienced significant growth and may not exceed Wall Street's expectations in the future.

• Chipotle's rapid growth in 2010 exemplifies the power of stocks that are growing too fast for investors to fully comprehend.

• The speaker uses stocks like Chipotle as a gauge for the market's behavior and to determine if it rewards growth stocks or risk-taking.