Heat. Heat. [Music] [Applause] [Music] [Music] Hello and welcome to another episode of the Investing with IBD podcast. It's Justin Nielson here, your host, and we are coming to you live at 5:00 p. p.m. Eastern, as we do every Wednesday. Uh this is June 4th, 2025, and we've got a special show for you today. You've probably seen them on a lot of our investors business daily shows, whether it's the SMT on Fridays, our swing trader status update on the second Tuesday, and also on IBD Live, it's Mike Webster, our uh senior market strategist or something like that. You know, you got I think I get just got a new business card. It said random dude. Yeah. Yeah, that that makes sense. So, uh, it's been a while since we've had you on the podcast. I mean, you're you're appearing on so many things. And I should also mention that we had Joe Fami on last week. Uh you were just on Joe Fami's podcast which was a a great show and uh that Joe Fami's what is it? Joe's Happy Hour. Joe's happy hour. So I've got to watch his uh most recent episode because he had the magician on that um that that came to our table when we went out to dinner one night. So Oh, very cool. Yeah, I haven't watch I've seen all the episodes except for that one. I'm behind on that, but uh Joe Fami, a good friend of both of us and and of IBD and and that was a ton of fun doing that that podcast with them. I really enjoyed it and looking forward to um when you're on there as well. Yeah, absolutely. Um so, let's get into it. Today, we're going to talk a little bit about ATRs and uh that stands for average true range and what um you know, a lot of we've been talking about this for a while. We talk a lot about it on Swing Trader. Uh we talk a lot about it uh just in general when we're discussing stocks and how uh you have these high octane names sometimes that are a little bit harder to handle especially if you have a portfolio uh full of them. So we're going to talk about ATRs in conjunction with markets with stocks and then of course as usual we'll get to some stocks at the end uh that are on your radar right now. But why don't you start out with just kind of a simple explanation of what an average true range is. uh why you you know why you turn it into a percent as opposed to just a dollar value and why you're using that instead of points percent all the things that people normally look at stocks uh the way that they normally look at them. Good questions. So I like to kind of just think of what's really important and then use use tools for that if they're available and if not build them. And so the average true range is not anything I invented. It came about long decades and decades and decades ago. And it just measures the distance that the stock travels on a normal day and it accounts it takes the any gaps in there. Um you know so it's not the the days range but it's the true range and the average of it. So if you gapped way up it's going or gapped way down it's going to look at the close from the day before. And that's how we feel, right, when we're in the market and you're trading something, if it's slow and pokey, it doesn't move a whole bunch uh on a normal basis on a normal day. And if you're trading high, you know, high octane stocks, the heat that we always talk about that we kind of gravitate towards, that's all they're all over the place. And so when you're comparing, you know, a 7% move on a slow pokey stock that maybe trades on average 2% a day um on its range versus something that um trades 10 15% on on average. That 7% is totally different, right? You know, and 7% was a very important thing to Bill O'Neal, the the founder of IBD. and you know cutting your losses at at a max of 7% is is you know really like at the core of what we do at IBD you know to cut our losses quickly but there's cutting your losses quickly which I still use the percent for um I'm aware of but everything else I do in terms of the ATR and like you said I points are just silly I haven't used the the point move on something since the 90s at that point I switched everything over to uh uh the percent instead of points because a $10 stock that moves a buck is totally different than a thousand dollar stock that moves a buck. You know, it just looking at the dollar thing is is irrelevant really. It it's and especially now cuz I mean, you know, a few decades ago, you felt like a lot of stocks would split enough to kind of keep their uh price, you know, their share price, you know, not too high. There were some stocks that just didn't care. or NBR for instance, but most stocks kind of, you know, kept it under $100. You know, that seemed like, you know, once you got over $100, they're like, "Okay, we're going to split." So, so people can afford our our stock in round lots. But yeah, and then that whole round lot thing, most people watching don't even understand that back in the day, if you traded anything less than 100 or anything not in increments of 100, you had to pay an extra commission. 100 shares these days. Yeah. um these days commissions are free so it's that's not even and people can trade fractional shares if they want so it's um it's just a different world now and so I I've switched everything to percents just like I switched um share volume to dollar volume because that you know how many dollars were really flowing through the stock because if it trades a million shares a day and it's a $10 stock versus a million shares a day on a on a $1,000 stock that's really really really different, right? How much money is flowing through. So, I just try to keep things as as meaningful and simple as possible. So, I I'm converting my mind from percent to uh average true range and I've been doing that over the last number of years. Um, and it's hard because, you know, we're both hardwired to think in terms of percent and then you're trying to think in terms of, okay, well, doesn't matter that I'm down 3% today. I'm down a full ATR or I'm down a half an ATR. You you want to think of it differently. So, anyone who's going to start at um using ATRs, do it gradual. Just start looking at the ATR. Be aware of it before you start implementing as part of your uh your your daily trades because it'll throw you off. And I would say that for any new instrument, you really want to test something out for, you know, weeks, if not months, so you have a really a strong understanding of it. But anyways, it's just a way of measuring what's normal and natural for a stock. So what's normal for a stock is very important. We're always looking for anything that's abnormal, abnormally weak or abnormally strong. Um, and using the ATR is I I think a great way of of doing that. Yeah. And I just want to kind of um back up a little bit to kind of make sure people understand that concept of the true range just to kind of get back to those uh the the first principles. So Crowd Strike today is a good example. Okay, it had earnings and when you look at this and you calculate the the range that it closed in, it closed in the upper half of its range 60%. But if you took the true range because really, you know, it came it came down all the way from the previous day's close. So what the true range does is it says, okay, I'm going to take the maximum of the high of the day and the previous day's close and I'm going to take the minimum of that day's low and the previous day's close and take the difference of that and that gives you your point total. Then of course you can average that out over uh whatever time you want to use. In our case we often use 21 days. Um and then you can put that into uh percentage terms by okay what are those points those point values relative to the share price. Um and that's how you do that conversion. And again this is something that as you said goes all the way back to Wilder who did a number of uh different you know uh technical indicators and I think this was back in the 1970s. So something you can easily look up the formulas uh on this but um maybe we can kind of also talk a little bit about when when you look at this and I'm just going to scroll down here because we took the market surge growth 250 which uh not everyone knows that you had a lot to do with uh it was based on the whole thing. I didn't have a lot to do with it. I had based on screens that you initially were doing for Bill O'Neal. Um, and then I would put all of those on Bill's screen, you know, after you came up with the the criteria and and worked with him on making sure he didn't miss anything cuz that was his goal. I want to make sure that we slice and dice it all of these different ways. Uh, and there were 33 different screens that we'd run uh all the time and put those in Bill's computer for him to look at. Um, but I took that growth uh that growth 250. I put it into a list here and um we're just going to sort it by the the 21day ATR. And where you can find this is if you go to market surge and you create a customiz column layout um and then you just you know for for instance I have this on my um I have a special like MA distance um one and so I have the 21 ATR right here. I pulled that from our price and volume. Uh, so you have all these different price and volume things that you can choose from. One of them is a 30-day ATR percentage, a 50-day ATR percentage. Um, the 21-day ATR percentage is what I pulled. And um, you know, that's that's what I'm using here. And so I just have this in the list as one of the columns. And now that it's in there, I'm going to go ahead and expand this out. And I'm going to zoom in just uh just a tad so folks can see it a little bit easier. Um, but I've sorted this by the 21-day ATR percentage, and you can see that there's a very big difference in what a stock normally moves, a stock like Olo that moves on average about 12% a day versus something like uh, you know, at the at the bottom of the range um, you know, a Disney that moves about 2 and a.5% per day. So, very different. So, how do you use this uh ATR for your individual stocks like this? Yeah. Well, a couple things on that. Can we go back to that the list where um you were showing them how to um put the ATR in? I just wanted to point one thing out there. Absolutely. Uh let me and I will say for the um growth 250, it's now 44 screens that I've put in there. it was 30 33 to begin with and then over the years you know things have changed. So, um, yeah, as as we often do, we iterate, right? We, uh, you know, that's your favorite word. We come up with something. We say, "Oh, you know what? That's pretty good, but can we make it better?" Um, so I'm going to go over again back to the wrench, back to our customized column layout. Uh, this is our MA distance. What was uh the other thing that you wanted to point out? Yeah. Go up to price and volume, and then go down. I just wanted to go down to where the ATRs are. I just wanted people to know, don't use the one that says average true range because that will be in points. So, just to keep things simple, do the one that Justin has the the 21-day ATR. If you want to use a 30 or a 50, that's uh fine. I prefer using the 21day. Historically, people have used the 14-day one. That's what you know or is in most programs, but we're a little bit different here, and we like to lean on, you know, 21 and the 50. So that's why we're using that um with this one. So I that always tends to confuse people. So I wanted to make sure they're using the right one. Um so pull up that first one, the SBET. And I will say I do have a tiny position in the Olo that you mentioned. Oh, I was I thought you were going to say SBET. I'm like wow, you're brave. Um the Olo scares me enough with that 2% position. U so look at this. It's all over the place. Go like four or five days ago. that that big blue day. How much was that up? 171%. Is that all? Okay. So, you know, you're playing if something goes up, whatever something goes up, I always think it can go down more than that. So, if something goes up 50% in a day, I think, wow, it could go down 70% in a day. So, I want to stay away from those. So, one of the things is using this to screen or, you know, for um when I create the IBD live watch list every day, I depending on what the market conditions are, I will put an artificial cap on there. So, for these days, because we're in a power trend right now, I'm going out to the the risky side and we go all the way up to an 8% ATR. Um, which is pretty aggressive. So, we're not going to put the Oloss of the world in that list just because they're too volatile. And certainly this one is not going to go in there. Let's go back. Let's pull up the Disney that you had mentioned that only has a two two and a half. Yeah, two and a half. So, this is more normal um type of stocks that most people are going to trade and should trade something with a really an ATR under 4%. Because you want to think as basic as possible, what is your max stop loss you're going to take? It's going to be with if you're following our system, Bill's system, uh, IBD system, you're going to have a max loss at 7 to 8%. So, let's call it 7%. So, if you're trading something that normally trades 7% on a given day, you have to be timing that exactly right or just normal fluctuation is going to move you out of it. Whereas, if you're trading something like a Disney with, let's say, a two-ish ATR, then that can move a lot, you know, on the chart where it would be really noticeable before it gets to that 7%. So, in general, if you're new to trading, I would stick with the lower ATRs. You can still find a lot of good ones in the three up to 4% that's still heat, but just not crazy heat like the high octane. Anyone who's trading the high octane ones like over an 8A ATR, you really have to be cognizant of your position size because when they come down, you know, they all come down at the same time and it's not fun. You know, they don't go, you know, the whole thought of a diversification like I I'll diversify my account, but I'm aware that they are all growth stocks are correlated when the market's coming in, you know, and and we saw that big time in 0709, right? Yeah. Yeah. the correlations again the diversification doesn't help you at all because everything is going down. So it's just a matter of like oh you know do you have you know the the whole idea behind diversification is uncorrelated assets but in crisis correlation of crisis uh the correlations really gravitate towards one. Um and you know it's interesting because uh the the the 21 days here on Disney. So, you know, remember we were looking at a 21-day ATR and that's actually right here. Um, just so happens to be right around the earnings um, you know, gap up uh, that that that it had. So, this was a big move. I mean, 10% move on this gap up, a 4% move on this gap up, but the average is still, you know, two and a half because of all the tight action in here. So, this is actually probably a little bit high for Disney um because of those two big gap ups uh really kind of ramping up uh what's normally probably closer, you know, to to a one, you know, ATR. Exactly. You know, and I think that's a good point. So, whenever you see gaps on there, that is when I will put a 50-day ATR in my list. I didn't want to confuse people, but when there's big gaps, I will put that in there just to see. Okay. given more time, what does it normally trade? Um, but in almost all cases, you can just stick with just the the 21day and just look at the chart. Whenever there's earnings and you get a big move, you just know to like discount it a bit. And also, I'm glad you brought this up. Going into an earnings, let's say something normally trades a 3 ATR, 3% on average, but if I go into earnings, I'm not going to think that that's going to be a 3% move on an earnings day. I'm going to look back over the last four to eight quarters, see what the movements have been on earnings, and I'm going to use that as a guide. And that's something that we want to add to um uh to market surge is you know just a percent range of you know the last earnings days. But you can just do it quickly. It just takes a couple minutes. And yeah I I want to address a question real quick. Uh you know I I I try to look at the comments coming in from YouTube and uh JCC Chapman was asking about the ATR. Is it a percentage up or down or the total move? Um, so yeah, this is not directional, right? It's not saying that it's going up by that amount every day or it's not averaging the up or the down. It's it's it's basically saying how much does it move? What does that total point move each day and that's what it's averaging out. There's not really a direction in there. Exactly. There's no direction um whatsoever. And so it is um it's just giving you a sense of character. You know, if you go all the way back to like the Livermore days or what Bill would talk about or all, you know, all the legends would talk about how stocks have characters, you know, and your job is to assess that character and most importantly know when that character is changing for the better or for the worse and then, you know, adjust accordingly. So, this is the best measurement that I know of to measure the character of the stock because if you've got something that has a 12 ATR, you know what you're dealing with. If you got something that's got a 1.5 ATR, you know what you're dealing with. Now, the other things are then the quality like what is the relative strength um line, what's the relative strength number, what's the EPS, what's the composite and all those things. Um, but that's separate that that's saying is it in position or how are the fundamentals, but just the character of the stock is just so it's so easy to see with the ATR. And so I'm just a big fan of it. And then also the moves when you're looking at a move, you're saying, "Okay, if this was a big move on the day, is it um how is that relative to the ATR?" So I'll just think in terms that way. If it's a 5 ATR and it moves up 10%, well that's a 28 ATR move, you know, if it's a a 2 and a half% ATR and it moves up 10%. Well, then that's a 4x, right? Uh so it it's, you know, you're always thinking in ter or that's how I think these days and it's been taking a while to get my it does take a while, right? Exactly. It's not a, oh, I can just flip this switch in my brain and now magically I'm thinking in these terms. You have to do some you have to do some translating for a while. Yeah. I guess if you if for the newer folks or the younger folks who aren't, you know, been haven't been doing it the as long as both of us have, you know, it it would be easier. So, if you're new, then that's great. And I would just start this way, right? Yeah. Uh, you know what? But I want to transition real quick because um you know so we we've looked at a few stocks on on the ends of the spectrum, but I want to kind of get into what happens when you have a lot of stocks acting together. So just as an example, I've I've gone over to this list and and what I did was I just put um put in some ETFs. We've got uh all your sector spiders, your 11 sector spiders in here. Uh we've got your everything from your triple leveraged uh TQQQ which I do have a position in that. Um our triple leveraged UPRO uh which uh I also have a position in that and both of those are on swing trader. So this is your your Q's that are triple leveraged, spies that are triple leveraged. Um gold miners are actually up there uh right right up with the leveraged as is the semiconductor ETF. Um and then you know at the very bottom you've got SPY at 1.29 29 and the XLP at 1.11. So, this kind of shows you how um and and you know what, just just for fun, I'm going to I'm going to throw in um what is a China ETF just for just for fun. FXI. Uh yeah, I was thinking of K Webb, but yeah. Yeah, I own some KB. Um and I do own the TQQ and the U Pro that you mentioned and Spy and Q's as well. Yeah. So here's here's K Webb um up at at 2% which is actually for K web not not that bad. Um and so you know probably some of that has to do with uh the fact that it's actually been relatively tight here over the last few weeks. Um but so let's just talk a little bit about this. Do you ever use like oh okay spy this is what spy is at 1.29 29 and I I feel like that's fairly typical for SPY. Although uh in in April, you know, especially after liberation day and then April 9th where, you know, we had the NASDAQ up 12% in a single day. Um even SPY was up over three uh for its ATR at that point. So, you ever kind of use this as a gauge of okay, this is what SPY is at. what you know what kind of stocks should I be looking at or what kind of risk does that add for me? Well, all the time. So I'm always comparing it to like just the way people uh would do pees versus the S&P 500 has been a kind of a standard for dec uh let's call the S&P uh PE 20 um just for example and you're trading something 25 well then it's rich you know or if it's 15 PE for your stock then it's you know undervalued you know that's the general concept uh of it. And so I think in the same terms with this. So I'll always look at even though I really should look at the cues because that's more in line with what we trade. But for some reason I'm just wired to look at spy. That's silly. Um but I'll look at that and I'll see it like how far away uh from that is it? How many times is it? And if you're trading something, you know, it depends on what type of environment you're in. Let's just pull up the um let's pull up the cues. Um so we are in um a power trend right now and something that you and I developed along with uh Charles Harris and anyone who's interested in what a power trend is you know in detail they can watch you know we we've got a bunch of um uh podcasts and stuff like that on investors.com on it. But in a nutshell, it is when the market tends to trend for a longer period of time. And the three of us came up with the very simple rules of your low being above your 21day for 10 or more days, your 50-day, which is your red line in an uptrend, and your 21day, which is your green line, above the um the red line, the 50-day for 5 days or more. And then, of course, you know, we have the thing of has to start on on a day that's blue. Um, so that's your basic thing and then, you know, it doesn't turn off until the the 21day crosses back below the 50-day in most cases. There's some exceptions, but that's the time when when you're in a power trend, good things tend to happen, you know, like the the best moves in the market have really been h have happened during power trends. But, you know, and that's how we designed it, you know, and you don't know at the beginning of a power trend if it's going to be a special one or not, but you want to think in terms that it could be just like what Bill O'Neal did with when you're coming down waiting for a follow-through day when you're in a bare market that we had, which was a market crash. People I don't hear a lot of people talking about that we just had a market crash in my opinion. We did, but pull it up on a weekly chart. It's a little bit more obvious there with some of those bad weeks in there. Like how much was that bad week down the week before the bottom? Down uh 9.87%. Yeah. In one week for you know like after it was already down and underneath your 10 week. So I look at that as a crash and there's two of us have looked at you know all the markets in in detail and this is very abnormal and the bounce back without looking back is very abnormal. The only other time we really saw it was during the COVID um recovery phase in 2020. So, but with that said, we're in a power trend. So, you want to keep an open mind that really good things could happen during a power trend. So, you want to start shifting away from the lower ATRs on balance into your more medium um ATRs and even a sprinkling of your high ATRs. and we'll talk about it in a little bit about from a portfolio level of how to manage that. But really, there's a time and a place for higher ATRs and a time and a place for lower ATRs. So, when you're underneath the 21day um you know, or you're in any type of corrective phase, you you want to lean towards low ATRs like three and under because that's when you get chopped up. And um if you're getting chopped up or even a sideways time frame like the December through February where we're just in that little flat base going back and forth, you know, doing a post analysis, what I should have been doing during that time frame is focused on very very low ATRs because there was still enough evidence to continue trading in there. like we know now that it didn't work out, but at the time there was enough evidence that it it that you wanted to be in the market, but really that's the time to be dialing it back with very low ATRs, like even more than what we were doing. Um, and then so every cycle you just learn and you're like, okay, you know, next time I'm in this chopped zone, I'm going to go to low ATRs as well as a a high cash position. But now that we've, you know, really breaking out of this cup with handle, um, that we've pull up the QQ, uh, QE, which I did buy, I think for the first time today. Um, I don't think I've ever traded it, but it's a nice little cup with this is the the Q's, but equal weight, and a nice little cup with handle that it's trying to break uh break out of. So, you know, trading that as well. And I'm sure the ATR on that is very low. Um, just like the like the other ETFs. In fact, yeah, why don't you put it in there and see what it is because I didn't look at it. So, yeah, QQE right there at about 1.46. Uh, so at at the lower end. Uh, so so and that's a nice thing to just kind of put some leverage on that. That would be nice to have a double, you know, just like the RSP that I that I trade. I think I have a position in um that is the equal way to spy. I wish that someone would come up with a a double. And you know, you you you bring up a good point because there was a question in the in the YouTube comments about, you know, what is the average percentage ATR that you use, you know, and and you know, does that change? And it it really does change based on the environment. And just as an example, um you know, for for Swing Trader, a product that you and I both work on, um you know, that is is offered by Investors Business Daily. When the follow-through day happened on this day, we started with QQQ and SPY, the single leverage. Yeah, the no leverage uh versions because okay, you already had a very high ATR environment. It was at the beginning and you kind of wanted to make sure you weren't going uh too far uh ahead of your skis. But then as the market kept on checking off these boxes, you you changed and said, "Okay, well now I'll look at ATRs that are, you know, in these different ranges." So it really is kind of a it depends uh answer to that question. Yeah. And great point. And so one of the things folks should keep in mind is just there's three key moving averages that that kind of dictate what type of environment you're in. The 21day exponential and the 50 and the 200 simple. So, your black line, your red line, and your green line. When they're not in the right order, meaning the right order is your your green, your 21 is above your 50 and your 50 is above your 200. When they're not in that order, um, then you want to go with lower ATRs because you're you're in a transition period or you're in a correction period. So now we're not in a correction period, we're in a transition period where we had a bare market and we're transitioning into, you know, a bull market and where we've got this power trend going. So while you were underneath both your 50-day and your 200 day, and that 50-day is underneath your 200 day, you want to go with your your your um smaller ATRs or if you're using ETFs, your single weighted ETFs. As you start getting above the 50 or above the 200 day, then you can go into your doubles. Um, and then when you get above the 200 day and you're above the 21day, then you can go into, you know, your doubles or triples. We really want to see that 50 get back above the 200 day. But it's going in that general direction um, nicely, you know, as quickly as anyone could have expected. Um, so but once that's up and we're into new high ground, then you almost you pretty much just do doubles and triples. But it's just think of it in terms of just those three moving averages. Are they stacked the right way? And are you where are you in them? And when you're above all of them and they're in the right direction, then you can go heavier uh with with higher ATRs and in reverse when you're underneath them or they're not stacked properly. Yeah. And again, those triples right now 3.85 ATR for UPRO. uh and 4.82 for TQQQ. So, it's like, okay, I can I can handle that type of risk. Um, now, well, you know, one thing that you mentioned that was during the B at the bottom, the the spy ATR was in the threes. So, with the U Pro at like nine, meaning that you're expecting Yeah. And with like with swing trader that you and I do, um, we like to keep our stop loss around three 3% give or take 3 to 4%. um even though we look at things in terms of ATRs that we also are cognizant of the the percent loss and so what we'll do is we'll go in there and um you know just adjust accordingly. Um but anyways yeah so um I man we we could talk about a lot of this stuff forever. This really needs to be like a three-hour uh three-hour long podcast but I don't think that's fine. I don't I don't have to do dinner for a couple hours. Yeah. If if if you want to see uh if you want to see our producer MJ freak out, then uh yeah, just keep keep on talking like that, Mike. Well, I was born in a small little town, right? But I want to get into because one of the things that we do on swing trader is we do kind of take a look at our um you know, it's a model portfolio. Of course, it's not like we're using real money, but uh we treat it like it is real money. and we will kind of take a look at okay our ATR not just for our individual stocks but how it's all acting together and so uh one of the ways we do that is by coming up with a portfolio uh kind of ATR and in this case here's a a very simple way to do that calculation um you know you take your your weighted ATR so for each stock you'll take what the ATR percentage is times the weight in the portfolio and that'll give you the weight for the ATR uh for for the stock. And then you sum all of those up. Uh and then that's going to give you your ATR. Now, what about when you are only partially invested? Let's say you're 20% invested. Um well, what that ends up doing is you kind of end up having um a a huge portion of your portfolio that's just zero, right? It's ATR is zero. Cash is by definition a zero ATR. And so um so that that portion is uh you know kind of kind of zeroed out. And so uh whether you use you could you could either do this with a sum product you know so where you take one column of your ATRs and one column of your weights and do the sum product or do them individually and uh sum them all up. But the the benefit here is that you can kind of see how that can really make a big difference in your ATR. So maybe you can walk through this slide real quick. Um these are just using the largest market cap uh with different weights. Let's say you had a 15% weight in your largest market cap. And of course we have uh this is old data by the way. This is uh just for illustrative purposes. Um, so you know, we're we're we're using old data, but just to make the point of here are the ATRs that Tesla was at the time, a seven and a half, um, all the way down to Berkshire, you know, Haway Bshares down below 2%. Um, and how that would kind of translate based on how you treated the weight for each um, for each position, assuming they were all equal weights. So if you can um kind of walk through that. Sure. And as you said this is you know a few months old um data but the concept is uh remains the same. So just think on the left that's 150% so you're 50% on margin. The one in the middle you're fully invested with no cash and the one on the right you've got a 50% cash position. And so each one of those, like the Apple for example, is at this point at a 2.95% ATR. So it it traded on average about 3% a day. If you had a 15% waiting in that and 15% waiting in all of those and you sum them up, that gave you your portfolio um ATR around 6%. So it gives you a sense of okay on average I could expect if they all did you know this movement around 6%. That's not exactly the you know it just gives you a guide to work off of. And once you start working with these numbers you can find the sweet spot that works for your personality because my personality in one of my accounts is different than a different one. But one that I'm very aggressive in another one I'm more conservative. And so everyone is going to be different and you might be different in different accounts as well. So that's on your one on your far left, a 6% ATR, that's heavy, man. That's hard to deal with. And you would only do that if you're doing really well for the year and you've got what I call chips. You've got chips that you can play with, meaning you're up on the year. When you're up on the year, you can can trade differently. when you're up on the year and outperforming the S&P or whatever your bogey is, then you can uh trade more aggressively. Now, if you're down for the year and you're and you're underperforming the market, well, then you're going to want to trade more conservatively. So, you start moving over to the right. So, the one in the middle, all the same stocks with all the same ATRs, but just a different position size. You can see that lowered your ATR from 5.99, so 6% down to 4%. Now, if you, as you pointed out, the cash component has a zero ATR. So, that any cash in there will really, that's a a way to really reduce your portfolio ATR. And so, by um having a 50% cash position on the one on the right, your ATR is now only two on your portfolio. And that's something you can most people the average person could deal with and probably deal with a little bit more than than 2%. So this is something that we do on swing trader. We're looking at it all the time and adjusting um which stocks we are going to go and which ETFs we're going to go based on what impact that's going to be on the portfolio on the model portfolio that we both run. And um this is a big tool and I put a ton of weight into this because if everything's going well, you don't need it. But when when you know you've got problems in the market, you're going to wish you had something like this. Yeah. And to that point, I'm just going to share um share real quickly a slide from our uh swing trader product. And this is something that we we do ourselves. Um you know that we when we're looking at things, we calculate. Okay, here here's here's our performance and I'm just using um one of our charts that we have on our chart dashboard that we use internally. Um and this shows our uh 50-day, you know, last 50 days. So, this is starting um March 26th. We had already kind of moved forward to the next day. So, yeah, this isn't through June 5th, I should say, because we don't know the future, but um you know, we had already kind of reset our uh our our stuff for the next day. Um, but you can see how okay we were with a our portfolio had a very low ATR weight all the way down to zero for most of this because let me go ahead and show another chart here real quick. This was our percent invested. So when our percent invested when we were completely in cash as we were for most of March, most of April, uh we actually went to cash on February 21st uh on swing trader and you know we dabbled in a little a little bit but not in a big way until after the follow-through day um as you can see here. So that's when we really started ramping up and you can see that reflected in our portfolio ATR weight uh where we were you know at zero we finally got up to kind of one you know as we got our follow-through day and then we started ramping up uh we have come down you know sometimes in a big way uh you know just in terms of reducing exposure when things look like they could come in a little bit um but overall uh it's been you know at at times pushing it a little to the point where we've actually been on margin uh a number of times here in May uh for a good portion of May. Yeah. So, I think you did a great job walking us through that. Go down to the next chart if you don't mind. So, you want to build this. Don't act on it. you know, do the same thing that Justin does with these spreadsheets for us for for a swing trader and just um just graph it out until you get a sense for where your sweet spot is because you'll start feeling uncomfortable at a certain level. And when we were getting close to five five ATR in the portfolio, even though we had, you know, sidestepped the bare market, um, and we're doing, you know, we're very happy with how we were doing, it was still a lot of risk. And then what happens with that is sometimes then when things start rolling, you you overcorrect is what you you see what we did there, bringing it all the way down to under, you know, down by one ATR. So, in hindsight, when you'll use this for a post analysis and say, you know what, I probably wouldn't have sold as much if I hadn't just been pushing it too high. So, lots of what you're doing is like a post analysis going, okay, well, I didn't like how I did that. How can I adjust it? And so we'll look at this and when we're deciding to peel things back to uh reduce our exposure, we'll look at our highest ATR stocks and see if those should be sold first. Because if you got you know 10 stocks in the portfolio and two of them have got a 6% ATR and you know two of them at a 2 ATR and the rest in between. Well, you want to if you're trying to raise cash to reduce exposure, you want to go, all things being equal, go with the six ATRs and remove those. Now, if you're trying to ramp things, then you don't want to add more two ATRs in there because then go back to the other slide. Um, you're then your green area, your percent invested will start getting higher than you want because you don't want to be 200% invested in there. that's still a level of risk even if the ATR, you know, is at 2% because if you've got some sort of um big risk event in the market that this that's going to happen being that deep in you, you want to look at both. So, it's not one or the other. It's it's looking at both. And then what you have up on the top of it that we talk about, the two of us talk about every second Tuesday of the month with our swing trader update um that we do here on on YouTube through IBD is look at those moving averages of your equity curve. So the equity curve is in purple there and our 10day is in yellow and the 21day of the equity curve. So that's not the 10 and the the 21day of of the S&P, it's of our equity curve. and use those along with it. So, when you're trending above those moving averages, that's when you go deeper with your uh a higher ATR on your portfolio. And when you're coming underneath those, which you will, then that's when you want to, you know, contract those. And so, it's a really good tool from a portfolio management um standpoint. And I think it's much better than beta. I think beta has a lot of people use beta because it's the old school way of doing things. study beta and you'll see that there's problems all over the place. It's a good concept for portfolio management from a very very big, you know, hundreds of stocks in the account, but that's not what we do. But for what we do, using beta is just um I don't think it's a good risk measurement. Um and uh we're going to go ahead and transition because I think we need to go over a few stocks because that's what we promised. Want to make sure we have time for that. And I also want to acknowledge that uh uh I was seeing some comments from Rever Asset. Uh so Don Vandenborg of course uh we've had on uh IBD Live, he's been on this podcast. Um he's actually going to be on the podcast I believe July 16th. Uh so good to see them in the comments. Um I'm sure we're going to be talking about ATRs with Don when he's on as well. Um but let's get into some uh some stocks. And I'm going to go ahead and start with um well, let's see. I I think I just lost my market surge, so I'm just going to have to put that back up here. Uh but I was going to start with um uh RCL if you don't mind just to get you prep. Uh I do have a position in this myself. So do I. And we do have it on swing trader as well. Yeah. Um and okay, here we go. Uh tell us what you're seeing here on RCL. Yeah, so it's a bit extended. It's 4% from its pivot and even more from kind of your alternative pivot as it was breaking the downtrend. of the handle. So, I wouldn't suggest buying it here, but you know, you really want to look at what stocks have really worked and um and then put them in a separate list and then wait to see if they give you another entry point. Now, sometimes they don't give you another um entry point, but most of the time they will. either a pull back to the 21day um kind of a shakeout with an upside reversal going sideways all sorts of ways to get back in to get into a stock if you've missed it. So, I wouldn't buy it here. But let let's go to the weekly for a second. Mhm. And in isolation, this large base, how deep it is would really turn us both off from what we learned from Bill that, you know, a deep base is um how deep is that base? uh looks like it's about 41%. Okay, so that's on the excessive side. Normally, you know, anything more than 30% you're like, "Oh, this is pretty deep." But in context, the the NASDAQ was off like 27% give or take um during that time frame. So, it gets a pass because of that. And lots of bases that we're looking at right now are are a lot deeper than what we feel comfortable with. We felt comfortable with the base that it had before the bare market. And how deep was that one? This one was just 15%. Yeah, that's beautiful. And that's what you want, but the market brought it down. And so, one of the things I'm looking at is what was looking really good before the bare market that then the bare market just kind of had it pause and had it go through a corrective phase, which happens um and then is now moving back up in position. Now, one of the things I don't like is that it did not hold the 200 day during the bare market. I have a positive bias towards ones that that did hold the 200 day. That is a big deal for me, but you can't get everything you want. Um, the other thing I like about it is the the leader in this space right now. We don't have to go through all of them, but the CCL and the Norwegian and the the Viking and all the other ones in the group, this is the best looking um one. Well, the carnival looks similar and Viking is coming back up, but pull up Norwegian. That one was um I don't know if it's specific to them, but that that's just kind of not acting. One of these kids is not like the others. There. There you go. I remember that game. Uh yeah. Does Nicholas play that? Uh no. I that was from Sesame Street as well. Oh, that was okay. I remember hearing it. I just didn't know what it was from. Okay. So, let's go back to the RCL. So, and let's do it on a on a weekly and go look at the quarterly numbers real quick. So, on here, what's problematic is the sales growth is going from in the 60% down to single digits. So, that's what we don't like. And you can also see with that earnings line up there, it was growing at a certain rate and now it's flattening out. So, that's a negative. But, you also want to look at the context of things. You know, we had the the COVID situation that kind of shut down this industry. So it was, you know, taking its time kind of, you know, coming back from all that mess and and everything. I know that was a number of years ago, but still it, you know, I I think it has some lingering um impacts in this whole sector. But on the right side of this base, you have several weeks up in a row. We like to seeing, you know, five days uh or five weeks or more up on the right side. Another thing that we learned from Bill. And so, you know, you've got that going for it. Um, it's not a perfect looking base, but it looks very interesting. And that RS line is above both of its moving averages, um, with a strong RS number. So, uh, certainly one to, uh, be looking for as a way to get in. Mhm. Um, I also wanted to make sure we had a chance to go over Dolingo. Um, this is, uh, this is, this has been a tricky one for me. I, look, I've got a 875day streak on the app. Um, I I really enjoy the app. Uh, and so I have tried this a number of times. Uh, some some good, a lot bad to be honest with you. Uh, not not real bad. It's just I I I basically sell it right before it starts moving. Um, you know, I I I finally kind of lose patience with it and then it turns around and moves without me. So, um Oh, that doesn't just happen to me, right? Oh, I thought it was the only one. Yeah. And and in in fact um I'm I'm trying to remember if I still have a position in this because yesterday I didn't particularly like the action of that downside reversal. I was buying it uh you know on this uh bounce off the 21day moving average line. We also added it to swing trader. Uh so I was buying it off the after the restriction period and um I think I think that day kind of spooked me. But this is still you take a step back on that weekly chart. I mean, you can't ask for tighter tighter closes than that, dude. It looks so beautiful, man. It really does. I don't have a position in it. I traded it the same way you did with that upside reversal and then uh sold it yesterday just because when you have a um when you're failing like it was on the daily, you don't know how much lower it's going to go. But when you step back and look at this weekly, it is a beautiful thing. So, I would say this is in the spirit. It's not a highte flag, but in the spirit of a highte flag that you ran up from, you know, the the low 300s up here, you know, into the mid 500s and you are holding dead tight. Um, you know, obviously Bill would want a 100% gain or, you know, or more and that's not what we have, but still um at least from the point where you would start counting, you know, looking at the flag. But this is really beautiful and tight. Let's go back to the daily for a second. So, how I would look at this is if it can take out yesterday's high, that's what that's going to be my, you know, um entry point. Now, if it comes down one more time to 500 and has an upside reversal, uh I would prefer that. Mhm. And one more just to wrap things up. Uh let's take a look at Toast. Here we have a a nice move that this had uh off of earnings. uh ramped up very quickly and now the pullback. I mean, it's staying above this earnings gap and getting support right there at the 21-day moving average line. Uh like Dolingo yesterday, it did have kind of a downside reversal. Um I I had a position kind of shook me out there. Uh it was an outside day closing at the lows, but I'm still watching this one that uh that intrigues me. The fact that it's potentially getting support at that 21day. Yeah, same thing. I did get shaken out of it yesterday and you look at it and go, "Yeah, it's, you know, an outside day downside reversal." You know, failing at, you know, it where it should have moved up and so you back away from it if you're a fast trader. But the support it's getting at the 21day is is great. And if it can u make it back above yesterday's high, that's probably something that I would be getting back into. And I just really like what they're doing. And Bill would always, you know, teach both of us that you want to go into something that's, you know, saving people money is a really good area to go into. And that's what these u this is doing. It's saving restaurants, you know, primarily from, you know, higher labor costs because when they put this in their their um their restaurants, it can really speed things up and you don't have to you can either get more people through there or you don't have to have as many um you know people working. So, and it's it's great. it's efficient and those are the types of things that we've seen through a lot of our models, but doesn't mean it's going to work. But, um, you know, lots of the best stuff are just sticking straight up in the air. So, I you know, uh, we wanted to have a few that were, you know, uh, viable in the near future if they move up. Yeah. Well, hey, I hope that people get a lot of things to kind of think about in terms of how they handle their um, their own uh, portfolio, how they look at the risk. Um, again, we have a lot of ways of looking at that risk. It's so important to keep that top of mind because uh that's how you live to fight another day is by making sure that you're never taking on so much risk that you can no longer play in the game because you got knocked out or so injured that you know you just can't play anymore. So, um hopefully people can use that ATR and really understand uh the the level of risk that they're taking with their individual stocks and also with the market and kind of know where to gauge uh their portfolio as well. Absolutely. And thanks for having me back on the show and I really appreciate it and you do such a great job with absolutely everything you do and everyone watching should know what is your nickname? Um Goofy. Uh no, something like that. That was from Disney. I was so st the the saint because anyone watching Justin is I I've seen known him since 1998. I've never seen him even once do anything. We met by sharing a room in Philadelphia for work. Yes, that was so that was so much fun. Yeah, that was that was that was good. I brought my it was almost like a sleepover. We were like up all night talking stocks and like you know I had brought my um Jesse Liver I had just recently got Jesse Livermore's How to Trade in Stocks which is probably one of my favorite it's in my top three books and I brought that. I was going to read it on the trip but we were hanging out so I didn't get to read it then. It was it was just so much um so much fun and it's just great working with you and and it it's uh really puts a smile on my face. So, thanks for all that you do and and people wouldn't understand. The IBD would not be what it is if it wasn't for Justin. And 99% of what he does is behind the scenes. And it's just um people don't realize we just couldn't be the organization that we are. Um nor could Bill have done everything that he did without um without Justin. So, thank you for all that you've done. Well, and hey, uh same same back at you, but buddy. Uh there's so many things that you've created uh um whether it's you know composite one next week. Great. Yeah. Right. Exactly. Um but anyway, before before uh the producer just kind of shuts us down, I'm going to go ahead and end it there and just say thank you so much for sharing your knowledge as you always do. And as a reminder, there's a lot of places where people can see you do your stuff. Um you know, not only are you on the Friday SMT, although you won't be there this week, I'm going to fill in for you. We also have that swing trader status update that we do on the second Tuesday of every month. That's free content uh for for people to take a look at. Uh you've also got your Webbby rambles uh that you do uh very regularly that you just are kind of sharing information for free uh on on YouTube. So, a lot of places to follow you um you know on on on your content. And then also uh go ahead and give people your handle in case they don't have that on X. Sure. Well, I'm on IBD live every Monday, Wednesday, and Friday. There's that, too. Right. That that's so much fun with uh three other people each time. And uh we have Eve Bobc. We always have a special guest uh every Friday. My Twitter handle or X is M Webster 1971 and the Webbby Rambles on podcast that that um I'm doing is um on uh my Webbby 5150 YouTube channel. And I do um I do an episode every week. I think I'm up to like 22 or 23 now. So hopefully people will um uh watch that when they have time. It's a good sleep aid. Well, thanks again for all that you do, Mike, and uh appreciate you coming on the show again. Thank you. Okay, that's going to wrap it up for us this week. U make sure you tune in next week because it's going to be all about what is the big money doing. We've got Scott Bennett coming back on the show from Investing with Rules. Um, and so that's going to be a great time to take a look at uh, you know, what how he views the market. Um, and he's, I'm sure, going to share some of the stocks that are most intriguing to him. So, hope you join us for that. Thank you so much for joining us this week and we will see you next week. Thanks for