Frequently Asked Questions
Did you use the 7-week rule or something similar during your period of super-performance when you were profiled in "The Best"? Or is this something you developed in recent years from further research?
From looking at various charts, it seems like this rule is hit or miss, working very well on some charts and getting you out of a position and exactly the wrong time on others.
I'm just curious because I want to start implementing it in real-time, but my initial observations don't instill much confidence.
Thank you for your time.
A: The 7-week rule was a strategy I developed shortly after developing the pocket pivot and buyable gap up strategies. When using the strategy, it is even more important to focus only on the best names in terms of fundamentals and technicals. Such names have a higher relative strength thus even during a market correction, such stocks tend to find a floor around their 50dma. That said, in this current market environment where QE reigns supreme in terms of pushing the indices higher in almost relentless manner, it is better to take profits when one has them, thus if one is using the 7-week rule, and their stock goes on an upside run, one can then sell perhaps at least half their position, booking profits, while their 'core' position is only sold should the stock violate the 7-week rule. Likewise, one may decide to sell half on an upside run, then side the other half on a subsequent upside run, while using the 7-week rule as a guide to keep them in their position until such upside runs occur.
Also, keep in mind that even during the best of markets such as in the late 90's, William O'Neils, David Ryan (in the 80s), Gil's, and my success rates were typically 50% at best. Thus position sizing is key as always. In 1997, my returns just topped 102%, yet my success rate was just under 20%.