Last week, we looked at creating a portfolio to follow all of the stocks in the Dow Jones Industrial Average (DJIA). Let’s now build a portfolio of DJIA stocks using the Pure Quant tool that we just introduced to our Lifetime members.
We built this portfolio to be able to easily see when 40% of the stocks have hit their Stock State Indicator (SSI) Stop signals and entered the SSI Red Zone. This has shown to be a good time to exit the market completely.
As of today, there are only three stocks in the SSI Red Zone and just four more that are in the SSI Yellow Zone.
We can now take this watch portfolio and enter it into the Pure Quant system to find the ultimate DJIA portfolio.
After clicking on the “Research” tab, and then clicking on the “Pure Quant” tab underneath, a new window opens and we can get this set up easily.
We’ll use our DJIA watch portfolio that we created last week, we’ll set this up as a $100,000 portfolio, and use 15 stocks in the portfolio.
After pressing the “Run Research” button, we will have a portfolio with 15 positions, all of which are in the SSI Green Zone.
You’ll probably want to save this as a new portfolio. Just press the button, pick a new name for this portfolio, and you’ll be ready to go.
You can choose to use either the VQ trailing stops or SSI trailing stops which are more conservative. We can set this up using the bulk feature in the “Positions and Alerts” tab.
After a stock is stopped out, you’ll want to sell it, but you won’t replace it immediately. Wait until the beginning of the next month and re-run the Pure Quant tool. You’ll use the stock or stocks that are nearest to the top that are not already in the current portfolio. Don’t forget to run the Risk Rebalancer to know the exact number of shares to buy of the new stock or stocks and to bring the overall portfolio to a state of risk-parity.
If there aren’t 15 stocks available, then don’t add any more and don’t rebalance. Once there are 12 stocks in the original DJIA portfolio that are in the SSI Red Zone, you’ll want to move completely to cash.
If you’re not a Lifetime member, but are interested in upgrading to the Lifetime membership in order to have access to both the Pure Quant tool and the Billionaire’s Club newsletter, please contact our Customer Success team at (866)385-2076.
Tom Meyer
Education Director, TradeStops
