Kyna Kosling@KynaKosling
Dan Zanger famously turned $10,775 into $18,000,000 in 18 months.
“He just got lucky. He was in the right place, at the right time.”
…that’s what someone will tell me in the replies.
And sure, that performance may not be fully replicable.
But I’ll be damned if we can’t learn something from Zanger.
He’s often spoken in interviews about chart patterns, but if you listen (or read) more closely, you’ll see that patterns are only ONE aspect of his system.
Here are 3 more:
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1⃣ Stock selection
Follow the strongest groups — what are the institutions buying? Stick with the winners until they begin to fizzle.
How to identify those leaders? Volume and chart behaviour offer major clues. Zanger also pays attention to CAN SLIM characteristics:
• Powerful earnings growth
• Low float and low institutional sponsorship
• Something new — fast growing companies dominating their space at a global level
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2⃣ Situational awareness
The market makes perhaps 2 big moves a year.
Each lasts maybe 6–12 weeks. The rest of the time, it consolidates the gains.
So, Zanger typically looks for an oversold market before he’d consider getting into a leading stock. He wants the market to appear to be bottoming and/or ready to take off, then get into the powerhouse stocks showing most relative strength just as they’re breaking out of a good base.
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3⃣ Chart pattern nuances
Zanger looks out for at least 11 patterns.
But his favourite pattern depends on the current market.
“In some markets I’m looking for falling wedges, descending trendlines, descending channels, to name a few. In other markets, I might be looking for horizontal channels and cup and handles.”
“I think the descending channel for buying is one of my favorite patterns as the market has become more choppy and volatile. You are seeing more descending channels and island reversals for buying.”
He also gets huge clues about stock behaviour by looking for surges in volume and seeing how price responds to them.
“If a stock really does not act right, and get up and go when it breaks out, for example, I would just sell the stock right there. I would not even wait for it to come back down to the breakout point. If you want to make money in stocks, you have to be in stocks that are moving up. The longer it continues to move up, the more money you make. If the stock breaks up and then goes to sleep, I am out of the stock. I want to keep my money in those fast-moving stocks that are always moving up.”
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In summary:
“[Watch] the behavior action of the stock, [do] some market timing and cycle work, and really [tune] into your stock’s behavior and its price action. Many people choose a stock and say they are going to wait for this stock to move up. Meanwhile, they missed a 30-point move on a stock sitting right next door to it. Really focus on the stocks that are going to move now.”
“I trade whatever the market is going to push up the most.”
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Covered in more detail on TTRH:
3 Key Elements to Dan Zanger’s System
Going beyond chart patterns
🔗 tinyurl.com/2ax3zw34
(Audio version available.)
