Victory is Stock Trading, Strategy & Tactics from the US Champion.
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Hi everyone, today marks a milestone for the channel, it’s the 50th video relating to stock trading and investing.
The channel really started to get traction in 2020, so there is no better way to mark the achievement than reviewing the E-book by the 2020 US stock trading and investing champion, Oliver Kell.
Kell takes us through his strategies and tactics which gave him a winning return of 941% within a year.
If you find value, please don’t forget to hit the like button and consider subscribing.
Before we look at the winning strategy lets look at the final championship standings.
We can see Oliver Kell won the title by a significant margin to second place, by almost 450%, with another well-known stock trader Sean Ryan, also making the final leader board.
So, what do we know about Oliver Kell?
Kell has been trading for over 10 years whilst also posting his ideas on Twitter, and since this winning performance his following continues to grow.
Kell’s father was a market maker on the Paciific Stock Exchange, so he grew up with a good foundation of market knowledge. Kell himself later traded at a firm which offered a 60 to 1 margin account, but the approach did not appeal to him, neither did the returns…
Despite tinkering in other ideas and extensive research of the markets, Kell could not nail down a strategy that suited him and went on to say:
“For all my studying, I still struggled to embrace the idea of controlled risk, a vital part of trading”
Over time Kell continued studying and applying strategies to the market, and with that eventually came consistency and account growth.
Kell attributes his success to the book Make Money in Stocks by William O’Neil, in fact Kell says the methods from the book are at the root of his methodology, from which he later built his winning strategy. Its also a book we covered in a previous video.
The former football quarterback clearly had a competitive persistence, and said that prior to perfecting his method, he did not make a profit for the first six years.
Kell is also the founder of Kell Capital LLC, an investment management firm.
Despite his stature, recent success, and newfound notoriety, Kell says his approach is simple, easy to understand and can be learned by anyone willing to put in the work. So, lets take a look at the strategy…
To get a feel for his approach, Kell says:
“I Consider myself to be an intermediate term trend follower and swing trader, I’m always looking for the strongest growth stocks with big earnings and sales growth”
Not too dissimilar to my own strategy, Kell looks for breakouts from big basing patterns, these trades tend to be held for longer periods.
For his swing trades he looks to buy pull backs or shorter-term continuation patterns.
He also focuses heavily on the moving averages to ride a trade to completion. Including the 10 and 20 exponential moving averages for all timeframes, and the 50 and 200 simple moving averages from the daily charts.
Kell combines multiple time frames, ranging from the 5 minute charts all the way up to the monthly charts.
Let’s pull all this together and look at some of his trades throughout the championship.
The well-known company Tesla was one of Kell’s top performers.
Here he takes us through his thought process, and although he does not divulge the exact detail, he does offer guidance.
This first Tesla chart is phase 1 of 3 and encompasses what Kell calls the fractal nature of price action.
Point A is a Blowoff Exhaustion, which extended considerably away from the 10 day moving average and completed a topping pattern.
Points B and C saw large selling candles through the 10 and 20 exponential moving averages, these confirmed price reversals from the prior Blowoff Extension.
Point D saw support from the weekly time frame which coincided with support from the 200-day simple moving average. This marked the potential for a trend change.
Point E marks the first buying opportunity. Price broke through the 20-day EMA confirming the reversal from point D.
The next buying opportunity is seen at point F for what Kell calls an excellent risk/reward trade. Price is supported by the 20-week EMA and a buy order could be placed with a stop loss just under the EMA. You either hit a trend or you exit for a small loss.
Point G becomes the next focus point, the price is squeezed by the support of the 10 and 20 EMA’s and the overhead resistance line.
Kell points out how the chart structure also emulated the well-known cup and handle formation, a formation he often looks to trade.
The pop above the resistance line (out of the handle) took Kell into phase 2.
Here we see point G again, the same break of resistance out of the handle, and the point at which Kell took his position. Kell also refers to this as the base and break.
The stop is placed under the support of the 10 and 20 day moving averages.
At this stage there are similarities to the Darvas box method.
Price once again consolidates, before breaking out through the upper resistance line. At this point you can add to the position and again move the stop loss under the moving averages.
Prices eventually extends too far from the 10 day EMA and reverses with volume. This confirms another blowoff exhaustion and again creates an inflection point which becomes the first point of resistance.
As a short-term trader Kell says this could be a selling point, but as a longer-term trader merely an area to manage expectation and accept that a new period of consolidation is likely.
Point K is an area where Kell gets excited, we see a break of the channel which also coincides with a lateral consolidation area, another great time to take a position. Again the moving averages are supporting the candle, which equally makes a great place to position a stop loss.
Kell sold at point L where he saw a considerable move away from the EMA’s, accompanied by large selling volume.
Before we move to phase 3, could I please ask you to hit the like button and consider subscribing, it really does tell me if people are finding value and if I should keep making similar videos.
Ok, now let us look at phase 3.
Kell points to another base and break at point M. It made for a sensible trade, a break above a daily consolidation, supported by the 10 and 20 day exponential moving averages, which provided the rationale for a sensible tight stop loss.
On this occasion price failed to break above a previous resistance point, reversed and took the stop loss out.
At this point patience is the key. Kell waited for the price to get close to the resistance line and looked for price to break. Eventually the line is broken with volume and a new position is entered.
Point P is observed as a Blowoff Exhaustion, but Kell says the candle is too early from its breakout point and on this occasion is not a reason to sell.
Point Q shows resistance from the moving average and could be a good point to raise the stop loss or even add to the position.
Point R sees another failed breakout, but a few days later the second attempt is successful.
Point S is confirmed as a Blow off extension due to the distance it has extended from the 10 day EMA, this marks a good time to take profits.
Point U confirms the end of the uptrend, identified by a large sell candle breaking and closing downward through both the 10 and 20 EMA’s.
Another interesting trade Kell discusses is that of the company Trade Desk.
We can see how the pandemic impacted the stock from March 2020. The price dropped, reversed, and pulled back forming a double bottom.
Price reversed once again, and the 10 day EMA crossed back above the 20 EMA.
We can see a six day consolidation, support of the 10 day EMA and an eventual break above. This could have been a buy point.
Next, we see the completion of the cup and handle formation. Price consolidated in the handle, and soon broke with a closing bullish candle, another great time to buy.
Price continued its ascent, finding support from the 10 day EMA, until price finally broke through, marking the ideal point to sell.
When we talk about fractals, this chart shows numerous examples; reversals, double bottoms, consolidation breakouts, cup and handles, exhaustions and so on. The more you study charts the easier these patterns become apparent.
The method I teach is based on the weekly timeframe, and if we overlay the same stock with the weekly chart, we can still see the similar patterns but with less noise.
Here we see the cup and handle. The breakout of the handle. Further consolidation followed by a breakout, and price exhaustion.
Notice too, how price is finding support at the 20-week moving average.
Ultimately the timeframe is down to personal choice, and although Kell predominantly uses the daily chart he does refer to the weekly and monthly timeframes for a more holistic approach. In fact, Kell presents a monthly chart for the company Spotify Technology.
He refers to the significance of the long monthly consolidation in price, and subsequent breakout, as a key moment to look for trades on the lower timeframes.
The company Peleton was another of Kell’s trades, this time referring to the weekly chart.
Again he looked for periods of consolidation, followed by a break up through resistance.
An exhaustion extension, confirmed by the excessive distance from the 10 EMA, and a pull back finding support from the 20 EMA.
Kell suggests using the weekly charts to catch larger moves out of consolidation.
Next we look at portfolio sizing and margin.
In terms of portfolio size, Kell refers to the quote from Stanley Druckenmiller “Put all your eggs in one basket and then watch the basket very carefully”.
In general, Kell will hold between 8 and 12 positions in his basket, and if fully invested, his position size would be apportioned as follows:
His two best trade ideas would each be allocated up to 35% of equity.
His next two, up to 20% of equity each.
The next four positions, up to 12% each.
And the last four positions, up to 8% of equity in each.
This brings us on to the margin (or leverage) applied by Kell, which is simply the sum of these percentages.
The positions equate to 190%, which is just under a 2 to 1 leverage ratio, meaning a $10000 account could control almost $20000 worth of stock, and in my view, considering his strategy, a sensible approach.
I rather like Kell’s ending analogy when he says:
“ David can beat goliath. If David is the individual investor and goliath is the institutional investor, understand that David has the advantages of flexibility and liquidity to get in and out fast.”
Hopefully this review provides insight into the previously unknown champion trader, Oliver Kell.
His E-book is focused and offers many other trade examples to learn from. Good luck and don’t forget to hit the like button and consider subscribing.
Hi, Gareth,
First of all great summary!! As you sad in this video about Oliver position size exposure, was there any insights how Oliver was selecting it's Super performance stocks fundamentally? The more interesting part would be how Oliver selects stocks fundamentally to his two biggest position exposures? Like how he knows that particular stock can be a big deal and should go to one of two biggest position exposures (for sure he does not know, but there should be some rules which gives him confidence to think so)?