As we saw last week, Pedro's Pride is a very simple strategy that produced excellent results, up 382% in 39 months. The only problem I had with it is that it suffered badly during the bear market years of 2002 - 2004 with a max drawdown of over 40%. It had a clever twist to it, however, that I really like. It was out of the market from July 11th to August 11th each year.

Mr. Yale Hirsch, creator of the Stock Trader's Almanac, has made it common knowledge that the market performs much better from November to May than it does from May to November. So, I thought, why not give it a try? I'll own the top 15 VST stocks only from November to May. Alas, this strategy mitigated the drawdown problem, but it returned a paltry 196.5% from January 5, 1996 to May 5, 2006, (I traded on Fridays only). Nevertheless, I still liked the idea of being out of the market during the summer months.

Mr. Hirsch's Stock Market Almanac also indicates that July and September have been the worst performing months when trading the Nasdaq and August and September were the worst performing months when trading the DJIA. So why not be out of the market during July, August and September? When rebalancing the top 15 VST stocks in this fashion, the results were stunning! I got a 911.9% gain from January 5, 1996 to June 8, 2006 with 66.1% winners and a max drawdown of only 21.43%. This strategy sailed through the 2002 - 2004 bear market like a piece of cake, the equity curve is a thing of beauty.

To be fair, I must report that we also tested Pedro's Pride over the same time period and it produced a return of 1,054.2% with 68.5% winners. But the max drawdown was 43.5%. I know I can't handle that, so I would not invest my money using that strategy. But I definitely will use the new strategy illustrated as this week's "Strategy of the Week," called Summer Hiatus.

P.S. Next week I'll write about how to further improve profits and reduce risk when rebalancing high VST-Vector stocks.

HOW TO FIND EXPLOSIVE LOW-PRICED STOCKS.
It's easy to get discouraged when the market is getting hammered the way it has over the last four weeks, but it's not necessarily a bad time to find some great winners. In July 1998, when the market was getting killed, I discovered QLGC at $3.44 per share on a split basis. It went on to triple in less than a year and ultimately peaked at over $95 in March 2000. In the summer of 2002 when the bear market was at its worst, I found SINA and SOHU at less than $2.00/share. Both stocks turned into 20 baggers. Finally, there's NTRI, which I found at $2.25/share in October 2004. It recently hit a high of over $75.00.

I've written about how to find stocks such as these on many occasions and have demonstrated the techniques numerous times. If you're interested in learning how it's done, attend the Technical Analysis Course in Ft. Lauderdale next Friday and Saturday. No matter what the market does, you can always make money if you know How to Find Explosive Low-Priced Stocks.