Back To All-Time Highs

Well I have done it again! I have successfully and unintentionally called the bottom for stocks. A few weeks ago I suggested that whenever I have written a "be cautious" type of post, it has coincided almost perfectly with a bottom for the market before racing back to new highs. This is why it is so important to stick with your strategy and not deviate from your plan no matter what you "think" will happen.

SP500
Weekly Trend Channel

I was listening to CNBC the other morning and heard one of my favorite traders (Josh Brown) discussing a recent trade that faked him out. He went on to say that regardless of how the stock traded in hindsight, he had to take his exit signal and was stopped out of his position. He then said how individual trade results are not what matters over the long term. The most important thing for long-term success is to stick to a consistent process. Trade results will vary depending on uncontrollable events, but if you remain consistent in your approach, you will come out a winner in the end.

It's normal to feel a certain bias toward the market, however you should only be acting on the signals from the price action of individual stocks. While I was feeling negative toward the overall market, our portfolio still had new entry signals which we took without hesitation and have now become profitable positions.

The main takeaway should be when managing money you must stick to your pre-determined plan. Do not deviate from that strategy regardless of what you might read, hear or see in the news. The price action of leading stocks will tell when to become more cautious and when to become more aggressive.

Speaking of price action of leading stocks, we had 3 new additions to our Large Cap portfolio this week. We added new positions in AAPL, UNP, and CSCO. We also increased a current holding, IP.

Entering Apple (AAPL)
1-yr Daily chart

Apple has eluded a position in our Large Cap portfolio until now. It just always seemed out of reach for one reason or another. But this week we got our signal. I actually took this entry on Tuesday's breakout to all time highs. I almost always wait for a weekly close to enter new positions for my Large Cap accounts, but this was just too good of a setup to miss.

We are in with stops below the consolidation support at $106 on a weekly closing basis. A move below 106 will not only signal breakout failure, but it will also put the recent uptrend in jeopardy. It appears the sky's the limit for this investor favorite.

Entering Union Pacific Railroad (UNP)

UNP finished Friday with its highest weekly closing price ever. After a lengthy consolidation it appears UNP is ready to resume higher. There is a chance this continues to consolidate for a while longer, but our entry signal and stops are clear.

We want to be Long this stock above the 111.90 weekly closing low. This long-time outperformer just continues to chug higher.


Entering Cisco Systems (CSCO)

This is textbook breakout material. After taking out multi-year resistance and then consolidating those gains over the last 6 months, CSCO has held and resumed its upward trajectory.

Zooming out further this picture gets even nicer:
Monthly chart

Looking back at the Monthly bars, Cisco is seeing levels not tested since 2007. The long-term MACD and Relative Strength look similar to a stock making a major bottom, not a top. This won't be a trade that is made in a few weeks, the implications are for potential multi-year returns for the Bulls.

I would be concerned with the validity of this conclusion if the stock were to turn lower and break the support lows at $26.35. But for now it appears that a date with the 2007 highs are in the not-too-distant future.


Increasing International Paper (IP)

I don't often add to existing holdings, but when I do its because of a situation like this. The stock is basically forcing me to increase my stake. Since our original entry in early November, IP had drifted sideways. I felt this was positive action as it was holding above the previous resistance level at ~$50. Sure enough we saw a great continuation breakout this week and my conviction for this stock has never been higher. -Not only did it hold its previous breakout, but it surged higher from this area validating it as new support.

We can slide our stops up to the most recent swing low at $51.50 as that would signal a failure of the recent breakout and put it back in a more choppy range.

Being that our new stop is now at 51.50, our position size can be increased to remain within the risk tolerance level, which is .5% of account equity (.5R)

At the close of the week the distance from the current price and our stop level was $5.81/per share (57.31 - 51.50 = 5.81). This meant, at the current holding size (75 shares), we are only risking .3R. And therefore can add another .2R position size (45 shares) and still be within our risk limit.

Knowing that this stock has spent the better part of two years trading sideways, in a sector beginning to lead the market and within a whisper of all-time highs, there is no reason to feel anything but raging bullishness for International Paper.

-Oh, they also pay a nearly 3% dividend yield. I'm pounding the table here!


Current Open Holdings Return (since inception 7/7/14):

UNH   +36.4%

BMY   +16.5%

SBUX  +14.6%

DIS      +12.3%

TLT     +11.9%

BA       +11.1%

PPG     +9.7%

PCG     +7.3%

IP         +4.9%

HON    +3.1%

TWX    -3.4%

SP500   +5.5%

We continue to let winning positions run and stop losers short. While we have experienced some stop outs over the last few months, we have continued to add new leading names into our portfolio. The ones that don't work we cut quickly. When they do work we give them a lot of cushion to try to become our next big winner.

Looking at our holdings' current performance I am very pleased to see such strong gains in only the first 7 months of this Funds' inception. Good things are in store for its future.

For current updates and watchlist ideas, please follow me on Stocktwits @ZenTrends.