So yeah, the initial reaction to the Jobs Report sucked. But our strategy and winners have survived
many a weakening economic report. It's just another uncertain day in
the market. Believe me, if you plan on doing more investing in the
future, there will be plenty of days like this. In fact if you ever plan
on holding the best winners in the market, you will have to sit through
many "fearful" days and anticipated "events". Sometimes we lose money,
its the price we pay for being in the market.
Your system back-test didn't factor in how you felt when the signals were taken or what the news was that day. It took them based on consistent rules. That's what makes it a winner over the long run. Rules, execution and consistency are what lead to strong returns. Emotions, bias' and predictions are what lead to ruin.
We had no changes to our Lg-Cap Portfolio this week, but there are some interesting things to look at none the less.
SP500 in a Box
From a Top Down perspective the resolution of this "Box" range will be the primary focus. A breakout below will suggest more weakness ahead and likely a test of the December lows near 1,980.
Focusing on Laggards
While its not the most glamorous part of portfolio management, the losing positions are what you need to be focusing on first. Winners take care of themselves, its the losers that are a drag on your bottom line. We currently have 4 holdings that look distinctly different than the others: PPG, CSCO, IP, and PCG.
PPG
CSCO
IP
PCG
These are Daily bar charts showing the recent breakout consolidations. All are still above prior breakout levels, so there is no need to anticipate their demise just yet. But they are our weakest looking holdings. PPG, CSCO and IP would be stopped out on a weekly close below these Box supports.
PCG is still fishing for a higher low, so I will maintain my positioning with a stop at $49.50 until a new swing low can be established. A breakout above the $54.50 swing highs would allow me to trail stops to $51.
Current Portfolio Open Gains/Losses
(view Weekly charts here)
UNH +46.33%
BMY +22.72%
SBUX +18.12%
DIS +14.32%
BA +10.81%
PCG +6.38%
PPG +3.62%
AAPL +2.61%
HON +2.26%
IP + .10%
FB -1.48%
TWX -2.04%
LMT -2.63%
WFC -2.98%
CSCO -7.88%
10 Winners, 5 Losers
Average Gain +12.72%
Average Loss -3.4%
Putting in work!
ReplyDeleteThanks!
DeleteHi Cody, do you have UA in a different portfolio? what kind of adjustments you make to your system to manage that kind of stocks? thank you in advance, your analysis gives a lot of perspective.
ReplyDeleteHi Efrain, yeah I hold UA in my Growth accounts. Since I manage different accounts for different investors, they have different risk parameters. So I do a couple of things differently depending on a Lg-Cap portfolio holding (which I share here) and how I handle my Growth accounts. Basically I manage my Lg-Caps (mostly mega caps) on a weekly timeframe, slightly longer term for more conservative investors. That was how I originally designed the blog in the first place; for people who are just getting started to follow along with trades in companies they knew and understood. It was designed to help beginners handle risk in the market with more stable stocks and companies.
ReplyDeleteWith my growth stocks I dont tend to share in depth for two reasons: Most individual investors cant handle the volatility of individual stocks let alone higher beta, fast moving growth companies. And the symptoms of risk are exaggerated with high growth companies as their stock prices tend to move around a lot more. Therefore traders have to be more experienced and have set rules in place so they dont overreact to the swings in prices. A "Trend Following for Growth stocks" service is something I plan to offer in the future. For now Im building a following and just trying to get the basics across to readers before upping the ante to the more aggressive strategies.
How I manage my growth stocks only differs from my Lg-Caps in the exit strategy. Growth stocks I tend to keep tighter stops and use Daily price closes to initiate signals (instead of Weekly closes for Lg Cap). I am currently in the process of experimenting with two separate exit strategies for my Growth portfolios. The first is based on the "Monster Stocks" system developed by IBD which uses volume indications around the 50 DMA (institutional trading behavior). The system will exit a fast moving trend when the 50 DMA is violated on higher than average volume (50 day average volume) or when a ~10% stop loss is triggered.
The other exit strategy is based on Daily Trend Following of swing lows as trailing stops. Once the trend of Higher highs, higher lows is broken I look to exit the position.
I ultimately always submit to the behavior of price movements, but this is how I handle my Growth positions. I want to be in when institutions are accumulating the stock and the trend is riding higher rapidly. I want to step aside when those conditions are not in place.
Hi Cody.
ReplyDeleteThank you very much for your comments to my question.
Your answer makes a lot of sense to me, because I thought that you applied the same set of rules to all kind of stocks, and it appeared to me that applying the 10 WMA to growth stocks was risking too much.
Basing your exits on the 50 DMA for growth stocks looks perfect from a trend following perspective.
Thanks again for all that you share with us.
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