Live: Thursday, January 23, 2020

1:10 p.m. New York time

Today was taking out the trash day, as I cleared out some positions from the Bench that no longer had a reason for being there. And it turned out to be a down day on the markets generally, so there were mainly losses.

I’ve reworked my stock trading rules to bring them into line with my current practices, adding a few new things along the way. Here they are:

      1. Entry
        1. When the Zacks criteria are met.
          1. Strategy portfolios, which are the results of queries into the Zacks database: When the stock appears on the screening, meaning it matches all of my search criteria.
          2. Watchlist portfolios, which are lists of stocks: When a stock on the watchlist has a Zacks rank of 1 or 2.
          3. Income portfolios: When the fund has a Zacks rank of 1, 2 or 3.
        2. Set a trailing stop/loss for each position.
            1. The standard stop/loss will be set at double the 14-day Wilder Average True Range at the time the stop is set.
            2. The stop/loss can be varied to meet the needs of a position.
      1. Position Management
        1. Exit each position that fails to meet the criteria of its portfolio.
          1. In exiting, consider setting a close trailing stop/loss rather than exiting outright, in case the position rises.
          2. A position that no longer meets the criteria of its portfolio may be moved to the Bench if there is a reason to continue to hold it, such as an ex-dividend date in the near future.

The biggest change is the trailing stop/loss requirement. I’ll be updating the Trading Rules section with these changes over the weekend.

Today’s focus was on the watchlist portfolios. I’m in the process of phasing out the Utilities Portfolio, replacing it with a Robotics Portfolio based on the holdings of the ARKQ exchange-traded fund, which also manages the ARKG fund, the source of the watchlist for my Genetics Portfolio (although ARKG calls it “genomics”).

Today’s Trades

  • Genetics
    • Entries
      • CDXS, for a $17.29 debit.
      • REGN, a $359.56 debit.
  • Robotics
    • Entries
      • CSOD, for a $62.43 debit.
      • TER, a $76.15 debit.
      • TSM, a $57.22 debit
  • Growth
    • Exits
      • AMED, for a $180.64 credit per share, down 31 cents from the entry level, a 0.2% loss over two days for a -31% annual rate.
      • ATSG, a $21.53 credit, down $1.64, for a 7.1% loss over 20 days, a a -129% annual rate.
      • NTAP, a $59.99 credit, down $1.65, producing a 2.7% loss over two days for a -489% annual rate.
  • Momentum
    • Exits
      • PERI, for a $9.06 credit, down 56 cents from the entry level, producing a 5.8% loss over one day for a -2,125% annual rate.
  • Bench
    • Exits
      • NGLOY, for a $14.06 credit per shares, up two cents from the entry level, producing a 0.1% return over 20 days for a 2.6% annual rate.
      •  PFGC, a $51.87 credit, down 23 cents, a 0.5% loss over 16 days for a -10% annual rate.
      • TALO, a $25.88 credit, down $5.11 from entry, a 16.5% loss over 16 days for a -376% annual rate.
      • TNK, a $20.02 credit, down $3.77 from entry, a 15.9% loss over nine days for a -643% annual rate.

By Tim Bovee, Portland, Oregon, January 23, 2020

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Live: Wednesday, January 22, 2020

12:05 p.m. New York time

I’ve updated GLD Analysis with results of my short iron condor trade.

11:20 a.m. New York time

My short iron condor position on GLD was filled for half of maximum potential profit. I shall update the analysis with results later today.

In stocks, today’s focus is on the Momentum Portfolio. I entered three positions and exited two positions in Momentum, and also exited two positions in the Growth Portfolio.

Stock Trades

  • Momentum
    • Exits
      • ICHR, for a $37.98 credit per share, down 73 cents from the entry price, producing a 1.9% loss over seven days, or a -98% annual rate.
      • SNX, a $146.65 credit, down $3.89 from entry, showing a 2.6% loss over seven days for a -135% annual rate.
    • Entries
      • MS for a $56.15 debit.
      • MX, a $15.92 debit
      • PERI, a $9.62 debit
  • Growth
    • Exits
      • EBMT, for a $22.51 credit, up 12 cents from the entry price, producing a 0.5% return over one day for a +196% annual rate.
      • SSNC, a $64.33 credit, up 67 cents from entry for a 1.1% return over one day, which is a 384% annual rate

By Tim Bovee, Portland, Oregon, January 22, 2020

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Live: Tuesday, January 21, 2020

12:50 p.m. New York time

This is another heavy day in the Zacks algorithm ‘verse. Four exits in the Growth Portfolio, another in Momentum, and seven additions to Growth.

This is primarily a Growth Portfolio day in my rotation of strategy-based queries. I’ll exit from all portfolios as needed, but give priority to entering new positions in Growth.

Adding to the complexity is the fact that I’m fully invested at this point, so all new positions will need be filled from the proceeds of exits. Another complexity: I’m in the process of increasing my target position size by 50%., so the exits may not cover all new positions.

This turned out to be a good day to try out an idea I’ve had bouncing around my head: Exiting positions once they exceed a 5% profit. This would be in line with the wisdom of financier and trader Bernard Baruch (1870-1965), who famously said, “Nobody ever lost money taking a profit.”

The average holding period for each of my positions is 13 calendar days, a bit less than 28 trades a year. A 5% return, then, is 140% annualized, meaning that if I could repeat that return on a position every time I traded, I’d double that chunk of money each year, and then some.

Clearly, a 100% rate of success is insanely optimistic, but let’s say I succeed only 10% of the time. In that scenario, I’ve earned 14% on money each year, still not bad. Moreover, I can lose 1% on 13 of the trades, and still not be down for the year.

In implementing the 5% rule today, I exited FORM and MKSI in the Growth Portfolio and HIBB in the Value Portfolio

Today’s trades

Positions marked with an asterisk (*) before the symbol were exited under the 5% rule described above. 

  • Growth Portfolio
    • Exits
      • BRT, for a $17.85 per share credit, up 18 cents from entry, producing a 1.0% return over 11 days for a +34% annual rate.
      • FN, a $66.29 credit, up 29 cents, resulting in a 0.4% return over 12 days, or a +13% annual rate.
      • *FORM, a $27.63 credit, up $1.54, for a +5.9% return over 15 days, or a 143% annual rate.
      • ITRI, a $87.42 credit, up $4.09, sowing a 4.9% return over 13 days for a +138% annual rate.
      • *MKSI, a $115.36 credit, $8.37 above the entry price. The return was $7.9% over 14 days for a 204% annual rate.
      • TX, for a $22.70 credit, down 50 cents from the entry price, producing a 2.1% loss over eight days for a -98% annual rate.
    • Entries
      • AMED, for a $180.95 debit.
      • CRMT, a $109.61 debit.
      • EBMT, a $22.39 debit.
      • NTAP, a $61.64 debit.
      • RH, a $223.16 debit.
      • SSNC, a $63.36 debit.
      • YY, a $63.97 debit.
  • Momentum Portfolio
    • Exits
      • *HELE, for a $182.95 credit per share, up 77 cents from entry, producing a 0.4% return over 14 days for a +11% annual rate.
  • Value Portfolio
    • Exits
      • *HIBB, for a $26.94% credit, up $2.05 from entry, producing a +8.2% return over 11 days for a +273% annual rate.

Tomorrow’s trading will focus on the Momentum Portfolio.

By Tim Bovee, Portland, Oregon, January 21, 2020

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Live: Friday, January 17, 2020

3:40 p.m. New York time

RH had started what appeared to be a leg up today, and to preserve gains, I set a tight stop/loss slightly beneath the starting point of the rise. The rise faltered, the stop/loss was triggered, and I exited RH for a $224.06 credit, up $19.53 from entry. the position showed a 9.6% return over 51 days for a 68.3% annual rate.

This is the last day for trading my short iron condor position on XLY. All that’s left, after an adjustment earlier this week, is a short put (bull) spread, which is out of the money and ought to expire without value, the preferred outcome with short spreads.

10:30 a.m. New York time

The Value Portfolio is up for management today, and I added a new position, GPX,

In the Growth Portfolio, TLYS was reduced to a “strong sell” rating by the Zacks algorithm. A stock in the Gene Pool, CDNA, qualified for addition to the Genetics Portfolio, and I bought shares.

As is clear from above, the manage-one-portfolio-per-day rule has broken down as quickly as I adopted it.

So, Plan B:

  • I’ll manage one screened portfolio daily, beginning with Value and then rotating through Growth to Momentum, and then restarting the cycle. This will give a me a diversity in days traded.
  • The pool portfolios — Genetics and Utilities — can be managed on any day, although in a crunch I’ll try to group them with the Value Portfolio, which is low maintenance.
  • Any holding in any portfolio that on any day drops to “sell” or “strong sell” can be managed immediately.

Under this plan, since today was the Value Portfolio’s day, and since Monday is a market holiday, next week’s rotation will be Growth on Tuesday, Momentum on Wednesday, Value again on Thursday and Growth on Friday.

I’ll note in passing that I’m not overly enthralled with the Utilities Portfolio. The stocks don’t produce a lot in capital gains, and the dividends are paid quarterly, which complicates management according to the Zacks algorithm. I’m leaning toward gradually phasing it out.

The Middle East having calmed a bit (or as much as that region ever calms), I’m returning to 20% trailing stop/loss. I won’t go back and change the 10% stops but shall set new positions at the higher percentage.

The morning’s trades:

  • Value
    • Exit
      • TLYS, for an $8.77 credit, down 9 cents from the entry level, producing a 1.0% loss over three days for a -124% annual rate.
  • Growth
    •  Entry
      • GPX, for a $14.96 debit.
  • Genetics
    • Entry
      • CDNA, for a $23.97 debit.

By Tim Bovee, Portland, Oregon, January 17, 2020

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Live: Thursday, January 16, 2020

3:40 p.m. New York time

SIG in my Value Portfolio shot up sharply on strong guidance from the company, and I took my profits before the inevitable end of day decline set in. I’ll make a decision Friday on re-entry, which coincidentally is when I manage Value positions this week.

I exited SIG for a $30.70 credit, up $11.86 from the entry price. The position’s return was 62.9% over seven days for a +3,281 annual rate.

1:55 p.m. New York time

A trailing 10% stop on DQ was triggered. The exit came at $54.05 per share, down 66 cents from the entry level. The position showed a -1.2% loss over 13 days for a -34% annual rate. DQ began in the Momentum Portfolio, moved to the Bench after it’s metrics deteriorated, and then returned to Momentum, where it met its end.

10:05 a.m. New York time

I exited PAAS after it’s trailing 10% stop was triggered. The position sold for $23.39 per share, down $1.81 from the entry level, producing a 7.8% loss over 21 days, or a -135% annual rate. PAAS was initially in the Momentum Portfolio but moved to the Bench after it dropped from the screen. It continues to hold a “strong buy” rank from Zacks.

9:55 a.m. New York time

I managed the Utilities Portfolio today. AES dropped from “buy” to “hold”. The stock goes ex-dividend on January 30, so I moved the symbol over to the Bench rather than selling it.

To replace it in the portfolio, I bought shares of EIX for a $76.97 debit each.

There were no changes to the Bench, beyond the addition of AES.

By Tim Bovee, Portland, Oregon, January 16, 2020

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Live: Wednesday, January 15, 2020

1:40 p.m. New York time

In stocks, I managed the Momentum Portfolio today.

I exited four positions in the portfolio, and removed a fifth from Momentum, although I continue to hold the shares because it remains qualified for the Growth Portfolio. I added four positions to Momentum. One symbol on the Bench fell to “hold” on the Zacks ranking, and I exited from it.

The trades:

  • Momentum
    • Exits
      • CNXM, for a $16.59 credit, down 20 cents from entry, producing a -1.2% loss over 12 days for a -36% annual rate.
      • CS, for $13.87 credit, down 8 cents from entry, a 0.6% loss over seven days for a -30% annual rate.
      • TGNA, a $17.41 credit, up 37 cents from entry, showing a 2.2% return over seven days for a +114% annual rate.
      • VIPS, a $14.61 credit, down 38 cents from entry, resulting in a 2.5% loss over 12 days for a -77% annual rate.
    • Transfers
      • FORM, to the Growth Portfolio
    • Entries
      • APAM, for a $34.55 debit
      • ICHR, a $38.71 debit
      • SIMO, a $50.26 debit
      • SNX, a $150.54 debit
  • Bench
    • Exit
      • JD, for a 40.06 credit, up $2.25 from entry. The position produced a 6.0% return over nine days for a +241% annual rate

1 p.m. New York time

My one remaining short iron condor position using the January monthly options, XLY, which trade for the last time on Friday, continues to be in the money (net unprofitable). To avoid having short shares of the fund appearing in my account after expiration, I have sold the call side of the position, updating XLY Analysis with details.

By Tim Bovee, Portland, Oregon, January 15, 2020

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Live: Tuesday, January 14, 2020

11:55 a.m. New York time

Another trigger on my 10% trailing stop/loss, on ESTE in the Momentum Portfolio.

The Genetics Portfolio is up for management today and saw three falls from qualification as Zacks scores moved from “buy” to “hold”. Two symbols were added to genetics.

One symbol, HII, dropped off the Bench due to sliding score.

I re-established two symbols that had been stopped yesterday but still qualified, TLRY to Growth and, outside of the rules, TNK, which had been stopped from the Bench but still has a qualifying score.

The trades:

  • Genetics
    • Exits
      • AQB, for a $2.56 credit, up 53 cents from entry, producing a 26.1% return over 26 days, or a 367% annual rate.
      • CGEN, a $5.98 credit, up 2 cents from entry, a 0.3% return over 22 days for a +6% annual rate.
      • INO, out for a $3.37 credit, up 25 cents from entry, an 8.0% return over seven days for a +418% annual rate
    • Entries
      • EDIT for a $31.79 debit
      • SYRS for an $8.42 debit
  • Momentum
    • Exits
      • ESTE hit the 10% stop/loss and was sold for a $5.64 credit, down $1.39 from entry. The exit produced a 19.7% loss over seven days for a -1,030% annual rate
  • Growth
    • Entry
      • TLYS, a position exited January 13 by a trailing 10% stop/loss, re-established for an $8.86 debit.
  • Bench
    • Exit
      • HII, formerly of the Growth Portfolio, for a $3.37 credit, up 25 cents from entry, showing a +8.0% return over seven days for a $418% annual rate.
    •  Entry
      • TNK, exited January 13 by a trailing 10% stop/loss, re-established for a $23.79 debit

By Tim Bovee, Portland, Oregon, January 14, 2020

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Live: Monday, January 13, 2020

9:15 a.m. New York time

I used the cash freed by the latest stop/loss sale to add another symbol the Utilities Portfolio. We’re in earnings season, which usually means dividend season. Utilities may dividends, so I’m attempting to capture those payments.

I entered a position on PNW for a $91.66 debit.

9:05 a.m. New York time

PSTI in the Genetics Portfolio triggered its 10% trailing stop loss. I exited for a $4.02 credit per share, up two cents from entry, producing a 1.8% return over 18 days, or a 36% annual rate.

10:50 a.m. New York time

Today I shall manage the stocks Growth Portfolio, in accordance with the modified plan I wrote about over the weekend in the post “Solving Problems“. There were also a couple of positions stopped out that required handling.

Three positions — LAWS, LPLA and MHO — dropped off of the Growth screen. Two positions hit their trailing 10% stop/loss levels, TLYS in Growth and TNK, which had been moved from the Momentum Portfolio to the Bench.

TX reappeared on the Growth screen.

TLYS issued guidance to traders of poor sales performance over the holidays, and is trading 28% below Friday’s close. I found no specific news on TNK, but since it’s an oil tanker company, it’s subject to the present volatility in energy.

Although I’m not scheduled to manage the new Utilities Portfolio until Thursday, I used a portion of the influx of cash to begin the build-out, purchasing AES.

The trades:

  • Growth
    • Exits
      • LAWS, for a $55.91 credit, up $3.38 per share from the entry price, producing a 6.4% return over 10 days, or a 235% annual rate.
      • LPLA, a $98.02 credit, up $1.86 from entry for a 1.9% return over five days, or a +141% annual rate.
      • MHO, a 42.85% credit, a two-cent profit showing a 0.05% return over four days for a +5% annual rate.
      • TLYS, a $22.82 credit, down $2.70 from entry, producing a 21.6% loss over four days for a -1,970% annual rate. The trailing 10% stop/loss was triggered.
    • Entry
      • TX, for a $23.19 debit.
  • Utilities
    • Entry
      • AES, for a $20.32 debit
  • Bench
    • Exit
      • TNK, previously on the Momentum screen, for a $2.82 decline from entry, an 11.3% loss over six days for a -686% annual rate.

By Tim Bovee, Portland, Oregon, January 13, 2020

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Solving Problems

3:20 p.m. New York time

I’ve made no secret of my malaise concerning certain aspects of using the Zacks system of trading. It boils down to two things: There are often a lot of changes in each portfolio every day, and there are a lot of whipsaw, positions that have a buy signal one day and a sell signal the next. Both are strange for a system that claims to be looking three to six months ahead.

It has never been my ambition to become a day trader, and yet, Zacks has turned me into a quasi-day-trader, although I still don’t trade in and out within a single day. My goal has always been to trade a few hours, get the records up to date, and then go live my life. Because, believe it or not, there is life outside of the markets.

Yet, even with its flaws, the method is profitable. Looking at the 23 trades using Zacks and completed so far in January, 57% have shown a profit. The average result of all trades, win or lose, was 2.2%. That’s the profit for the holding period, running from 43 days down to a single day, so the annualized profit is quite large.

Of the seven whipsaws — in one day, out the next — four showed a profit and three, a loss. The highest win was 2.6%; the greatest loss, 3.6%. Beyond those two, the rest of the whipsaws had profits or losses of less than half a percent.

So far only four trades qualify for a test to see what happens a week after I exited. They split — two profitable, two not — but the two losses were losing when I exited, and one of the winner was winning at exit. Only one flipped. It was showing a 1.8% loss when I exited and a week later was showing a 1.5% profit.

It’s a small universe of data. It’s impossible to draw a robust conclusion.

However, the data suggests that there wouldn’t necessarily be a change in the win/loss rate if I were to increase the sampling span to a week rather than a day, the latter being the shortest allowed under the Zacks system. Doing so would fix my workload problem by stretching it out and eliminate the irritating whipsaw problem entirely.

Beginning the week of January 13 I shall alter my sampling of the analysis to once a week for each portfolio. I have assigned each portfolio a day of the week for the first week. The second week, I’ll move everything forward by a day, flipping Friday’s portfolio over to Monday.

At present I have four portfolios, three based on screens of the Zacks database and one based on a watchlist of “buy” or “strong buy” holdings in an exchange-traded fund. To fill all days of the week, I shall add a fifth portfolio, Utilities, based on a watchlist of “buy” or “strong buy” holdings by the exchange-traded fund XLU. It will provide dividends and ought to be relatively low turnover.

This week’s rotation, picked by random number, will be the Growth Portfolio on Monday, Genetics on Tuesday, Momentum on Wednesday, Utilities on Thursday and Value on Friday.

By Tim Bovee, Portland, Oregon, January 11, 2020

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