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

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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Based on a work at www.timbovee.com.