Live: Tuesday, November 26, 2019

3:30 p.m. New York time

XLU Analysis updated with results

3:05 p.m. New York time

The exit order on the rest of my XLU short iron condor position has been filled. I’ll update the analysis with results shortly.

2:05 p.m. New York time

My short iron condor position on XLU reached close to half of its maximum potential profit, and I attempted an exit, receiving a fill on half the contracts. The order to exit the rest remains active.

10:05 a.m. New York time

I’ve updated XLY Analysis with results.

9:50 a.m. New York time

My short iron condor position on XLY reached 50% of maximum potential profit and I exited. I shall update the analysis shortly with results.

By Tim Bovee, Portland, Oregon, November 26, 2019

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Live: Friday, November 22, 2019

2 p.m. New York time

Two shares left the momentum portfolio screen. I exited AMED at $157.63 per share, a $1.30 profit, and SAH at $32.71, a 17-cent loss.

The momentum portfolio continues to show its tendency to whipsaw. There may be use momentum screens, but this isn’t one of them. I’m phasing it out, replacing exit with buys in the upgrades and revisions portfolio, which so far has been more stable.

To that end, I entered share positions in the upgrades and revisions portfolio on AEL, for $28.98, and DCO, for $48.48.

AMED produced a 0.8% return over one day for a 303% annual rate. SAH showed a 0.5% loss over one day for a -188% annual rate.

The shares portfolios line-ups as the week draws to a close:

Momentum plays: MUSA, NSIT, ORN and SEM. (NSIT also shows on the revisions portfolio).

Upgrades and revisions plays: AEL, BMCH, CNNE, CRAI, DCO, IBP, MHO, NSIT and SSD.

Income: DX, HYG.

Of my six short iron condor options positions, I exited one, GDX, on Thursday. The remaining five all remain within their zones of profit at expiration.

TLT, XLU and XLY are showing a profit, although they are below half of maximum potential profit, my exit trigger. XLU is closest at 43.5% of max.

APA and XOP aren’t profitable at present, with XOP at worst shape as it wanders in and out of profitability.

By Tim Bovee, Portland, Oregon, November 22, 2019

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Live: Thursday, November 21, 2019

1 p.m. New York time

I’ve updated the GDX Analysis with results.

12:40 p.m. New York time

I exited my short iron condor position on GDX at 51.7% of maximum potential profit. Analysis update to come shortly.

Turning to shares, I exited CROX for $34.58, up $1.58, in the momentum portfolio, and also EIG, at $41.57, down 75 cents, and FAF, at $62.81, up 34 cents, from the upgrades and revisions portfolio.

SSD in the momentum portfolio also gave a sell signal, but after I entered the position as a momentum play, the symbol also appeared in the upgrade and revisions portfolio, where it still shows in the screen. So I’m continuing to hold the position in the latter portfolio.

I balanced the portfolios at six issues each, entering AMED, at $156.33, SAH at $32.88 and SEM at $21.35 in the momentum portfolio. The transfer of SSD  and exit of EIG and FAF leaves the upgrades and revisions portfolio with six symbols.

By Tim Bovee, Portland, Oregon, November 21, 2019

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Live: Wednesday, November 20, 2019

11:55 a.m. New York time

In the upgrades and revisions portfolio, AUY dropped off the screen results and I exited for $3.53 per share, a gain of seven cents. I replaced it with CRAI, entering at $51.04.

AUY produced 2.0% return over a one-day holding period for an annual rate of +738%.

By Tim Bovee, Portland, Oregon, November 20, 2019

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Live: Tuesday, November 19, 2019

3:35 p.m. New York time

Two exits, AXE from the momentum portfolio for $85.07 and UCTT from the upgrade and revision portfolio for $22.65. Both were losses.

Given the turnover in the momentum portfolio, I replaced both vacancies with upgrade and revision trades, BCMH for an entry debit of $29.24 and EIG, $42.32.

AXE produced a 0.8% loss over one day for a -283% annual rate. EIG’s loss was 1.4% over four days for a -131.04% annual rate.

Given the high turnover in the momentum portfolio, I’m moving all funds freed by momentum exits to the upgrade and revision portfolio, which is less volatile.

By Tim Bovee, Portland, Oregon, November 19, 2019

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Live: Monday, November 18, 2019

1:35 p.m. New York time

In my Momentum shares portfolio, CUE and NAVI dropped from the pool at the end of the day in which I entered positions, and by my rules, I exited both today, CUE for $8.87 and NAVI for $14.23.

In their place I’ve entered positions in AXE, for $85.74 per share, and MUSA, for $119.35.

CUE resulted in a 1.7% loss — 16 cents — over three days for a -211% annual rate.

NAVI resulted in a 0.8% loss — 12 cents — over the three days for a -102% annual rate.

By Tim Bovee, Portland, Oregon, November 18, 2019

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I’m a fan, but…

I’ve long been a fan of Zacks, the investment research company that brought quality analysis and analytical tools to the trading public independent of the brokerages. I’m still a fan, but in setting up a trading system, I’ve uncovered a few items that make me wish that they would expand their tool set just a little.

I’ve been using Zacks to set up a stock trading system. Since the Fed dropped its funds rate below 2% last September, I’ve lost interesting in government bills and notes and vehicles to house my cash reserves.

I’ve turned to stocks, and as regular readers will know, I’ve been trying to work out a system.

The company was founded in 1978 on the premise that earnings analysis in aggregate by those brokerage analysts was the best way to see ahead to a company’s prospects, earnings being the ultimate basis of stock prices and brokerage analysts being important in setting trader expectations for the future of those prices.

Not exactly the stuff of quants programming their split-second AI underlings, but an approach that has proven solid for many decades.

For me, the beauty of Zacks lies in its analytical tools, a database of information related to 4,000-plus stocks, including fundamentals and analyst opinions, that I can write queries against and download into a spreadsheet for further analysis, all for the price of $20.75 a month. Not out of reach for a trader with limited capital.

My basic outline for a set of trading rules goes like this:

  1. Rule for the size of the portfolio, in either value or number of symbols (portfolio sizing).
  2. Rule for determining the size of each trade (trade sizing)
  3. Rule for conditions that trigger entry (buy signal).
  4. Rule for how long to hold before first evaluating (holding period).
  5. Rule for how often to evaluate the stocks in a portfolio (evaluation period).
  6. Rule for conditions that trigger exit (sell signal).

Zacks comes into play with Rule 3, when to enter. Using the company’s database and my spreadsheet analysis, I can set the conditions for entering a trade — so much change in analyst evaluations, for example, or so much acceleration in momentum, and lot more.  I generally aim for a poll of 25 or 30 stocks from the Zacks query and then pick the trade using my spreadsheet analysis.

When a stock no longer appears on the query, then that’s the signal to sell, without second guessing or remorse.

Zacks’ educational materials recommend slowing down process by evaluating positions and trading once a month or for the obsessive, once a week. I’m used to trading once a day, which shows my level of obsession.

Another brake recommended by Zacks is to not exit a position for the first four weeks after entering it, to avoid whipsaws.

It seems to me to slow down trading through something as arbitrary as a period of days. Back the old days (last spring) it made sense to slow trading, because each trade generated a commission that cut into profits and enhanced losses. But since then many of the major brokerages, following the example of the upstart Robinhood, have eliminated commissions on stock trades.

That simple act has created a whole world where we can, for the first time in my lifetime, trade as often as we wish without a penalty for trading.

Commissions also required that we set a minimum size on trades, in order to reduce the percentage of our profits gobbled up by commissions. In a commission without commissions, there’s no penalty for keeping positions small, thereby increasing diversification.

So if a sell signal invalidates a position, as it does under a system-based strategy, why would I want to hold an invalid trade for a month or a week or even a single day? Either a trading system deserves trust, which argues for a quick response to signals, or it can’t be trusted, which argues for changing to a new system.

My second dissatisfaction with Zacks has to do with the ranking system and whipsaws.

The company’s ranking system — 1 for a strong buy recommendation, 2 for buy, 3 for hold, 4 for sell and 5 for strong sell — is relative. That is, 1 and 5 each account for 5% for the pool, 2 and 4 for 15% each, and 3 for 60%. If a ranking is on the margin, it can change very quickly.

I’ve not found a way to get the score that underlies each Zacks rank. If a given signal has a rank of 1, the top 5%, it makes difference to know wether that’s the top 4.99% or the top 1%. Their query system does allow me determine how much the rank has changed in the past four weeks, but nothing further.

The remedy, of course, would be to increase the granularity in the Zacks score. Perhaps 1A for the top 1% down to 1E for just above the boundary.

So that’s what I’ve been working on for the past couple of months. On Friday I did a restructuring into two portfolios, Momentum (which is prone to whipsaws), and Analyst Revisions (which seems to be less prone to whipsaws).

I also want to create an Income portfolio based on Zacks, rather than the no-system portfolio I have today.

And a third possibility that I’m considering is to analyze solely based on the Zacks rank, Rank Change over the last four weeks, and then limit the choices further by market capitalization or some other characteristic.

Here’s a list of the stocks in each portfolio as of Friday, six symbols in each:


CUE and NAVI dropped off the screen for action on Monday, giving sell signals, so I shall sell them and based on new analysis, buy AXE and MUSA.

Revisions: AUY, CNNE, FAF, IBP, MHO and UCTT.

No action required.

By Tim Bovee, Portland, Oregon, November 16, 2019

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Live: Tuesday, November 12, 2019

3:15 p.m. New York time

I exited two momentum shares plays, NTRA ($38.38, -1.8% return) and RNG ($173.74, +0.4% return).

I replaced them with two entries using an analysts upward revision screen, FAF at $62.47 and IBP at $69.37.

My options positions are all chugging along within their profit zones.

By Tim Bovee, Portland, Oregon, November 12, 2019

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APA Analysis

Apache Corp. (APA)

I have entered a short iron condor spread on APA, using options that trade for the last time 43 days hence, on December 20. The premium is a $1.29 credit and the stock at the time of entry was priced at $24.01.

The profit zone for this position is between $28.79 on the upside and $18.79 on the downside.

The implied volatility rank (IVR) stands at 72.0%.

Premium: $1.29 Expire OTM
APA-iron condor Strike Odds Delta
Long 30.00 90.0% 14
Break-even 28.79 84.5% 20
Short 27.50 79.0% 26
Short 22.50 61.0% 33
Break-even 18.79 76.5% 19.5
Long 17.50 92.0% 6

The premium is 34.4% of the width of the position’s wings.

The profit zone covers a 19.9% move to the upside and a 27.8% move to the downside of the entry price, for total coverage of 47.7%

The risk/reward ratio is 1.9:1, with maximum risk of $246 and maximum reward of $129 per contract.

By Tim Bovee, Portland, Oregon, November 7, 2019

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Live: Thursday, November 7, 2019

11:30 a.m. New York time

My short iron condor order on APA has been filled for $1.29, and I’ve posted an analysis.

11 a.m. New York time

I’ve renewed my attempt to open a short iron condor position on APA. The structure is +c30 -c27.5 -p22.5 +p17.5, with an asking price of $1.30. The implied volatility rank is 72.0%

My momentum shares position in ANIK was closed at $60.41, a $9.29 loss, when the price hit my trailing 20% stop/loss. I’ve replaced it with shares of NSIT, entered at 62.45.

By Tim Bovee, Portland, Oregon, November 7, 2019

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