Swing Trade, Round 7: Buy SU SLW G

 Stocks, Swing Trading  2 Responses »
Apr 192013
 

Commodity prices are low and resource companies in Canada have lost quite a bit of value recently. But did the world really change that much since March to warrant such a huge sell off? Maybe, I don’t know. The price of gold dropped like a sack of potatoes last week. But even at $1400 per ounce, gold production companies are still making about $600 in gross margin for every ounce they mine and sell, so their bottom line is still good (~_~) Stocks could get a lot worse before they get better again. However if this turns out to be the buying opportunity of the year then I don’t want to miss out（＾ｖ＾） So it’s time for another swing trade :)

I’ve decided to trade Goldcorp, Silver Wheaton, and Suncor in my margin account. This means the bank will lend me money to buy stocks. In this case they’re lending me 70% of what I buy. But I have to cover the remaining 30% with cash. In other words I only need $30 of my own money to buy $100 worth of stocks :)  Earlier this morning I plunked down $2,000 to start a swing trade. This means I can buy roughly $6,670 worth of stocks because the bank is financing 70% or $4,670 of it :)

Initial Investment: $2,000.
Leveraged up to $6,679.
Transaction details below.

13_04_swingtrade7a, swing trade

I chose these companies because they are high quality, large cap stocks with over 50% institutional investors, so there is very little risk of them going down to zero. Let’s take Suncor for example. Here are 3 reason why I think it’s a good stock to buy now.

1) Stock analysts love this company. According to Globe Investor Suncor currently has 16 analysts reporting on it. 14 of which calls it a strong buy. These people spend way more time studying companies than I do. If their professional consensus shows that Suncor is a strong company then that’s probably a good sign :D

2) High price target prediction. Stock analysts often have to come up with 12 month projections for where they think a stock will be. 1 year is a long time and it’s hard to get these estimates right. Some analysts will be bearish while others will be bullish so there will always be a range of predictions. In Suncor’s case, this range is between $36 to $48. That’s a pretty good target, considering where the stock is at today.

13_04_swingtrade7b swing trade suncor

3) Near 52 week low point and strong support. Suncor has maintained a nice technical support around the $27/share range for many years now. Today we are pretty much at that point again. If it stays within it’s 52 week range then there is a good chance it will go up from here.

13_04_suncorswing

I hope my leveraged trading strategy pays off :) My plan this time is simple. Sell all 3 stocks once I make $1,000. Or BUY MORE if falling oil and gold/silver prices drag down commodity stocks even lower. I can lower my average cost of buying and make a profit later on. Will I be $1000 richer at the end of all this or will I lose big time? We’ll just have to wait and see :)

Swing Trade, Round 3: Sell and Loss

 Stocks, Swing Trading  15 Responses »
Mar 162013
 

About a year ago I bought some HVU.TO. It was my first time dabbling in the futures market and it was quite risky. The HVU, or Horizons BetaPro S&P 500 VIX, is an ETF that tries to double the gain or loss of the VIX index which is a benchmark for volatility in the stock market. Normally when the stock market is doing really well like right now the VIX index is low because investors don’t think stocks will fluctuate very much in the near future. But in 2008 and 2009 when stocks were low the VIX was high because there was a lot of uncertainly in the markets. Buying into volatility is a way to minimize portfolio risk lest the stock market decides to take a dive.  I bought about 180 shares of HVU in February last year. Total purchase price was worth about $2000.

13_03_hvubuy, swing tradeWhen I bought the HVU back in early 2012 I thought I could make a quick swing trade but instead of selling when I could have made a small profit I decided to wait for it to go higher. Well that was a mistake because soon I was losing money and the price never came back up. By being too greedy and missing my opportunity to sell I ultimately lost out (>_<) I checked my balance today and was less than impressed with how the HVU have performed over the last year.

13_03_hvu_account, swing trade

Apparently it’s lost 98% of its value since I bought it and I’ve lost almost all my initial investment of $1979.19. The reason the quantity says “4″ instead of my original “180″ shares is because it went through a 1:10 split and then another 1:4 split *sigh* (ーー゛). Even if it goes back up 10 folds now it still won’t be worth very much. So earlier today I put in a sell order of all my HVU holding. Since markets are closed today the sell order will automatically be executed first thing on Monday morning :)

13_03_hvu_sellorder, swing trade

Initial Investment: $1000. Leveraged up to $1969.20 by borrowing $969.20 on margin at 4.25%.

Feb 15st, 2012
Bought: 180 shares of  HVU.TO at $10.94/share = $1969.20
Today, Mar 16th, 2013
Sold: 4 shares of HVU.TO at $8.68/share = $34.72
Difference: -$1934.48

Expenses:
Commission: 2 trades x $9.99 = $19.98
Margin interest: $44.62

Net loss after expenses: $1999 (pre-tax)

That’s a 200% loss on investment. Unfortunately this swing trade could have turned out better. Can’t expect to win every time I guess :) Good thing I wrote in my disclaimer that readers shouldn’t take my financial decisions as advice.  I think there was a few key mistakes I’ve made this time that led to the loss. Normally for my swing trades I buy more than 1 name, but this time I only bought HVU so the risk was greater. I also chose to ignore all the signs, like the 1:10 split. That’s usually how you can tell a stock is in trouble, lol. But the biggest factor was that I held on to a losing position for too long. I should have gotten out of the HVU after a couple of weeks at most but didn’t. This was simply due to poor judgement on my part. I even considered selling if I lost 50% but didn’t pull the trigger.  At least a poor performing VIX index is usually a sign of a healthy stock market :D Since I bought the HVU the Canadian stock market has returned over 13%, and my total stock portfolio has made a positive return despite my $2000 loss. I think I’ve learned a n important lesson about trading risky equities :) mainly don’t hold onto to a losing stock, especially if it lacks fundamental underpinnings. On the whole I think $2000 is a small price to pay for learning that experience the hard way. That’s life isn’t it (゜∀゜) Making mistakes is just part of trying something new, haha. I’m glad that I got the chance to learn from my errors now rather than later on when I might have a family and decide to risk a lot more money ;) I might trade the volatility index again in the future, especially since the VIX is at record lows, but if I do then I will definitely have a stop loss to minimize any potential downside, and not hold onto it for so long again （＾ｖ＾）I believe someone once said good judgment comes from experience, and experience comes from bad judgment. I probably have a lot more experiencing to do then lol (ʘ‿ʘ)

Swing Trade, Round 6: Sell and Profit

 Stocks, Swing Trading  14 Responses »
Jan 282013
 

In December of last year I wrote about the Santa Claus rally. It’s this interesting occurrence when the stock market rallies during the holiday season. Based on statistics and historical data the Dow Jones grew 80% of the time during this period, and the S&P500 gained 1.5% on average. Of course swing trading is risky, and there are no guarantees you’ll make money. But if you’ve bought stocks and then sold them during this Santa Clause rally in the past, then 8 out of 10 years you would have made money on the index, for example, by buying the etf DIA, which tracks the Dow :0)  Don’t know about you but that sounds like some pretty good odds to me. So on Dec 21st, I spent about $3000 to buy some Amazon and Bank of America stocks and hoped the overall market would rise and carry my stocks with it so I can make a quick profit :D

After the Santa Clause rally however, the stock market continued to climb. Must be the January effect, which I’ll explain in another post. No point selling on an uptrend they say. But earlier today I didn’t like how my 2 stocks were performing so as I’ve already mentioned on Twitter, I sold both and completed my swing trade. In the end I’ve made $140. Mission complete. This swing trade was a success :0) That’s a 4.6% return in roughly 1 month. Not too shabby.

swing trade successful

Initial Investment: $2975.70

Fri, Dec 21st, 2012
Bought: 6 shares of  AMZN.Q at $257.23 = $1543.38
Bought: 128 shares of  BAC.N at $11.19 = $1,432.32
Total money spent buying stocks: $2975.70

Today, Monday, Jan 28th, 2013
Sold: 6 shares of AMZN.Q at $280.27 = $1681.62
Sold: 128 shares of BAC.N at $11.52= $1474.56
Total money earned from selling stocks: $3156.18

Difference: $180.48

Expenses:
Commission: 4 trades x $9.99 = -$39.96

Net profit after expenses: $140.52 (pre-taxes)

So not a whole lot, but enough to buy another can of sturgeon roe haha. But most likely I’ll use the money to cover the commission on my next 14 trades :0) I think both Amazon and BoA will continue to grow their businesses in the long term, but I’m not sure about the short term risks they’re facing so that’s why I sold. I mentioned my exit strategy going into this swing trade from the start, and I stuck to my plan :) A small profit is still better than nothing lol.

Best part about this particular swing trade strategy is that it’s based on a reoccurring annual event, the Santa Claus rally, which just to be clear is not guaranteed to perform well every single year, but based on historical evidence, does so most of the time （＾ｖ＾）I’ll definitely be doing it again at the end of this year.

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Random Useless Fact: The surrounding temperature around a person can affect his or her appetite. A person in a colder room is likely to eat more than if that person was in a warmer room.

Swing Trade, Round 6: Buy – Santa Claus Rally

 Stocks, Swing Trading  12 Responses »
Dec 212012
 

I was listening to the local radio station yesterday and during the business news section, heard about something called the Santa Claus Rally. It’s basically a term to describe a rally in the stock market during the holiday season, or more specifically the last 5 trading days of the year and the first 2 of the new year (7 days total.) Based on years of research by an analyst at J.P. Morgan the Dow advances 80 percent of the time during this rally period. And the S&P 500 averaged 1.5% gain from the rally since 1950 according to other studies. Seems like the odds are favorable :0)

Thank you Santa

If historically stocks have performed well during this time then why not try to take advantage of this once in a year opportunity :D So I did some research last night, and just this morning, literally like 20 minutes ago when the markets opened I bought 2 companies, Amazon.com Inc and Bank of America for a new round of swing trading…

swing trading Santa Claus rally

Both these companies have great short and medium term technicals which is important for swing trading and I feel like they both can out perform the market which is also what we want because we’re expecting the stock indices to gain over the next 7 trading periods :0) I’ve looked at Amazon before from an investment point of view and cannot wrap my head around it’s ridiculous P/E ratio. I know its business is growing at like 40% a year, but fundamentally it’s still on the overvalued side which is why I’ve never bought it for my buy and hold portfolio. But hopefully it will make for a good swing trade stock. As for Bank of America, they are one of the largest banks in the US. If housing sales continue to improve, and GDP numbers stabilizes then this bank’s shares should do really well :0) Below are the details and the prices that I actually bought them at.

Amazon.com Inc. (AMZN.Q)  Bought: $257.23 x 6 shares = $1,543.38
Bank of America Corp. (BAC.N)  Bought: $11.19 x 128 shares = $1,432.32
Total Initial Investment = $2,975.70

Santa Claus Rally with Amazon and BAC

As usual I’ve censored my account numbers with black bars for obvious reasons. I don’t plan to make much from this swing trade, maybe around $100 to $200. My exit strategy is to sell both these stocks when I’ve made $100 to $200 and the stocks are going down, or sell both stocks and take my losses if I start losing over 50% of my investment. Whichever comes first. Will this be a good move or will I lose big? We’ll just have to wait and see :D

The reasoning behind the Santa Claus Rally is that people on Wall St and those who work for large financial companies get paid bonuses at the end of the year. So professional stock traders and other people with deep pockets are helping to boost the stock markets during this time. Also January has been known to be a good month historically for stocks, so many investors want to try and get into the markets before the January effect takes place.

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