11:28
Today I am taking profits in a few long stocks that are still up: The Dow Chemical Company, Visteon Corp, and Facebook.
Since the January gaps are now filled and there’s some heavy resistance at 2000 (the exact gap fill price for the original drop) for the S&P, the market will most likely make another leg down. I’m going to keep all short positions open, trying to recoup losses that happened during the recent gap-fill rally.
9:50
This morning, I am going to preserve some gains in long stocks that may otherwise disappear this week. BMRN, TYC, and BBBY are all up about 4-6% in the past few days, and I am selling them at the market.
11:52
I’ll be adding some more positions — long and short — later today, but for now I want to sell a long position that I’ve been holding for a couple of weeks. HP Inc. (HPQ) is up about 6.5%, which is about twice that of the market since Feb 22 when I bought it. The market is staying strong today, so I may have more sells later today as well.
12:08
These are the new positions that I will be adding today. They are all momentum-based trades, rather than seasonal. I will buy them at the close and place a 10% stop loss on each one:
Long:
MGM Corp (MGM)
United Therapeutics Corp (UTHR)
Ralph Lauren (RL)
Short:
Oracle (ORCL) (long term short)
Brixmor Property Group (BRX)
Solar City (SCTY)
12:40
One of the seasonal long stocks that I bought on Friday, Big Lots Inc. (BIG), has not failed to continue its seasonal trend. In less than 2 days of trading, it is up over 8%. With the market this high in a risky environment, I am going to take profits here.
2:30
Next up to sell is Cambrex (CBM). This biotech stock has been trading flat for most of the day despite the sizable fade in the Nasdaq and Biotech sector. I bought Cambrex last Monday, and it is up a little more than 7% since then.
9:48
Tupperware (TUP) has basically gone up in a straight line since I bought it on Monday, resulting in a rare 8% gain in a week for a very defensive stock. I’m taking the gains this morning.
11:39
I bought Twitter at the close on Wednesday looking for it to continue its run up, and it did not disappoint. After less than a day and a half of holding, it’s up almost 9%. Of course, the market helped a little, but I think the sheer momentum of the stock did most of the work. I know it may be headed up further, but I’m happy with 9% in a day and a half, with plenty of other stocks on the rise behind it.
1:53
Time to unload a couple more long positions that I’ve had for about a week. The first is Radian Group (RDN), which I bought on 2/26, one week ago. It’s up about 8% so far since then. The other is AES Corp (AES), which I bought on 2/24. It, too, is up almost 8%. Who knows what next week will bring; I want to lock in these gains now.
As the market continues to climb, I’m trying to squeeze out all of the gains that I can get by adding more and more long positions to offset the ever-dropping short positions that I currently hold. In the month of March, I have already been stopped out of 5 short positions for an average of a 17% loss.Thankfully, most of the damage was done in February, and I still edged out the market overall for the month. I have also sold 7 long stocks for an average of about 7.25% gains this month, so it almost evens out. For March alone, the average closed position return has been a positive 3%.
Anyway, the stocks that I am buying today are some more seasonal positions, which have done pretty well so far (sold 2 for gains and currently holding a third, Bed Bath and Beyond (BBBY), which is positive at the moment).
The first stock is CSX Corp (CSX). Between March 3 and April 15 of the past 10 years, it has returned an average of +10.98%, and the lowest dip it has ever taken within that date range is -10.58%. When the average gain more than evens out the worst intra-range dip, it’s a pretty rare opportunity. The highest return that it has produced in the time frame is 32.14%.
The second stock is Avalonbay Communities, Inc. (AVB). The holding range for this stock is March 4th to April 22nd. I will be looking for an earnings run up, which means that the stock should gain some momentum before its report, which will occur some time around April 27th. The average gain for the past 10 years has been 9.93%, the largest was 42.16%, and the lowest dip that it has seen within the date range is -9.51%. Overall, it is an extremely safe stock, as it pays a 3.2% dividend and only carries a 0.25 beta (hardly correlated with the market).
The third stock is NewMarket Corporation (NEU). The holding range for this stock is March 4th to March 25th. This one doesn’t have to do as much with earnings, as it does not report until the end of April. However, it is the best performer out of this group, averaging a 13.75% return over the past 10 years. For whatever reason, it almost always goes up in March, so it looks like a reliable buy. It’s also another defensive stock with a sub-1 beta, which lessens the risk in buying it for a few weeks.
The fourth stock is Big Lots Inc. (BIG). The seasonal range for Big Lots is March 4th to March 23rd, as it is more of an earnings play than anything else. In fact, the company reported earnings this morning and it already up about 4%. It is also the least risky of the bunch, and may be one of the least risky seasonal plays out there. Over the past 10 years, it has yielded an average of 13.44% during this time range, the highest being 40.3%, and has only dropped -3.77% at any point within the couple of weeks’ holding period.
10:33
Two of my long positions are up a decent amount since I bought them: TYG and HTH. Both of them were bought on 2/26, right before the recent market rally, and are up about 8% since then. I am selling them this morning, and will replace them with a couple of seasonal stocks.
9:42
A couple of long positions have done pretty well over the past few days, and I am going to take profits on them this morning. The ones I am referring to are XON and MTG, both of which are up about 7% since I bought them last Wednesday and Friday, respectively.
12:14
Box is up huge today even though the market is flat. There isn’t any news for the stock, so it may just be a fluke 1 day momentum run, which is known to happen in small caps. So, I am going to take profits in BOX…up about 8% today.
1:44
Since I bought GPRO back on Feb 22, it has been somewhat of a disappointment, and I’ve been waiting for it to rebound so I can take profits. Almost pulled the trigger last Friday, but I figured I’d give it a couple more days so I could at least break even. It’s up good today, as high as it’s been since I bought it, and this is where I’m going to sell.
2:54
One more stock to take profits in today: MOS. Since Friday when I bought it, it is up almost 9%. To fill the spots for the long positions that I sold today, I am buying XOM, TWTR, ALXN, and STT at the close.
So far, I have been making trades based off of momentum, with a couple of exceptions. However, since the momentum indicator that I am using is still a work in progress, I am going to use something a little more concrete in the next week or so: seasonal trends.
The focus of these trades will be commodities, currencies, market indices (ETFs), and stocks. For the stocks, the date ranges will vary, as in they will not necessarily be for a whole month (March 1 – April 1). For the rest, the trades will usually be a 1 month investment horizon, although of course I will take gains sooner than that if there is a large spike/drop in price.
As usual, each one of the trades will be hedged. For individual stocks, this will be done by using a stop loss (usually 10%, depending on the volatility of the stock). For the rest of the trades, I will take an equal position in something that is negatively correlated. This will balance it out and reduce pretty much any possibility of having a major loss.
The seasonal commodities that I will be trading in March are all going to be short positions, since the general trend in recent history for the month is down.
A couple commodities that have seen large downward price swings in the month of March are Natural Gas and Sugar.
Commodity Trade #1: Short Natural Gas
Natural gas has been falling quite a bit with oil recently, which doesn’t help that fact that it already usually drops significantly in price during the winter months. And even if there is a rally in oil (which I think will be short lived, anyway), it does not necessarily mean that natural gas will follow. In fact, the price of natural gas does not have a significant correlation with crude oil at all, especially in March. Over the past 6 years, natural gas has yielded an average return in March of -11.28%, and 4 out of the 6 years were negative.
There is a large discrepancy in returns; the largest gain was 14.99% in 2011, and the largest drop was -43.78% in 2014. But, that’s why I will have an offsetting hedge position: so even if the price goes up 15% again this month (highly unlikely), the losses will be minimized, and I may wind up with a gain anyway.
Natural gas does not have too many assets that correlate strongly with it, so there are not many to choose from when deciding on a hedge for the trade. Over the time span that I’ve gathered data for, platinum has the highest correlation with natural gas prices (+0.62) , and the Euro has the highest divergence (-0.55).
For this trade, I am going to use platinum as the hedge. So, I am shorting natural gas (^NG) and buying platinum (^PL). That way, if natural gas prices go up, so will platinum (based on correlation), and it will offset the natural gas loss.
Commodity Trade #2: Short Sugar
Sugar, over the past few years, has seen an enormous drop in price. The bulk of this drop comes between the months of November and April, during which it averages about a 3% drop per month. The worst month out of the year for sugar, though, is March, when it has averaged an almost-6% drop since 2010.
Like natural gas, sugar has seen a negative return in 4 of the past 6 years. However, the returns are not nearly as inconsistent. The upside has been minimal; the only positive returns in March during the specified time period are 1.16% and 1.18%, in 2013 and 2014, respectively. Last year, the price fell 8.44%, and in 2011, it fell almost 10%.
Choosing a hedge position on sugar is a lot easier than choosing one for natural gas. Platinum, copper, coffee, and cotton all have correlations of +0.75. Since coffee is the highest at +0.84, that is the one that I will be using, so I will be going long coffee to hedge. Both of these crops are grown in a lot of the same places, Brazil being by far the top producer for both. So, I am going to go short sugar and long coffee.
Seasonal Stock Trade: Buy Bed, Bath, and Beyond
Between the dates of March 2 and April 20 over the past 10 years, Bed, Bath, and Beyond stock has yielded an average return of 12.7%. This is more than likely due to good Q1 earnings reports in recent years, as the report usually falls at the beginning of April. This year, it is projected to be sometime between April 6 and 11. If the stock has already produced good gains by then, I will sell it in case the report does not meet expectations.
The most that the stock has fallen within the date range is 7.41%, and the most that it has gained is 54.07%. So, based on history, this is not too risky of a trade. However, I am still going to place a 10% stop loss in case the market falls or there is a sell-off before the earnings report.
9:33
This morning, AMC corp is up big due to an earnings beat, which was reported before the market open. It’s now up almost 10% since I’ve bought it (last Wednesday), so I am going to sell at the market. I will have this week’s trades posted later today.
10:23
Looks like investors weren’t pleased with ENDP’s earnings report this morning, despite their earnings and revenues both beating expectations for the 4th quarter of 2015. It seems to be the large increase in their debt level due to recent acquisitions that have investors fleeing the stock. Since it’s dropped so much, it looks like a good place to cover. So, I am covering shares of ENDP at the market.
10:51
As the market is pretty flat today, there are not many new positions that I am adding. I will also be adding some commodity/currency trades for the month of March tomorrow. Here is what I am buying and selling today; they are all short-term positions, so I plan on holding them for 2 weeks max. Also, I am placing 10% stop losses on each one:
Buying at the market:
BioMarin Pharmaceutical (BMRN), Tupperware (TUP), Cambrex Corp (CBM), Angie’s List (ANGI)
Shorting at the mrket:
Bank of America (BAC), EOG Resources (EOG), EQT Corp (EQT), Cimarex Energy (XEC)
3:04
With the market falling this afternoon, I am going to take some profits in a couple long positions. Brookfield Infrastructure Partners (BIP) and Nvidia (NVDA) are both up around 5%, and I’ve been holding onto them for a week and a half, which is a good amount into my investment horizon for short term positions.
I am selling BIP and NVDA at the market.
3:50
One more sell to close out the day with a gain: KOS is up about 6% since I bought it on Friday, while the market has been pretty much flat. Locking in gains is always good, especially with a stock like that with big intraday price swings. Selling KOS at the market
9:35:
To start off the day, I am selling Canadian Solar (CSIQ), which is up about 10% since I bought it on Monday. Not a bad weekly return. I will have a replacement for it soon and will post when I find one.
10:19
More Buys:
A few stocks showing some momentum right now are:
Baker Hughes (BHI)
The Mosaic Company (MOS)
MGIC Investment Corp (MTG)
Kosmos Energy (KOS)
I am buying BHI, MOS, MTG, KOS at the market
11:10
I am taking profits in RAX, as it is up about 10% today so far. Will have a couple additions to my long positions soon.
11:29
My focus today is adding more long positions to trade with the overall market rally. Right now, I have more short positions than long, and if the market climbs higher (I think it may hit 202-204 range), I want to be prepared. So I am adding the following to my long positions:
Radian Group (RDN)
Hilltop Holdings (HTH)
Tortoise Infrastructure (TYG)
Visteon Corporation (VC)
11:37
And if the market rallies, most, if not all, gains on short positions will go down or be lost entirely. So I think it makes sense to cover my top short position right now. ALXN is down about 5% since I shorted it, despite the overall market moving up.
I am covering Alexion Pharmaceuticals (ALXN) at the market
Trading Through Trends 