long term position trading -primarily etf's-

[sowterdad]

4.14.15 -
Added $6500 Roth contribution for 2014 into the IB account.
That brings the account value to $16,225.00, prior to the add, the account value was 9725 after the TQQQ stopping out today. That was within 1% I believe of where i started this year off-
I mention this $$$ Add & will include a screenshot - just for transparency .
This add into the account also reflects a higher self-confidence on my part- although my net results this year are not impressive- I had about a -4% drawdown low in the account value, during the market's decline, and higher volatility; but slowly have played catch-up. This likely corresponded with the swing in the market-
The goal is to not match the market on the downside swings-but retain some profits and give back less. Slower and steadier may win the race.
I've ventured into some more dicey spec - momentum - UVXY for example- and a couple of 3x leveraged trades- and some of those were losses and - had i refrained from the impulse
to reach out and ' touch the hot stove' I might have been a bit higher by now.
I also have been very reliant on a few select areas- Pharma, Biotech - With my Pharma position up 3% - but the dollar value $3,570.00 is over 1/3 (38%) of the prior trading account value- XBI -biotech- is also somewhat represented in some positions in PJP-
Those combined 2 positions represent 66% of the prior account value-

Now, That's taking on too large a RISK with the account assets- but I felt i had it justified by my willingness to trade larger % size combined with a tighter stop-approach-using the faster time frame chart . Also, by trading ETF's I own dozens of different companies within that sector-with just 1 purchase- I'm not choosing from Amgen, Pfizer, Celgene- since I own a piece of each of these in 1 ETF.

Now, that overall sector focus is just 1/3 of the overall account value- That is likely all it should represent- and even then it is overweight/slanted- towards that segment.

As a trader- I need to open my eyes wider- and find other market segments on the move-
With some diversification- other markets- other sectors- things not correlated too tightly to the US market. If the technical approach has merits, it should work equally well in a wider TA universe- It ultimately comes down to the interpretation of the operator- the individual.
My disclaimer for the next 30 days is that my day time work load will be larger- including some weekends...... But I hate it when i get similar excuses in the day job.....
That should coincide with the often mentioned- Sell and Go Away In May.

As a final note- I have some other separate Roth accounts-but I elected to fund this more active IB trading account with this year's contribution- I'm trying to put my money where my mouth is- OR_ simply that i am intending to be more focused on my active trading this year.

This -overall-new account value is not a large sum of monies in total.
What counts for me over the longer term is how my net overall % performance stacks up over the remainder of this year- The exact dollars are not what counts- it is solely the %
gain or loss Not every larger portfolio should necessarily try to Beat the SPY or S&P 500 index. I realized this recently when reading some literature on a balanced mutual fund holding both stocks and bonds. The returns were less than the SPY- index- but also the historical drawdowns were also less- because they included a diversified asset base including bonds. A diversified portfolio should give exposure to the wider market volatility- but have a balance with some less volatile choices as well.

From an investors standpoint- My wife also funded the 2014 contribution in her Vanguard Roth brokerage account- She will decide to invest after the expected volatility in this quarter- "go Away in May" - perhaps April.....

 

[sowterdad]

OIH-Oil Services sector Broke through prior resistance today and closed near the high-
While it would have been nice to have had a buy-stop waiting to get the breakout cheaper-
It looks to be a solid higher close- So, I'll look to purchase with a lower Buy-stop and a limit higher- This was a break higher of a resistance level touched with 3 prior attempts.
Retest possible, as is a momentum move higher- Target is potentially the higher prior range-
My initial order set a wide stop and a wide limit sell $45.00 - but I likely will adjust both tomorrow on any fill. The stop-loss will get tighter as will the limit sell.

 

[sowterdad]

OIH-Oil Services sector Broke through prior resistance today and closed near the high-
While it would have been nice to have had a buy-stop waiting to get the breakout cheaper-
It looks to be a solid higher close- So, I'll look to purchase with a lower Buy-stop and a limit higher- This was a break higher of a resistance level touched with 3 prior attempts.
Retest possible, as is a momentum move higher- Target is potentially the higher prior range-
My initial order set a wide stop and a wide limit sell $45.00 - but I likely will adjust both tomorrow on any fill. The stop-loss will get tighter as will the limit sell.
View attachment 151471

WAAAY too long a work day- started 7 am- home at 11:30 pm- burning the candle- but off tomorrow-Friday.
I was filled on OIH at the open 50 @ $38.26. Closed slightly lower- That is OK......
Price declined - but held well above the breakout level-
Where will it go from here? I think it goes higher-
Why the pullback today? Consider that the price action just had a substantial break higher -A break above resistance - the more times price comes back to - or rises up to - a price level,
you can assume that becomes more substantial support.
I like today's relatively tight and higher pullback- Compared to yesterday's bullish bar, this is a minor inside consolidation bar -IMO- and it prompts me to believe that the possibility for a follow through to the upside is going to occur before a full retest of the breakout resistance level. Even with a pullback/retest- I think today's failed high presents a good entry level on a bullish continuation. Again, this is simply my perception- but i intend to increase my position size by 50% with an order to Buy 25 buystop / limit $38.70 -$39.00.
This is somewhat aggressive trading- it could well back fire- I am also allowing the stop to be a bit wider- outside of the faster 2 hr tighter stop-
I will not be working tomorrow - Taking Friday off- but working through the weekend to make up for it- Hmmm - did i ever mention keeping this stuff in balance? will get to review some of this trading stuff in real time- offset with garden time.
XBI- nice 3/4% gain today while the markets were down a bit.
Couple of quick notes - EEM is higher- but looks tenative to pull back-
Caught Gartman on CNBC tonight talking about Greece pulling- or being tossed out of the EU- i think this is a significant potential to be a market disruptor- because if investors get nervous about Europe- it may have huge impacts.
Bonds- TLT- where is it headed- Is the Fed knocking down the dollar ? UUP?
I don't have a Clue.
Commodities? Next big move? How about USO?
It's exactly at prior swing resistance- I think it looks to be a Buy- on a move higher from here. Buy it - on a higher move- $20.30- $20.45 .
This may be more of a value buy here- but this is so oversold- but looks to be ready to catch up- trust the chart.

 

[sowterdad]

Have this Friday off- Futures are down -but improving -Europe is down .
Concerns about Europe, Dax, Greece down -2% as well as the FED....-Fed rate hike appears to not be likely in June. What else?
CNBC commentators are trying to outline possible concerns......
CPI is up slightly- but the benefit of additional consumer spending boosting the economy does not appear to be the case-
What about Oil prices going higher Wednesday? Also pushed the OIH higher- Is that a sign of growth or a concern?
Odd how some Data can be chosen to be interpreted and attributed to what makes the market's move in one direction or the other- Some months ago, the cheaper oil was a concern that the global demand was soft- meaning growth was weak and a concern- and then again, it was a substantial income bonus for the consumer-
SPY is pushing against 211 for the 3rd time- up for the year just a few percent-
It has stayed above (closing price) the upturned 10 ema for the past 9 market sessions, with the penetration down to $208- we've had 3 successive higher declines in March-
This could be viewed as an AT- and if price holds the bottom trend line of these lows, it would be a positive for an eventual breakout higher-as compression continues. We certainly
all could use some positive market upside.
I'm not reacting to the weak futures this - with aggressively tightened stops-
What counts is where price closes.
The OIH trade largely tracks with higher OIL prices .
A price performance chart Chart compared with OIH, USO attached.

With water being a big concern-Now and in the future- I would think the water resource ETF's (PHO is just one) would see opportunity for long term demand- I'm going to look further into that area- It declined in 2014, and has been flat and in a tightening sideways consolidation for the past year- very low volume- It may not be worth looking at as a short term trade- but the sector should have promise as an investment area for the longer term.

With Hacking still being up font in the news- Hack is extended but may be a strong candidate for further upside- in 2015

 

[sowterdad]

Have this Friday off- Futures are down -but improving -Europe is down .
Concerns about Europe, Dax, Greece down -2% as well as the FED....-Fed rate hike appears to not be likely in June. What else?
CNBC commentators are trying to outline possible concerns......
CPI is up slightly- but the benefit of additional consumer spending boosting the economy does not appear to be the case-
What about Oil prices going higher Wednesday? Also pushed the OIH higher- Is that a sign of growth or a concern?
Odd how some Data can be chosen to be interpreted and attributed to what makes the market's move in one direction or the other- Some months ago, the cheaper oil was a concern that the global demand was soft- meaning growth was weak and a concern- and then again, it was a substantial income bonus for the consumer-
SPY is pushing against 211 for the 3rd time- up for the year just a few percent-
It has stayed above (closing price) the upturned 10 ema for the past 9 market sessions, with the penetration down to $208- we've had 3 successive higher declines in March-
This could be viewed as an AT- and if price holds the bottom trend line of these lows, it would be a positive for an eventual breakout higher-as compression continues. We certainly
all could use some positive market upside.
I'm not reacting to the weak futures this - with aggressively tightened stops-
What counts is where price closes.
The OIH trade largely tracks with higher OIL prices .
A price performance chart Chart compared with OIH, USO attached.

With water being a big concern-Now and in the future- I would think the water resource ETF's (PHO is just one) would see opportunity for long term demand- I'm going to look further into that area- It declined in 2014, and has been flat and in a tightening sideways consolidation for the past year- very low volume- It may not be worth looking at as a short term trade- but the sector should have promise as an investment area for the longer term.

With Hacking still being up font in the news- Hack is extended but may be a strong candidate for further upside- in 2015
View attachment 151560

Friday 4.17.15
Red across the board- all sectors down -1% China large caps down -5% FXI
SLB oil services co reported better earnings but gave a warning going forward.Cutting 15,000? jobs????
This may be all it takes- along with the market weakness- to knock the OIH trade back below the breakout level-
Tough to see Red on my platform-as real time-profits are declining-
It would be very difficult without a lot of actual real time -real dollars at Risk- to be that real time trader that trades only his charts and his approach-
It's a balancing act in not just reacting to some red- but considering it also with the larger picture-- With global markets and US markets selling off- it's a good time to be protecting assets instead of overly optimistic- I think tightening stops are warranted.

 

[sowterdad]

2 HR SPY-
Do any of the levels defined on this short term 2 hr chart have any relationship to the longer term Daily chart?
While this chart appears somewhat dramatic - price bars dropping sharply- price is still above the prior downside swing lows. The faster the chart- the more tenative-short lived are any TA interpretations- So, this chart should be considered also by viewing the larger
time frame daily chart.
For those trading/investing- Targeting a lower level to Buy also gives the opportunity to select a price entry level that is close to the "Point of Failure"- (FARLEY) which makes it a lower % Risk trade .
If there is also a coinciding support on the Daily - that should increase the potential for the trade to be a stronger point of entry. That could be a Trend line- or prior price support consolidation level.
Time to put some plants in the garden......

 

[sowterdad]

OIH- cost $ $38.26 Sold all 50 $37.20 on raised stop.Closing near $37.32
PJP Avg cost $77.07 Sold 15 on stop $78.16 closing price higher $78.87
Remaining 30 shares -stop $78.10 PJP came down to $78.11 low- Held by $.01.
XBI sold 229.85 Cost $226.77

Only 1 position -PJP 30 shares still active-by $.01 from the stop.

In the investment account- had some exposure still to emerging economies, Europe- cutting those much smaller-by 50% looking to lock in some of the recent profits there-but i only recently had put some money back in there- - Also selling some of the Bond fund. With mutual funds, there are no stops- only trade one price at the market's close.

Today, the markets dropped 1-1.5% - and didn't leave those with Long positions very confident what may happen on Monday.
SPY is down for the week, but still up 2% for the year.
Those that are holding long positions- are "Hoping" things improve Monday-
Those that stopped out and took the loss- can sleep easy over the weekend. They have certainity as to where they stand. Perhaps have to evaluate as to how to proceed moving forward....

Something just occurred to me- In my mind, I can separate my trading account and my Investment account- but , the one often affects the other. Who is prepared to tackle the bigger picture?
I caught part of CNBC tonight where Guy Adami was trying to explain the difference in being a trader and an Investor- and how a trader holding a bad trade suddenly morphs into becoming an Investor.
There is nothing wrong in choosing to be an Investor- As long as it is not the result of an unwillingness to set a stop-loss on a trade.

 

[eurusdzn]

There has been macro theme that is now being talked about more for 2015 so its old news
but one doesnt know.
Emerging markets( most anyways) are ln a good run relative to US markets. With US rate hikes pushed out and weak US data, the dollar has weakened recently. Low rates and weaker dollar are supportive of commodities, emerging equities and emerging currencies. Blah blah
RSX,EWZ,EWH,FXI,EWY,EEM along with an increasing number of these markets with currency hedged ETF's
Recent history does show some EM tantrum when rate expectations in US rise. December
Eurodollar and fed funds rate expectations continue to drop so EM's are behaving "well" here.
I know youre aware emerging markets are doing good. Best not to question why its happening in my case. It just is. By the way,PJP is a good find i didnt know of. Thanks.

 

[sowterdad]

There has been macro theme that is now being talked about more for 2015 so its old news
but one doesnt know.
Emerging markets( most anyways) are ln a good run relative to US markets. With US rate hikes pushed out and weak US data, the dollar has weakened recently. Low rates and weaker dollar are supportive of commodities, emerging equities and emerging currencies. Blah blah
RSX,EWZ,EWH,FXI,EWY,EEM along with an increasing number of these markets with currency hedged ETF's
Recent history does show some EM tantrum when rate expectations in US rise. December
Eurodollar and fed funds rate expectations continue to drop so EM's are behaving "well" here.
I know youre aware emerging markets are doing good. Best not to question why its happening in my case. It just is. By the way,PJP is a good find i didnt know of. Thanks.

I Think You are right-There is indeed a lot of life outside of the US markets-
For the investor/ trader having a wider perspective offers better opportunities- Just as sector swings occur within the US markets- some substantial moves occur that we US centric focused don't seek out or try to take advantage of ./.. It is a global market- and sector shifts are as much global shifts that - and when one area declines- it may not do so as the tide shifts around the world- As such- gaining a larger global perspective in the macro swings would likely be desireable to A: diversify expposure B: find areas of favorable momentum..... Maybe this is where - as an Investor/trader- we need to broaden our horizons.
As to PJP- and Biotech- I'm glad you find this of interest.....Hopefully, you will find this area as productive as i have. These are both areas that have significantly outperfomed the markets for a number of consecutive years now- They certainly should represent a small portion of a diversified portfolio that wants to add some growth & volatility- In this trading account I have been very overweight in this market segment- I do not recommend that anyone follow this overweighting- as i tend to do- I intend to expand my trading universe- and reduce my sector exposure
It get's dangerous when you think a certain narrow market segment can simply go on - and -on That is the reason to employ stops - and to diversify- look wider.

 

[sowterdad]

A good friend shared with me his situation of averaging down in a losing position he was holding- I am not meaning to be critical of my friend- His situation is shared by many of us during our trading experience.

i will post my response- e-mail to save time-
But the question becomes- When is averaging 'down' a good way to build a position?
My initial premise- Is that I trade primarily based on a breakout move higher- or on a swing higher move- these are simply higher probability trades for me.
My friend took an entry on a trade in a single stock position-
I'm not sure that I can convey the multiple RISK one assumes when trading single stock positions- It's like saying AAPL- All Black- and I'm Rich...But the roulette wheel spins a Red.
Guys- Gals- One takes on inordinate Risk when trading large on a single market sector ETF- Like PJP in my case- When you decide that you will drill down in a specific market segment and pick the Diamond in the rough- and instead of buying PJP- you arrogantly decide BMY or JNJ is the ONE--
Reminds me of the Matrix movies with Keanna ........ One of those bullets may strike home.

There is no ONE- or if there is- it is very short lasting-
What is 5 years over 20? - Perhaps market cycles find outperformance in 3-5 year cycles- but then periods of decine- Maybe Moore's law of 18 months becomes applicable to the computer traded markets we have today. Perhaps Investing is passe? Maybe in 5 years tha AAPL watch will just be a footnote in how developing technology was transformed by an upstart company that did microscopic implants behind one's ear lobe......

It is only because we do not have the memory/life span of the ocean traveling tortoise
that we only relate to what occurred today and in our recent memory - We are bound to repeat history .

i would believe in the longer term investment value cycle as one that would survive the market gyrations- including a potential market "event' - overall sell-off-
If you get nervous about the market- where are you positioned?
Are you in Tech- chasing the latest technology- Or are you buing Warren's value based BRKB?
BRKB declined along with the market in 2008- 2009 for a substantial drop - did not seem to be a lot of safety there- relative to what occurred- but one owned a considerable number of companies- rather than betting on just one or two.
Investing - and trading- are not the same animals.
When a trade becomes an Investment- we have screwed up- failed to implement a stop-loss - We made a choice- a decision- as to when we would enter a trade- based on some rationale- but we failed to make a similar decision that said the markets did not agree with our assessment-
People choose to trade differently- There is nothing at all wrong with that- People will 'succeed' or will 'fail'-
Warren Does nothing - but Warren has the resources to hold hundreds of companies that met his definition of a value purchase-
In that regard, he could have one of his companies go bankrupt- go to $0.000 and he could still have a profitable year.
Warren is diversified- but also focused-and he also sells companies that do not live up to his expectations.

When you Buy a specific stock with the expectation that it will outperform the market- and it fails to meet your expectation-
Usually determined by a decline in price. a decline in the value of the principal investment.- If this stock is just one of 20 you have your assets
in, then it is just a 5% risk in your portfolio. If this stock is 1 of 5 investments you hold, it is now 20% of your portfolio.

It is important to understand position sizing- and the potential Risk you may be taking when you enter a position- When you enter- you should have a point where you would acknowledge that the Market does not see it as you do- and you are willing to sell your shares for a loss-
This point can usually be determined by a chart comparisom of where price has come from in the past- , where you expect it might go- and where you will agree that the market does not see it your way- This is often selected as a breakdown lower in the price trend.

Averaging down on any trade- works as long as the trade rebounds and makes you whole-But - a single small stock is a very large individual RISK-
I may have told you this story before- Several years earlier, I had an older gentleman contact me and he was in duress - He had put $40,000.00 of his retirement monies in a popular tech stock,- I cannot recall the name at the moment- it is still a popular one-
It had declined 50%- My recommendation was that - unfortunately, I would have had to have sold on a much higher stop-loss- and put my assets to work elsewheres- I also recommended that he seek out a for fee- financial advisor to give him investment advice- His desire to be correct - and fear of taking a smaller controlled loss- put him into a rather desperate situation. You cannot fix that psychology that cannot accept a loss in trading- We all struggle with choosing where to take a loss- By experience- I can attest that a smaller loss is less Angst than a larger loss.

So, when you Buy BRKB- and suggest you may be a long term holder in the position- despite the price swings etc- I feel confident that -over the longer term you will be fine- You are almost buying a small value index- I would still have a stop in place.
When you Buy a Chinese very focused single pick- such as CAAS- you are absolutely playing with Fireworks! They are light years apart in Risk and value-
You likely would not put your money into a bag and go to Las Vegas- and jump on the roulette wheel- But, my good friend- You are doing exactly that when you think you have found a 'good thing' and jump on it as a trade- only to find it did not do as you expected- But you then added to the trade- averaged down- in the hopes of making it work out in your favor as a "break-even" or smaller loss- or even a gain eventually.
This is human nature at work- But it is a total recipe for disaster- because- IF you manage to get out of CAAS at break-even - or god forbid - a profit- it reinforces what is a bad and self defeating behavior...,. based on the conviction that eventually everything will come back around. There is a certain opportunity value to money- IF you have it tied up in a trade you are waiting to get back to square one on- That becomes your focus- Around you- are other possible better trades moving higher- But, your capitol gets tied up trying to get back even....

The issue you face, Investor/Trader- is that psychologically, when you go through the process to choose to make an investment- you have likely done some homework- unlike me- No homework- no PE assessment- No valuation judgement- Just a look at the chart-
After having done the homework, your analysis - your process of elimination has made a decision that this purchase is worthy of your hard earned money- and -more importantly- you selected it when you could have selected/chosen a different company to invest in. Unfortunately, you and I don't have the assets to make 20 such separate appraisals......
Even before you clicked the BUY button- In your mind was the expectation of higher growth, profits, and that your assessment was correct- Larger profits would be your reward due to your due diligence and analysis........... All of the criteria you reviewed when making this decision was likely valid- What followed, is that the market interpreted the prospects of growth and higher profits from a different perspective than you- and decided that the value of the company - at that point in time- was not a good investment- relative to the wider forces in play- perhaps weakness in the trading universe- or just in growth in China-
Your position declines - and you try to make up for the paper loss by adding back into the trade- averaging down- to lower your net break-even point on the position-
If - at the time you took the trade- you would have determined that if the trade declined to point X on the chart- You would be out of the position-- and take the smaller loss than where you now find yourself. It's not that your analysis was not correct- It is just that the market did not agree at this point and time on your definition of it being a good investment. Eventually, the market may come back and see it your way-
But- you also could have elected - instead of adding to this losing position- to have purchased something that was trending and moving higher- It's Human Desire to feel we are justified in our trading decisions- and to want to get rewarded- But that 'desire' is human nature- and more emotional than analytical.
When one swims at the beach, and a rip current tide is going out- the recommendation is to not try to fight through the tide- because the force of the tide momentum will wear you out- Just recognize the tide is occurring and don't expend energy and assets in trying to fight against it. The market direction can be smooth, but then have periods of Rip Tides-
There is a world of difference in averaging down on a single focused stock- and on something like a market index or BRKB.
I do not know how to convey adequately how much added Risk owning just a few specific stocks carries-
If you want to get exposure to China- consider the reduction of Risk that automatically occurs when you purchase the Index. You still have sector Risk- but it covers many of the better companies in that area.