Year to Date Portfolio Performance – February 2015

logo-cytoritextUnlike my barely positive January, February proved to be a far better month. I can attribute that to better stock selections, patience on entries, management of position size, and cutting losses more quickly. I also adjusted to direct my attention at taking base hits on shorter term swing trades in order to book profits before they could be snatched away, particularly if a trade turned out to be a quick hit. Freeing up capital to avoid lost opportunity cost elsewhere made sense in some instances. I also noticed my trade execution seemed more systematic an unemotional. The combination of all of those elements worked.

February Net P/L:  +9.96%

Year to Date Net P/L:  +10.64%

Notable Wins

  • My star trades of February involve Cytori Therapeutics (CYTX). I suspected the catalysts were in place for a strong move and my patience was amply rewarded. I sold 1/2 of my position on a 76-day trade for +42%, then two days later sold 1/3 of my remaining shares for +125%. Ironically, the profit earned on each of those trades was nearly identical to the penny which is a reflection on my position sizing. I still have a nice core position playing with the house’s money.
  • Xenon Pharmaceuticals (XENE) 15-day trade for +25.6%. I took my entry at 14.25 referencing the 61.8% Fibonacci level on the daily chart which went green from there. I targeted 18 for potential resistance and sold just short of that, and in doing so I missed some more of the move higher. I was satisfied though since XENE is a little difficult to trade due to volatility, and I’ve seen the bid / ask spread as wide as one dollar. Sheesh.
  • 13-day trade in First Solar (FSLR) 47.88 to 57 for +16.9%. I planned to sell prior to earnings, so the YeildCo news bump a day ahead of time was a gift.
  • Fannie Mae (FNMA) 7-day trade for +12%. Gave up a lot before stopping out.
  • Vericel (VCEL) 6-day trade for +11.7%. Another short-term swing base hit.
  • Control4 (CTRL) 21-day trade for +7.8%. Selling before the earnings debacle prevented this from being placed in the “Notable Losses” category.

Notable Losses

  • Civeo (CVEO) 10-day short position stopped for -10.2%. My stop saved me from much worse here.
  • I gave up on my Leju Holdings (LEJU) long position just yesterday for a -9.5% loss. Under 9.55 was it for me.
  • Dorian (LPG) 6-day short position went against me for an -8% loss before I exited.
  • Actuant (ATU) 17-day short position exited for a -6.7% loss.

The majority of my shorts just haven’t been working for me; not surprising in a bull market, but there’s more to it than just that. I’m glad to be largely out until I figure out a better way.

Notice the overall theme though? Bigger winners and smaller losers works like magic. Monitoring my progress with a greater emphasis on tracking monthly performance in relation to annual performance is keeping me better tuned in to trade management which is translating to greater success.

Many times during February as I booked profits and cut losses I recognized the motivations behind my actions were based on advice I’ve learned from successful, experienced traders time and time again. I had some real “I get it” moments this month that were nice confidence boosters. More pieces of the puzzle are coming together. This was a great month of success in many aspects to build upon going forward.

Current Positions

Long – AAPL  BCLI  CJES  CYTX  ELMD  GFI  IPHI  MNDO  MUX  PLNR  PMCS  RLGT  SONC  VIXY

Short – FXI

Any Time is a Good Time for Review

review-roundthumbsI spent some time here mid-month reviewing closed trades for the year in an effort to make adjustments since my profits are barely edging out my losses. Identifying problems is worthwhile but it’s only effective when solutions are found and implemented to correct them.

Thus far for 2015 I have 24 closed trades consisting of 14 wins and 10 losses. Profits are edging losses but are not commensurate with that win ratio although that has improved over last year. I need to target better risk / reward entries and cut losses quicker once it’s clear a trade is not working out to my advantage. I can cite two recent trades in particular where I would have benefited from a little more patience on my entries. I often have many setups I’m tracking for optimal entries so there’s really no need to force trades with impatience.

Of my 10 losses, 7 of them are shorts that went against me. I need to determine better entries, tighten up my stops, or leave them alone altogether until I study shorting more. I plan on getting to Kathryn Staley’s “Art of Short Selling” book soon to look for some help there.

Patience to wait for superior risk / reward entries and tightening the leash on short buy stops should make a positive difference.

CyberArk Trade Strategy

CyberArk (CYBR) Daily Plot Chart - February 6, 2015

CyberArk (CYBR) Daily Plot Chart – February 6, 2015

CyberArk (CYBR) hit the upper resistance trendline Friday before backing off a bit. I’ll be watching for a move over Friday’s high of 37.95 with significant volume such as that seen in mid-November to signal a buy. If not, I’ll continue to monitor price and volume in relation to the trendline along with the potential for the stock to retrace to 61.8% at 31.63, same as I’ve been doing for the past few weeks. Technicals matter more on young charts lacking data history.

CYBR’s IBD rating is 97 and is scheduled to report 4Q earnings on February 12 after the close.

Cheetah Mobile Trade Analysis: The Wrong Channel Was Having No Channel

Cheetah Mobile (CMCM) Daily Plot Chart - February 6, 2015

Cheetah Mobile (CMCM) Daily Plot Chart – February 6, 2015

Referencing the above Cheetah Mobile (CMCM) chart above, this is a new chart configuration I’m employing specifically to track trades. I’ve narrowed the view to better see candle and indicator relationships and to plot patterns and levels for entry and exit points.

Due to lack of diligence I did not have such a chart in place prior to exiting my trade, but now that I do it’s clear I would still be in it if I did. Here are my thoughts during the trade.

I deemed CMCM to be buyable after coming off the lows with good volume on January 5. The next day after pulling back and recovering I bought it at 16.60 with a stop under the previous day’s low. Three days later I was holding over a 16% gain.

Over the next six days my gain dwindled from 16% to just over 3% which frustrated me. At this point I had my stop up to break even despite the disheartening thought of stopping out flat to give back all 16%. As price began to rise again I decided to keep my stop moved up a little closer to price.

January 30 started the day with persistent selling. I placed my stop under the previous day’s low with what I thought was an ample cushion, but it hit intraday at 18.77. I booked a 13% profit. Unfortunately the low turned out to be 9 cents below my stop at 18.68, price reversed, then CMCM closed the day at 19.52 and has resumed higher from there. That, of course, opened my inner debate over exiting intraday vs exiting based on the close. Arggh!

Had I done my homework and had this chart’s channel drawn in place in advance I would still be in this trade today since the trend is still moving up and confirmed support is intact, but not utilizing it while at the same time being skittish over my earlier lost gains put me in the wrong place at the wrong time to exit the trade.

I’ll see what happens at 21.67 where another buy point may emerge.

You Must Be Wrong Because I Know I’m Right

statlerandwaldorfI’ve been heckled more than a few times by traders berating a chart or trade idea I posted somewhere on social media which is indicative to me of someone who does not have a process of their own worked out for themselves, or at least they don’t understand that one process does not fit all. They are so enamored with their own train of thought that anything contrary poses a threat to their thesis, or worse it suggests the possibility that their way of thinking may be wrong. I’ve found this to be especially true of long holders who are in love with their stocks reacting to traders taking a short position. To them, not only is someone foolishly shorting a stock that is destined to only ever go up, but they’re also messing with their mistress. Hell hath no fury like a single-minded trader scorned.

We all have different methods, objectives, time frames, patterns, etc., that we look for. Blend those with a mix of psychology and emotions and you have a recipe for an infinite combination of factors that can be combined to formulate a trade from idea to execution to resolution. No two traders are ever alike so it’s futile to expect to find conformity of process and opinion between any two or more of them.

This came to mind after seeing some trade ideas posted recently by other traders who I respect which prompted me to pull up and examine charts before thinking, “What the heck? That’s not a trade I would take there.” That’s how I perceive a trade when applying my own process to it, not theirs, so that’s where it ends – I move on to other trade setups and wish them well on theirs. It’s beyond belief that anyone would take it a step further and actually reach out to inform another trader how wrong they are based on their own mindset and perception.

Ah, what am I saying. It’s completely believable and happens all the time.

There are no right or wrong trades except in how they relate to your own process. Any way you can consistently earn profits while minimizing losses is the “right” way to trade regardless of what anyone else thinks. Make sure no one else does your thinking for you and you’ll be well on your way down the right path to success.

Year to Date Portfolio Performance – January 2015

performanceI could do my “what if?” and pretend the month closed out before January 30 but I suppose that would be cheating. Friday did some damage to what was shaping up to be a fairly decent month.

My net January gain with slippage figured in was +.68%. Considering SPX was -3.1% I’ll call that a benchmark victory of sorts.

Notable Wins

  • A percentage of my Radiant Logistics (RGLT) position was booked for +29.5%
  • A 6-day trade in McEwen Mining (MUX) was booked for +21.1%
  • Stopped on Cheetah Mobile (CMCM) for +12.8%

Notable Losses

  • Short iShares China 25 ETF (FXI) covered for -4.4%. My position size was too large and I let it run a bit too long past the point of knowing when the trade was wrong. My bad. You can be sure I lashed myself for it.
  • I shorted Avon (AVP) not long before the January 22 privatization rumor and stopped out for -5.2%. Price went way higher than where my stop hit, reaffirming why hard stops in short positions are a golden rule I never mess with. It happened during lunch when I wasn’t even looking. Could have been much worse.
  • Attempted a range trade long in Bank of Ireland (IRE) which failed. Stopped out for -4.4%.

One positive theme here which I will work to continue is that the win percentages are far exceeding the loss percentages. I attribute that to applying the appropriate strategies to better stock selections and better risk management. The reason why the wide difference of win / loss percentage is not reflected in my .68% January performance total is because most of my current positions were carried over positive from last year. If I can maintain that skew then going forward should see improvement.

Doing the necessary homework and calculating favorable risk / reward trades is paying off. I’m satisfied with that .68% for now as long as my process keeps working.

Current Positions

Long – AAPL  CELG  CTRL  CYTX  GST  LEJU  LRAD  MNDO  RLGT

Short – ATU  CVEO  LPG  SJR

The Long and the Short Of It

ls-dachshundBefore I ever shorted a stock I used to think a long / short portfolio was a counterintuitive strategy. I assumed that on up market days short positions would counter gains in long positions and vice versa on down market days. How would you ever expect to make progress with each side always working against the other?

I’ve since learned the key to the long / short portfolio lies in successful stock selection. On a bullish market day, truly poor stocks are more likely to have minimal gains, be flat or be down while good, strong stocks haul in positive gains. Conversely, when the market is red, short positions are more likely to be hammered while superior stocks can comparatively hold losses to a minimum, stay flat or even gain ground. With wise choices made in stock selections of a long / short portfolio, each side ideally will work in their defined direction while at the same time helping to buffer market volatility.

Today was a good example of that for me as long and short elements of my portfolio each worked as intended. With the market starting out red, my Apple (AAPL) long position opened green and stayed that way while shorts in New Oriental Education (EDU) and Shaw Communications (SJR) dropped. As the market ramped up, Apple strengthened while other long positions, if not already up, turned green and joined the rally. At the same time, while the two indicated shorts recovered ground from their lows they nevertheless closed red despite the strength displayed in the market.

Each side countered the effects of the market’s influence under all circumstances during the day while ultimately working their way toward their respective intended directions. It was kind of a textbook long / short portfolio type of day.

Bias Keeps the Apple Away

logo-apple-macintoshAmericans encourage the pursuit of the American dream, proudly hailing our country as the land of opportunity. We love a good rags to riches story. We love to root for the underdog who we will faithfully support and encourage in the hope of seeing a transition to become the next great American success story.

Somewhere along the way though, an arbitrary line can get crossed which prompts the masses to look at great American success stories and see them for being overachievements. Having too much success? You’re not the lovable underdog any more. Time to knock you down a notch or two. If you’re too successful at doing what you’re good at for too long then you start to become hated by some.

The New York Yankees. Starbucks. Bill Gates. All are known for great success. All have legions of people who either love them or hate them.

Apple (AAPL) is another of those success stories. Somewhere along the journey from Jobs and Wozniak scrounging money to cobble together and sell handfuls of rudimentary computers to becoming the iconic global behemoth it is today, the company has attracted its share of people who can’t wait to see the mighty Apple fall.

I have owned several iPhones and I love them. Haters would call me a fanboy when all I really am is a consumer of a product I enjoy using. If I discovered a product I thought I might like more than my iPhone I’d give it a try to see if I preferred it. I like Apple but I’m not married to Apple.

cloudedjudgementI’ve traded in and out of Apple many times over the past years, but since I now regard it as a core holding of mine I chose to maintain my position through 4Q earnings. To come to that decision required tuning out a lot of noise and speculation though. I couldn’t help but notice some respected traders on media outlets and on Twitter voicing their negative opinions about Apple and Apple investors. What was surprising to me about it was that negativity reflected directly on their bias and loss of objectivity, something I would not expect from traders of their caliber. Is it Apple’s great success that motivates rational thinking to become biased? Has missing out on that success in the past influenced opinion about the future? Some want to see failure happen when they haven’t been along for the ride, after all. Regardless, the fact is no one really knows what is going to happen so speculation is just that, but when bias of any kind figures in to the equation then judgement becomes clouded.

This comes to the heart of what this post is all about which has also been the tag line on my Twitter profile since day one:

“Study those who know, share what you learn, think on your own”

I don’t always hold positions through earnings. I based my decision to hold my Apple position on personal research and observation. Had I let the bias of others cloud my judgement I might have been persuaded to sell ahead of time and watch from the safety of the sidelines. Fortunately that didn’t happen, and fortunately it worked to my benefit.

Think on your own. Be your own trader.

Technical Difficulties

technicaldifficulties

Skimming through some charts today I noticed a weaker looking television media theme appearing in the services sector. Here are weekly and daily chart looks at three of them.

Shaw Communications (SJR) Weekly Chart - January 23, 2015

Shaw Communications (SJR) Weekly Chart – January 23, 2015

Shaw Communications (SJR) Daily Chart - January 23, 2015

Shaw Communications (SJR) Daily Chart – January 23, 2015

Shaw Communications (SJR) has been selling on higher than average volume all month after putting in a double top, however after disappointing on earnings and revenue reported on January 15 selling accelerated and drove the stock forcefully through the 200 DMA. Look for the short setup if price penetrates the October low of 23.31. SJR’s IBD rating is 38.

Scripps Networks Interactive (SNI) Weekly Chart - January 23, 2015

Scripps Networks Interactive (SNI) Weekly Chart – January 23, 2015

Scripps Networks Interactive (SNI) Daily Chart - January 23, 2015

Scripps Networks Interactive (SNI) Daily Chart – January 23, 2015

Scripps Networks Interactive (SNI) is set to report earnings on February 12 so it may be range bound until then, however it is worth noting that the moving averages are turning negative after printing a recent lower high. I’m probably least confident in this short setup unless my price alert triggers below 70.61. SNI’s IBD rating is 57.

Viacom (VIAB) Weekly Chart - January 23, 2015

Viacom (VIAB) Weekly Chart – January 23, 2015

Viacom (VIAB) Daily Chart - January 23, 2015

Viacom (VIAB) Daily Chart – January 23, 2015

Viacom (VIAB) earnings are close at hand set for January 29, but the technicals here are worth noting. Moving averages have rolled over negative and strong selling since January 14 has been paired with a weaker retracement. If volume kicks in on another drop I’ll be watching for a short setup under 64.79. VIAB’s IBD rating is 50.

Follow My Lead

Back on September 8 of last year I posted a chart of Cheetah Mobile (CMCM) along with this tweet:

tweet-cmcm-8sep14

CMCM was at 30.35, closing strong on good volume just two cents away from the previous August 19 all-time high of 30.37 – in my opinion a prime breakout candidate to consider. The following day it popped to 30.77. A common rule of thumb is not to buy a breakout unless it reaches at least ten cents higher from the break, so everything looked good to go at that point.

Price faded from there and the breakout failed with CMCM closing that day down 10% from my mention of it. A month later it was down 46%. Despite the outcome, it was nevertheless a good setup idea, however I passed on it in favor of taking a position in SunEdison (SUNE) which I preferred to be in at that time. No harm done, and I’ve since taken a position in CMCM on January 5 at 16.60.

The crux of this story comes from a conversation I had last week with someone I know personally who I was unaware was following me on social media. What he said was, “Cheetah is starting to look good. Do you think it will get back to $30? I’d like us to get our money back.”

Uh oh.

cmcm-lemmingsI explained that I did not take that trade and was only in CMCM from earlier this month. That was met with a measure of surprise, but although things seemed a little awkward there appeared to be no hard feelings on his part. I encouraged him to judge the pros and cons of his position on his own and decide if it was worth holding or selling even though I knew this was someone who evidently didn’t have a plan of his own to work with nor did he seem to be utilizing any kind of risk strategy. More than likely I suspect he’ll be holding his position to the break even point or until the end of time, whichever comes first.

I am consistently researching to develop trade ideas and setups to have targets ready for whenever I have capital available to deploy. Ideas may linger for a while with me or just as easily be forgotten in favor of others as quickly as they appear. If I see something interesting that looks to be a favorable risk / reward setup I will often post a chart of it on Twitter, however I may or may not be involved in trading it then or in the future. They are merely ideas I see which I feel are worth presenting, however it is up to each trader viewing any chart to determine how it fits their criteria and suits their own individual trading style to interpret and decide what it means to them. A setup I might think is a good long trade could be seen just as favorably to someone who sees it as a good short opportunity, and that’s fine. One will be right, the other wrong. Knowing what to do with that trade either way before and after the fact makes all the difference in the world.

There are many traders on social media posting charts and ideas all of the time. When I see something interesting I always evaluate it on my own merits though. Never do I follow any other trader blindly into a trade. With all of the infinite variables to trading styles, time frames, objectives, risk tolerances, etc., it’s foolish to simply mimic whatever someone else is doing. A trader who develops a habit of following will never develop into a trader of their own who can earn their success and lead their own destiny.

My advice is simple: don’t follow traders or mentors and be a follower, follow traders or mentors and be a thinker.