$4.75 Stock Trades. Visit OptionsHouse.com Today!      Save 15% on H&R Block At Home Products Deluxe



Archive for November, 2009

RINO added to portfolio, JADE sold

I decided to get rid of JADE, which doesn’t fit to my trading strategy. As I mentioned earlier, this purchase was a deviation from my rules. This is the reason why every investor or trader needs to remind his rules as long as he remembers them.

11/30/2009    15:36:47    Sold  34  JADE  @  3.0805

I also added 3 shares of RINO to the portfolio:

11/30/2009    09:30:16    Bought  3  RINO  @  33.49

Why I added only 3 shares? As the Reverse Scale Strategy dictates, you should add only the same amount of dollars to the position as your initial investment was. When I ran my portfolio loss control calculation I could add 15 shares of this stock, but RSS rule says not to do it. The reason is simple. If this new position turns against me and I will be stopped out, I will lose the second purchase, but the first purchase will make up the loss and I will end up equal. If however I would have purchased more than the first position, the second position loss would easily wipe out the first position gain and get me into a loss. For example:

My first purchase into RINO was $100 (per the loss control plan I could not spend more).
My second purchase into RINO was also $100. If this position turns against me and I will lose money, I will lose $28 on this purchase. But my first position is already making me $38, so I will end up with $18 gain. If I have purchased 15 shares instead, I would lose $150 on the second position and the whole trade would send me into -$112 loss.

Posted by MartZee November 25, 2009

Review your portfolio and get rid of junk

When I realized recently how much I was ignoring my trading rules I used those last couple days working on getting back on track. I learned again, how important it is to have rules and follow them no matter what. Of course, you still can be working on improving or modifying those rules to fit your trading style, but you should stick to them. Otherwise you soon start buying junk and losing money.

Today, I reviewed my portfolio to check, how many stocks fit into my stock selection rules and I found that LJ International (JADE) and Netezza (NZ) do not fit. If you ask me why I bought those stocks, I do not have an answer. I just had a feeling. But feelings will lose you money. Both stocks didn’t surprise with earnings, both stocks have negative sales growth ratio, none make new 52-W highs, JADE doesn’t even have minimum required trading volume and it trades below $5 (another wishful thinking about getting rich quick).

I decided to give those stocks a chance. However, I moved my stop loss order tight to the price for both stocks. If they won’t go up only, they will be sold.

Posted by MartZee November 24, 2009

ORS sold

It seems, somebody was lucky today morning when I decided to sell ORS. I was sold first thing in the morning:

11/24/2009    09:30:24   Sold  67  ORS  @  0.78

Since then, the price was falling like a rock, because ORS filed worse than expected 3rd Q results. The outlook is not bright as well, even though it was packed into nice words. I am not interested in this stock anymore.

ORS removed from portfolio

I decided to sell Orsus Xelent Technologies Inc.(ORS). This stock appears to me as a complete junk. It doesn’t fit almost none of my criteria, it doesn’t trend and I do not want to block my money on something like this.
The truth is, I just picked up this stock in euphoria of making money by buying a penny stock, which for sure will rise to $40 a share and makes me a lot of money. Heck no! This is not how I want to trade stocks. I might be watching this stock and if it shows momentum and price movement I might buy it back.

So far, it violates almost all my rules:

  • It doesn’t make new 52=W high
  • It has negative sales growth
  • It trades below 50 day MA
  • It has choppy trend with no progress
  • Daily volume is below 300k
  • Its market capitalization is below limit
  • its price is below $5 (for a reason)

I don’t know why I even bought such stock. This is another lesson, why I need to stick to my rules and stop buying stocks based on feelings.

I placed an order to sell this stock tomorrow at market opening.

Posted by MartZee November 23, 2009

CTL added to portfolio

Today I bought CenturyTel, Inc. (CTL):

11/23/2009    09:30:21   Bought  9  CTL  @  36.09

My portfolio is now invested, so no more positions can be opened.

CenturyTel CTL as a core of the portfolio

CenturyTel CTL as a core of the portfolio

The whole Sunday I spent rereading and polishing my stock pick strategy. Recently I deviated from several rules I originally used. I thought I already remembered them all or I could outsmart the market again. What a costly thinking! This time I, however, wrote them all down on the paper and created a checklist in Excel spreadsheet with data necessary to input manually (in this case I would really remember those rules).

What screening rules do I use?

It’s simple. As the Reverse Scale Strategy defines I use stocks which:

  1. Are making new 52-Week Price highs.
  2. Have the highest 1-year sales growth possible.
  3. Have the highest 1-year price/share growth ratio possible.
  4. Have the highest growth factor possible (this one is calculated based on the ratios as in items #2 & #3.
  5. The daily volume is above 300k.
  6. The stock price is not overextended more than 20% above 50 day MA.
  7. The stock is trending upwards without excessive volatility – checked on a daily (YTD), weekly, 1 year and 5 years chart.
  8. The stock has a reasonable price to sales ratio P/S – when I add all selected stocks together I calculate an average ratio of all stocks and then check the particular stock’s ratio with the average. For example the screen I ran today has an average of 1.29 and CTL has P/S of 2.73. This number is among those higher ones, but acceptable for telecommunication companies.
  9. The company is not among banks, miscellaneous, savings & loans, utility, mining and real estate (REIT) companies.
  10. Market capitalization 5B – 10B
  11. Sales growth (revenue) double digit growth ratio in the most recent year.

CenturyTel, Inc. (CTL)

CenturyTel is a company which fits my screening criteria. It has sustainable growth, it is trending up (the price is above 50-day MA and 200-day MA), it is not overextended, creating new 52-week highs. Its quarterly revenue growth ratio is at 188%, price growth at 62%. It is a telecommunication company operating a range of communications services, including local and long distance voice, Internet access, and broadband services in the continental United States.

Centurytel, Inc.

I decided to buy 9 shares of this stock tomorrow at market open.

STEC in consolidation

STEC in consolidation

In my weekly Picks History post I mentioned STEC showing a reversal sign. Although I am losing my interest in this stock, because it doesn’t meet my picks criteria any more, I am just curious how the stock will develop and I may consider a small position as a swing trade based purely on technical analysis.

When I look at the chart of STEC I can see that the stock is still downtrending (1) even though the StochasticRSI indicator came up with a reversal signal (2). The stock moved higher, but then flailed again. The good sign is that the volume is declining (3). It is still significantly higher than prior November 2, 2009 but falling down. And more, the stock is creating a consolidation at its support line at $12.5 (4).

STEC

Now, four scenarios may happen:

  1. The stock will continue drifting down in slow pace and declining volume and all my technical analysis will be off. We will have to wait for new development.
  2. The stock falls down on higher than average or heavy volume (and todays action was close to this – even though the stock closed higher than yesterday, overall the trend is negative and volume was rising again, which may support further fall or support the reversal). If the stock falls further down on heavy volume, it would be a great opportunity to go short. I do not short stock so I will take no action.
  3. The stock will move higher on rising or high volume and will continue in uptrend on rising volume then I may consider opening a small position. However, when you look at today’s intraday movement, the most of the run happened in the morning and the rest of the day the stock was losing steam. I am not much confident about a strong buying power, but it may come.
  4. The stock will continue jumping at its support line (4) and no movement happens. It may be a positive sign at least in the case of losing selling pressure which we could experience several days ago. On the other hand the stock will have no buying power either and it will continue in its consolidation for several days or even weeks or months. We will have to wait some more days for confirmation or break out.
STEC
STEC intraday trading, MarketWatch.com

As I said, I am not interested in this stock much, but I am interested in seeing whether my assumptions will be correct or not. I may or may not enter in this stock or I may just watch if I was correct or not. My main criteria for the stock picking are that the stock must be trading above 50 day and 200 day MA or cross it over and this stock is not there at all. However, as a highly speculative swing trade this may be a great opportunity to make some bucks out of it.

Posted by MartZee November 17, 2009

Netezza (NZ) added to portfolio

I decided to buy Netezza (NZ) this morning:


11/17/2009    09:30:16   Bought  10  NZ  @  11.12