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Posted by Martin May 17, 2015
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Is the stock market poised to break its bad luck?


Not that I believe in good or bad luck of the stock market as it is purely driven by participant state of mind and mostly their irrational behavior. By “its bad luck” I refer to already infamous “iron ceiling” as some people called it. We are once again dwelling near the all-time highs and investors and traders are now in eager expectations of what’s coming next week.

Will we break the resistance or will we bounce back down? We saw all this for more than 6 months again and again when the $SPX went literally nowhere. And it is very frustrating.

From the hind side view, it may seem easy trading such market. Trade Iron Condors and you will be fine. Unfortunately, it is not that easy. The swings of the market were so wide, that it was difficult to stay on a safe side of the trend. The swings from bearish to bullish side were so violent that it was very difficult to stay calm and ride thru them. The market played investors nerves and mine very well. One misstep and you are chasing the price tape like a fox chasing a rabbit.

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I know what I am talking about as this happened to me again a few weeks ago. And that mistake is still chasing me. Although the trade looks OK now, it still can turn into a nightmare.

An original bearish trade suddenly turned bullish. I had a bear call spread with the lower strike at 2115. One hour before the close the market was attacking 2114 price and I panicked. It looked like that at that time it would be different and the market would go higher. End of choppiness, new all-time highs. I already raised my spread higher once and I couldn’t do it again.

So I reversed the trade into a bull put spread.

Then 15 minutes before close the market tanked and closed at 2108. It fell 6 points in 15 minutes.

I still have modifications of that trade alive trying to navigate it thru this market managing it to expiration trying to let it expire worthless. Have I stayed the course of the original trade, I would be out of the trade that day and enjoyed nice profits. But who could tell the market would crash 15 minutes before the close?

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Last Thursday and Friday price action of the market was promising. Without any catalyst or good news, the market moved up by about a 1% leap. On Friday a morning selling was quickly offset and the market ended in green. Not too much, but green anyway. Some investors see this as a good sign.

We are again near the all time highs. Will the market have the strength this time? Or will it repeat the same trap which happened a few weeks ago to me?

Market expectation for May 18

All technical indicators I watch are pointing up. MACD is rising in all time frames I watch. Heiken Ashi chart is green, positive, pointing up, and above 21 day MA. Also a parabolic SAR turned positive, see two charts below indicating those changes.

SPX move

The chart above indicates the market wants to get higher. It shows a buy signal. It turned up after a small pullback and MACD is also pointing up.

SPX expected move

Because of the technicals I expect the market to continue higher on Monday. As there is still a battle between bulls and bears we may see bears taking action on Monday, but it looks like they may lose the power and the market may actually move higher.
 
 




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New buy in my ROTH IRA – RWX addition for free


Today, I could once again add one share of RWX to my holdings for free. Yes, saving money for my next dividend purchase could be commission free with a non-transaction fee ETF. I can buy even only one share and it will cost me a zero.

Dividends received

This week, I received a few more dividends from the following stocks:

VNR Vanguard Natural Resources, LLC $4.00
LGCY Legacy Reserves LP $28.00
KMI Kinder Morgan, Inc. $11.52
O Realty Income Corporation $9.29

Addition of these dividends to my account increased my available cash so I could buy a new share of RWX. I am saving $1,000 in RWX so I can buy a new stock. I already have saved $635.46 at 2.39% profit and while waiting I am collecting 2.95% in dividends.

Happy trading & investing!
 
 




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New buy in my ROTH IRA – RWX a commission free saving


When I started dividends investing in 2012 I had no goal or strategy and I was purchasing stocks with every penny I had. It was long before I realized how futile way of investing this was. Whenever I received a few dollars in dividends or contributed $50 to my ROTH IRA account, I immediately invested that cash into a dividend paying stock.

It was tempting as I hate my cash sitting in the account doing nothing. I wanted every penny to bring in the dividends.

I didn’t see how expensive that was.

For example, if I purchased a stock for $44.00 a share, I got hit by $9.95 commission. Such transaction got me into a staggering 22.61% loss! The cost basis of such transaction was immediately $53.95 a share.

The stock would have to move from $44.00 a share to $53.95 a share to just get break even. A horrible deal, right? And yes, I was doing that!!!

Over time I found that an acceptable amount to invest is at least $1,000 a transaction or of course more if you have more. But a picture of $800 sitting in my account waiting until I save another $200 to be able to invest and doing nothing was painful. To me this wasn’t acceptable. Mainly, at times when saving another $200 could take me a few months (at some point I could only save $50 a month!).

So, what to do if you can save only $50 monthly and you do not want your money sitting in the savings account, making puny 0.90% or in your brokerage account making 0.001% when you can make 3%?

A solution could be investing into commission free ETF paying dividends. To me, RWX REIT commission free ETF is the answer to that question. Of course, you need to verify with your broker whether they offer a commission free ETFs and which pay dividends.

RWX is one which does that. I can buy a single stock and pay nothing on top of my purchase price and the fund pays 2.9% annual dividend. Now, anytime I receive a cash or contribute to my ROTH IRA account I buy RWX. I do that as long as I save $1,000. Once the total market value of RWX in my portfolio is $1,000 or more, I sell shares of RWX and buy my desired stocks. A few weeks ago I used this strategy to purchase COP stock.

Dividends received

Last week, I received dividends from the following stocks:

AGNC American Capital Agency $31.02
MA MasterCard $2.56

These dividends increased my free cash in my account to a level allowing me to buy one share of RWX.

RWX new purchase

For tomorrow (Monday 11th, 2015) I placed a buy order to buy one share of RWX. After the purchase, I will own 14 shares and my current market value will be $579.28. I will be half way to saving the desired $1,000 limit for a new stock purchase. While waiting to save the rest, I will collect 2.9% dividend.

RWX is not a dividend investment to me. It is a cheap saving vehicle, since I do not use a DRIP.

Why I do not use the DRIP?

I want to be free in choosing my next stock purchase and use all collected dividends and contributions to do that. With a DRIP, I will be limited to investing contributions only. And I do not want that.

What do you think about this strategy? How do you deal with little cash in your account? Do you invest it or let it sit until you accumulate enough to buy a new stock?
 
 




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Posted by Martin May 03, 2015
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Stocks to buy in May 2015


April finished surprisingly well and stocks I selected for April mostly rallied. If you bought those stocks at the beginning of April, you would end up with 7.32% profit. That’s not bad considering how volatile the market is these days and that investors are expecting the market to crash.

I created a screener which browses my dividend stocks watch list consisting of about 200 dividend stocks (there are a few growth stocks too). Every month the screener selects stocks which are undervalued based on their P/E, PEG, current earnings and future earnings, and forward P/E among others and assigns a rank to each stock. The first 30 stocks are then selected for my portfolio.

I buy those stocks in my Motif Investing account and rebalance every month by removing stocks which are no longer on the selected stocks list and add new stocks. You can see the April selection here.

I also use the screener to buy stocks in my ROTH IRA account. Unlike at Motif investing where I can buy fractional stocks and thus the entire portfolio of 30 stocks at once, in my ROTH IRA account I typically select a stock with the highest rank to add and invest the entire amount into that one stock.

For example, in April I could add a new stock into my ROTH IRA account as I saved $1,000 amount (a minimum amount to minimize negative effect of commissions). To decide which stock to buy I looked at my screener result and found out that ConocoPhillips (COP) had the highest rank as the most undervalued stock. So, I bought the stock.

And here is a new selection for May 2015 which I am also using to rebalance the motif in my Motif Investing account:

 

You can buy this motif if you want if you open an account with Motif Investing. Then you can buy the entire portfolio the same way as a mutual fund – you buy all positions at once with minimum $250 investment. You will be buying fractional shares if you do not have large amount of money.

As I mentioned above, I rebalanced the “Undervalued Stocks” motif removing stocks no longer valued as “undervalued” such as VNR (+14.00% gain), NGLS (+13.30% gain), MSFT (+18.75% gain), BSMX (-5.72% loss) and replacing them with TIS, MBT, PCH, and GME. I also trimmed gains achieved in other stocks and reallocating to those less performing to bring the entire portfolio to equal weight balance.

 

 

 

I purchased this motif myself to show confidence in my stock selection. You can open your account too and if you start investing, you will receive a $150 bonus from Motif Investing.

I am rebalancing this motif every month. Let’s see, how well this portfolio will do at the end of the year.

Good luck to all of you!
 

Previous selection :

Stocks to buy in January 2015
Stocks to buy in February 2015
Stocks to buy in March 2015
Stocks to buy in April 2015
Stocks to buy in June 2015

 




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April 2015 trading, investing and dividends results


April 2015 is over and I am going back to reporting my results. I wasn’t much consistent in reporting in the past as many times I either didn’t have time or was lazy to write a report. I am still looking for the best way to report my results but keep it simple since at one point in the past I overdo it. I made reporting, analyzing, and recording so complicated that I myself lost interest in doing it. So keep it simple.

The readers, investors and traders following this blog know that I participate in the market in two ways: trading options and dividend investing.

April 2015 trading results

I trade options, mostly spreads (bull put and bear call spreads, sometimes debit spreads, and naked puts) against publicly traded companies and SPX index (S&P500). You can follow my trades at My Trades & Income page where I list all open and closed trades.

In April I made no money but I also lost no money. Many of my trades are open and a few trades I had to be closed in April I had to move them away in time as they went against me. And I still fight with those trades:
 

April 2015 options trading result: $0.00 (0.00%)
2015 portfolio value: $12,336.99
2015 overall trading account result: +5.39%

 

April 2015 dividend investing results

I use the dividend growth strategy at my ROTH IRA account. I am not as aggressive contributing and investing in my ROTH IRA account as I wish to be. My income doesn’t allow me to contribute more. So I slowly accumulate all received dividends plus my small contributions, invest them into a commission free ETF (I like to use RWX which pays dividends and so far I was able to make some money with this ETF). Once I save at least $1,000 in this ETF, I sell the fund and buy a stock. Then rinse and repeat.

Using the above accumulation strategy I was able to accumulate enough to buy a new stock into my portfolio:

 

April 2015 dividend stock buys: ConocoPhillips (COP)
April 2015 dividend stock sells: none

 

Last year I was working on a screener which would help me to find a stock I should buy when deciding which stock to add to my portfolio. I am a mechanical engineer and because of that I like to keep my trading math based and mechanical. As mechanical as possible, so I can eliminate my emotions.

I created a screener which calculates the most undervalued stocks to buy. It is based on P/E, forward P/E, current earnings, future earnings and some other metrics. It browses my watch list of dividend stocks (approx. 200 stocks) and assigns a rank to each stock. A stock with the highest rank is the most undervalued and that is the stock I want to buy.

I publish those stock picks every month in my “Undervalued Stocks” section and if you bought my picks for April 2015, you would be up 7.32% for the month.

You can also open an account with Motif Investing (and get $150 bonus) and by my Undervalued stocks motif (or portfolio). With Motif Investing you can buy all 30 undervalued stocks. Each month the portfolio is rebalanced where I remove stocks which are no longer undervalued and add new undervalued stocks. In the meantime, you can collect the dividends.

If you do not want to be selling, you can just add stocks which are on the list and start from the top.

 

April 2015 dividend income: $79.07
2015 portfolio value: $18,478.22
2015 overall dividend account result: +5.89%

 

All accounts

Besides trading and dividend accounts I also have 401k account, emergency savings account, etc, which I do not report in detail. You can review those accounts in my “all Accounts Value table at the bottom of My Trades & Income page.

From that table you can see that all my accounts are up 9.86% for the year. Considering how bad the market was this month I think, this is not a bad result.

What do you think?

How about your investing or trading result?

 




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$SPX market expectation for May 1st 2015


Today we saw a big sell off on Wall Street. Media say it was because of bad economic reports we saw recently from big companies. Who knows what caused this crash, but the reality is that we are now oversold.

I do not expect much from this market as we again failed to move higher and returned back into the range. Today the market slipped down below 50 day MA and closed there. That means we will see more selling pressure and gates are open downward to 2040 or even to 2025 levels.

However, since we are oversold now, we may see a bounce tomorrow if bulls will have enough strength to step in and push the market higher. I do not expect much from such bounce. It can just be a morning bounce followed by a sell off afternoon. Remember, it is Friday, and Fridays can be vicious.

Tomorrow we will see more.

Happy trading!
 




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$SPX once again fails to break the resistance. Another fall down is likely, read why!


Bear beats bullLast week the market broke the descending resistance (the top of the falling triangle) which gave hope to many investors turning bullish. I myself was also fooled by this market (again) into believing that we finally see a break out. Friday’s trading moved the markets into the new all-time-highs and I decided to reverse my weekly SPX trade from bearish into bullish.

But, last 10 minutes trading on Friday the market crashed again and sold off hard setting the trend to the downfall. Have I stayed tight and did nothing with my bearish trade on Friday, I would be out of the trade with a nice profit. Now I have a break even trade on moved two weeks away from now hoping nothing serious happens and I will be able to get out break even a few weeks from now.

I think more traders were convinced about the market finally moving out of the range and start finally trending. These violent moves up or down are quite frustrating making my weekly SPX trading strategy difficult to handle.

But I am persistent and want to move on and go on and improve my trading strategy and create gains.

Today’s trading was a disaster to all bulls. And it can be a game changer again. Let’s review the chart below why I think this can be a major problem for bulls.

SPX struggles again

As you can see a price action inside the circle, the market broke the falling resistance (the red line) of a falling triangle on Thursday last week. On Friday it continued up well. But today although the market moved up in the morning it crashed at around noon and wasn’t able to recover.

What’s important on this is that the crash happened at the all-time high resistance at 2120 level! The market moved higher above it, created a new high at 2125, but then crashed hard. See the daily crash action:

SPX crashing down

Although the intraday chart looks sinister we still may see a bounce tomorrow and trend continuation. There are two catalysts for a move of this market: one is AAPL earnings reported today after the market close, the second is the FOMC meeting on Wednesday if auntie Yellen makes positive remarks (positive for Wall Street) about FED stance on economy and rising interest rates.

As of now AAPL doesn’t seem to be moving SPX futures as it is still sliding down (/ES is at 2108.9 down -0.03). But as of this writing, futures are not as important as they will be tomorrow morning. And of course, Yellen may have remarks accepted wrong by Wall Street and this market can go to abyss.

I am still bullish, but caution is needed. If this market bounces tomorrow and moves higher (and it still is very well possible), the trade I have put on can be moved away to save it or even make money.

Happy trading and investing!




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Where is $SPX heading next? I expect down and here is why.


I was wrong many times in predicting the direction of this market. For about five months the market headed nowhere. We are range bound between 2000 and 2100 level with a few over shots which are immediately sold off.

Although the overall long term bullish trend is intact, we are undergoing either a huge consolidation or a standard distribution.

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What happens if we are in a consolidation pattern? Well, in this case I mean a bullish consolidation pattern. We got into this pattern from a bullish rally, now consolidating heavily (meaning going nowhere) and once we break up thru this pattern we will see a new strong rally.

If we are in a distribution pattern then the bull trend is in trouble. If this really is a distribution pattern then we are at its very beginning and we may see some more up or down trading, but overall this may reverse the market and send it down.

Every rally occurred on a missing volume and was sold off on a heavy volume hard every time so far. Even today’s rebound from Friday’s selling was accompanied by absent volume. So I think, we may see more selling this week.

I try to set up my trending software so I can see the trend more clearly (short term trend since I trade weekly options against $SPX) and here is what I can see so far:

SPX trend 200 ticks

As you can see I have the charting software set to show swings based on ticks and Heiken Ashi candles. This set up helps me to see the trend more clearly. And what I see now is that we swung up and basically exhausted any momentum in that swing.

The pivots indicate a sell signal, the trend shows red candles, and the MACD is in the extreme, pointing down, and fading. I do not see anything in that chart which would point to more upward buying. But, I may be wrong. Tomorrow will show what is about to happen. My expectation is DOWN however. And if not tomorrow, then later on this week.

Here is another view which makes me think we are not done with selling:

SPX expected move

As you can see, although we had nice strong rally today, it didn’t have enough power to reverse the short term bearish outlook – the candle in Heiken Ashi chart is still red (although weak), the PPS is still with a sell signal and we are on a downtrend slope. The only slightly positive is MACD which started pointing up again and changed into solid green histogram. That is the only light in the tunnel which may tell us that we may see a reversal and upward trend continuation.

If I am wrong and the market moves up tomorrow, this may be the point to go bullish again. But even if this happens, there are a few strong resistances, one at 2115 and the second one at 2120 which must be broken before we can call this a bull’s victory. Two attempts in the past already failed. Will the third be the charm?

Happy Trading tomorrow!
 




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Posted by Martin April 20, 2015
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Legacy Reserves (LGCY) cuts dividend


LGCYLegacy reserves cuts its quarterly dividend today to 0.35 down from 0.61 cents. The company originally planned to sustain the dividend as it did in 2008, however, at the end of the day they gave up and reduced the dividend.

However, it is apparent that the market expected this cut months ago and already priced the cut in when the stock traded at $10 or even $8 a share. This price reduction was probably inspired by cuts made by LINE and BBEP previously. Thus now the stock price already reflected that.

As cutting the dividend was expected, then both outcomes were possible – no cut, the price would jump, – cut of the dividend, the price would jump too.

And that’s exactly what happened. Amid the dividend cut, the stock rallied by 9.15% today as it was appreciated that this cut would improve the company’s balance sheet ahead of oil recovery.

Thus this move helps our put options we hold in our account, but hurts our dividend income.

Hopefully, this trend will continue and as oil continues recovering the stock recovers in price, recovers its dividend and our options trades keep expiring worthless for full premium profit.

LGCY trend

When you click on the picture above you will see today’s trading with a large bullish uptrend. Even after hours the stock continued spiking up high. If this continues this way up, our trades will end up very well with very nice profits. I am even planning on selling more puts against this stock.

The put selling against this company also helps offset my loss on the stock. As you can see below, if I held a stock only, I would be losing $477.72 on my 36 shares I own. However, my put options I sold earlier are now helping me offsetting the loss. I am losing $235.72 only as of now.

But, if I add all dividends I already received from this stock in my TD trading account, my loss would only be $106.13 in lieu of $235.72!

LGCY positions

Granted, those trades are not over yet. One positions is set to expire in June 2015 and the second spread is set to expire in September, and many things may happen in the meantime. My expectation is however that this stock will go up as oil will be recovering so I believe that these trades are no brainer.

It still can be a bumpy way up, so if you mirror my trades (via our free newsletter where we publish our trades), you need to be prepared for the bumpy road. But, in my opinion, it will be a rewarding one if you hold tight.

This is one reason, why I like selling put options against dividend (or even non-dividend) stocks since the options would allow you to collect premiums which may be considered an additional dividend.

Happy trading!




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Posted by Martin April 15, 2015
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Kinder Morgan (KMI) increases its dividend


KMICurrently, this cutie (KMI) is paying 1.8 bucks per share annually. That translates it into nice income of 4.30% on invested dollar. Where else can you get such nice interest? No bank would pay you this. Not even bonds (they actually pay a negative interest). So unless you start your own consumer credit loans business where you will be legally allowed charging a usury interest of 20% or more you won’t get any better return on investment anywhere else.

KMI announced today after close that it is increasing its quarterly dividend to 48 cents a share, up from 45 cents in the fourth quarter of last year. The company plans to pay a full year dividend of $2 a share! And they are on track to meet this goal so far. Basically KMI plans increasing dividend by 50 cents every quarter.

The stock slipped about 1% in afterhours trading as the company announced revenue and earnings for the first quarter that were a bit light of analyst expectations. The stock closed Wednesday at $43.43. (Source Barron’s)

What can I say to this?

Yes baby, go down on all those anal-yst expectations so I can buy more!

Currently, I own 98 shares of KMI in my dividend growth portfolio and I am definitely LONG on this stock.

 




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