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Posted by Guest May 20, 2015
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OPEC Struggling To Keep Up The Pace In Oil Price War


OilPriceSome market watchers, such as Cornerstone Analytics (CA), have consistently stated that the underestimation of demand, coupled with over-estimation of supply, will mask the growing call on OPEC oil in the second half of this year. CA recently noted that global demand outstripped supply by some 4 million barrels in April . This comes in addition to the mounting evidence that the oil market, via rig count declines, slowing production growth, higher demand and huge API crude inventory declines, is starting to readjust.

Be that as it may, Goldman Sachs (GS) seems to believe oil must fall to $45 by October (like it previously thought $30 oil was a certainty) to clear the market and rebalance, despite signs that a readjustment is already underway. When was the last time fundaments got ignored and prices went in opposite direction? As an aside, take a look at the S&P 500 vs. GDP growth, as one makes new highs while the other falls from 3.0 percent growth to under 1 percent so far this year!

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In other words, asset prices continue to be set by central bankers, and not free markets, so the GS call does make sense if you believe fundamentals don’t matter at all. Still, they should be discussed either way. Rather than being based on the fundamentals, GS, like others, have consistently been off the mark when it comes to oil prices, but refuse to acknowledge it (the agenda at GS has been exposed via Zerohedge). Multiple calls just this week for $45, on top of other economic research, clearly reveal this.

I will be first to admit that I thought oil prices short term would peak in $60s and $70s, but I never thought they would retest the lows. Why should they, if all the trends point to markets slowly rebalancing? In fact, there is growing evidence that not only are we slowly rebalancing but the world may actually be running short of oil. According to Reuters, Saudi Arabia has turned down requests from China for more oil, as they are using it for their own domestic refining needs. It goes on to quote: “[a]nother source with a Chinese refinery that takes Saudi oil said Saudi heavy crude was ‘a bit tight’ in May and June.” China was forced to turn to Russia, Oman, and other non-OPEC nations for their needed supply. Why would Saudi Arabia refuse to supply China unless oil was, in fact, tight?

This provides the strongest indication yet that the world is not facing a 2 million barrel-per-day surplus in supply, as many allege, and instead the call on OPEC crude is most likely growing. The latest EIA weekly inventory data showing a drawdown of 2.7 million barrels reaffirms that the US is no longer oversupplied either.

Finally, just to reinforce the point, oil companies indicated during some of their first quarter 2015 earnings calls that rigs could begin to be added back into operation when prices reach somewhere in the neighborhood of $70 per barrel. Quite frankly, producers shoot themselves in the foot by providing a set price, which, I believe, affects how oil is traded. GS and everyone else are using that guidance on trading oil. But to be clear, we know for sure rigs won’t be added at $50, never mind $45. Once you factor in the natural depletion of existing wells, production will have to eventually go down – another reason why the GS call will be wrong.

By Leonard Brecken of Oilprice.com




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Posted by Martin May 18, 2015
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My Cheat On Commissions At Work Again


I was able to save a few bucks again ($100) and deposit to my ROTH IRA account. Yes, my ability to save is limited therefore I depend on increasing my income and thus I trade options to make more money. But if you are just starting the investing journey and you only have a few dollars to invest, I hope this will be a good inspiration for you how you can start with small money.

There are other strategies out there, but this one works best for me.

I invest a few dollars into commission free ETF which pays dividends and save money this way. Once I save enough (I have a minimum limit of $1,000 per stock purchase), I sell the ETF and buy a dividend growth stock.

I use RWX ETF for this purpose which pays around 3% dividend and so far I was able to make money with this ETF, unlike the others where I mostly lost money.

Tomorrow, I will be adding 2 shares for free to my RWX holding. That means I will have saved $765.17 dollars. I will need to save another $234.83 dollars to have $1,000. After that, I will be able to sell RWX and buy another stock in my ROTH IRA.

Which of the following stocks would you buy if it were you?
 

[poll id=”23″]

Thanks for voting! And if you have any other stock idea, use comments below to share your tip!
 




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Posted by Martin May 18, 2015
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My stock market prediction for tomorrow


When I say “stock market prediction” I do not necessarily mean predicting where it ends up. Just trying to assess the direction of the market. Yesterday, I called the market to go up based on all of my technical indicators pointing up.

Today the picture is not as clear as it was yesterday. I see a weakness in the trend. Well, the whole market is still weak. People refuse to believe in this market and yes, we still may see a return back down into the range or stay range bound in this new level.

SPX move

The picture above says it all. We had a nice move, but the indicators are weakening. The trend shows a sell signal and it is turning down. MACD is also weakening and turning down. However, this chart indicates more intraday trend and not a day trend on 1 year basis.

SPX move daily

The longer based chart shows a different picture though. We are still in nice uptrend and all technical indicators are still bullish. No reversal whatsoever.

Based on that I think the market will show some weakness, maybe in the morning, but at the end it will end up.

If weakness, what to expect?

SPX intraday

If we go down, it may happen in the morning to continue a trend from the end of today’s session and we may go down to 2128 level or a bit below it to 2126 level. Then we may reverse back up and go higher. In the worst case scenario, we may re-test 2124 level.

Although in this market, everything can happen, I expect weakness, but move higher at the end.
 




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Posted by Martin May 17, 2015
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Dividend yield or rate?


As my dividend account is small my goal is to maximize income to get as much money out of my invested dollar as possible. Then the question comes, how to achieve it? I know I need to invest in companies providing higher yield to get more money in and reinvest them.

I also understand that by investing into higher yield stocks I am taking bigger risk. A true dividend growth investor would prefer investing into lesser yielding stocks but he wants to have a maximum possible security as far as income from the dividends goes.

Chasing yield can be dangerous, but there are stocks out there which offer security and high yield. There are stocks which are still acceptable such as some REITs (Realty Income O), MLPS (a former KMP now KMI), then stocks such AT&T (T), or now my favorite energy, oil involved stocks such as ConocoPhillips (COP) or Chevron (CVX).

The latter two companies were heavily sold off lately due to investors’ panic and them freaking that oil price war may hurt them if not liquidate them whatsoever. And if you look at the price of Conoco, it is still declining:

COP

Or look at Chevron (CVX) and its decline as investors are dumping the stock:

CVX

If investors are dumb enough to sell stocks which pay dividends, both provide great yield (CVX yields 3.90% and COP 4.50%) both have great dividend history and their decline is just temporary. Over the course of 5 or 10 years the stocks will be higher and paying a great dividend as they have been paying for the last 20 years.

So, if you want to dump the stock, go ahead. I will gladly buy it.

Why COP or CVX?

As you may remember, I created a proprietary screener which calculates value for every stock. COP and CVX are now ranking as the most undervalued stocks. See a screenshot of my screener:

Stock Picker

As you can see in the table above COP ranks as the most undervalued stock as the screener evaluated my entire watch list and calculated the rank for each stock. I decided to publish the result of the screener every month and invest into those stocks. How?

My stock pick investing strategy

I use two ways to invest into those stocks. My first way is to invest into those stocks by buying them all at once. How can you buy them all? It would be difficult to buy them all if you only have, let’s say. $20,000 dollars to start with. Fortunately, there is Motif investing (which by the way offers $150 promotion if you open an account, but the offer will end soon)which offers an opportunity to build a motif with your favorite stocks and invest in them all at once.

You can invest as little as $250 and buy the entire motif (portfolio), and you can purchase partial shares of each company. It works exactly like investing into a mutual fund. The good thing here is, that you can create your own mutual fund and start investing. That’s what I did here, created a motif “Undervalued Stocks” and invested my own money in it.

Turn Ideas Into an Investment. Customize or Build Your Own Motif.

My second way, or strategy, is buying high ranking individual stocks from the screener. Every time, I have money available in my ROTH IRA account, I check the screener and buy the highest ranking stock with the highest yield.

Dividend yield or rate?

I recently invested into COP as it is high ranking, high yield stock. I am saving more cash for my next purchase and I was thinking what would be my next purchase? Should I invest again into COP or should I pick the next high yielding and high ranking stock?

Then I saw CVX and what caught my eye was its dividend rate. I noticed CVX is paying $4.28 a share, while COP just $2.92 a share.

Wow, that’s almost twice as much as COP! And I want my portfolio to grow faster so investing into CVX would pay me more money, right? Well, it depends. Sometimes just looking at the numbers only without putting them into perspective can be deceiving.

I was completely decided to make my next purchase into CVX because of the higher rate I can get. But then I used a simple math.

If I invest $1,000 dollars (as is my minimum limit) I would be able to buy 15 shares of COP (at current price of $65.76), but only 9 shares of CVX (at $108.03 a share).

COP then would pay me $43.8 annual dividend, but CVX only $38.52 annual dividend.

I get more money investing into COP with a lower rate for invested dollar. That means, that I will continue investing into COP as long as it stays in my screener as “BUY”.

Well, this small exercise may seem obvious, but the point is that the numbers can be misleading and before investing, always look at them from a different perspective. Don’t invest into any stock just because one number looks better than the other one. It actually may not be.

What do you think? Would you invest into COP or CVX?
 
 




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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?

Turn Ideas Into an Investment. Customize or Build Your Own Motif.

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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