The Transparent RRSP: My Own Stocks and Father’s Day

No actions taken the week of June 12

It’s been a very busy week for me, but it’s a good time to be busy as the markets are still looking like they’re headed lower. I don’t feel the need to take action quite yet. The US markets need to go down through May’s lows – at the very least – before going up again. This could affect the Canadian market; we have already been weakening the last couple of months and going through our own correction. If the US market goes down more and we don’t, then that’s a good sign for us that our correction could be over.

markets.jpg

Price charts of QQQ, AAPL, XIC, and SPY on freestockcharts.com

Apple (AAPL) is a big part of the NASDAQ (ETF: QQQ) and it’s been weakest of the big tech stocks (Facebook, Amazon, Netflix, and Google). Until it stops going down and levels out, it will continue to lead the NASDAQ down.

It’ll be interesting to see if the rest of the US market follows suit. I’ll keep my eye on the S&P 500 (the SPY ETF). Its financial sector (XLF) has been quite strong, but this sector is due for a correction. A slower summer market could cause it to stall and look less inspiring to investors. A correction in the financial sector could take the SPY down. There was a lot of selling last week in some of the big US banks (BAC, JPM and WFC) as well as Visa (V). Other big financial stocks (C, MA, and AXP) were trading strong. A divergence between a sector’s biggest stocks creates uncertainty.

Summer Trading Means Fewer Selections

Often, when the leading market heads lower, other markets eventually do the same. However, it can be different in the summer because of less trading volume. Performance is more stock and sector specific and less market dominant.

Investors and traders pile onto the fewer, more promising opportunities that stand out. Sectors kind of do their own thing and are less prone to overall market moves because there’s less of a dominant trend. It becomes more obvious which sectors are stronger and which ones are weaker. It’s actually a very good time to look for sectors and stocks that are about to embark on a new move or trend before it gets busier again in the fall.

For me, the summer is usually the time when I focus on the quiet under-performing sectors and I try to see if there will be a new longer-term opportunity in it. I’m going to watch the Canadian financial sector as it’s been weak since late February. I feel that it should correct just a titch more, and if it does, I will watch very closely for when it sets up again. If this happens, Canadian banks, here I come!

I didn’t have time to do a stock search this week – I only had time to look at my own portfolio. Here are a few of my stocks that I’m considering buying more shares of:

  • Aphria Inc. | APH.TO
  • Aritzia | ATZ
  • Bombardier | BBD.B
  • BMO SP TSX Laddered Index ETF | ZPR
  • ECN Capital Corp. | ECN
  • Extendicare REIT | EXE

I’ve been complaining a lot about having too many stocks. It’s better for me to focus on what I have and get more shares of the ones that I like. I just have to wait for a new entry point.


Thanks Dad!

My dad passed away in 2009. He was 59 and battling a long-term ailment. At least I can say that shortly before his death, he was living life to the fullest. What happened to me after his passing was something worth thinking about. Without his guidance, his half-believable stories, and hilarious anecdotes, I had to use whatever resources he’d passed onto me to keep going. I’m sure this recognition was all subconscious, but I finally had the courage to see things for what they were and let them go in order to do the things I most wanted to do. I took a promotion at my job, saw my career trajectory and said, “On second thought, I’m going to learn how to trade stocks. However that turns out.” The rest is my history.

I’m halfway through reading Jack D. Schwager’s, Market Wizards: Interviews with Top Traders. It’s been an incredible read so far. I’ve heard of some of these guys before. It’s so cool to hear about how they all had to overcome so many barriers to get to where they were. One thing none of them had to overcome was their gender. I can honestly say that neither have I, even though I am a woman.

Since I was young, my dad convinced me that being a girl was an advantage. His dad, my grandfather, was in the US Army, and he was away a lot. He served in WW2 and in Korea. So my grandmother ran the show when my grandpa was away. My dad was the youngest of seven siblings, four of whom were older, amazing sisters. My dad ended up being a very macho guy – who saw women as being greater than anything macho.

Because of my dad, I never felt disadvantaged for being a woman. I actually thought that I could do whatever I wanted to because I was female – he’d long convinced me it gave me an edge. Maybe it is true – our society has yet to accept this concept. Or maybe he just told me a tall tale knowing what I’d be up against. As I got older, I became more painfully aware of the disadvantages women frequently encounter. I love trading because the market doesn’t care about your personal details. You’re either in at the right time and right price, or you’re not. It doesn’t get more gender neutral than that.

As I’m reading Market Wizards, I feel that I can relate to these traders on so many levels, but it feels a bit too much like a boys club. I know there are a lot of extremely successful female traders out there. We’ll just have to cover our own stories. Whether or not I become a market wizard worth writing about one day, I’m sure my dad would be proud of me.

Happy Father’s Day, Dad!

 

The Transparent RRSP: Stock Picks

Action taken the week of May 29
  • I deposited $150.00 into the RRSP account. There is now $169.90 of available cash in the account.

I’m still waiting to see if the Canadian market will have a more definitive correction than what it gave in May. It could set up over the next few weeks/months for a new run, but I doubt it. The monthly chart looks like the market is inching downward. I still would like to see the market come down to the same level it was at in mid-November.

With the lower trading volume during the summer months, I put less emphasis on the market (as long as it’s not making any extreme moves that invite concern or attention) and I pay more attention to individual stocks that are getting a lot of action. I might casually pad my trading accounts now and then with extra cash so that should opportunities present themselves, I’m ready to take action.


Some Stock Picks

I found some stocks with nice charts, some of which are seeing a lot of recent action in price moves and trade volume. These have been trading better than the market – which doesn’t say much.

  • BBD.B.TO – I don’t like that Bombardier has gone straight up the last two weeks, but it’s been stronger than the market. I would prefer a correction on the daily time frame. It’s worth watching as the weekly chart is promising with a breakaway candle that held strong with increasing volume. I’ve owned this stock since early February 2016 and I can tell you that it’s not much of a mover. This can be a good thing when this stock experiences volatility because it’s less of a shock to your portfolio (unless you have a lot of shares and took on too much risk). While the monthly chart is very nice, the yearly chart is not inspiring.
  • BTO.TO
  • HGU.TO (This is a gold ETF.)
  • TD.TO
  • MG.TO
  • RY.TO
  • NA.TO
  • TA.TO – This is already in the RRSP. I was beyond busy this week and I wish I had a chance to look at the chart earlier this week. Depending on what it does next week, I might buy more shares.

If you’re not inspired to take on any risk, you can just watch these over the next few weeks and months and see how they do with or without the market. If you do feel inspired to trade, I’d recommend taking on less risk and buying fewer shares. I only say this because I still think the market will correct further and this could take down your stock and it could be a while before it starts to improve.

As always, please keep in mind the industry, sector, the company and its fundamentals, any recent news, upcoming earnings announcements, the amount of risk you’re taking, how it fits within your portfolio, your anticipated time horizon, etc. It’s always important that you look into what you need to in order to feel confident in your investments.

The Transparent RRSP: Just Watching

No action was taken the week of May 15 
  • I had been uneasy about the market all week, so my only play was to sit on my hands.

The last few months, I’ve been chipping away at making my trades easier to track, record, and analyze. This process was always interrupted by the market, attractive stock picks, sections of my portfolio that needed immediate attention, and addictive Netflix series. Each time I got back to where I left off, I found I disliked my method or format. You would think that after all these years, I’d have figured this out by now.

With summer coming, I expect the market to lighten up in volume and offer fewer opportunities. This means it’s a good time to get back on track with getting organized. I’ve been spring cleaning my house as well as all the portfolio information that I manage, making a bit of progress each day. It feels great to de-clutter my living space and streamline all the pertinent information for my trades. All I can do is keep at it until I’m in a place where I can function effectively on a consistent basis – and still watch my Netflix!


What a week! Here is my market analysis:
xic

The XIC ETF on freestockcharts.com

#1. The trade volume candlestick bars of April 24 and April 25 show an abnormal amount of buying.

With all that buying, there was such little price movement as you can see by the small size of the price candlestick bars. Big volume with little price movement often signifies a reversal. To trade beyond those prices would require even more buying. The following volume bars show that the market could not sustain so much buying. Another thing to note: we have not penetrated those prices since.

#2. What messy, volatile trading!

After April 25, there was more selling than buying. The candles show wider trading ranges, particularly the red bars, which depict heavier selling. I drew a square around this week alone to show you how, in such a short amount of time, the market can drop because of uncertainty, volatility, and buying fatigue.

On Wednesday (the day of that big red candle, third to last), the US market reacted to bad political news and this affected us (as well as many other markets). I believe that generally, markets are more prone to news when they’re already uncertain or weak. A strong market won’t be affected very much or will bounce back quickly. The following Thursday and Friday did show some buying. It will be interesting to see whether or not we can get back up to the previous trading ranges of the last two to three months.

#3. Lots of selling volume.

The trade volume over the last four weeks shows mostly selling. When you’re looking at longer time frames for longer-term buying opportunities, this situation is not tantalizing.

#4. First red monthly candle in almost a year!

We hit a new 2017 low with that one little day on Wednesday this week. What I like about the monthly chart is that it provides a bigger, clearer perspective.

The last time we saw significant selling volume was in June last year (remember the Brexit referendum?) and before that, the last major selling low was in January 2016. We’ve been going up for a year and a half. This new low is minor compared to the massive run we had. Way to go, Canada! If your portfolio didn’t do well last year, then maybe you should take a break from your advisor and consider buying a market index ETF – once it’s a good time to get in.


It will be interesting to see how we trade until the end of May. Whether we close positive or negative, this summer I would like to see a more substantial correction that comes down all the way back to where we were in November before going up again. For most folks – especially unrealistically optimistic people like me – this seems like a drastic thing to wish for. However, I believe that if you want a meaningful run in the market, you need a meaningful correction, not a one day sell-off like Wednesday’s.

I will be watching for how the US market impacts the Canadian market. The tech sector needs to take a break while the energy sector looks like it’s itching to make a run to the upside. I don’t think oil will ever trade back to its previous inflated levels, but I do think it will make a very short-term bullish move along with a short-lived rush in the gold sector. I don’t know if that would be enough to help the US market continue its upward trend. The Canadian market could still go down on its own, but it will to a greater degree if the US also makes a considerable correction.

 

The Transparent RRSP: Book Review

No action was taken the week of May 1

I did an extensive search and didn’t find any good candidates for the RRSP. I think that once we see a more substantial correction in the market followed by some stabilization, we’ll see more options.


 

Market

The XIC, SPY, and QQQ ETFs on freestockcharts.com

 

Chart 1 is the weekly chart of the XIC ETF. It didn’t budge much last week and traded sideways for the most part. However, as you can see from the arrow I drew, it had some strong selling as indicated by the red trade volume bar.

Chart 2 shows the monthly chart of XIC. We finished close to where we opened. The arrow shows that overall for the month of April, there was more buying. As we’ve seen from a shorter timeframe of the weekly chart, there was heavy selling last week. Well, investors like a strong finish.

Already in this week alone, we traded lower than the month of April’s lows. This means investors are getting cautious and losing a bit of confidence. They’re selling shares, taking profits, and holding out on new opportunities – and if investors do trade, it might be with fewer than normal shares to reduce risk. No market can go straight up, so this isn’t anything to get too nervous about.

Chart 3 is the monthly chart of the SPY for the US market’s S&P 500 Index. The arrow identifies trading in March. You can see there was heavier selling in March. April had more buying than selling, however, it wasn’t able to trade higher than it did in March. All week it has been trading sideways. It might still have a positive May, but watch the volume and look for signs of less buying.

Chart 4 is the monthly chart of QQQ ETF for the Nasdaq 100 Index. The tech sector, especially the semiconductors, have been extremely strong since last summer. May will mean the seventh month up on a strong move. The arrow shows that April had a huge move up, but with lesser buying than in March. Are the Qs losing steam? We shall see…

There is naturally lower trade volume going into the summer months, starting in May. I will be keeping a close eye on the weekly and daily charts to look for more immediate signs of a reversal in the markets.


Last week I finally finished reading Michael Lewis’ hugely entertaining book, Liar’s Poker. I was sad to be done, but I feel like the story hasn’t ended because I’m living it through my own trading and from watching the markets. There is a story behind every trade and each investment decision. He skillfully addressed throughout the book how the human element of emotion is what drives markets.

This true story was about Lewis’ introduction into Wall Street as a bond salesman for Saloman Brothers, a securities firm. Every successful sale was done by convincing an investor that what he was selling them was going to be worth more later on. This sounds conniving and this book reads more like a humourous confessional as Lewis grew increasingly conflicted the more successful he became.

Even though this book focusses on the bond market, it translates the same way for stocks and any other security for that matter. Optimism is what drives the markets and allows them to thrive and continue. Pessimism morphs into fear and will make most investors regret their decisions and jump ship into something else.

All year so far, I’ve been providing you with analyses of the ups and downs of markets and making shorter-term projections based on price moves and the corresponding trade volume. These moves occur because of optimism and pessimism. The reason why I trade is because I’m generally an optimistic person and my long-term view is that the markets will always keep going up because I believe that most people are inherently optimistic. That is why, despite all these tales of glory and failures that come out of Wall Street, it’s still around. The markets aren’t going anywhere and I’m happy to believe that more of us are getting involved.

 

The Transparent RRSP: Month-end Market Read

Action for the week of April 24
  • I transferred another $150.00 to the RRSP account’s current cash of $29.90, which will give me $179.90 for the month of May.

I also didn’t do anything for the RRSP last week (the week of April 17). I mainly sold more shares of other stocks in my TFSA. I was feeling exposed having so many stocks at a time that I feel the market is going to have a correction. The fact that I still have 28 stocks in this account is still a head-scratcher. I managed to make a decent profit on some of these, so I’m sitting on more cash than I have in a long while.


Marks

The XIC and SPY ETFs on freestockcharts.com

The Canadian Market

You can see on the XIC that the Canadian market has just been trading sideways. At the time of writing this, there still remains one more trading day this month. There is usually a lot of selling at around month-end mainly because funds are re-balancing their portfolios for cash to pay investors. So, it remains to be seen how we’ll close, but I don’t think it will be too far off from where we closed last month.

The Canadian market has been lagging the US market this year so far. It’s not a surprise. Check out the two bottom charts where I drew the circles. Upon quick visual inspection, you can see we covered way more distance in 2016 than the US market. We (our economy and our loonie) got beat up so badly from the underperformance of oil/energy in 2015, that we had so much room to climb up and recover. And that we did. Our sectors in energy, mining, and finance gave great performances.

Every good run needs a break to slow down and catch its breath. If I want to find out what is making the market do what it’s doing, or where the market could be heading, I will look at the major players. I’ll either check out the sector ETFs, or the biggest companies in the influencing sectors.

For this scenario, I’m keeping an eye on the banks, all of which are in the process of a correction. It could be just a bit of a selloff, or it could be a substantial selloff that will keep going until mid-late summer or fall. Now, don’t go on selling your dividend-paying bank stocks – I’m just saying keep an eye on them if you want to have a better gauge as to where the market is going.

I will suggest that if you’re interested in accumulating more shares in bank stocks, you might want to wait a while for the prices to come down more and have settled down for a bit before going up again. I am a huge fan of waiting for new buying opportunities and I will wait months, even years, to get into good stocks.

The US Market

I can’t invest or trade or think anything stock-related without looking at “the SPY,” the most popular American S&P 500 Index ETF. It’s more out of habit having used it so much for day trading than it is out of necessity. I look at it to get the feel for the market, its momentum, and its sentiment. It often is quite off from the actual S&P 500 Index, but it’s where the action is at. This is where I discovered the importance of monitoring trade volume.

I never look at the SPY without looking at the QQQ, the NASDAQ Index ETF. Plus, I never look at “the Qs” without looking at some of its big players/action stars: Apple, Microsoft, Facebook, Google, etc. I attribute the US market’s most recent run, not as much to its new president (but I’m sure he’ll take full credit for it, very true), but to the technology sector. I’m sure this would stir a lot of debate, but I’m speaking from an on-the-ground perspective because I own a few tech stocks.

The tech sector has been the leading sector over the last year, so it’s important to keep an eye on it along with its biggest stocks. You can watch the Qs and the tech ETF, XLK and the semiconductor ETF, SMH. When observing the big players in tech, look out for shifts in volume and ask is the buying volume is lessening? is the selling volume increasing? or whenever the prices drop, is there a lot of buying or just a little?

I would also be watching the US financial sector’s ETF, XLF. Like Canada’s, the US financial sector has been pulling back the last couple of months. If tech starts to come down along with the financials, then I’d expect a more prominent correction in the US market before more new buying opportunities start presenting themselves again.


This is my process and how I see the market. I’m always trying to find clues that indicate optimism (buying), euphoria (heavy buying with big price moves), panic (heavy selling with quick and large drops in price), pessimism (selling), or neutrality (lower volume, sideways trading).

I still hear over and over that timing the market is useless. I don’t look at it as ‘timing’ because it’s not a science, nor is it something you can accurately measure. It’s more about reading the market. Investors’ feelings and sentiment move the markets, not numbers. I hope that one day, more people will see it this way and learn how to invest with the flow.

 

 

 

 

Your Special 4/20 Newsletter of 2017: Medicinal Stocks

“What weed stock should I buy?”

If there is one question I am asked the most, it’s the cannabis question. I’m asked about this more than whether to buy Facebook, Apple, or Lululemon. I don’t know anything about cannabis strains, but I can speak a bit more about cannabis stocks.


2016 to 2017

Last year I posted a newsletter on this celebrated day. I listed a few stocks to check out:

  • Canopy Growth Corporation | Ticker symbol CGC.V | $2.60
  • Aphria Incorporated | APH.V | $1.56
  • OrganiGram | OGI.V | $1.10
  • Mettrum Health | MT. V | $1.66
  • Emerald Health Botanicals | EMH.V | $ 0.17

This is where they’re at now:

  • Canopy Growth Corp.| Ticker symbol now WEED.TO on the TSX | $10.24
  • Aphria Inc. | APH.TO now on the TSX | $7
  • OrganiGram | $2.87
  • Mettrum Health | It halted trading at $7.05 because it’s merging with Canopy Growth Corporation
  • Emerald Health Botanicals| $ 1.54

WOW.

I wanted to buy all of them out of pure excitement, but at the time, it was a decision between me and JP. We decided on Aphria, mainly because of its price and proven earnings.


Cannabis presents a new industry for the public, and it’s still in its early stages as it’s working its way through various long and rigorous legalization processes. You can’t expect this journey to be straight and easy, but it’s going to happen whether you agree with legalization or not. (Interesting personal observation: Among the people who ask me what weed stocks to buy, half of them are very conservative and would never smoke it. The other half smoke it and still have shown no indication of buying any of these stocks.)

I remember the time when Colorado and the few other states were legalizing. It was impossible to tell which weed stocks to buy on the US exchanges. They each had the patterns of the new publicly traded company in a speculative industry: cheap with wild swings in volume and price moves. I had to wonder if a company was going places or was just another pump and dump.

I watched a lot of media coverage on Colorado. There was definitely a saturation of industry players – in other words, too many suppliers. Some went just as quickly as they arrived. The stronger, more resilient, established, and adaptive ones survived and endured. Others joined forces and resources to become bigger companies. It will be interesting to see how the industry plays out in Canada.

I’d purchased a couple of other weed stocks since, both of which trade on the TSX Venture Exchange. I bought shares of:

  • Maple Leaf Green World Inc. | MGW.V | 0.62 and
  • The Hydropothecary Corporation | THCX.V |$2.28

I did a quick search and found other stocks with good trading volume:

  • ICC International Cannabis Corp. | ICC.V | $1.29
  • Aurora Cannabis Inc. | ACB.V | $2.84
  • CanniMed Therapeutics Inc. | CMED.TO | $11.61

Oh! And I love that Horizons has created a new ETF: Horizons Medicinal Marijuana Life Sciences ETF (ticker symbol HMMJ.TO, $10.80). It’s got a wonderful mix of medicinal cannabis stocks from Canada, the US, and the UK, including one of my portfolio darlings, Aphria. It also owns some of the stocks mentioned in this newsletter so far. At some point, this ETF will start paying distributions (none yet). If this is a long-term investment for you, then you might want to hold this in your RRSP to avoid withholding taxes.

There are a few things to note about Canadian cannabis stocks. They’re inexpensive and they all overreact to any cannabis information that comes out of Trudeau’s mouth. They settle down after the market reaction to any news and shape up again for more investors to get on board before the prices go up for another run. It’s generally been run after run at higher and higher prices.

Most of these stocks trade very similarly to each other, with only their prices and trading ranges that might differ. If your stock isn’t moving like the others, you might have to wait longer to better see whether or not it’s a dud before getting rid of it. It also might just be a company that needs a lot more time before it proves itself to the market.

If you’re considering buying shares of cannabis stock, you’d have to look deeper into the company’s fundamentals. Remember, because they’re new and in their early phases of development, they all promise growth. I would pay most attention to company earnings and pick the one generating profits already.


The Cannabis Industry vs. the Market

Without trying to sound the alarm, I will strongly suggest that I feel that the market is going to have a major correction soon. The market had a huge nine-year run. We’re now facing rising inflation rates, a new US president, and heavier selling volume in the market as of late. Major stocks that had a good run outshining the market, are showing signs that their investors are now being cautious, even uncertain.

As proactive investors start to unload their positions, they’ll be executing their defensive plays (getting into utilities and consumer staples), as well as looking for what is trading on its own page and less affected by market moves. I think that cannabis stocks, given their industry newness and lower prices, will provide that opportunity for investors.

You might feel conflicted about cannabis and if you do, then you should probably feel the same way about alcohol. As we all know, booze was once outlawed and look at it now. The same will happen to weed. They say if you can’t beat them, then join them. What’s nice about a cannabis stock is that you don’t have to smoke it to own it.

 

 

 

 

The Transparent RRSP: Markets Closed

No actions were taken the week of April 10

This week has been a busy one for me. All week, I was getting my tax stuff in order. No, I haven’t filed yet! If you saw what I had to do to get ‘er done, you’d understand why I was procrastinating. If that’s not enough, I’m in the middle of moving.

The dreadful task of packing always necessitates decluttering. Moving forces me to ruthlessly get rid of what I no longer want or need. For the last month, I’d been going through my things and filling up boxes and bags of stuff I knew had no place in our lives anymore.

This drive to purge shifted to my TFSA. Mid-week, JP recommended that I sell two of my stocks he noticed were underperforming for a long time. They were in the money but had barely budged for a year. I sold them, then I sold four more stocks. I had way too many stocks – we’re talking 33 in this one account! I won’t even get into what’s in my US trading account. 33 is more than I could manage, but I guess I just kept buying them the way my brothers buy shoes and ball caps. This is what can happen if you pay very little in commissions per trade.

After we had a decent market last week, it was easy to see who the laggers were in my portfolio. I don’t mind active stocks that go up and even down, but I do mind the stocks that just don’t move at all. A healthy stock needs steady volume and a decent amount of movement. Without enough investor interest, they’re just duds.

Today, the Canadian and US markets were closed for Good Friday. The volume in the markets was low which is typical before a holiday weekend. People either don’t take on new positions or they sell or reduce their positions because they don’t want to hold them over a long weekend.

I feel lighter with fewer stocks to manage (yet I still own quite a few!) and more cash in my account. I might buy more shares of stocks I already own and am happy with. I’ll see what the market does next week and what my stocks do in relation to the market. Now, back to packing!

The Transparent RRSP: Post #15

Actions taken the week of April 3
  • I deposited $150.00.
  • I bought 25 shares of TransAlta (ticker symbol TA.TO) for $7.63 per share. This cost me $190.75 + 0.25 cents in commission which makes it $191.00 altogether.

This leaves me with $21.90 in cash. Penny stocks, anyone?

I bought shares of TA because the monthly chart caught my eye. The daily chart displays a long consolidation that shows this stock has been trading in this price range since late November. I had been checking this stock out for a few months now. I never took action because I wanted to wait for a better setup on the monthly chart. The weekly chart is a little sloppy, but I’m not as concerned because of its strong monthly chart.

ta

TA price charts on freestockcharts.com


I’ll just mention that for my TFSA, I bought some shares of TransAlta Renewables (a subsidiary of TransAlta, ticker symbol RNW.TO) at $15.73. I feel like I was late to the party for this one. I just kept missing the good entries. Its price moves are around $2 in range (as you can see from the arrows on the chart below). This stock has already moved up $1.30 since its last selloff in early March. If this goes up from here, it’ll probably stall at around $16.50. We shall see.

I’m not thrilled about the monthly chart; however, the daily and weekly charts, volume action, and monthly dividends made me want in. I like subsequent consolidations because it shows a lot of consensus among investors in price areas just below my entry. This is what traders call ‘support’ because if the stock does fall below my entry point, it’ll likely land softly around the $15.00 area where a lot of people have been buying shares at since January. I’m counting on strength in numbers to hold this stock up.

rnw

RNW price charts on freestockcharts.com

The market was positive this week. If nothing out of the ordinary happens (politically/economically), the market will likely trickle up for the rest of the month.

 

The Transparent RRSP: Post #13

No action was taken the week of March 20

This week felt like my own personal spring break. I’ve just been waiting for the market to pull back. When the market is uninspiring, I’m uninspired to do much in that department. When this happens, most stock charts look unpromising to me. Being patient can be boring; it is, however, a necessary virtue for a trader to have.

In my freed up time, I managed to catch up on some of my reading. JP and I typically have a number of books, magazines, and articles littered around our house. Depending on where I end up sitting, I pick up and read whatever happens to be right next to me. 

The last couple of weeks, I found myself focussing on three of the twenty or so items within my lazy reach. I’ve been reading Felix Martin’s Money: The Unauthorized Biography, Michael Lewis’ first hit book, Liar’s Poker, and Joseph Nocera’s, “The Ga-Ga Years,” an old article that was published in Esquire magazine in 1988. Interestingly, at one point this week, I found the subject matter of all three works intersecting at the topics of bonds, money market funds, and beating the market. To boot, they were all referencing the same point in financial history’s timeline: the years leading up to the stock market crash of 1987. I am not a fast reader, but by golly do I wish I could just read it all in one sitting right now. I just find people’s different experiences and ideas on money fascinating.

I have a very loosely formed concept of money that’s been evolving since I started working and saving it. While I can’t say that my understanding is advanced by any stretch, I can say that it’s deepening the more I learn about it and invest it. Money is one of those human inventions – a “social technology” as Martin calls it – that is fluid instead of concrete in its nature. Different forms of it, whether as a currency, a security, a financial product, or a means of exchange, can and will go up and down in value. As I spent more time watching the markets, it became increasingly apparent to me that these fluctuations are created by us. We get optimistic about the promise of growth or the next big opportunity. People pump money towards potential. As more people buy in, prices go up, cash runs low, and perceptions start shifting; as people start to cash out, fear of losing runs high. It’s amazing to think how the general agreement of our feelings about something has the power to change the market value of our investment accounts.

Beating the market is what every investor or fund manager wants to achieve. I’ve done it. I’ve also been horribly beaten by it. I learned that the best way to not get beaten by it is to sit patiently and wait out any fear or pessimism until optimism sets in again. Until then, I’ll just keep reading about the rise and fall of others instead of letting history repeat itself with me. 

 

 

The Transparent RRSP: More Thoughts on the Market

I posted on Monday that I had bought another 16 shares of LFE.TO at $6.12. This cost me $97.92 + 0.16 of commission. I now have $60.90 of cash remaining in my account. This was at the same price I got the previous 24 shares of LFE.TO at, giving me 40 shares of this stock.

Currently, I’m not crazy about entering any new positions given the market. I would prefer it to have a more substantial correction before it resumes going up. My preference would be for the market to just slightly sell off below February’s lows. The market could just move sideways for the rest of March, which I’ll be satisfied with. If the market isn’t going to have a correction, then it at least needs to take a break from going straight up.

When the market is operating near a peak like this, I tend to find that stocks with great setups are merely shortlived opportunities in that they might only be in the profit zone for a few days – then people get scared at the slightest hint of a reversal and sell their positions to take their profits.

Another thing I find when the market is iffy: investors tend to gravitate towards stocks doing their own thing regardless of what the market is doing. That is the only reason why I bought more shares of LFE. I said earlier this month that I didn’t want to take any new positions for the RRSP until the market had a decent correction. This stock was resilient during some market weakness and looked like it was taking off.

When I am doing something that goes against my intentions, I have to ask myself, “If this stock takes off without me, will I be upset?” Some setups are dodgy enough that I wouldn’t have regret even if it works because I’ve learned that if I took such setups every time, I’d have consistently worse returns. The setup LFE was demonstrating is the kind you just can’t ignore.

Below is a comparison of the daily and weekly charts of LFE to one of my favourite market index ETFs to watch, the XIC. I also watch the actual TSX Composite Index, however, I prefer looking at the XIC because I get a better view of the trading volume in the market.

lfe

I haven’t lost sight of the increased amount of risk when taking trades in a market like this. I feel that LFE will trade on its own page for a while. Eventually, it’ll likely be more affected by the market. Hopefully, that happens when it’s at a much higher price!