The Transparent RRSP: Market Fears

The Week of August 8
  • I left the RRSP account alone. I wanted to buy shares of Bombardier (BBD.B.TO), but I couldn’t find an entry. There might be an entry on Monday or Tuesday.

 

BBD vs XIC

Price charts: BBD.B vs. XIC on freestockcharts.com

As you can see in the top two charts, BBD.B has been more positive than the market (the two lower charts of XIC). If the market continues to head lower, I’ll either abandon the plan to buy shares of BBD.B or just wait until the market settles down.


Last Thursday, the markets collectively demonstrated anxiety over North Korea. There was a big market sell-off and most gold stocks went up. It’s hard to say at this point if this is a reaction temporary in nature, or if it will signify the beginning of more and more selling due to fear. I’m going to make it a point to pay closer attention to the news and to how the market trades over the next couple of weeks.

Last week, I put together a big watch list of stocks that had promising charts. After last Thursday, only a few of them still look okay:

  • L.TO (Wait another few weeks to a month for this to properly set up)
  • H.TO (I own shares of this stock already.)
  • EXE.TO (I own shares of this stock already.)
  • TCW.TO
  • D.UN.TO (This is a REIT.)
  • CNE.TO (Needs a better setup unless you’re into aggressive, riskier entries.)
  • LIF.TO

Until you know what’s going on with the market, I don’t recommend buying anything. These stocks would be worth looking at while also observing the market. Watch how these perform against the market or their sector. If resilient stocks start to show weakness, then it’s usually a good sign that a weaker market will become even weaker.

There are different ways to play defensive during uncertain times. You can buy gold or shares of gold stocks. You can also buy consumer staples stocks. You can buy nothing or you can sell all your stocks. Whatever you do, don’t lose sight of what you want for your portfolio long term and think strategically.

Since the late spring, I’ve been unloading shares of stock. I’m either selling portions of my positions or all of them to either collect profits or reduce my exposure to the market. I have still been buying shares here and there, but not as actively as I used to. This has nothing to do with North Korea. Rather, it’s more about the market, which has been pulling back since the end of April. Maybe eventually, it will have everything to do with a conflict with North Korea. Regardless of what happens, I’ll let the charts guide me, not my fear.

 

 

 

 

 

U.S. Stocks

I get this Monday off at work because it’s a holiday. The US stock market, however, is still open, and I really hope to get my trade on.

It’s been so long since I’ve been able to watch the US market live. I still have an active trading account with Interactive Brokers set up just for day trading and swing trading. My US trading account looks a lot like a backyard that needs a lot of tending to: some big glorious trees (a couple of winning stocks) among a bunch of weeds (half a dozen losers).

Regardless of its imperfections, my US portfolio has been outperforming the market all year — a huge reason why I leave my trades alone. I’ve been busy transplanting my life to a new city, anyway. Making any attempts at fast trading while busy and heavily distracted would be bad practice. The US market is full of action, but it’s a hostile environment to navigate. The payoff can be fast and big, as can be your losses. I need to be focused and ready to execute even just one quick trade. Now that I’m all moved in and my office is all nicely set up, I hope to do a bit of ‘yard work’ for the first couple of hours that the market is open.

Half of my money in this trading account has been sitting there doing nothing for a very long time. I hope to open one or two swing trades this Monday – and maybe get a day trade or two in there while I’m at it.

I did a search on finviz.com using the filters and criteria for finding stocks I like based on price and trading ranges. I found a few worth considering:

  • CARA
  • CLR
  • DKS
  • DVN
  • FL
  • NSC
  • TRIP
  • UAL

I noticed some pretty beat up stocks that would be worth considering if a shocking reversal were to happen (a VERY aggressive play):

  • LNG
  • RH

Usually, before the market opens, my brokers provide a number of stocks that are actively trading in the pre-market (before 9:30 AM). These stocks often end up being in play all day, or at least for a big part of the morning session (trading usually slows down around lunch).

My own discipline requires that I only select only a few of these stocks and watch them closely. If and when an opportunity presents itself, then I’ll do a trade that will last anywhere from a few seconds to a few hours. Day trading is not for most people and I would never recommend for anyone to even try it.

I discovered day trading is not for me either. Swing trading (a few days to a few months) and position trading (months to years) is more lucrative and a more realistic way to handle your money. I haven’t totally given day trading up because doing it every now and then (like once a month) keeps my instincts sharp. Most importantly, it reminds me of the value of never risking too much on any one trade. I might win on these trades 80% of the time, but the losing 20% can be such a blow financially, mentally, and emotionally. Losing keeps things real and really forces me to learn from my mistakes.

If the market is too volatile or my choices aren’t great or don’t open well, I might just leave the account alone and not trade anything. Always have a great Plan B so you don’t end up trading just because you had originally intended to. Not every day is a good day to trade — it’s just not something worth forcing. I might just take the holiday off and go to Niagara Falls instead!

 

The Transparent RRSP: Summer Reading

The Week of July 17
  • I took no action for the RRSP.

Instead, all week I’ve been stewing and brewing over something I wrote two weeks ago:

This week, I was actually considering buying shares of APH.TO for the RRSP, but it’s not quite ready yet. I know this one is capable of developing really good patterns. Once I see the trading range tighten, the selling volume lessen, and a pattern improvement on the daily and weekly charts, then I’ll pick the price I’d like to enter at and I’ll put in an order. I’ll give it another couple of weeks. If it ends up going up while I’m waiting for these things to align, I won’t be too concerned if I miss the run. It will either set up again later or I’ll find something else.

So, APH had a major breakout three trading days after that post. The setup I was identifying actually happened – just a lot sooner. I took my eye off the ball. So, I went with my next play. Last week, I bought ECN at $4.03 with a strong feeling that it was going to take out a previous low of $3.87, which it did only three trading days after I put in my limit order.

 

APH ECN

Price charts for APH.TO and ECN.TO on freestockcharts.com

 

I was right both times. The problem is, I’m left frustrated, mainly because I missed the stock that had the bigger move. You know what’s worse than losing money for most traders?

  • Exiting a stock too soon and leaving money on the table;
  • Missing out on something you knew was going to happen;
  • Overcompensating for either of the above two reasons.

I actually shouldn’t be frustrated. Let’s say I never noticed APH at all. I would take that ECN trade any day and I’d be okay with it.

Trading Psychology

Trading psychology is actually a ‘thing.’ I once had a trading coach – an infinitely kind, generous, patient, uber positive day trader based out of Colorado. He was really into trading psychology and he consistently banged the drum on the importance of visualization, meditation, and forming a strong belief system supported by mindful practice. He got me reading Psycho Cybernetics and books by Tony Robbins, among many other things. This reading took me down a path of self-exploration deeper than any other self-improving attempt I’d made in the past. This was when trading had changed me.

I learned that most of what drives our decisions is conscious, but so much of what drives our actual actions is subconscious. A common action for traders is to right a wrong. When we lose, we become prone to overtrading or overcompensating for something we should’ve done instead. We try to make back what we lost or make what we should’ve made on something we ‘knew’ would work. The reality is, there is no certainty in markets and everybody knows this. Nor is there total certainty about anything in life.

I finished reading Market Wizards, a great book featuring interviews with top traders in the U.S. These traders all had their own unique strategies, their special recipes for success. What they had in common, however, led to their success: tested strategies, experience, persistence, the need to manage their losses, and learning to deal with the uncertainties of the market.

In this book was also an interview with Dr. Van K.Tharp, a psychologist who focuses on the psychology of trading. It was so fascinating to read about how this psychologist understands the thought process behind trading and has dedicated his work to helping traders get past mental and emotional road blocks in order to achieve their goals for success. Of course, I ordered one of his books from Amazon. I’ll be reading Super Trader – Make Consistent Profits in Good and Bad Markets over the next few weeks as I also read Edwin Lefevre’s Reminiscences of a Stock Operator.

Am I upset about missing the move on APH?  150% yes. Have I missed other amazing opportunities in the past? Yes, hundreds of times. Has that ever stopped me from making other decisions with good payoff? No. Will I miss other great opportunities in the future? Of course. Will I take other great opportunities in the future? You betcha.

The market will always be there. Opportunities will always present themselves. I will try to be ready for them, but I can’t catch them all. Learning and growing from these experiences is part of the fun and adventure of trading. I know I’ll get over this missed trade with APH. I hope that things work out with ECN and that I’ll have another few opportunities to buy more shares of it. One day, APH will present yet another opportunity and I will do my best to be ready.

 

Trading Dreams and Stocks to Watch

Trading Dreams Can Reveal Good Ideas 

I have always been prone to having work dreams after I’ve been at a place for a while. When I was a very active trader, price charts were a constant occurrence in my dreams in which they had the strangest capacities. For instance, I couldn’t open a door until a stock price went up another 50 cents. Or I couldn’t get to a party until I made $1000 on a trade, so I’d have three trades open. Weird stuff like that.

I had one profound dream where I was talking to my buddy about stocks. In real life, I knew he had gambled unsuccessfully on penny stocks and sports. In this dream, we were catching up while looking at a glass wall that had a stock chart on it.

He told me that he stopped wasting his time on penny stocks. Instead, he decided to keep things simple. He bought the stock of a company that made sense to him. This company started to become successful rather quickly. Every time he had extra savings, he would just buy more shares and increase his position. Over the next five years, the stock kept going higher in share price. As he explained this, the chart on the glass wall started to grow live on a timeline. The chart finally stopped moving once it reached the present day. At that point, he was up $18,000 with that one stock.

Scaling In

While I don’t believe it’s a good idea to put all your money into one stock, I do believe in the strategy of adding to a good position. At the time of this dream, I wasn’t confident enough in my own methods to add to any position. If anything, I was exiting too soon. Over the years, I got over my fears; it eventually became a practice I employ in the situations I feel most confident in.

I’ll often decide on a stock because I like the chart and its sector. My initial strategy might be shorter term. I might sell shares to take profits or lighten my position and just keep some shares for the longer term. Other times, I’ll change my outlook. If the chart and the stock show more potential for longer term growth, I’ll buy more shares of it at the next opportune setup.

I don’t think of investment decisions in definite terms because there’s no way to predict exactly how much you’re going to make. I like the idea of interacting with your investments over time in order to be fluid with the demands of the market or to take advantage of new opportunities that come up.

My Own Stocks

The market has been doing a nicely controlled correction – thankfully, it hasn’t dropped rapidly. I don’t know if it will react further to the news next week if we find out for sure that interest rates will go up. The market doesn’t like surprises, so if interest rates do go up, then there should be no major shock to the market. If anything, the anticipated news is already priced into the market and we can move on once it comes out.

I’ve been casually looking for stocks, yet I haven’t been very inspired by much of what I’ve seen out there. When this happens, I become more interested in watching how the stocks in my own TFSA portfolio are doing. Some of them are either consolidating nicely or seem to be doing their own thing. Here are some of my stocks that I might scale into:

  • ZPR.TO
  • MSI.TO
  • ECN.TO

These other ones I’ll be watching for more confirmations from the sector and/or market:

  • BBD.B.TO
  • EXE.TO
  • TECK.TO
  • APH.TO

This week, I was actually considering buying shares of APH.TO for the RRSP, but it’s not quite ready yet. I know this one is capable of developing really good patterns. Once I see the trading range tighten, the selling volume lessen, and a pattern improvement on the daily and weekly charts, then I’ll pick the price I’d like to enter at and I’ll put in an order. I’ll give it another couple of weeks. If it ends up going up while I’m waiting for these things to align, I won’t be too concerned if I miss the run. It will either set up again later or I’ll find something else.


N.B.

The last thing I want to do is to make stock calls for the purpose of getting others to pump up my own stocks. I tend to pick stocks that trade higher in volume, so price jumps are less likely to occur unless A LOT of investors step in. I lack that kind of influence – this is a low-key blog, not BNN. I expect investors to do their own necessary due diligence before making investment decisions.

 

The Transparent RRSP: Interest

Action taken the week of June 26
  • Transferred $150.00 into the RRSP. That gives me $170.90 in cash.

If I see anything that looks interesting, I’ll be ready to take action with some cash in the account again. I’ve been looking around and I found a few compelling charts. However, the market is just so uninspiring right now. I’d much rather wait for it to settle down before I do anything. It would be great if there was nothing to do until next month.

Another thing to note: If we raise interest rates sooner, that will greatly impact the market. I plan to consider, over the next week or so, some good trading/investing ideas.


July xic

XIC ETF in freestockcharts.com

Let’s look at the monthly chart of my favourite TSX index ETF, the XIC. I would like the market to pull back until the blue line. I mentioned in a previous blog that I’d like a market correction to come down to the same area we were at around November last year.

I think, though, that we’ll likely only pull back to the orange line, which is where we were at in December. This year so far, we had the heaviest selling volume in June. To get significantly below June’s levels we’d have to sell a lot more.

If interest rates do actually go up, a lot of sectors like retail and housing will be impacted. The financials, on the other hand, have been recovering since late May. Higher interest rates will be better for their business, especially after they’ve been running on low interest rates for so long.

I wrote previously that I think there’ll be a recovery in energy (oil) this summer – and I still think that. It’s worth considering swing trade opportunities in this sector as it could go up over the next few months to a year.

After a quick search, I noticed that the following stocks have had heavy selling volume the last few months:

  • SU.TO
  • PD.TO
  • CVE.TO
  • BTE.TO
  • ENB.TO
  • ECA.TO

If you feel conflicted about putting money into the yucky oil industry, you can just treat this as a study into my process when I look at sectors that have been beaten up. Here is a general run down of my process:

  • Watch the daily and weekly charts of stocks;
  • Look for signs of sideways trading;
  • Watch for reduction in trade volume. The volume should indicate less selling some more buying;
  • Check the monthly chart – it should look like a reversal is happening;
  • Compare all this to the sector ETFs;
  • Among the sector’s stocks, watch for the ones that are looking the best;
  • For swing trades, look at the strongest stocks that meet your criteria for entry, price, and trading ranges. In other words, figure out which ones that will give you the most bang for your buck.

I’ll share my ideas on this more recent trade idea and if I do take a trade, I will let you know. If this makes you nervous, then you can sit back, relax, and enjoy watching me fall flat on my face. I often go into trades thinking that I will do just that, but it’s exciting enough for me to take action. This mindset forces me to only risk enough so that I won’t be devastated if I’m totally wrong. Personally, it’s more devastating to not financially benefit from an idea I had that actually worked.

Money Talks

 

Recently, I did a presentation at the Toronto Public Library on investment basics. I had no idea how it would turn out, but I ran through my head a number of best and worst-case scenarios. It was better than I could’ve ever imagined.

I’d never seen a more diverse audience in age, background, and investment interests. Each person was comfortable enough to engage or ask questions – great questions, I might add. To all those who attended, I’d like to offer my deepest gratitude for your participation. This was the conversation I’ve been dying to have with people. This is the type of conversation more Canadians need to have with each other.

Today I’m going to share with you the questions that I can remember. I’ll add parts of my original answers, but I want to answer the questions more fully. These are in no particular order.


How long does it take for you to do your investment research each week?

Now, it’s a few hours a week, anywhere from two to six hours. But I also apply up to 20,000 hours of previous learning and experience. I hope that I can help others enough so that you don’t have to take as long as I did to learn how to invest.

I’d like to also add that many of my decisions result from bouncing ideas off my man, JP. He has put in the time and discipline to learn as well. We have the advantage of combined knowledge and experience. I share a lot of these very ideas in my weekly blog.

As much as I’d like to spend more time doing research and trading more actively, I would become more prone to micro-managing my trades. I’ve done a lot better with a more passive and hands-off approach.

How did you get a 70% return last year?

2015 was a terrible year for the Canadian market. The loonie and the Canadian economy were weak. We patiently waited for the market to stop going down. This happened around late February 2016. We looked for stocks that we knew traded actively and had suffered huge drops in share price. It was a very good time to get into the market. These opportunities don’t come very often.

We bought shares in TECK.B.TO, ECA.TO, BBD.B.TO when they were really cheap, and then in April, bought some APH.V (now APH.TO). We bought a few other stocks, but these few alone did very well after just a few months. We kept selling shares incrementally each time the stocks surged in order to secure profits (called ‘selling into the strength’), but they kept going up. We could’ve done much better had we just kept the shares in and moved up our stops (selling prices). It became a decision between banking on certain profits and waiting to see what will happen. We did a bit of both and we still have shares in all those stocks.

I don’t anticipate as big a return this year, unless the market has a major correction, soon after which there’ll be many more big buying opportunities (a bad and selfish thing to wish and wait for, I know, but…). My US portfolio, though, has been my big winner this year because I had the same idea with US tech stocks last summer.

One of the things I always say is that investors are always looking for new opportunities.

What ETF should I buy?

Many financial institutions create ETFs. Some are:

  • BMO
  • Horizons
  • Vanguard
  • iShares
  • Claymore

When doing your research, consider your investment objective – dividend income, market index performance, sector selection (like banking), fixed income, etc. Also consider the MER, share price, distributions, and frequency of distribution payments, to name a few things. You can look up this information on the ETF info sheet. For me, I only select among ETFs with higher trade volume.

Market ETFs can swing a lot in price because of the demand of traders in the market. So the ETF might be worth more (or less) than its actual value (NAV). Would it make sense to put some money in a market index ETF and some in an index mutual fund (which will be less prone to price swings)?

If you want to invest in the market, consider an ETF or an index fund – or both. The major distinction between these is the MER as it’s a lot higher for mutual funds than it is for ETFs; however, it can be more affordable to buy units in an index fund than it would be to buy shares in an ETF.

An actively traded market ETF can experience more volatility than the actual index it’s based on. Its price will vary based on the demands of buyers in the market. If buyers drive the price up, it’s possible for the ETF to be worth more than the net asset value (NAV) of its assets, so you’re paying a premium in share price. If investors are fearful, heavy selling can drive its price down below its NAV, so it’ll be trading at a discount. For index funds, the NAV is what it is after the market closes. At the end of the day, you shouldn’t notice a big difference between similar index funds, be it an ETF or a mutual fund. (If you do, the mutual fund will likely be underperforming because of the MER.)

What’s most important is that you’re 1) comfortable in what you’re investing in, and 2) you’re not paying too much in fees.

What do you think of mortgage-backed securities?

These have had a bad reputation as these were hugely responsible for the 2008 recession, but mainly because they were deregulated. They’re just bundles of mortgage loans that pay investors interest.

If you’re after real estate income, the REIT (real estate income trust) is great because it can pay investors their share of the distributions which will come from a mix of rent, mortgage interest, capital gains, as well as return of capital. You can also get real estate ETFs. Because of the mixed forms of investment income that come from these, they’re best held in registered accounts. Also, keep in mind the MER. I own a couple of these to add diversification to my portfolio. Other than the value of real estate happening in my own backyard, I don’t really follow the real estate market as much as I should.

What brokerages do you use?

I have opened accounts in the past with Disnat Direct and Questrade. I now have accounts with Virtual Brokers and Interactive Brokers. I’ve been with the last two for years.

What do you pay in commissions per trade?

With Virtual Brokers, I pay 1 penny per share. It’s less if the stock price is under $1. With Interactive Brokers, it’s 1 penny per share, but a minimum of $1 per trade. So if I buy 125 shares, I pay $1.25 plus any market data fees.

Both of these accounts were opened as margin accounts – trading on margin means you need to open with and maintain a minimum amount of cash in the account which allows you  3 times the buying power. So if you open with $25,000, your buying power is $75,000. To attract active traders, the commission fees are very low.

I also have TFSA and RRSP accounts with Virtual Brokers (VB). Thanks to JP’s slick skills in negotiation, we managed to have the same awesome rates extend from the margin account to our registered accounts. Often with registered accounts, you get charged a quarterly administrative fee. With VB, they do charge $25 plus HST unless your account has a minimum of $5000 in it.

I am an active FOREX trader. How should I be doing my taxes every year?

With an accountant. I did our taxes the first couple of years we started day trading. I had the advice of a friend who’s an accountant. She gave me samples on how to calculate the adjusted cost base of securities and their exchange rates, etc. It was actually a really good exercise in learning about taxation for the self-employed and how to factor in fees and expenses; on the other hand, it was a total headache. After that, we started using an accountant who magically does it all in a few days.

What is your take on robo-advisors?

They’re great if you don’t know what stocks or ETFs to buy, or when to sell them. They take away from you the inconvenience of guessing and researching and they make those decisions for you. I’d just be cautious about the frequency that the portfolio is rebalanced and focus on the ones that meet your criteria and charge the lowest fees. As you get more comfortable and savvy with reading the market, you should compare how your portfolio is performing against it and decide then if you might be better off investing in an ETF.

What is your advice for women and their investment choices, especially as they age?

Women have developed a reputation for being great long-term investors because we typically make conservative, less risky decisions. I feel that the financial markets have shifted so that being conservative could work against us in the long-term. Those traditionally conservative decisions, like owning a lot of GICs and low-risk mutual funds, could leave us with less money than what we actually need to have, especially as we live longer and longer. We should be thinking about how our portfolios need to keep generating income as we age. In my opinion, we should consider dedicating more of our portfolio to more medium-risk choices, like blue chip funds or stocks that pay us a dividend.

I know I have a pretty aggressive approach when it comes to making money, but I’m careful with most of my money and more risky with a smaller amount of it (or maybe that’s just what I tell myself and it’s more like half and half). A big part of my own early retirement plan is to live off of dividends, although I still want to make money on capital gains if I have to sell my shares to rebalance my portfolio.

What are good websites that could tell me more about Canadian securities?

I drew a blank – thank you to the audience members for their helpful input. Motley Fool Canada and Retire Happy were mentioned. I also think that Canadian Couch Potato and My Own Advisor are excellent.

You must have a really diverse portfolio?

Yes. It not only keeps things interesting, it spreads and reduces the risk factors within my portfolio. A lot of my trade decisions come from looking at the sector or industry first. That’s why the economy is a big part of my book. I have stocks and ETFs across many different sectors.

I risk very little for each stock, so I’m not worried if it turns out to be a dud (a rare occurrence). After a while, if I like a stock enough, I’ll buy more shares if there’s a new entry (called scaling in).

How do you research fundamentals?

I said I cared about two things: the price I got in at and dividends. I’ll admit, it was a shortcut answer. I don’t pay as much attention as I should to the fundamentals mainly because I learned about stocks from traders who studied price charts and used only technical analysis. When it comes down to it, even if a company’s fundamentals look good, if the stock price has gone too far up or isn’t trading well, I just won’t enter.

I use technical analysis for all my decisions and I apply very general guidelines when considering a company’s fundamentals. One day, I’d like to take the time to figure out how to use both forms of analysis to become an even better trader. For now, I rely on good charts that indicate signs that a trend is about to start; I look at the sector the stock is in; and I compare the stock to other stocks in its sector. Then I cross my fingers hoping that the rest of the market catches on and buys the stock up.


We all have different ideas on what we want to do with our money. There are so many different ways to apply strategies, even between people who have similar takes on risk and opportunity. What I think we all need to have is a general basis of knowledge and from there, we each can branch out and find our own approach to investing.

Thank you, TPL! I had a wonderful evening.

 

 

The Transparent RRSP: Share Prices & Flash Crashes

Action taken the week of June 5
  • Bought 20 shares of TransAlta (TA.TO) for 7.74. This cost me $154.80 + 0.20 cents of commission. I now have 45 shares of TA. There is $16.90 in cash left in the RRSP account.

If you buy a stock at different times and at different prices, then it makes sense to figure out the average cost of the shares. The previous 25 shares of TA were purchased at $7.63 per share. I’ve worked it out below:

  • 25 shares * $7.63 = $190.75 + $0.25 commission = $191
  • 20 shares * $7.74 = $154.80 + $0.20 commission = $155
  • $191 + $155 = $346
  • $346 / 45 total shares = $7.69

This is also known as the adjusted cost base, or ACB. I use the share price of $7.69 to determine how much I make in profits (or losses) when I sell the shares at a different price later on.

If I want to determine just the average price of the shares, I can do the same thing, only I leave out the commission fees. It works out to be $7.68. It doesn’t seem like much of a difference, but that’s only because my commissions are extremely low.


Flash Crashes

Yesterday the Canadian market closed positive. We traded sideways all week. Not much action, which I prefer. The US market, mainly the NASDAQ, however, experienced a flash crash. I saw the charts and so I had to see what the news had to say about it. They explained that the mega-cap tech stocks (Facebook, Apple, Amazon, Netflix, Google – aka FAANG) were starting to sell off. They weren’t the only ones selling off hard before the crash. The semiconductor stocks (SMH is a semi-conductor ETF in case you’re interested in viewing its chart) were selling off heavily after noon. It had been a long while since the tech sector had shown any major weakness.

After hitting new highs this week, investors were starting to collect profits and play defence by unloading some shares to be less exposed to a sell-off. Well, if enough investors with large holdings (particularly institutional investors) get the same idea, this triggers a mass sell-off. These sales which began around noon triggered the automated trading programs to sell later on in the day, which led to an overall big sell-off in the market. This domino effect happens when giant stocks fall; sometimes even one giant stock can affect the general market. The NASDAQ market lost its last three weeks of gains in minutes. It recovered partially at the end.

I have shares in a few of these tech stocks and I was thinking this week, “Wow, I can’t believe it just keeps going up! When will it come to an end?” I had sold some shares to collect profits a few weeks ago; I was left with the disappointing feeling that I had acted a little too soon. However, I did so because I was anticipating this. (If you’ve been reading my blogs, then you know this isn’t hindsight commentary.) I’ve lived through enough flash crashes to know that I’d rather make my decisions away from such events, not in reaction to them. I still have some shares left in these stocks, but I’ll see how they do over the next couple of weeks.

The Canadian market came down a bit in reaction, but it came back and closed positively. These flashes tend to be more pronounced in the US markets. Because the US market is so big, a crash can affect the global markets if sustained recovery doesn’t follow.

It’s events like this that could deter people from wanting to ever invest in the market in the first place. These things can happen in any market, though, because people are prone to panic. Rather than cave into your feelings and react out of fear of the worst to come, it’s best to try to be objective: Observe the sentiment of other investors and see how your holdings are doing on the bigger time frames like the monthly charts. There is a good chance that your charts are still looking healthy. A correction here and there is to be expected as nothing ever goes straight up. All I can say to all that is to keep calm and let your stock carry on!

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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: Managing Doubts

Action taken the week of May 22
  • I reviewed my holdings in both my RRSP and TFSA. I am considering buying more shares of TransAlta Corp. (TA.TO) next week because I like the monthly chart.

A Glance at the Market

XIC may

The XIC ETF price history charts on freestockcharts.com

As you can see on the weekly chart, there has been mostly selling in May, which is consistent with the saying, “Sell in May and go away.” It would take more buying than all the selling that’s gone on all May for the market to trade above that. If the selling continues to consistently happen, even in small amounts, we’ll start to move lower.


When I’m in Doubt I Stay Out

I’ve been going over my portfolio and considering each stock that I bought and sold over the last year. First, I listed my primary and secondary financial goals for each one. If I had sold the stock or some of the shares, I made note of why I made the sale. Then I looked at the price history charts for each stock on my list and considered whether the stock’s performance was still in line with my intentions and goals.

Of course, my ultimate financial goal is to make money in any stock that I invest in. The major distinctions between each of them are determined by how I want to make money (dividends? capital gains? both?) and when (in the next few months? in a few years? in decades?). It was interesting to see how many of my holdings were initially intended for a swing trade after which I ended up wanting to keep them for much longer. This tends to be a pattern with me.

I’ll often buy a stock with this thought process: Let’s see how this performs. If it’s good, I’m keeping it. I might sell some and keep the rest. I might buy more the next time it has a good setup. If it’s a dud (a stock that sees zero action despite the market or its sector), then I’ll opt to sell it at break even or for a small profit and move on.

Selling at a loss is almost never an option for me. This only happens if, for whatever number of reasons, it becomes obvious beyond any doubt that the stock appears to be worth significantly less. I then have to ask myself if I’m willing to hold until that lower point and then wait for its recovery. If it does recover, at what price will it likely recover to before it goes up – or down – again? I rarely have to address the prospect of selling at a loss. This is not because I’m a decent stock picker. It’s because after years of trading, I saw that most of the stocks I sold at a loss ended up doing well weeks, months, or years after I bought them and sold them.

This basically means that it doesn’t matter if a stock has a good chart or not. It also doesn’t matter if you can time the market. More time in the market surpasses any well-timed entry. For a chart reader like myself, admitting this an act of hypocrisy! The price history chart is merely a tool that helps me understand the bigger picture.

Once I decide to invest, I rely on my ability to be patient. I believe strongly that patience is the key factor to growing a strong portfolio. Getting in and out of stocks frequently can really mess with your mind and potential to do really well. I learned that the biggest threat to patience is doubt. Doubt can be very powerful if you don’t trust the market, the world of investing, and yourself.

Whenever doubt starts to creep into my thoughts, I remind myself this: There is a finite amount of money and this puts a limit to the value that we place on things. Collective optimism makes things go up, but not forever. Collective pessimism leads to fear and this makes investors sell, but only until that fear exhausts itself. Humans are generally optimistic, and this is reflected in the overall market’s tendency to go up. I can’t always time everyone’s optimism or predict the end of all pessimism. If I get into a stock during its early signs of new optimism, it’s easier for me to exercise patience, even if it takes a while before market consensus helps the stock take off.

The main reason why I look at charts is because I can’t wait around until some analyst goes on TV to talk about a security that has been doing well already. While many investors might feel more confident in making investment decisions by waiting for an expert to give his or her opinion, it’s often too late for me at that point. I am more likely to act on doubtful thoughts if I know I got into a stock later rather than early on. I end up self-sabotaging my efforts by looking only for factors that confirm my doubts and fears. I’ve done this enough to know not to listen to such counter-productive thoughts. I’ve learned to trust my process and to stick with the strategies that give me the most confidence. Now, I only buy – and sell, even at a loss – when I’m confident in the factors contributing to the decision. I’m not afraid to make mistakes, but I don’t and won’t act on doubt.

 

 

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.