Fish Market

This market is fishy. I have been very suspicious of this last move up. Since last year, people have been asking me if I think the market will ever go back to where it was. The real question people are asking is: Will the price of my stock ever make it back to where I bought it? There are still many folks who are feeling the pain of being under in their investment accounts despite the last big upward move in the market. My answer is, of course the market will make its way back up. I just don’t know when.

I thought the bounce that had begun after Christmas would be a short bounce before a big flush in January before we’d go up again. Nope. Thanks to a combination of positive factors, we just went straight up and in a big way.

This market has done my head in. There are many conflicting factors happening in the world impacting the economy that have a lot of financial experts arguing over the next direction of the market. As much as I’d like to take a position here or there, I’d been waiting for the market to take a breather and reset itself. It just continued to head up and up. All I can do is look at the charts for some guidance.

This is the S&P 500 Index on four different time frames. Each time frame tells me something different.

A: Daily Chart

We are trading above the 200-day moving average (MA) as seen by the little green squiggly line in Chart A. This means that the market is trading above the average closing price levels of the last 200 days. (Please note that this line could appear differently in other charts for explanations beyond the scope of this blog.)

This is normally a sign of a positive trend over the last 200 days (you can also use 100-day MA or 50-day MA, etc.). More conservative investors typically feel confident to be holding positions above this level. To trade below this would make investors more cautious. Given how quickly we got to this place (40 trading days at this point), I would say that most people wouldn’t feel too confident that we’re gearing to go up again without some challenges.

B: Weekly Chart

We have gone directly up for nine straight weeks with very little selling. We are now approaching areas where we had previously tried to go up further in October, November, and December last year — but failed to. I drew arrows where there will likely be minor sell-offs and attempts to move up again.

C: Monthly Chart

Big severe price swings in either direction as depicted in this sloppy monthly time frame usually means volatility. If I were to go by this chart alone, I’d say that the market is not stable.

Personally, I have been whipsawed out of positions when I tried to buy stocks with charts that looked like this. The trades with the best moves usually come from charts that have stabilized over a narrow price range for some time. This chart tells me to stay away from trading for a while and wait for some stability. However, if I do see an opportunity that seems too good to pass up, I would need to be really careful and use fewer shares with a shorter time horizon for my position.

D: Yearly Chart

You can look at this chart in two ways.

While you could say that we’ve gone straight up since 2009, we did have a small reset in 2015-2016. You could argue that this reset was enough to give us another burst of equal measure. If this is the case, we could just keep going straight just a tad beyond 3000.00.

If you’re cautious or even doubtful of the above scenario, then you would have noticed the big red candle that I’ve circled. It has a large topping tail which means a lot of selling happened here. From a technical standpoint, this pattern usually signifies the start of a reversal move down or a pause in the upward trend.

My Humble Opinion

As much as I feel better that we’ve been positive in the market, my gut tells me it’s not done flushing out all the over-buying that’s happened the last few years. It was fun cashing out on stocks late last year; however, there are still many investors who bought at the top who have not benefited from the last nine weeks. These folks are still itching to get out of their positions. The pain from the last moves down is still all too fresh. It would take a lot more for them to remain in their positions or even feel confident enough to invest again.

I’m actually really hoping that we’ll come back down below the lows of 2018. A substantial correction on a longer time frame usually means we’ll find way more buying opportunities after prices have come down more. Then we could count on another good move up in the market and hold our positions for longer stretches. If this correction on the yearly chart does not happen, I would at least like to see some more stable sideways action in the market before we were to move up again.

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.

 

 

Canadian Stock Picks – Feb 22

Here are some stocks with nice charts. None of these had all three perfect daily, weekly, and monthly charts, but they all had the kind of increasing volume that I always look for. Often in strong market environments, many stocks won’t have perfect setups, but they’ll do well.

Having said “strong market,” I’d like to point out, though, that the Canadian and U.S. markets have gone straight up since last fall. They’re due for a correction, which I’d like to see happen on the monthly charts, before resuming an upward trend. There have been short-lived corrections on the daily and weekly charts (I’m looking at the XIC for Canada and the SPY for the U.S.).

Stocks with nice daily charts
  • F.V – This trades on the TSX Venture Exchange.
  • IIP.UN.TO – This is a REIT.
  • BBD.B – This has gone straight up for five months on the monthly. I love the daily chart on this, but I’d like to see it trade sideways and consolidate for another couple of weeks. I already own shares of this stock.
  • LFE – This high volume consolidation is hard to ignore! The weekly and monthly charts are okay. I bought shares of this today.
  • MFC – I want this to shape up better on all time frames. However, the consolidation on the daily chart + high volume makes this very attractive.
  • MGW – This also trades on the Venture. Beautiful consolidation on the daily and weekly charts. I bought some shares today because the building volume is attractive.

Stocks with nice weekly and/or monthly charts

  • DMM
  • INV – This one’s daily is nice too, but I’d prefer it if it consolidated longer on that time frame.
  • PXX
  • RNW – The daily is shaping up nicely, I’m love the weekly, but I’m not crazy about the monthly.
  • LGO – The consolidation on the monthly chart is very nice.
  • ESN – This actually has nice charts on all time frames. My only hesitation is the volume activity on the daily. There is still a lot of selling, but if this stock holds its price around the 0.75 area for a bit longer and the volume indicates more buying, then I think we’re in business.

Remember, just because I said I bought something doesn’t mean for you to buy it. I have a higher risk tolerance than most investors. Please do your research and consider the industry, the sector, the company, dividends (or lack thereof), so that you can feel confident in your investment. Invest well, invest wisely!

L2T Updates

updates


November

Financial Literacy

Lots of stuff going on especially with Financial Literacy Month coming up this November. In my world, almost every day is Financial Literacy Day

I’m always trying to learn more about investing and anything related. Right now I’m reading a book called Money, by Felix Martin. Next, I plan to read a book on options trading. I’m sure for most of us, the idea of reading such books doesn’t trigger the same excitement as reading a best-selling thriller like Girl on the Train (which I read too), but it’s great stuff for investor nerds like me.

Speaking of thrilling reads, to encourage financial literacy among new investors, I’ll be offering a massive discount of $5 off my eBook, which is currently available for $6.99. So for the low price of $1.99, you can become financially literate in the short time it takes to read this easy book on your phone or tablet. What’s so thrilling about the book is how knowledgeable you become as you read it!

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Columnista

I’ve got another column coming out in Investor’s Digest of Canada‘s November 25th issue, which you can find at most Chapters Indigo stores. Earlier this month, I was on the cover, front and centre, for another column I’d written. 

id-4

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Stock Picking Cont’d

I will also continue to blog my strategies on Stock Picking which I hope to complete over the course of November.


December

YouTube School of Investing & More

I’ll be posting a video on my process of selecting and analyzing stocks before the end of the year.

I’ll also be posting on various investment strategies based on investments I’d written about in my book to consider for the new year.


2017

Transparent Investing

I’m going to be doing a STOCK INVESTING CHALLENGE. I’m opening a separate RRSP account and I’m going to put $1000 in it. I’ll be selecting Canadian stocks for the portfolio and posting every week the results, my picks, my strategies, my analyses on performance, and the markets. I’m going to be totally transparent to all my readers about the results.

My goal is to make that portfolio grow through stock performance and compounding its growth through regular deposits. It’ll be fun and a great learning experience for us all. I wonder if this is how David Blaine feels when he thinks of his next on-TV challenge…

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Summer Kick-off at the Toronto Public Library in North York

This is an early announcement, but I’m too excited about it to keep it bottled up for almost eight months…

Mark your calendars: On June 20th, I’ll be hosting an event called, Investment Basics Made Easy, at the TORONTO PUBLIC LIBRARY! It’s going to be engaging, extremely informative, and loads of fun. If you’re brand-spanking new to investing, you’ll leave financially savvy and ready to make your money grow!

You really gotta love libraries and their commitment to being incredible resources to the public. The Toronto Public Library offers the Small Business Program in which they regularly schedule experts there to teach you about things related to business, marketing, and investing. I am so grateful for this wonderful invitation to share and engage with people interested in learning how to invest. 


 

That’s it for now, folks!