Potential Exit Strategy

Reading a blog post from Dr. Wish (posted 1/1/18) he stated “I don’t wait around holding declining stocks. Buy and hope is not my style. Once a stock closes 2 days below its red lines I like to exit. As the great William O’Neil has written, all stocks are bad, unless they are rising.”

I took a look at the chart of Microsoft as an example because I knew that it has some history of being range bound for a while and then trending recently. To me, it looks like this exit strategy would have resulted in many whipsaws where it would have taken me out of the stock only to see it rebound and continue trending up. In all fairness, I need to do a more detailed analysis using more stocks for examples and be more objective, but that will need to wait for another day.

Hyatt (H) Added to Potential All Time Highs Breakout Watchlist

Hyatt (H) came to my attention via an email from Merrill Lynch stating they were adding H to their “US 1” list. I took a look at the weekly chart and noticed that it was trading at an all time high over a 20 year period. After and all time high was set at $63.74 during the week beginning 9/15/14 there was a pull back that lasted over three years. On 10/30/17, the price broke out to a new all time high of $67.36 during the week starting 10/30/17 on about average volume. Since then, the price has been trending up with no significant pull back.  It has a current Zack’s rank of #1, so that adds to my interest. So I am adding it to the watch list and will be watching for a pull back lasting at least 12 weeks and then wait for a new break out above whatever price a new all time high is established at if it is accompanied be above average volume.

Just for the Asking!

It seems many of the subscription services make it super easy to sign up, but not so easy to cancel your subscription. You just sign up on line, with no direct contact with a sales rep necessary. And they make it even easier to continue your subscription in the future by signing you up for automatic renewal. The automatic renewal is sometimes added without the subscriber being fully aware what they are signing up for because the agreement is included in some fine print with a selection box pre-checked or because the subscriber is enticed into agreeing with the arrangement based on a promotional price as long as they agree to the auto-renewal at the “regular subscription rate.”

Usually, there is a provision to cancel the automatic renewal prior to the renewal date. However, they aren’t going to make it as easy as it was to sign up. The instructions for cancelling are often very difficult to locate. In fact, I have had times where I check every menu I can find on the services website without success. I then do a web search with key words containing cancelling the particular service and eventually find the instructions for cancelling buried in some FAQ’s list somewhere. Then I find that cancellation usually involves having to call the service, and then during their “regular business hours.”

However, this can be worth the effort! For example, today I received an email that my subscription to a stock information service that I subscribe to was about to renew at the regular rate of $199 for 12 months. I called customer service to cancel the auto renewal, thinking that they would offer me a better rate once I let the membership lapse. After asking me why I didn’t wish to renew, the customer service rep immediately offered a discount rate of $119 for the year. I accepted, saving $80! Of course I had to agree to the auto renewal at the regular rate one year from now. But hey, we can play that game again! I don’t think an $80 discount is bad just for asking!

 

Bought Amazon (AMZN)

I just purchased AMZN at $1245.12 per share. AMZN has been on my watch list for quite a while based on subjective observations. For example, it seems that any retail purchase I make these days involves a search on Amazon.com to make sure that I am getting a fair price if I choose to buy in a brick and mortar location. But increasingly, I just end up buying from Amazon. But this is only one dimension of this multi-faceted company. Discussion of all of Amazon’s business segments is beyond the scope of this blog entry. Suffice it to say, that more and more, AMZN has become the 800 pound guerilla in the room, and I wanted a piece of it.

Back on July 21, AMZN closed at a new high on a weekly chart. Then, over a twelve week period, it pulled back gradually and then started advancing again forming a fairly smooth trough shape. Then for the week ending October 27, it broke above the previous high closing at $1100.95 on almost twice the normal volume. This should have been my buy signal. But for many reasons, I didn’t get in. Two of those reasons were based on middling ratings by paid services that I tend to use (Morningstar and Zacks). The only real positive objective signs I could point to were annual increases in revenue, earnings, and earnings per share. But I still had a gut feeling that I wanted to be a part of Amazon.

The following four weekly closes were higher, but on decreasing volume, ending in a new weekly high of $1186 on 11/24/17. After that came five weeks of a slight pull back. Then for the week ending 1/5/17, another break above the new all time weekly high closing at $1229.14. Even though the volume was a little less than average, I took this as a second chance buy signal, and bought a position in AMZN today at the previously mentioned price of $1245.14. If I had purchased the shares at the opening on the day following the original buy signal, I would have gotten in at just under $1100. Therefore, I would have a unrealized gain of about 13%  at this point. Nevertheless, I am happy to be a participant in Amazon’s performance from this point on.  Just in case things don’t go my way, I am setting a stop loss order at $1110.97 which is 3.5 ATR (Average True Range)  below the closing price today (based on weekly ATR), and will be trailing that stop should the shares continue their advance.

Here’s a link to view a chart of AMZN as of this date:

http://tos.mx/SGfB2c

 

New Techniques for the New Year!

About a year ago, I attended a local AAII Meetup with guest speaker Dr. Eric Wish. I learned so much from Dr. Wish, and sought to put some of his practices into use. I had much more success with my investments than ever before applying some of the things I learned from Dr. Wish along with some of the books he recommended on his blog (wishingwealthblog.com).

The biggest change for me, was that I used to primarily invest in shares that I considered to be at bargain prices. Specifically, I looked for stocks rated as “5 stars” with “wide moats” by Morningstar. I especially focused on companies that paid dividends at or above the average rate for the S&P 500.  However, I seemed to find that stocks that became a good value (5 Star Rated) often went on to become much better values! I learned what the saying “catch a falling knife” meant.  So I started looking for ways to find better entry points to increase the chances that a company that looked like a good value was done falling in price and had a greater probability of price appreciation. I did have greater success with this, but still found that shares would often continue their downtrend after a brief trend upward.

At the beginning of Dr. Wish’s presentation, he asked the question of the audience “would you consider investing in a stock that was trading at an all time high?” I don’t know about others in the room, but my answer was “no” because I thought it would be likely to be overvalued and have a high probability of pulling back. However, one thing that Dr. Wish said that made sense to me was that when a stock is trading at an all time high, there doesn’t exist a supply of shares that were purchased at higher levels owned by investors that just can’t wait to get back to even and sell. That struck a chord with me because I have seen that happen time and time again. I would buy a stock that had fallen to some level that I thought represented a bargain. If I was lucky enough to see it start to rise, it would invariably meet some level where a bunch of sellers came in to the market and pushed it back down.

For this reason, I started studying Dr. Wish’s approach and personalizing it to make it my own. So far, I have used these ideas in different combinations, and somewhat haphazardly. But over the next few days,  I will detail some of the techniques that I learned as I try to put together an overall trading plan utilizing these techniques.