Thread: coolhand's Account Talk

Originally Posted by coolhand

The utilities sector has been seeing some selling pressure of late. I watch SO, PCG, ALE, and DUK, among others and I'm thinking there may be a buying opportunity coming down the road. Might not be in the short term, but I had some great entries into SO, PCG and ALE the last time they were beaten down.

I've been waiting for a buying opportunity in Westar Energy(WR). It's down over 2% today, but needs to drop a lot more for me to buy. It pays a nice 4% dividend.

Originally Posted by weatherweenie

I've been waiting for a buying opportunity in Westar Energy(WR). It's down over 2% today, but needs to drop a lot more for me to buy. It pays a nice 4% dividend.

Most of them are definitely over valued. But with the Fed continuing to flood the markets with liquidity, I'm not sure how long I'd have to wait to see significantly lower prices. I guess we'll see how far the current weakness takes the sector. But they'd have to come down at least 10% for me to feel comfortable with adding shares.

Of all the stocks I track, I pay close attention to the utilities sector. Many of the companies that comprise it pay nice dividends, are relatively stable, and I believe will continue to be seen as a safe haven in these times of economic uncertainty. It's one of the sectors that has been leading the market, which is not what one would expect if the economy is truly turning around. For the past week and half or so, this sector is coming under pressure even as the broader averages are moving higher. Liquidity remains very high as of Wednesday. And bonds too are seeing some pressure. There appears to be at least a short term rotation out of safer investments and into riskier ones. Riskier being a relative term. First, I'm thinking this market may see some serious upside action yet that will catch many by surprise. The support has certainly been there. It's just a question how much emotional distress it will take to coax money from the more conservative positions in the market and into those that are starting to over perform. That would help build momentum to the upside for the major averages.

But I'm not a big momentum chaser. But I am seeing what looks like rotation out of utilities and that may allow more conservative investors an opportunity to buy back in at lower prices. Utilities will always have a place in my personal portfolio, so I'm watching the action intently. Let's take a look at this sector.

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We can see that XLU, a utilities select sector SPDR, is seeing some downside pressure. I'm watching the Fibonacci retracement lines for a clue as to when we could see a turn, because I'm not convinced utilities won't come back in the relative short term. The 50% retracement level is what I have my eye on, but I'm not predicting that's where this will turn. Only that it's a reasonable target area. RSI and MACD will help in determining how deep the retracement goes too. And as you can see, they're still pointing lower. I am watching several companies in this sector and when I think we're turning the corner, I may be a buyer. For now, I'm just watching these indicators. One other thing to consider. If the rotation turns out to be longer term, prices could fall much further than the 50% retracement area. The picture is not clear, but the indicators should help bring things into a bit more focus as time goes on.

ERF is slicing through resistance in morning trade. I'm up over 15% currently (since 4/23). I'm not sure it can sustain this move in the short term, but it can be a runner at times. If it can get to the $15 area and close there, there could be more upside in the days/weeks ahead. This is for short term traders. Longer term, and from an "investment" perspective, you have the option of just riding any volatility while you collect monthly dividends in the 7.8% yield area and possibly being rewarded with further capital gains down the road.

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Since I own ERF in two different accounts, I sold one of those positions for $14.73, which was good for about a 15.25% gain, not including the divvy later this month.

Quick update on three stock picks.

COV.png

Since I first posted Covidian, it's been steadily climbing higher. It's now up about 6% since that time and technicals look good for more upside.

LLY.png

I posted LLY early last week. I was still on fence about whether is was turning or not, but suspected it was. We can see now that it was turning. This one is now up about 3.4% and its indicators also look positive.

ERF.png

I first posted this stock (green arrow) back when it was under $13. I bought it at $12.78. As of today, it is up more than 22% and could run further.

As far as our TSP, the underlying support for this market (liquidity) is still quite robust. As such, it makes sense to stay long until support falls off. And that won't be an easy decision, as liquidity has been curtailed from time to time by as much as 50% or so only to ramp back up to much higher levels. Of course, many longer term systems roll over during those drawdowns and that's helped propel price higher and higher as many traders and investors get whipsawed out of position and then scramble to get invested again once it becomes apparent that the downside action was nothing more than a head fake. Eventually, it won't be a head fake and we'll see a more pronounced sell off. But it's anyone's guess when that actually occurs.

You've made some good trades, Jim.

There were a few others that I haven't posted (lack of time) that were also very successful. In a liquidity driven environment, it puts the wind at my back so-to-speak on these types of plays. When the liquidity falls off, the profits may get more challenging, or at least require more time for price to appreciate in many cases.

Originally Posted by MrJohnRoss

You've made some good trades, Jim.

I posted this chart a while back and thought it would be a good time to revisit it given we're hitting news highs almost daily on the indexes.

5-16-2013 7-29-18 AM.png

This is a chart of the S&P 500 (C fund). I've included some envelopes that show where price would be at 6% and 8% levels relative to the 50 day moving average. As a general rule, if price reaches 6% above the 50 dma, a pullback is possible near term. If it reaches 8% above the 50 dma, a pull back to at least the 50 dma is possible near term. This is a general rule and this is not an ordinary market. Still, it provides some measure of risk management in markets experiencing large moves either up or down. In this case, I'm really only watching the upper envelop and price is getting closer to that 6% above the 50 dma mark.

The wild card is all that liquidity and the emotional response this market may elicit as more traders and investors are left standing on the sidelines as the indexes continue their trek higher. This is just a scenario, but if we hit those levels it may be prudent to take something off the table. Having said that, regardless if we see a pullback at those levels or not, this market is very likely headed higher in the weeks and months ahead. This just doesn't look like a longer term top being made, but it could be a short to intermediate term one. And given we aren't overly flexible with IFTs, it may not be worth chasing lower prices if one can't get reinvested quickly if need be.

Just some thoughts I'd like to share. I'm still 100% invested here.

Originally Posted by coolhand

I posted this chart a while back and thought it would be a good time to revisit it given we're hitting news highs almost daily on the indexes.

5-16-2013 7-29-18 AM.png

This is a chart of the S&P 500 (C fund). I've included some envelopes that show where price would be at 6% and 8% levels relative to the 50 day moving average. As a general rule, if price reaches 6% above the 50 dma, a pullback is possible near term. If it reaches 8% above the 50 dma, a pull back to at least the 50 dma is possible near term. This is a general rule and this is not an ordinary market. Still, it provides some measure of risk management in markets experiencing large moves either up or down. In this case, I'm really only watching the upper envelop and price is getting closer to that 6% above the 50 dma mark.

The wild card is all that liquidity and the emotional response this market may elicit as more traders and investors are left standing on the sidelines as the indexes continue their trek higher. This is just a scenario, but if we hit those levels it may be prudent to take something off the table. Having said that, regardless if we see a pullback at those levels or not, this market is very likely headed higher in the weeks and months ahead. This just doesn't look like a longer term top being made, but it could be a short to intermediate term one. And given we aren't overly flexible with IFTs, it may not be worth chasing lower prices if one can't get reinvested quickly if need be.

Just some thoughts I'd like to share. I'm still 100% invested here.

Remember what I said last week about the S&P tagging the upper envelope at 6%. We could see a pullback. Today we hit that 6% mark and got a pullback. This pullback "may" be a bit deeper than the last couple we've had, but that remains to be seen. I'm not expecting the market to roll back to the 50 dma, but it could. It will depend on what the underlying support for this market is doing and how sentiment reacts. Typically, the bears have come out quickly when significant weakness presents itself. And that has helped kill downside action relatively quickly. We'll see how it plays out soon enough.

Bonds continue to sell off and that has my attention too.

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Coolhand,

I know you track your numbers a little differently, and on a weekly basis, but I noticed that yesterday was the first time since you mentioned the herd being under 40% invested that Ocean's List now shows 40% investment in CS&I. As of COB yesterday, the herd was at 40.07%. I'll check in a couple hours to see what today's update looks like. Very interesting.