
______________________________________________________________________________
Issue No. 20 – April 4, 2005 Prescott, Arizona Systems@WiserTrader.com
______________________________________________________________________________
This week the emphasis returns to stocks. Our seven watch lists, including the experimental down-market list, are currently all profitable, ranging from +1.1% for the modified Growth Momentum stock candidates to +9.8% for the Cooper option candidates. By contrast the major averages are down for the year ranging from -3.2% for the S&P 500 to -8.8% for the NASDAQ.
The past week has been a good time, for example, to find a host of short term energy trades. The picture now presented by the market is characterized by a sideways motion of the major averages. Since their sizeable rally from August through December, the major averages are within 1 to 4% of where they were a year ago. They are all below their 100 day moving averages, approaching their 200 day moving averages, in a rising interest rate environment. The S&P500 has an average PE ratio of more than 20, making stocks expensive. These conditions call for a bit of caution.
Stocks that have compelling long term value are not found with the same frequency that short term growth stocks have been found in the past. Longer term stock selections require a great deal more research. If you decide that this kind of research is right for you, consider joining the Wiser Trader Stock Advisory. This gives you the choice of longer term value investing, in addition to, short term trades from the weekly Options Advisory. As always, the first month is free.
Whatever your decision, watch your stops carefully and take losses early to protect your capital and profits. Establish a level below which stocks are not allowed to fall without closing out the position. The markets are poised to react to the coming earnings season without much having been resolved by the recent flurry of economic data. I’m slightly bearish.
© 2005 WiserTrader.com, LLC. Members of wisertrader.com are neither licensed brokers nor licensed advisors. Trades discussed represent recommendations made by the editor for the wisertrader.com portfolio. The newsletter and web site are for information only and should not be considered as personal advice. While it is believed that the posted information is factual, mistakes can be made in transcription. Investors should trade stocks only after verifying all information and consulting with a licensed broker or adviser
Industry leadership is in Table 1 below where leading industries are ranked from highest to lowest.
Table 1
Market Summary
Week Ending 04/02/05
Major Indices:
Dow Jones -0.4%
NASDAQ -0.3%
S&P500 Index +0.1%
Russell 2000 -0.6%
30 Year Bond 4.729%
10 Year Note 4.451%
Industry Leaders
For the Past Week:
Internet
Apparel Retailers
Distillers & Vintners
Health Care Providers
Water
Oil Equipment & Services
Hotels
Food Retailers & Wholesalers
Specialized Consumer Services
Aerospace & Defense
Industry Leaders
For the Past Month:
Railroads
Health Care Providers
Exploration & Production
Apparel Retailers
Hotels
Internet
Specialty Chemicals
Airlines
Aerospace & Defense
Defense
Crude Oil $57.27
Gold for the past 30 days:
USD -1.41%
CAD -3.56%
CHF +1.90%
GBP +0.73%
EUR +0.85%
JPY +1.69%
Indices were more mixed this week as the market's focus remained on oil prices, inflation and interest rates. Oil ended last week at $54.84 a barrel and this week at $57.27. There were lots of economic data this week that have not been fully assimilated by the markets. So the markets remain directionless until earnings get into full swing in a couple of weeks. Many analysts have criticized Goldman Sachs’ analysis that it will take a large oil spike to $105 a barrel in order to quell demand. Are these the same analysts that discounted the idea that oil would approach $60 a barrel?
The 5 day RSI for the DOW, S&P500 and the NASDAQ are neutral. The 5 week RSI for the DOW, S&P500 and NASDAQ are oversold, neutral and very-oversold, respectively. Other sentiment indicators are given in Table 2 that shows traders are becoming more cautious.
Table 2
VTO Report on Market Sentiment Indicators
|
Sentiment Indicator |
Value |
Last Week |
2 Weeks Ago |
Complacent |
Cautious |
|
VIX |
14.09 |
13.42 |
13.14 |
< 20 |
> 50 |
|
VXN |
17.61 |
17.15 |
17.88 |
< 30 |
> 70 |
|
Put/Call Ratio |
0.813 |
0.500 |
0.721 |
< 0.6 |
> 0.7 |
______________________________________________________________________________
______________________________________________________________________________
It was decided not to change any of the screening criteria simply to add more stock picks in a directionless market. Such a move could give undesirable results. When no new picks are screened by our filters it’s the market’s way of telling us to be cautious and perhaps even to stay out.
With a greater newsletter emphasis on stocks, it was also decided to treat each watch list more as if it were a portfolio by adding trailing stop information in place of options information that was relegated to the options advisory service. The last column on the right of each watch list gives the current price as a percentage relative to the maximum value the stock reached after it was listed in the watch list. Those selections that have declined by 15% or more from their maximums after being listed are highlighted with a red.
The following stock screens were generated with tools from AAII. The short term trading filter used for Table 3A looks for optionable stocks whose percentage relative strength over the past 6 months is greater than 90%, EPS Growth over the past 12 months is greater than 80% and are within 5% of their 52 week high with a minimum price of $50.
Key
|
Open Trade |
|
Passed Recent Filter |
TXI was removed because its price declined too far below its 52 week high and its relative strength no longer met requirements of the filter. CRS and X were removed low relative strength and price declines
Table 3A
Stephen Cooper Stock Candidate Watch List 04/02/05
|
Stock |
Reference |
% Chg |
Company |
Sector |
Industry |
% of High |
|
AAPL |
01/10/05 |
18.6% |
Apple Computer, Inc. |
Technology |
Computer Hardware |
90.7% |
|
AEOS |
02/07/05 |
6.9% |
American Eagle Outfitters |
Services |
Retail (Apparel) |
97.3% |
|
AET |
01/03/05 |
20.2% |
Aetna Inc. |
Financial |
Insurance (Accident & Health) |
95.9% |
|
APA |
03/10/05 |
3.2% |
Apache Corporation |
Energy |
Oil & Gas Operations |
99.4% |
|
BHP |
02/24/05 |
-3.2% |
BHP Billiton Limited (ADR) |
Basic Materials |
Metal Mining |
92.3% |
|
BTU |
11/22/04 |
20.4% |
Peabody Energy Corporation |
Energy |
Coal |
95.1% |
|
BYD |
02/21/05 |
6.9% |
Boyd Gaming Corporation |
Services |
Casinos & Gaming |
92.9% |
|
DO |
03/04/05 |
2.1% |
Diamond Offshore Drilling Inc. |
Energy |
Oil Well Services & Equipment |
100.0% |
|
FFIV |
02/14/05 |
-7.9% |
F5 Networks Inc. |
Technology |
Computer Networks |
86.9% |
|
GMR |
02/25/05 |
-6.2% |
General Maritime Corp. |
Transportation |
Water Transportation |
93.8% |
|
MGG |
12/27/04 |
1.5% |
MGM MIRAGE |
Services |
Casinos & Gaming |
88.9% |
|
MON |
12/20/04 |
23.2% |
Monsanto Company |
Basic Materials |
Chemical Manufacturing |
100.0% |
|
PCO |
02/14/05 |
19.6% |
Premcor Inc. |
Energy |
Oil & Gas Operations |
100.0% |
|
PCU |
03/10/05 |
-3.3% |
Southern Peru Copper Corp (USA) |
Basic Materials |
Metal Mining |
91.3% |
|
POT |
12/20/04 |
5.4% |
Potash Corp./Saskatchewan (USA) |
Basic Materials |
Non-Metallic Mining |
94.8% |
|
SIE |
02/14/05 |
9.1% |
Sierra Health Services, Inc. |
Financial |
Insurance (Accident & Health) |
98.3% |
|
SM |
03/10/05 |
1.0% |
St. Mary Land & Exploration Co. |
Energy |
Oil & Gas Operations |
97.5% |
|
SUN |
03/04/05 |
3.3% |
Sunoco, Inc. |
Energy |
Oil & Gas Operations |
100.0% |
|
SWN |
11/22/04 |
18.0% |
Southwestern Energy Company |
Energy |
Oil & Gas Operations |
96.4% |
|
TS |
01/10/05 |
33.1% |
Tenaris S.A. (ADR) |
Capital Goods |
Construction - Supplies and Fixtures |
92.7% |
|
TXU |
11/22/04 |
25.2% |
TXU Corporation |
Utilities |
Electric Utilities |
100.0% |
|
VLO |
02/07/05 |
33.3% |
Valero Energy Corp. |
Energy |
Oil & Gas Operations |
100.0% |
|
YELL |
03/10/05 |
-4.5% |
Yellow Roadway Corp. |
Transportation |
Trucking |
95.0% |
Average change for this watch list = 9.8%
Stocks selected by the put option filter are listed in Table 3B. This filter looks for stocks having the potential to decline in a down market. They are optionable stocks priced above $30 having less than 20% year over year EPS growth, a 26 week %Rank Relative Strength of less than 20% and are within 5% of their 52 week lows. The status of this experimental filter is discussed in Section 4. It is observed that these stocks do not necessarily deteriorate quickly when the market turns down. Their declines seem to be consistently gradual. NYT was removed due to its relative strength increasing beyond filter requirements.
Table 3B
Put Option Candidate Watch List as of 04/02/05
|
Stock |
Reference |
% Chg |
Company |
Sector |
Industry |
% of High |
|
BMET |
03/25/05 |
-5.4% |
Biomet, Inc. |
Health Care |
Medical Equipment & Supplies |
91.6% |
|
CPS |
03/04/05 |
5.4% |
ChoicePoint Inc. |
Services |
Business Services |
98.5% |
|
DJ |
02/24/05 |
-2.7% |
Dow Jones & Co. |
Services |
Printing & Publishing |
95.9% |
|
FITB |
02/21/05 |
-6.2% |
Fifth Third Bancorp |
Financial |
Regional Banks |
92.4% |
|
FRX |
03/18/05 |
-1.2% |
Forest Laboratories, Inc. |
Health Care |
Biotechnology & Drugs |
96.9% |
|
GM |
02/07/05 |
-22.3% |
General Motors Corporation |
Consumer Cyclical |
Auto & Truck Manufacturers |
77.7% |
|
LLY |
03/18/05 |
-2.5% |
Eli Lilly & Co. |
Health Care |
Major Drugs |
96.8% |
|
NBIX |
04/01/05 |
0.0% |
Neurocrine Biosciences, Inc. |
Health Care |
Biotechnology & Drugs |
100.0% |
|
MIL |
02/07/05 |
-3.9% |
Millipore Corporation |
Technology |
Scientific & Technical Instruments |
93.6% |
|
WL |
02/24/05 |
3.1% |
Wilmington Trust Corp. |
Financial |
Regional Banks |
97.3% |
Average change for this watch list = -3.6%
The stock filter resulting in Table 3C is for the potential to write covered call options. The filter looks for optionable stocks whose percentage relative strength over the past 6 months is greater than 90%, EPS Growth over the past 12 months is greater than 80% and are within 5% of their 52 week highs with a maximum stock price of $20.
Table 3C
Stephen Cooper Covered Call Writing Watch List as of 04/02/05
|
Stock |
Reference |
% Chg |
Company |
Sector |
Industry |
% of High |
|
AES |
02/24/05 |
0.3% |
The AES Corporation |
Utilities |
Electric Utilities |
93.7% |
|
CCK |
03/18/05 |
-9.5% |
Crown Holdings Inc |
Basic Materials |
Containters & Packaging |
90.5% |
|
GLBL |
02/24/05 |
-3.9% |
Global Industries, Ltd. |
Energy |
Oil Well Services & Equipment |
92.9% |
|
MDR |
03/18/05 |
-4.5% |
McDermott International |
Energy |
Oil Well Services & Equipment |
95.5% |
|
MDRX |
02/07/05 |
24.0% |
Allscripts Healthcare Solutions, Inc. |
Technology |
Software & Programming |
93.2% |
|
RETK |
03/04/05 |
32.3% |
Retek Inc. |
Technology |
Software & Programming |
96.4% |
|
SGR |
02/07/05 |
24.8% |
The Shaw Group Inc. |
Basic Materials |
Misc. Fabricated Products |
96.3% |
|
SID |
12/20/04 |
31.7% |
Companhia Siderurgica Nacional (ADR) |
Basic Materials |
Iron & Steel |
92.6% |
|
SYXI |
04/01/05 |
0.0% |
IXYS Corporation |
Technology |
Semiconductors |
100.0% |
|
TIWI |
02/14/05 |
0.1% |
Telesystem International Wireless (USA) |
Services |
Communications Services |
97.1% |
|
USU |
03/18/05 |
-7.8% |
USEC Inc. |
Basic Materials |
Non-Metallic Mining |
88.7% |
|
WFR |
03/04/05 |
-7.3% |
MEMC Electronic Materials |
Technology |
Semiconductors |
91.0% |
|
XXIA |
01/02/05 |
5.4% |
Ixia |
Technology |
Electronic Instruments & Controls |
91.5% |
Average change for this watch list = 6.6%
For the screen in Table 3D, the number of selections is reduced by eliminating stocks having P/E’s greater than 30. PTRY was removed due to week price and relative strength.
Table 3D
Growth Momentum Watch List as of 04/02/05
|
Stock |
Reference |
% Chg |
Company |
Sector |
Industry |
% of High |
|
CRAI |
03/18/05 |
-2.1% |
Charles River Associates Incorporated |
Services |
Business Services |
96.3% |
|
ELK |
02/24/05 |
-0.8% |
ElkCorp |
Capital Goods |
Construction – Supplies and Fixtures |
92.2% |
|
KBH |
01/10/05 |
15.5% |
KB Home |
Capital Goods |
Construction Services |
94.2% |
|
OSK |
03/12/05 |
3.3% |
Oshkosh Truck Corporation |
Consumer Cyclical |
Auto & Truck Manufacturers |
98.6% |
|
SFY |
03/18/05 |
-2.2% |
Swift Energy Company |
Energy |
Oil & Gas Operations |
97.8% |
|
SPF |
02/14/05 |
-0.1% |
Standard Pacific Corp. |
Capital Goods |
Construction Services |
90.3% |
|
TDY |
03/18/05 |
-3.9% |
Teledyne Technologies Incorporated |
Services |
Business Services |
95.2% |
|
USNA |
02/21/05 |
5.8% |
USANA Health Sciences, Inc. |
Consumer Non-Cyclical |
Personal & Household Products |
88.7% |
|
WFR |
03/18/05 |
-4.6% |
MEMC Electronic Materials |
Technology |
Semiconductors |
95.4% |
|
WOS |
04/01/05 |
0.0% |
Wolseley plc (ADR) |
Capital Goods |
Misc. Capital Goods |
100.0% |
Average change for this watch list = 1.1%
For the Peter Lynch screen in Table 3E, again the number of selections for this screen is reduced by eliminating stocks having P/E’s greater than 30. Toyota appears to be in a decidedly down trend.
Table 3E
Peter Lynch Value Watch List as of 04/02/05
|
Stock |
Reference |
% Chg |
Company |
Sector |
Industry |
% of High |
|
BLSC |
12/13/04 |
6.0% |
Bio-Logic Systems Corp. |
Health Care |
Medical Equipment & Supplies |
83.9% |
|
CAJ |
01/31/05 |
1.1% |
Canon Inc. (ADR) |
Technology |
Peripherals |
98.5% |
|
CHL |
03/18/05 |
-3.6% |
China Mobile (Hong Kong) |
Services |
Communications |
95.4% |
|
CSLMF |
12/13/04 |
-2.9% |
Consolidated Mercantile (USA) |
Basic Materials |
Containters & Pkg |
92.5% |
|
GMK |
04/01/05 |
0.0% |
Gruma S.A. de C.V. (ADR) |
Cons Non-Cyc |
Food Processing |
100.0% |
|
IMY |
03/25/05 |
-4.1% |
Grupo IMSA S.A. de C.V. (ADR) |
Basic Materials |
Iron & Steel |
95.9% |
|
KEP |
12/13/04 |
0.2% |
Korea Electric Power |
Utilities |
Electric Utilities |
90.5% |
|
LFL |
12/13/04 |
19.6% |
Lan Airlines S.A. (ADR) |
Transportation |
Airline |
99.2% |
|
MBT |
01/10/05 |
2.1% |
Mobile TeleSystems OJSC |
Services |
Communications |
86.3% |
|
MKTAY |
02/07/05 |
0.5% |
Makita Corporation (ADR) |
Consumer Cyc |
Appliances & Tools |
91.1% |
|
NOLD |
12/13/04 |
5.3% |
Noland Company |
Capital Goods |
Misc. Capital Goods |
92.1% |
|
PCU |
12/13/04 |
22.4% |
Southern Peru Copper Corp |
Basic Materials |
Metal Mining |
87.1% |
|
SHI |
12/13/04 |
18.8% |
Sinopec Shanghai Petrochem |
Energy |
Oil & Gas Operations |
91.3% |
|
SKM |
02/07/05 |
-2.8% |
SK Telecom Co., Ltd. (ADR) |
Services |
Communications |
90.7% |
|
TM |
12/13/04 |
-1.0% |
Toyota Motor Corporation (ADR) |
Consumer Cyc |
Auto & Truck |
90.7% |
|
TMIC |
03/25/05 |
-0.2% |
Trend Micro Incorporated (ADR) |
Technology |
Software & Prog |
99.8% |
|
VCP |
03/25/05 |
0.5% |
Votorantim Celulose e Papel S.A |
Basic Materials |
Forestry & Wood |
100.0% |
|
VLCCF |
12/13/04 |
10.9% |
Knightsbridge Tankers Limited |
Transportation |
Water Transportation |
97.1% |
Average change for this watch list = 4.1%
The filter for Warren Buffet style stock picking in Table 3F is for the intermediate to long term. Two requirements were added. One was to include only optionable stocks in order to find LEAPS opportunities. The other requirement was to include only those stocks having a PE of 17 or less. ABFS was removed due to weak price action.
Table 3F
Warren Buffett Value Watch List as of 04/02/05
|
Stock |
Reference |
% Chg |
Company |
Sector |
Industry |
% of High |
|
COLM |
01/10/05 |
-5.0% |
Columbia Sportswear Company |
Consumer Cyclical |
Apparel/Accessories |
92.6% |
|
DHI |
12/27/04 |
2.6% |
D.R. Horton Inc. |
Capital Goods |
Construction Services |
88.3% |
|
DSPG |
02/07/05 |
0.4% |
DSP Group, Inc. |
Technology |
Communications Equipment |
96.0% |
|
ELBO |
01/31/05 |
19.9% |
Electronics Boutique Holdings Corp. |
Services |
Retail (Technology) |
89.5% |
|
HOV |
12/27/04 |
9.1% |
Hovnanian Enterprises |
Capital Goods |
Construction Services |
87.3% |
|
LNCR |
12/27/04 |
4.8% |
Lincare Holdings Inc. |
Health Care |
Healthcare Facilities |
99.6% |
|
PGR |
12/27/04 |
7.3% |
The Progressive Corp. |
Financial |
Insurance (Property & Casualty) |
98.5% |
|
RS |
12/27/04 |
2.8% |
Reliance Steel & Aluminum |
Basic Materials |
Misc. Fabricated Products |
84.4% |
|
VLCCF |
02/21/05 |
-1.4% |
Knightsbridge Tankers Limited |
Transportation |
Water Transportation |
97.1% |
Average change for this watch list = 4.5%
The stocks from Benjamin Graham’s style of utility investing are listed in Table 3G. A requirement was added to include only those stocks having a PE of 17 or less. It should be noted that all of these stocks are expected to pull back about 20% or so as interest rates increase.
Table 3G
Benjamin Graham Value Watch List as of 04/02/05
|
Stock |
Reference |
% Chg |
Company |
Sector |
Industry |
% of High |
|
ATO |
04/01/05 |
0.0% |
Atmos Energy Corporation |
Utilities |
Natural Gas Utilities |
100.0% |
|
KEP |
01/10/05 |
8.2% |
Korea Electric Power Corporation (ADR) |
Utilities |
Electric Utilities |
90.5% |
|
PGN |
01/10/05 |
-4.4% |
Progress Energy, Inc. |
Utilities |
Electric Utilities |
93.7% |
|
PNW |
01/10/05 |
-1.3% |
Pinnacle West Capital |
Utilities |
Electric Utilities |
98.6% |
|
SRE |
01/10/05 |
10.8% |
Sempra Energy |
Utilities |
Natural Gas Utilities |
94.9% |
|
WPS |
02/07/05 |
2.5% |
WPS Resources Corp |
Utilities |
Electric Utilities |
96.4% |
Average change for this watch list = 2.6%
Alert number 9 is the TNX DEC 45.00 CALL with the symbol TNX LI. This trade is down a -19.1% and remains open. I think the right thing to do is to wait until the April CPI data on inflation is reported unless the trade is stopped out before then. Alert number 10 is the QQQQ JUN 36.00 PUT with the symbol QQQ RJ. This trade was stopped out with a 19% loss. Alert number 11 is the NYT July 40.00 PUT with the symbol NYT SH. This trade was cancelled due to the stock showing improved relative strength. A PCO September 60.00 CALL with the symbol PCO IL remains open. This trade is currently up 74%.
Table 4A
Option Portfolio Trading History as of 04/02/05
|
Stock |
Buy Date |
Buy Price |
Last |
Action |
P/L(%) |
Option |
|
URBN |
11/23 |
11.50 |
$9.00 |
Sold 11/30 |
-21.7% |
URQ FG JUN 35.00 CALL |
|
TXU |
11/23 |
11.30 |
$6.30 |
Sold 12/2 |
-44.2% |
TXU DK APR 55.00 CALL |
|
USG |
11/23 |
8.40 |
$12.80 |
Sold 12/15 |
52.4% |
MAY 25.00 CALL |
|
ADSK |
12/20 |
8.20 |
$9.20 |
Sold 12/23 |
12.2% |
ADQ GN JUL 70.00 CALL |
|
MON |
12/20 |
3.80 |
$4.80 |
Sold 12/23 |
26.3% |
MON GJ JUL 50.00 CALL |
|
POT |
12/20 |
7.00 |
$8.00 |
Sold 12/23 |
14.3% |
POT FP JUN 80.00 CALL |
|
TXI |
12/20 |
5.50 |
$9.00 |
Sold 12/23 |
63.6% |
TXI GL JUL 60.00 CALL |
|
AET |
1/7 |
5.70 |
$7.10 |
Sold 01/19 |
24.6% |
AET GX JUL 135.00 CALL |
|
CLF |
1/7 |
7.30 |
$9.20 |
Sold 01/19 |
26.0% |
CLF GJ JUL 50.00 CALL |
|
MTH |
1/21 |
6.80 |
$9.20 |
Sold 02/01 |
35.3% |
MTH FZ JUN 62.50 CALL |
|
BZH |
1/31 |
13.70 |
$17.30 |
Sold 02/01 |
26.3% |
BZH HJ AUG 150.00 CALL |
|
KBH |
1/31 |
9.20 |
$11.10 |
Sold 02/01 |
20.7% |
KBH GU JUL 110.00 CALL |
|
BHP |
1/28 |
2.25 |
$2.70 |
Sold 02/01 |
20.0% |
BHP HE AUG 25.00 CALL |
|
X |
1/25 |
5.30 |
$4.90 |
Sold 02/02 |
-7.5% |
X GK JUL 55.00 CALL |
|
SFI |
1/24 |
0.75 |
$0.30 |
Sold 02/04 |
-60.0% |
SFI PH APR 40.00 PUT |
|
EBAY |
2/7 |
6.80 |
$5.60 |
Sold 02/08 |
-17.6% |
XBA SO JUL 75.00 PUT |
|
CCJ |
2/4 |
6.60 |
$10.20 |
Sold 02/11 |
54.5% |
CCJ IG SEP 35.00 CALL |
|
MON |
2/4 |
8.00 |
$8.20 |
Sold 02/15 |
2.5% |
MON GJ JUL 50.00 CALL |
|
TOL |
1/2 |
7.10 |
$7.30 |
Sold 02/17 |
2.8% |
TOL IR SEP 90.00 CALL |
|
BZH |
2/9 |
14.60 |
$16.90 |
Sold 02/17 |
15.8% |
BZH HN AUG 170.00 CALL |
|
KBH |
2/7 |
11.10 |
$10.40 |
Sold 02/18 |
-6.3% |
KBH GC JUL 115.00 CALL |
|
VLO |
2/24 |
6.98 |
$8.70 |
Sold 03/02 |
24.6% |
VLO IN SEP 70.00 CALL |
|
TXU |
2/25 |
3.55 |
$4.70 |
Sold 03/04 |
32.4% |
TXU GP JUL 80.00 CALL |
|
SWN |
3/3 |
6.50 |
$5.00 |
Sold 03/11 |
-23.1% |
SWN IL SEP 60.00 CALL |
|
GM |
3/9 |
2.20 |
$5.80 |
Sold 03/17 |
163.6% |
GM UZ SEP 32.50 PUT |
|
VLO |
3/17 |
6.60 |
$7.50 |
Sold 03/18 |
13.6% |
YGY AP JAN 80.00 CALL |
|
BHP |
2/24 |
2.25 |
$2.40 |
Sold 03/22 |
6.7% |
BHP HF AUG 30.00 CALL |
|
QQQQ |
3/29 |
1.05 |
$0.85 |
Sold 03/31 |
-19.0% |
QQQ RJ JUN 36.00 PUT |
|
PCO |
3/17 |
5.00 |
$8.70 |
Long |
74.0% |
PCO IL SEP 60.00 CALL |
|
TNX |
3/14 |
6.80 |
$5.50 |
Long |
-19.1% |
TNX LI DEC 45.00 CALL |
Overall Average Profit = 16.4% per trade.
The goal of the filter tracking experiment is to observe the use of stock candidate filters to buy call options and write covered calls in rising and sideways markets and the down-market filter for use in buying put options in declining and sideways markets. So far we have not had a significant sustained down market environment in which to test the down-market filter. Essential features of the 3 filters are described in Table 4B.
Table 4B
Filter Criteria
|
Description |
(1) Stock Candidate |
(2) Down-market |
(3) Stock Candidate |
|
Purpose |
Buy Call Options |
Buy Put Options |
Write Covered Calls |
|
Market direction |
Up, Sideways |
Down, Sideways |
Up, Sideways |
|
Price |
> $50 |
> $30 |
< $20 |
|
12 m EPS growth |
> 80% |
< 20% |
> 80% |
|
Relative Strength |
26 wk >90% |
26 wk < 20% |
26 wk >90% |
|
Price within |
5% of 52wk high |
5% of 52 wk low |
5% of 52wk high |
|
Exchanges |
NASDAQ, NYSE |
NASDAQ, NYSE |
NASDAQ, NYSE |
The relative average filter performance for the three groups of filtered stocks is compared with proxies for the major averages in Table 4C. Filter 1 stocks are those listed in Table 3A and filter 2 stocks, for the experimental filter, are listed in Table 3B. Filter 3 stocks are listed in Table 3C. Filter 2 stocks decline more than filter 1 and 3 stocks for the past week and for the past month.
Table 4C
Average Filter Performance as of 04/02/05
|
Instrument |
Past month |
1 Week ago |
2 weeks ago |
3 weeks ago |
4 weeks ago |
|
SPY (S&P500) |
-4.3% |
0.2% |
-1.2% |
-1.5% |
-1.9% |
|
DIA (DOW) |
-5.0% |
-0.4% |
-1.4% |
-1.7% |
-1.6% |
|
QQQQ (NASDAQ) |
-3.5% |
-0.2% |
-0.7% |
-1.8% |
-0.9% |
|
IWN (Russell 2000) |
-5.5% |
-0.4% |
-1.4% |
-1.0% |
-2.8% |
|
Filter 1 > $50 |
-3.6% |
1.3% |
-2.5% |
1.3% |
-3.7% |
|
Filter 2 > $30 |
-6.9% |
-1.3% |
-0.2% |
-3.3% |
-2.3% |
|
Filter 3 < $20 |
-0.4% |
0.0% |
-2.6% |
2.1% |
0.2% |
It is significant that the major averages are within 1 to 4% of their values one year ago. Profits are likely to be found in either longer term investments such as stocks that have compelling value or in very short term trades that take advantage of small market fluctuations. The jury is still out on the future demand for oil. But it is unlikely that a glut in gasoline will emerge in the foreseeable future making refineries a solid bet.
Average fractional profit for 30 trades, FP = 16.45% per trade.
Fraction of trades chosen in the correct direction, FC = 70.0%
Average fractional gain for 21 winning trades, FG = 33.92% per trade.
Average fractional loss for 9 losing trades, FL = -24.30% per trade.
The dollar profit goal DG
is set equal to the average capital used per trade C such that
N = 1 / FP = 6.1
becomes the average number of trades to earn the average traded amount.
The Profit Factor for the
trading system, FG FC / [FL (1 - FC)]
= 2.74
Gross Profits divided by Gross Losses (includes
1% commission)
Below are links to conference registration sites where you can sign up.
Conference Search