WiserTrader Industries Monthly

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October 2007                          Prescott, Arizona                     Contact Editor

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Contents

 

 

 

 

Published the 3rd Tuesday of the month        Subscription is free.

 

 

 

 

 

 

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     The new top-down stock portfolio got off to a good start.  Now a month old, more selections can be added while attempting to achieve a more balanced asset allocation.  Criteria for choosing stocks are quite simple.  We look for leading industries in leading sectors and find stocks that show growth in market share, earnings and sales. 

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1.0 Leading Sectors and Industries for October

 

     Sector and industry rankings are normally determined by the percent increase in industry composite index values over the previous 4 weeks.  Industry rank ranges from a high of 1 to a low of 215 based on a list of 215 industries in the Yahoo Finance industry classification system. 

 

     We have commented before that a 1-day change of 15% or more in an industry’s index value can be caused by splits, mergers or acquisitions.  Yahoo is aware of the problem.  Two leading industries having this problem now are Independent Oil and Gas and Auto Parts.  So I have decided to rank sectors based on the average of their industry rankings to damp out the effects of noise in the data.

 

     Sectors rankings based on the average of their industry rankings are listed in Table 1A.

 

 

 

Table 1A

Sector Rank

Rank

Sector

Average Industry Rank

1

Basic Materials

38

2

Technology

78

3

Consumer Noncyclical

90

4

Energy

90

5

Transportation

97

6

Industrial Goods

108

7

Services

121

8

Healthcare

121

9

Utilities

121

10

Financial

124

11

Consumer Cyclical

137

12

Conglomerates

147

 

 

     The leading industries for the past month are ranked in Table 1B.  The leftmost column is the rank based on the previous 4-week percentage change.  The second column from the left is ranked by the number of positions an industry is above or below its 4-week average rank.  The third column from the left is the average of the first two columns.  Clicking on the industry name takes you to an industry summary page.  The “C’s” will display the companies in the industry.  The last three columns on the right are the percentage gains for the previous trading day, the previous week and the previous four weeks.

 

 

 Table 1B

Leading Industries

October 16, 2007

Rank [R]

Rank of Change   [C]

(R+C)/2

Industries

Companies

Last Gain

1 wk Ago Gain

1 mo Gain

1

92

47

Nonmetallic Mineral Mining

C's

1.7%

-0.7%

19.0%

2

100

51

Industrial Metals & Minerals

C's

-1.5%

0.5%

15.8%

3

61

32

Personal Computers

C's

0.7%

0.6%

14.4%

4

30

17

Education & Training Services

C's

0.8%

2.9%

14.1%

5

91

48

Internet Information Providers

C's

-1.4%

-1.1%

13.8%

6

114

60

Copper

C's

-2.6%

1.5%

13.8%

7

21

14

Diversified Investments

C's

-2.1%

4.3%

13.7%

8

69

39

Basic Materials Wholesale

C's

-1.7%

1.2%

13.0%

9

2

6

Heavy Construction

C's

-1.9%

1.1%

12.4%

10

14

12

Data Storage Devices

C's

-1.2%

1.4%

11.8%

11

64

38

Business Software & Services

C's

-0.7%

-1.4%

11.7%

12

101

57

Agricultural Chemicals

C's

-0.3%

1.7%

11.5%

13

95

54

Foreign Money Center Banks

C's

-5.1%

-12.3%

10.6%

14

35

25

Drug Delivery

C's

-1.6%

0.4%

10.4%

15

45

30

Computer Peripherals

C's

-1.2%

-0.6%

10.4%

16

98

57

Silver

C's

-2.9%

1.6%

10.2%

17

53

35

Major Integrated Oil & Gas

C's

-0.1%

6.8%

9.9%

18

43

31

Steel & Iron

C's

-2.9%

-2.4%

9.8%

19

82

51

Telecom Services - Foreign

C's

-0.5%

3.0%

9.7%

20

130

75

Music & Video Stores

C's

0.4%

1.5%

9.6%

21

124

73

Technical Services

C's

-1.5%

0.1%

9.6%

22

23

23

Security Software & Services

C's

-0.9%

-1.5%

8.9%

23

46

35

Shipping

C's

-1.4%

-0.5%

8.7%

24

26

25

Wireless Communications

C's

-0.6%

1.0%

8.5%

25

127

76

Gold

C's

-1.3%

3.6%

7.9%

26

34

30

Farm Products

C's

1.2%

2.6%

7.9%

27

1

14

Long Distance Carriers

C's

1.1%

1.2%

7.0%

28

68

48

Asset Management

C's

-1.6%

-2.9%

6.9%

29

25

27

Business Services

C's

-0.8%

-2.3%

6.6%

30

32

31

Beverages - Brewers

C's

-1.2%

-2.6%

6.6%

31

20

26

Rubber & Plastics

C's

-0.5%

-1.0%

6.4%

32

59

46

Internet Software & Services

C's

0.1%

-0.9%

6.3%

33

90

62

Industrial Electrical Equipment

C's

-1.0%

-1.3%

6.3%

34

22

28

Air Services, Other

C's

0.7%

4.8%

6.3%

35

118

77

Life Insurance

C's

-1.3%

-3.3%

6.3%

36

56

46

Aerospace/Defense Products & Services

C's

-0.1%

-0.9%

6.2%

37

117

77

Multimedia & Graphics Software

C's

-1.5%

-2.1%

5.9%

38

24

31

Healthcare Information Services

C's

-0.4%

-0.2%

5.8%

39

128

84

Diversified Communication Services

C's

-0.4%

-2.0%

5.8%

40

78

59

Oil & Gas Refining & Marketing

C's

-0.2%

3.2%

5.7%

 

 

     The top 20 leading industries are plotted in Figure 1.

 

 

FIGURE 1

 

 

2.0 Industries Rising in Rank

 

     Table 2A contains the industries that are moving up in position the fastest.  The 20 fastest rising in rank are plotted in Figure 2.

 

 

 Table 2A

Industries Advancing in Rank the Fastest

October 16, 2007

Rank [R]

Rank of Change   [C]

(R+C)/2

Industries

Companies

Last Gain

1 wk Ago Gain

1 mo Gain

27

1

14

Long Distance Carriers

C's

1.1%

1.2%

7.0%

9

2

6

Heavy Construction

C's

-1.9%

1.1%

12.4%

47

3

25

Management Services

C's

-0.2%

-0.2%

4.8%

53

4

29

Recreational Vehicles

C's

-0.9%

-3.0%

4.2%

54

5

30

Semiconductor - Specialized

C's

0.1%

-0.9%

4.1%

46

6

26

Advertising Agencies

C's

-1.8%

-1.9%

5.0%

45

7

26

Industrial Equipment Wholesale

C's

-0.9%

-1.4%

5.2%

89

8

49

Meat Products

C's

-1.2%

-4.0%

2.6%

78

9

44

Marketing Services

C's

-1.3%

-1.7%

3.2%

61

10

36

Information Technology Services

C's

-1.5%

-2.0%

3.9%

66

11

39

Cigarettes

C's

0.4%

1.3%

3.6%

56

12

34

Regional Airlines

C's

-1.2%

-0.6%

4.1%

68

13

41

Tobacco Products, Other

C's

-0.2%

2.6%

3.5%

10

14

12

Data Storage Devices

C's

-1.2%

1.4%

11.8%

121

15

68

Staffing & Outsourcing Services

C's

0.4%

-1.4%

1.2%

85

16

51

Oil & Gas Pipelines

C's

-0.2%

1.2%

2.7%

111

17

64

Insurance Brokers

C's

-0.7%

-2.3%

1.7%

106

18

62

General Contractors

C's

-0.9%

-1.4%

1.8%

128

19

74

Drugs Wholesale

C's

-0.7%

-1.9%

0.8%

31

20

26

Rubber & Plastics

C's

-0.5%

-1.0%

6.4%

7

21

14

Diversified Investments

C's

-2.1%

4.3%

13.7%

35

22

29

Air Services, Other

C's

0.7%

4.8%

6.3%

22

23

23

Security Software & Services

C's

-0.9%

-1.5%

8.9%

29

24

27

Business Services

C's

-0.8%

-2.3%

6.6%

24

25

25

Wireless Communications

C's

-0.6%

1.0%

8.5%

39

26

33

Healthcare Information Services

C's

-0.4%

-0.2%

5.8%

135

27

81

Publishing - Newspapers

C's

0.7%

-0.7%

0.5%

94

28

61

Lodging

C's

1.0%

-0.7%

2.3%

4

30

17

Education & Training Services

C's

0.8%

2.9%

14.1%

58

29

44

Research Services

C's

-0.2%

-1.4%

4.0%

91

31

61

Cement

C's

-1.7%

-5.1%

2.5%

30

32

31

Beverages - Brewers

C's

-1.2%

-2.6%

6.6%

64

33

49

Security & Protection Services

C's

0.2%

-1.1%

3.6%

26

34

30

Farm Products

C's

1.2%

2.6%

7.9%

14

35

25

Drug Delivery

C's

-1.6%

0.4%

10.4%

86

36

61

Diversified Computer Systems

C's

0.7%

-0.2%

2.7%

92

37

65

Grocery Stores

C's

-0.5%

-0.6%

2.5%

142

38

90

CATV Systems

C's

0.1%

-0.7%

0.0%

80

39

60

Property & Casualty Insurance

C's

-0.6%

-1.6%

3.1%

65

40

53

Electronics Wholesale

C's

-0.7%

-1.1%

3.6%

 

 

FIGURE 2

 

 

 

3.0 Industries Falling in Rank

 

     A list of the industries declining in rank the fastest is given in Table 3A.  The 20 fastest declining in rank are plotted in Figure 3.

 

 

 Table 3A

Industries Declining in Rank the Fastest

October 16, 2007

Rank [R]

Rank of Change   [C]

(R+C)/2

Industries

Companies

Last Gain

1 wk Ago Gain

1 mo Gain

209

176

193

Savings & Loans

C's

-2.0%

-6.3%

-8.0%

108

177

143

Restaurants

C's

0.0%

-3.1%

1.7%

200

178

189

Real Estate Development

C's

-2.6%

-6.1%

-6.5%

57

179

118

Resorts & Casinos

C's

-0.4%

-1.8%

4.0%

163

180

172

Medical Appliances & Equipment

C's

0.0%

-5.0%

-1.4%

212

181

197

Trucks & Other Vehicles

C's

-1.6%

-13.4%

-10.1%

166

182

174

Credit Services

C's

-2.1%

-5.5%

-1.8%

173

183

178

Paper & Paper Products

C's

-0.8%

-5.3%

-2.2%

152

184

168

Electronic Equipment

C's

-1.2%

-3.9%

-0.6%

193

185

189

Mortgage Investment

C's

-1.8%

-6.3%

-4.5%

168

186

177

Railroads

C's

-1.5%

-3.9%

-2.0%

195

187

191

Textile - Apparel Clothing

C's

-0.3%

-3.3%

-5.0%

205

188

197

Regional - Mid-Atlantic Banks

C's

-2.1%

-6.2%

-6.8%

129

189

159

Recreational Goods, Other

C's

1.1%

-1.0%

0.7%

188

190

189

Department Stores

C's

-1.4%

-5.3%

-3.7%

77

192

135

Metal Fabrication

C's

-0.7%

-4.2%

3.2%

103

191

147

Investment Brokerage - National

C's

-1.3%

-4.9%

2.0%

125

193

159

Foreign Utilities

C's

-0.9%

-0.8%

1.1%

180

194

187

Lumber, Wood Production

C's

-2.2%

-5.4%

-3.1%

175

195

185

Industrial Equipment & Components

C's

-0.5%

-2.5%

-2.5%

141

196

169

Diversified Electronics

C's

-0.8%

-3.6%

0.0%

96

197

147

Synthetics

C's

-1.6%

-3.3%

2.2%

104

198

151

Catalog & Mail Order Houses

C's

-0.9%

-2.7%

1.9%

162

199

181

REIT - Residential

C's

-1.6%

-5.6%

-1.3%

140

200

170

Technical & System Software

C's

-2.6%

-6.1%

0.1%

191

201

196

Money Center Banks

C's

-2.5%

-4.9%

-4.1%

107

202

155

Independent Oil & Gas

C's

-6.8%

17.8%

148.1%

154

203

179

Aerospace/Defense - Major Diversified

C's

0.8%

-3.7%

-0.7%

174

204

189

Auto Parts Wholesale

C's

-0.5%

-2.1%

-2.3%

147

205

176

Conglomerates

C's

-0.3%

-2.2%

-0.3%

184

206

195

Surety & Title Insurance

C's

-2.7%

-6.9%

-3.2%

183

207

195

REIT - Diversified

C's

-1.5%

-5.7%

-3.2%

171

208

190

Toy & Hobby Stores

C's

-1.3%

-2.0%

-2.1%

213

209

211

Sporting Goods Stores

C's

-2.1%

-3.2%

-10.8%

119

210

165

REIT - Retail

C's

-1.4%

-5.6%

1.3%

198

211

205

Consumer Services

C's

-0.4%

-5.8%

-6.0%

157

212

185

Toys & Games

C's

-0.4%

-2.7%

-0.8%

156

213

185

Communication Equipment

C's

-4.9%

-5.1%

-0.8%

208

214

211

Oil & Gas Drilling & Exploration

C's

-0.2%

-8.0%

-7.9%

172

215

194

Housewares & Accessories

C's

-0.5%

-3.4%

-2.1%

 

 

FIGURE 3

 

 

 

4.0 Lagging Industries

 

     Lagging industries for the past month are listed in Table 4A.  A chart showing the rank performance of the 20 worst ranked is shown in Figure 4.

 

 

 Table 4A

Lagging Industries

October 16, 2007

Rank [R]

Rank of Change   [C]

(R+C)/2

Industries

Companies

Last Gain

1 wk Ago Gain

1 mo Gain

176

171

174

Printed Circuit Boards

C's

0.2%

-0.1%

-2.5%

177

145

161

Office Supplies

C's

-1.3%

-7.5%

-2.6%

178

107

143

Specialty Eateries

C's

-0.2%

-1.8%

-2.6%

179

110

145

Home Furnishings & Fixtures

C's

-1.1%

-4.0%

-3.0%

180

57

119

Wholesale, Other

C's

-0.7%

-3.4%

-3.1%

182

116

149

Gaming Activities

C's

-0.3%

-5.2%

-3.1%

181

196

189

Lumber, Wood Production

C's

-2.2%

-5.4%

-3.1%

183

207

195

REIT - Diversified

C's

-1.5%

-5.7%

-3.2%

184

206

195

Surety & Title Insurance

C's

-2.7%

-6.9%

-3.2%

185

96

141

Textile Industrial

C's

-0.5%

-1.8%

-3.2%

186

147

167

Water Utilities

C's

-0.4%

-3.7%

-3.4%

187

146

167

Drug Stores

C's

-0.4%

0.0%

-3.6%

188

190

189

Department Stores

C's

-1.4%

-5.3%

-3.7%

189

162

176

Home Furnishing Stores

C's

-0.5%

-3.8%

-3.8%

190

159

175

Regional - Southwest Banks

C's

-1.2%

-4.0%

-4.0%

191

201

196

Money Center Banks

C's

-2.5%

-4.9%

-4.1%

192

113

153

Semiconductor- Memory Chips

C's

-1.2%

-3.9%

-4.5%

193

76

135

Sporting Goods

C's

-0.9%

-3.8%

-4.5%

194

187

191

Mortgage Investment

C's

-1.8%

-6.3%

-4.5%

195

186

191

Textile - Apparel Clothing

C's

-0.3%

-3.3%

-5.0%

196

136

166

Photographic Equipment & Supplies

C's

-2.5%

-6.8%

-5.3%

197

175

186

Regional - Midwest Banks

C's

-1.7%

-5.3%

-5.6%

198

211

205

Consumer Services

C's

-0.4%

-5.8%

-6.0%

199

131

165

Auto Dealerships

C's

-0.7%

-3.9%

-6.2%

200

177

189

Real Estate Development

C's

-2.6%

-6.1%

-6.5%

201

166

184

Building Materials Wholesale

C's

-1.4%

-5.5%

-6.5%

202

157

180

Regional - Pacific Banks

C's

-2.2%

-6.6%

-6.5%

203

170

187

Home Health Care

C's

-1.6%

-5.8%

-6.5%

204

94

149

Trucking

C's

-0.9%

-2.7%

-6.7%

205

188

197

Regional - Mid-Atlantic Banks

C's

-2.1%

-6.2%

-6.8%

206

164

185

Apparel Stores

C's

-1.7%

-4.3%

-6.9%

207

93

150

Medical Practitioners

C's

-1.6%

0.2%

-7.2%

208

214

211

Oil & Gas Drilling & Exploration

C's

-0.2%

-8.0%

-7.9%

209

176

193

Savings & Loans

C's

-2.0%

-6.3%

-8.0%

210

150

180

Hospitals

C's

-1.9%

-5.4%

-8.2%

211

148

180

Regional - Southeast Banks

C's

-2.0%

-6.6%

-9.7%

212

181

197

Trucks & Other Vehicles

C's

-1.6%

-13.4%

-10.1%

213

209

211

Sporting Goods Stores

C's

-2.1%

-3.2%

-10.8%

214

141

178

Home Improvement Stores

C's

-1.5%

-4.0%

-11.6%

215

165

190

Residential Construction

C's

-3.7%

-8.7%

-13.1%

 

 

FIGURE 4

 

 

     It is important to remember that the usefulness of industry ranking depends on how each industry is actually performing.  When the market performs poorly, the leading industry could very well be the one that declines the least.  An industry could be doing nothing price wise but could end up near the top or bottom of the ranking list because other industries might be doing extremely poorly or well.  There is not enough information in an industry’s ranking list alone to infer how the industry index has actually changed over time.  There is no substitute for looking at the actual percentage change of an index for the industry of interest. 

 

     Industries ranked according to how much their rank positions have changed from their average is a strong indicator of future industry leadership.  This indicator also confirms how well a leading industry is maintaining its position. 

 

    The spreadsheet from which the charts and tables were obtained is available as a free download.  It is named the “industries” spreadsheet and is obtained by clicking on the Excel Files link.  The industries spreadsheet gives you performance values for all 215 industries on a single page.  The “companies” spreadsheet, used to view performance of all the companies in an industry, is downloaded from the same web page.  XLQPlus is required. 

 

 

 

5.0 Top-Down Portfolio

 

     The Top-Down Portfolio in Table 5A has 4 stocks.  Stocks are selected based, in part, on their past month price performance.  Also included are growth in market share, sales and earnings.  

 

     Three precious metals positions were exited on October 5th when the decline in the US dollar began to slow.  The gold stock symbol LIHR was sold at $36.31 for a profit of 16.3%.  The gold stock symbol IAG was sold at $8.62 for a profit of 5.5%.  The silver stock symbol PAAS was sold at $28.86 for a profit of 8.0%. 

 

     FCX has been moved to a hold because its price has declined by more than half the sell stop percentage.  Refer to Section 6 for new sell stop rules.

 

 

Table 5A

Top-Down Portfolio

October 16, 2007

Stock

Open Date

2007 Open Price

Last Date

Last Price

2007 Gross P/L (%)

Status

Sell stop

FCX

9/18/07

103.02

10/16/07

110.94

7.7%

Hold

105.66

BHP

9/18/07

68.57

10/16/07

82.00

19.6%

Buy

76.28

PBR

9/18/07

70.60

10/16/07

84.03

19.0%

Buy

76.56

SNP

9/18/07

108.65

10/16/07

153.93

41.7%

Buy

137.11

 

 

     Now a month old, currently held positions show an average profit of 22%.  The gross profit, including closed positions, is 16.8%.  After broker fees, the net profit is 15.4% as summarized in Table 5B.

 

 

Table 5B

Top-Down Portfolio Performance

October 16, 2007

Top-Down Trading in 2007 ($7000 Initial Capital)

Closed trades in 2007 =

3

 

Average Trade Size =

$1,000.00

 

Total Closed Position Share costs =

$3,000.00

 

Gross Profit on Closed Positions =

$298.24

9.9%

Number of Open Positions =

4

 

Cost of Open Positions =

$4,000.00

 

Gross Profit on Open Positions in 2007 =

$879.71

22.0%

Total Gross Profit =

$1,177.95

16.83%

Broker Commission ($9.99/trade) =

-$99.90

 

Subscription Cost to date =

$0.00

 

Net 2007 Profit After Expenses =

$1,078.05

15.4%

Cash =

$3,198.34

 

Current Capital =

$8,078.05

 

 

 

 

 

     This month we will attempt to balance to the portfolio a little.  One guideline for asset allocation is that used by my favorite stock pickers at the Oxford Club.  We can modify this a bit because it is too early to enter real estate.   

 

Asset Allocation Guideline

     30% Domestic stocks

     30% Foreign stocks

     10% High grade bonds

     10% Inflation adjusted treasuries

     10% High yield (junk) bonds

       5% Real Estate

       5% Gold

 

     Currently we have one domestic stock, Freeport McMoran (FCX), and three foreign stocks.  Following the guideline, we should try to find two domestic stocks to equalize the foreign versus domestic stock portion of the portfolio.  Bonds can be approached later through exchange traded funds.

 

     Ten industries ranked by the average of the two left-most columns are listed in Table 5C.  Industrial goods is ranked 6th in Table 1A while technology is ranked second.  Technology is also the predominant sector in Table 5C.  First we can scan through the four technology industries.

 

 

 

 Table 5C

Leading and Rising Industries

October 16, 2007

Sector

Rank [R]

Rank of Change   [C]

(R+C)/2

Industries

Companies

Last Gain

1 wk Ago Gain

1 mo Gain

Industrial Goods

9

2

6

Heavy Construction

C's

-1.9%

1.1%

12.4%

Technology

10

14

12

Data Storage Devices

C's

-1.2%

1.4%

11.8%

Technology

27

1

14

Long Distance Carriers

C's

1.1%

1.2%

7.0%

Financial

7

21

14

Diversified Investments

C's

-2.1%

4.3%

13.7%

Services

4

30

17

Education & Training Services

C's

0.8%

2.9%

14.1%

Technology

22

23

23

Security Software & Services

C's

-0.9%

-1.5%

8.9%

Technology

24

26

25

Wireless Communications

C's

-0.6%

1.0%

8.5%

Healthcare

14

35

25

Drug Delivery

C's

-1.6%

0.4%

10.4%

Services

47

3

25

Management Services

C's

-0.2%

-0.2%

4.8%

Consumer Cyclical

31

20

26

Rubber & Plastics

C's

-0.5%

-1.0%

6.4%

 

 

 

 

    In the Data Storage Devices industry, EMC Corporation (EMC) has the highest growth in market share of 1.6%.  It has a 15.4% sales growth and a 12.5% earnings growth.  It was ranked 6th for the week and 3rd for the month.  Western Digital Corp (WDC) has the next highest market share growth of 1.2%, a sales growth of 26% and earnings growth of 40.2%.  WDC was ranked 16th for the week and 5th for the month.  Brocade Communications (BRCD) has the third highest growth in market share of 1.1% with a sales growth of 30.7% and an earnings growth of 56.3%. BRCD was ranked 4th for the week and 2nd for the month.

 

   The long distance carriers industry showed nothing of interest.

 

   In the security software & services industry, VASCO Data Security International (VDSI) grew in market share by 1.2% with a sales growth of 39.4% and earnings growth of 59.1%.  VDSI was ranked 1st for the month and 3rd for the week.

 

   In the wireless communications industry, stocks having significant market share growth are all foreign, CHL (Chinese), AMX (Mexican) and VIP (Russian).  These are all great companies but the goal is to find domestic stocks.

 

     The 4 domestic stocks are listed in Table 5D. 

 

 

Table 5D

Comparison of Technology Stocks

Company

1 wk

% Chg

1 mo

% Chg

Mkt. Share

Increase

Sales

Growth

Earnings

Growth

EMC Corporation (EMC)

2.1%

15.8%

1.6%

15.4%

12.5%

Western Digital Corp. (WDC)

-4.9%

9.2%

1.2%

26.0%

40.2%

Brocade Communications Systems (BRCD)

3.2%

20.9%

1.1%

30.7%

56.3%

VASCO Data Security International (VDSI)

2.6%

24.7%

1.2%

39.4%

59.1%

 

 

 

     Brocade Communications Systems (BRCD) and VASCO Data Security International (VDSI) are selected as the new domestic stocks for the portfolio because they appear to have an edge in sales and earnings growth.  They will be entered in the portfolio at today’s closing prices (10/16/07).  Next month we will look at bond exchange traded funds.

 

 

 

6.0 Portfolio Sell Stop Settings

 

     Sell stop settings have been narrowed for both WiserTrader portfolios. 

 

     1. When the stock price remains within 20% of the buy price:

              Trailing stop percentage = -10%.

 

     2. When the stock price rises to greater than 20% of the buy price:

·        When the S&P 500 is trending up, the trailing stop is initially set to give back 1/2 of the maximum gain ( f = 0.5).

 

·        As the S&P 500 dips below its SMA 30, the trailing stop is set to give back 1/3rd of the maximum gain ( f = 0.333).  The S&P 500 is currently 3.9% above its SMA 30. 

 

·        When the S&P 500 SMA 30 slope turns negative, the trailing stop percentage is set to give back 1/4th of the maximum gain ( f = 0.25).  The SMA 30 slope is currently at +0.17% per day. 

 

·        A simplified version of the trailing stop percentage mentioned before is given below in terms of f the fraction of gains given back, the buy price PBUY and the maximum price reached PMAX

 

                 , a negative percentage.

 

·        The sell stop price PSELL is,

 

              

      

    These settings are designed to at worst, (1) take a 10% loss, (2) break even when there is a 10% maximum gain and (3) walk away with at least half of a 20% or greater maximum gain.  At the same time the stock price is given room to vary.  Deviations from these standard settings are possible.

 

 

____________________________

 

 

 

 

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