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WiserTrader Industries Monthly |
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March 2008 Prescott, Arizona Contact Editor __________________________________________________________________________
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Published the 3rd Tuesday of the month Subscription to Weekly Newsletter
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Table 1A
Top-Down Portfolio Performance
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Top-Down Trading in 2008 ($7809.07 Initial Capital) |
% Initial Capital |
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Closed trades in 2008 = |
8 |
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Average Trade Size = |
$1,000.00 |
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Total Closed Position Share costs = |
$8,000.00 |
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Gross Profit on Closed Positions = |
-$694.94 |
-8.90% |
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Number of Open Positions = |
3 |
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Cost of Open Positions = |
$3,000.00 |
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Gross Profit on Open Positions in 2008 = |
$119.49 |
1.53% |
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Total Gross Profit = |
-$575.45 |
-7.37% |
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Broker Commission ($9.99/trade) = |
-$129.87 |
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Subscription Cost to date = |
$0.00 |
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Net 2008 Profit After Expenses = |
-$705.32 |
-9.03% |
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Cash = |
$4,097.14 |
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Current Capital = |
$7,103.75 |
3/18/08 |
* includes stocks bought in 2007 and sold in 2008
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Since last month 3 commodity stocks, ACH, POT and BHP, were added and were stopped out with small losses. Current stocks are listed in Table 1B. TIP is an inflation-protected US Treasury ETF. FXE is a currency ETF for the Euro. FXA is a currency ETF for the Australian dollar. Stop loss settings are explained in Section 2.
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Table 1B
Top-Down Portfolio
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Top - Down Portfolio |
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As of Market close on |
3/18/08 |
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Stock |
Begin Date |
Begin Price |
Last Date |
Last Price |
Gross P/L (%) |
Status |
Sell stop |
Metrics |
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CNX |
12/31/07 |
71.52 |
1/4/08 |
65.48 |
-8.4% |
closed |
66.22 |
Growth |
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BBY |
12/31/07 |
52.51 |
1/4/08 |
47.48 |
-9.6% |
closed |
48.04 |
Growth |
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PBR |
12/31/07 |
115.24 |
1/16/08 |
98.09 |
-14.9% |
closed |
106.93 |
Growth |
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SRP |
12/31/07 |
16.98 |
1/22/08 |
14.90 |
-12.2% |
closed |
15.28 |
Defensive |
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CPD |
1/16/08 |
17.00 |
1/28/08 |
15.27 |
-10.2% |
closed |
15.30 |
Defensive |
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ACH |
2/19/08 |
45.26 |
3/6/08 |
45.71 |
1.0% |
closed |
46.91 |
Growth |
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POT |
2/19/08 |
152.50 |
3/10/08 |
143.03 |
-6.2% |
closed |
147.85 |
Growth |
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BHP |
2/19/08 |
72.66 |
3/10/08 |
66.16 |
-8.9% |
closed |
68.18 |
Growth |
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TIP |
12/31/07 |
105.26 |
3/18/08 |
109.72 |
4.2% |
Buy |
100.37 |
Defensive |
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FXE |
12/31/07 |
146.40 |
3/18/08 |
156.66 |
7.0% |
Buy |
141.98 |
Defensive |
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FXA |
02/19/08 |
92.34 |
3/18/08 |
92.99 |
0.7% |
Buy |
85.95 |
Defensive |
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Trailing Stop Settings are Bearish |
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Tspi (long) = -10% |
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Net capital for 2008 = |
-9.0% |
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f (long) = 25% |
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The market has been in a down turn for the past month. For the sectors charted in Figure 1A, only conglomerates and basic materials showed positive movement over the past four weeks. For the past three weeks, the basic materials sector has actually been in a down trend and conglomerates have been essentially flat. Sectors are listed in Table 1C.
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FIGURE 1A
Table 1C
Sector Rank
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Sector |
Last |
1 wk |
1 mo |
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Basic Materials |
2.6% |
0.0% |
1.1% |
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Conglomerates |
4.2% |
5.8% |
2.4% |
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Consumer Cyclical |
3.7% |
0.2% |
-3.8% |
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Consumer Noncyclical |
3.0% |
-1.0% |
-1.9% |
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Energy |
2.6% |
-4.6% |
-4.5% |
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Financial |
5.1% |
0.6% |
-1.6% |
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Healthcare |
2.1% |
-0.6% |
-7.4% |
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Industrial Goods |
4.6% |
1.5% |
-0.7% |
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Services |
3.9% |
0.3% |
-4.2% |
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Technology |
4.1% |
0.3% |
-2.0% |
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Transportation |
5.2% |
-1.7% |
-6.6% |
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Utilities |
2.2% |
-0.5% |
-3.1% |
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The sideways to downward sector movement does not seem to be a firm basis for making a selection so we turn directly to industries. Figure 1B shows industries that have been leaders for the past four consecutive weeks. Music and video stores stand out with a 20% monthly gain.
Neflix, Inc. (NASDAQ: NFLX) is the only optionable stock priced over $20 for this industry that is in our database. Netflix, Inc. provides online movie rental subscription services in the United States. NFLX is being added to the portfolio with a -10% trailing stop.
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FIGURE 1B
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Currency Trades:
Staying with what seems to be working in the declining market are defensive positions in currency ETF’s.
Currency Shares Swiss Franc Trust (NYSE: FXF) is an ETF that reflects the price of the Swiss Franc.
Currency Shares Japanese Yen Trust (NYSE: FXY) is an ETF that reflects the price of the Japanese Yen.
FXF and FXY are being added to the portfolio with a -10% trailing stop.
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2.0 Portfolio Sell Stop Settings
The trailing stop percentage TSP for WiserTrader portfolios has been adjusted for accuracy and flexibility in keeping with the original intent. When stocks are bought in a bullish market, an initial trailing stop percentage TSPI = -20% is just about right. However, the market can change. A -20% trailing stop is too wide when the market turns bearish and a -10% trailing stop is too narrow when the market is bullish. Also, there is the feeling that when profits grow beyond 40% (and we have seen several of these), a stock should have a progressively wider trailing stop. So a 40% profit acts as a kind of transition point. Each of these considerations is described graphically in Figure 2A for long positions. The solid lines indicate the TSP for bullish, cautious and bearish market conditions.
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FIGURE 2A
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1. When the stock price remains within 40% of the buy price, the initial trailing stop percentage TSPI varies according to market conditions. For a long position,
· Bullish, TSPI = -20%, as when the S&P 500 is above its SMA 30 · Cautious, TSPI = -15%, as when the S&P 500 is below its SMA 30 · Bearish, TSPI = -10%, as when the S&P 500 SMA 30 slope is negative
2. For a long position, when the maximum stock price is 40% or more greater than the buy price, · TSP is the wider of TSPI or
o f is the fraction of gains placed at risk, § Bullish, f = 0.5, as when the S&P 500 is above its SMA 30 § Cautious, f = 0.375, as when the S&P 500 is below its SMA 30 § Bearish, f = 0.25, as when the S&P 500 SMA 30 slope is negative o PBUY is the buy price and o PMAX is the maximum price reached.
3. The sell stop price PSELL is,
Current Status: Bearish The S&P 500 is currently below its SMA 30. The S&P 500 SMA 30 slope is currently negative.
Note: The signs for TSP and TSP1 are negative for long positions and positive for short positions.
These settings are designed at worst to, (1) take a 20% loss, (2) break even when there is a 20% maximum gain and (3) walk away with at least half of a 40% or greater maximum gain. At the same time the stock price is given room to vary. Deviations from these settings for individual stocks are possible when their industry undergoes unusual activity.
If you follow these portfolios, keep in mind that they are only benchmarks which can not be matched exactly because of the round numbers used. Entry prices are taken from the previous close and exit prices are taken from the close on the day that trailing stops are triggered. You can either sell as soon as a trailing stop is triggered or wait until after the close and try to get better prices over the next few days. Once out of a position, a stock is set aside for a period of about two months.
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Table 3A
Leading Industries
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Rank [R] |
Rank of Change [C] |
(R+C)/2 |
Industries |
Companies |
Last Gain |
1 wk Gain |
1 mo Gain |
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1 |
92 |
47 |
5.9% |
7.2% |
21.7% |
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2 |
29 |
16 |
6.6% |
9.7% |
12.3% |
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3 |
2 |
3 |
6.6% |
9.2% |
11.7% |
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4 |
12 |
8 |
5.3% |
4.2% |
10.4% |
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5 |
82 |
44 |
2.8% |
0.9% |
10.2% |
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6 |
31 |
19 |
5.3% |
1.3% |
9.0% |
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7 |
1 |
4 |
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