Moody Memorial Weekend Update

tldr: The "Sells"/"shorts" lead this week due to precious metal miners dip

Here are the latest weekly notes for this week. Tech leads as of this week but precious metal miners have dipped from last week. Financials continue to be very weak.

My goal will be to keep it short, simple and simple to scan. There will be a lot of information packed in each update within the summary charts. For those who use trend following or price following information with longer time frames, then these updates will be very helpful.

Short-term traders may find ideas they can run through their systems but they may not appreciate the almost slow-seeming pace of change in the lineup. Not my wheelhouse.

On to the summary chart. This list will be edited down to keep it manageable.

The rules for this chart are based on a notional starting principal of $1M USD, with 0.5% (half-a-percent) of risk per idea when an idea is introduced.

The summary chart reports a suggested “Risk per share” to show what this portfolio will tolerate before an idea is stopped out for a loss, or for a trailing gain. The suggested stop loss exit price will be updated from time to time if an idea continues to progress. This is what will take up a lot of time to update as we move forward. This is a 12 month experiment - this is “week 3” theoretically.

Here’s the summary chart of the long ideas. I may simplify it to make it easier to scan.

Interpretation of this weeks’ long ideas summary:

Tech leads, gold miners dipped. And we have a few more new ideas added to the list.

Remember we risk half-a-percent of $1M USD per idea - we’re pre-planning to risk losing $5K per idea. I have supplied a “risk per idea” for each idea. You divide that 1/2% risk by the risk-per-idea. I would trade different share amounts for each idea - each idea’s trading range or volatility is different but the capital risked stays same.

(Example: You have “risk per idea” of $12.87 for SE. Divide 5K by 12.87. That gives you 389 shares. Your entry comes the week after the week SE was introduced, the week ended 5/15/20. It is not perfect, but you get the idea.)

It’s heftier list than last week.

Heads-up note: We will be limited to a maximum of $2M long position (if one were to use margin for this stock focused list) but it is likely we won’t do that unless we have accumulated some notional unrealized profits within that list. At some point, we’ll have to drop off ideas that are negative or close to their stop loss exit prices or stop adding new ideas and let nature and time sort out what stays in the list.

Don’t forget stocks and trends go down too. Here is the sell / short list. Some can use it as an “avoid as a long from trend trading POV” list. (Long but you get the idea.)

The short version of this week’s list:

The sell ideas are in the lead in terms of profits.

We have started with 818K worth of longs (their market value when introduced) and 285K worth of sells, with a net long position of 533K based on the starting market value (818K - 285K). So far the sells are in the lead and provide most of the gains so far. this will change over time. We’ll see what the rest of 2020 brings.

We’ll review some charts to get a visual sense of what’s happening. Let’s keep it simple and look at the top 10 from this week for a quick sense of leaders. Many of you are probably trading these ideas for your own systems.

We’ll play it by ear each week, and see what the markets bring us to trade with.

Dipping Toes Into Charts, Part 2

Looking into 2020's market - sentiment still mixed.

This is a followup to last week’s preliminary look at the financial markets, with a limited focus on equities and some trend following of weekly price behavior. We’re going to look at what the longs and sells are as of May 2020. Here is the lineup.

As you see it’s primarily precious metals for the moment and the first week’s results (starting from last week’s initial post) reveal what the market has been pressing upward: merchants online and metals underground.

The current market value of the current lineup is about 600K, including the latest ideas. (This is the number of shares times the most recent weekly close price.)

You may be wondering why the share counts are different for each idea.

The one thing all ideas have in common is that they are potential longs to follow. The other thing is an estimation of what my stop loss exit price would be for each idea. When it’s a new idea, during its first week, a stop loss exit price is estimated. The difference between the initial week’s closing price and that estimated stop loss price is used to calculate the shares that could be risked for that idea. Confused? Read on.

Share Sizing Math: You’ll see first idea of the above chart, where the weekly entry is 708.97. The estimated stop loss exit price for this initial entry is 516.42. That means my approach will risk losing 192.55 per share. To keep it simple we’re using a $1M USD account value and we are planning to risk 5K per idea at entry. Divide 5K by 192.55 and you have 26 shares. (These are all estimates since entries are not perfect but to keep is simple and consistent to update, we’re using weekly close prices.)

This is the summary for the longs as of this week: A total of 26 long ideas, with about a market value of under 600K, so far and 4.3k in net gain as of this week.

This is not all - there are also sell ideas (“shorts”) - with a market value of 100K.

These are the results for the sell ideas - these were not posted last week but this updates the notes. About 9.97K in gains for 9 ideas, led by airlines and financials.

The total result is the sum of the long and the short ideas lists, with a net long market value of 500K (600K long and 100K short, or 500K net long).

Here are the chart views of these results so far.

As we see, it’s almost a distribution led by proxies for the economy’s and society’s current state of mind - we have gold miners along with tech and consumer.

I will see if the market made it’s turn in earnest. I hope it is but hope is not a system.

Post-script: I have not been posting these types of entries for about 6 months because of a family health emergency which is ongoing - a lesser reason of little importance is that I have had nothing to post (on the long side at least) with my market observation approach. A friend has invited me to explore my approach for the coming year, to see how it performs with a few consistent parameters ($1M USD account, with my usual system rules) - I am not sure what will the coming week brings, as prediction is not my business, but it will be an interesting process to experience. Perhaps it leads to more.

post-script: some notes I wrote to myself re something Howard said, that I shared and commented on. He like the “take” on the big picture and I am reminding myself it could happen or it could go completely 180 degrees. I have to remain dispassionate.

"this is possible, conditions now exist for a robust AND distrusted trend up "Bubbles are created when investors do not recognize when rising asset prices get detached from underlying fundamentals" word "bubble" has baggage but "trend" might be less charged word it's natural to not make filters for the "economy" narrative from the "market" narrative (a/k/a price action) - we want things to make sense now about the future and not just in retrospect when it becomes the past. But not for TRADING. this is not all bullish: a lot of today's "hotness" (disruptors, (on)demand) may be left behind by new competitors (decentralized.) startups started NOW in middle of this awfulness in early 2020s could become massive leaders in the 2030s; this is also not all bearish: a lot of 2000 also-rans rescued themselves and surprised (we are using MSFT, ADBE,etc which transformed their income w subscriptions, SaaS, on demand, a/k/a recurring income); some beat-down names may reinvent themselves”

Dipping Toes Into Charts

Back in May 2020, after 6 months away

This is a preliminary return to charts after 6 months away. Are we safe again?

The selection from my price following POV is slim and tentative compared to 2019.

Below is a basic “sheet” and set of charts, whittled down to 20 ideas (there really weren’t much more, a few have been stripped out for narrative gap ups based on the current pandemic and economic crisis).

From a top down view, here are 20 charts, which I suspect will look very different in 6 months - new leadership is forming and I don’t know if it will be like last year’s.

The list may be be posted and updated occasionally on Koyfin to keep it simple.

Here’s a list with notes of about 20 long tickers with estimated sizing. It may be updated and filtered down further - I want to remove all the “noise” of current “news”.

A preliminary suggested initial stop loss and trade size for a notional account of $1M USD, with a notional risk of 0.5% per idea goes into these notes. I’ve given suggested stops - that means if the price dips to that suggested stop - that’s a possible exit.

At this time there’s about 440,000 in total notional value based upon a weekly close May 8, 2020, for a theoretical $1M account to keep it simple and easy to track.

This a preliminary first look at the market from the “long” side. This could all change.
Right now it’s gold and shopping from home. Stripped out were a handful of charts based on the current crisis. My sense is that going forward conditions will change.

It will be interesting to see what happens by the time Q4 2020 approaches. It’s been a strange and traumatic time all around on multiple levels. For all we know it could all get better and most of these ideas driven by fear and crisis could disappear. Or we really are in trouble and gold has its day under the sun again after a decade in exile.

Damodaran's Market Thoughts On The Crisis

The Dean of Valuation talks about the current crisis, teaching & investments

A very nice talk Noah Kagan had with one of my favorite “must reads” and “must listens”, NYU professor Aswath Damodaran.

Kagan thoughtfully zeroed in with summary notes including:

Set aside the “FANG” label, and focus on the cash. Apple has cash.

Damodaran has 4 investment buckets for everyone to use.

(I like Kagan’s use of tacos in this graphic. I like tacos.)

Taco #1 is the old school investment of the Ben Graham Margin of Safety school.

Taco #2 is the temporarily discounted growth rocket. They blow up or go to the moon.

Taco #3 is personal favorite: the fortress of cash solitude the size of nation states.

Taco #4 are the disruptors of social behavior. Maslow’s hierarchy solved in new ways.

I see one thing in common between all of these different approaches: the idea of “lumpy returns”. Each of these techniques produce positive returns but they are not investments with perennial ATM like returns. Their returns will be uneven: lumpy.

Looking to the future Damodaran asks how will societal habits change?

Bitter Notes On A Coffee Company

There Are No Thanks but Maybe Profits for Muddy Waters

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