MAY 9, 2020
the market story? Saw tooth. That’s what stocks and markets do. Done. Stock price gyration nets out either up or down, eventually. Chode still sinks while cream still rises.
Meanwhile investors scheme, wait, hope, and scratch like simians. We’ve never been paid for scratching, and we’ve done a lot of that. Yes, the market action’s fun, or sickening. Someone talked about the market; “a tale told by an idiot.” Well, yeah. That guy obviously understood price-action.
Some are slower than others. Thus finally, we’re learning to make those ass-itching gyrations pay. We’re discovering the countless paydays along the way. We’re beginning to do so by crisp design. We’re sharing it with you so you can too. You probably already are.
Long-term investors leave bucket-loads on the table. Why? Because they ignore the majority of the movement. Yet truly savvy players invest and trade. We’re doing both now, and we’re geeked out of our minds. We hope you love it as well. The cash for our example trade’s on the way. “Rise Exit Repeat. Patterns That Pay.”
offers all the charm of a dead car battery, along with the rectitude of Soviet education. We find AT&T’s move into content to be misguided, extraordinarily late, and massively underfunded. But it’s O.K. We don’t want to marry them. A nose clamp will do, and isn’t a lot to suffer for a winning trade. Fact. AT&T is our favorite dog turd, one we simply can’t steal clear of. Why? It’s a neon-blinking repeating pattern with a dividend backstop. Hum.
T offers perhaps the largest perhaps sustainable dividend in the market at 7.22% on a payout ratio of 78.3%. They don’t report again until July 23, thus offer less chance of any stray bombs. They sport a 5Y annualized Beta of 0.68, or stable vs. the S&P at 100. SJ picked up 100 shares when it hit $29. We should have waited for $28.50. Yet upon this writing our position is up 2.59%, in two days. You see where this is going. We’re hoping for 10%, or $31.90.
T may be a perfect example of a great trade. T’s business is both easy to understand and track. It’s recession-resistant. People don’t abandoned their phones. People would still be paying if Zombies swarmed the neighborhood. You gotta talk when Zombies flock. T is also a slowly increasing player in both content and it’s provision; think HBO, Time Warner, and even antiquated Direct TV. Reason four, relative price stability. Why? Investors love income and have long looked to T for exactly that. That helps to build in a price-shock cushion.
Mortgage meltdown to COVID.
a trade is a defined play. Trades have a specific target percentage move, or dollar return. We’re keeping that simple, for example targeting 10%, or $100.00-$300.00. Ask the question; “Would you sneer while picking that up off the parking lot?” You’ve done the work leaning what you know. Be paid for the effort. It accumulates, like dividends. For us, the above test question remains our guiding rule while evaluating potential trades. What’s the other key rule? Only buy things you’re willing to keep, because you may be.
-Our Alteryx Trade-
hours trading displays true volatility. Think after-hours earnings reports. Spikes and plunges are the rule. We’ve been watching extended hours price action for years, but not with the sensibilities of a trader. That’s precisely what we’re bringing now. And why Alteryx? Alteryx is a great company providing a code-free and predictive analytic software platform that anyone can operate, and it works with desperate data forms. We have a functional understanding of their product and love the Saas business model. We’ve tracked and owned them for a couple of years. If the trade doesn’t happen, we’re happy to stay with them because they will eventually roar.
The story here is about both investing and pattern-trading. For us that often means “trading around a core position.” Alteryx allowed us to take a small payday along the way, while yet being there for the monster 9.83% move on Friday. We traded off only 10 of 41 shares. We had simply built a larger position as prices allowed. In turn that allowed us to sell a chunk when prices jumped. We had a set sell point and executed. We’ll do it again, and again.
The keys to pattern-trading success begin with having a design. Ten percent or $100 is simply a guide. Know your stock. Pick quality that works in this market–not banks, airlines, etc. Go with quality, plays you’re willing to sit on if things don’t immediately pan out. And learn their ways, their patterns, and durability when the market sells off.
Most stocks display patterns, as the examples above demonstrate. Use the Relative Strength Index(RSI) as your guide. “Over-bought and over-sold” are key leading directional signals. That’s what we’re working. Finally, don’t be greedy. Define your trade and show the discipline to stick to it. And don’t fret over a few bucks left on the table. Bombs usually go off while attempting to ransack the last dollar. As always, good luck and good investing.
“Line of Duty”