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Nothing presented is financial advice, trading advice or recommendations. Everything presented is the author's ideas only. The author accepts no liability for its use including errors and omissions. You alone are solely responsible for your own investing and trading. There are considerable risks involved in implementing any investment strategies and losses can be large. Trade at your own risk.

 

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Jul 30 2009
2009
CANADIAN RETIREMENT (RRSP) ACCOUNT
STOCK TRADES

These are trades I did following the March 2009 Decline
Return To Retirement Trades Index

A stock market decline like that seen from Sept 2008 through into March 3 2009 are rare events. A decline that large usually is followed by a enormous run-up. It's a rare chance to purchase stock, hold it for a few months without covered call writing. Naked Puts and Covered Calls work well, but in a rapidly advancing market I believe buying and holding stocks for a short period is best. The last market rapid advance was in Feb 2003.  


Here are the indicators I followed which seemed to point to a market up turn after the March 3 decline.

 
Vectorvest did not call a market up, but did indicate that the market appeared itching for a rally. The MTR timing model (
www.mtrig.com) on March 13 2009 gave a Market Up signal. There were other indicators as well.
In November 2008 Laszlo Birinyi called an S&P bottom at around 750. In January he reiterated his position and again on March 3 he said the market was extremely oversold. However one thing that did catch me was that all three times he indicated that all the usual technical models were not reliable this time, down.  Here is what he said: A few things caught our eye. One was that we started to have some very bad days in November (2008) but the market still recovered. On Dec. 5 (2008), the unemployment news was really terrible and yet the market recovered that day, with the S&P closing up 3.7%. To us, those are signs of a positive market where people are starting to look beyond the bad news.”

He also indicated that the greatest decline in a bear market are at the end of the bear decline at around 70%. He then named some companies he liked, including GE, with a dividend yield then of 8% on the common stock. I have found Laszlo Birinyi to be very accurate on many of his calls. I watched Louis Rukeyser on Wall Street Week and Laszlo was on often and sometimes he would be the host when Louis was away. I really miss that show. Today almost all the financial shows are like watching entertainment tonight.  

The next indicator was the number of naked puts I had written for Jan and Feb. They had all expired worthless. This is unusual for me if we are in a bear market. Normally on so many positions I will be assigned at least 5 when we are in a declining market. However Jan and Feb I was not assigned at all. This told me that the decline could be reaching a climax and the Bollinger band by Mar 3 was at its narrowest. The last time this had happened to me was in Nov 2002 to Feb 2003 when the market was still being called a bear market. In Feb 2003 I had gone in and bought stocks and then worked with a stop loss, but I did not sell CC’s at that time. This was another reason to buy the stocks I did.

While it is true that the 10-20-30 rule did not give a buy signal in early March, the 10-20-30 rule (click to review 10-20-30 strategy) did show that the 10 day SMA was turning up and volume was picking up after the plunge around March 3 2009.  Also I use the 10-20-30 rule primarily to buy and sell naked puts not so much for stocks although I do plot it before buying stocks. This 10 day SMA (Simple Moving Average) was turning up on all the stocks I follow, not just a handful. This told me a trend change could indeed be happening. 

 

As well the bearish indicator was at an all time high. The number of bearish analysts was more than 70%, normally a sure sign to me that we are going to see a reversal.  Also the PE ratio on the S&P was below 12X, and dividend yields were very high. Bank of Montreal in Canada was paying over 10% on the dividend. Royal Bank was at 9%. In fact all the large Canadian Banks had unbelievable dividend yields. At 10% on Bank of Montreal, you could buy it and tuck it away for years – which I did. The dividend alone would pay you to hold the stock. The last 15 bear markets had seen a PE of no lower than 10.8 on the S&P. I felt that buying when I did, made sense as I saw little more downside, but if there was I believed I would be able to sell CC’s against my stock purchases. 

 

Last was the VIX. If you look at the VIX chart, you can see that the climax in volatility was actually in October 2008 not March 2009, and from there is had continued to decline. On October 20 the VIX hit a high of 89.3, but on March 3rd it only hit a high just above 52. The trend in the VIX was down. This told me that the sellers were getting tired. Just like the rally since March, the VIX had continued to decline throughout the rally. You can see it in the premiums of options, that continued to decline. Right now (March 13 2009) I think the VIX could work its way to 20, which is where it was last August 26 2008.
 

Here are the stocks I bought in March 2009 and sold in August 2009. After selling, I returned to my usual strategy of covered calls and naked puts. All of the stocks were primarily Canadian Financial Stocks. I have had a long term love affair with our Canadian Financials. I think they are terrific stocks to own. They pay a great dividend and I have confidence to buy them in any decline. It nice to have some stocks that you can buy at any downturn, confident that they will return to full value. By August though I felt that these stocks were fairly valued, sold them and returned the funds to my covered call portfolio.   

 

Date Stock & Symbol Action Capital Invested (includes Commission) Profit/Loss Return
Mar 12 09 Bank of Montreal BMO 1000 Shares Purchased @ 31.10 $31,107.00    
Apr 29 09 Bank Of Montreal Dividend 1000 X .70   $700.00  
Aug 5 09 Bank Of Montreal Dividend 1000 X .70   $700.00  
Aug 13 09 Bank of Montreal BMO 1000 Shares Sold @ 51.20 $51,193.00 $20,086.00 64%
Mar 12 09 TD BANK TD 1000 Shares Purchased @ 39.93 $39,937.00    
Apr 1 09 TD BANK Dividend 1000 X .61   $610.00  
Jul 2 09 TD BANK Dividend 1000 X .61   $610.00  
Aug 10 09 TD BANK TD 1000 Shares Sold @ 63.55 $63,557.00 $23,620.00 59%
Mar 9 09 BANK OF NOVA SCOTIA BNS 1000 Shares Purchased @ 29.20 $29,207.00    
Apr 3 09 BANK OF NOVA SCOTIA Dividend 1000 X .49   $490.00  
Jul 3 09 BANK OF NOVA SCOTIA Dividend 1000 X .49   $490.00  
Aug 11 09 BANK OF NOVA SCOTIA BNS 1000 Shares Sold @ 44.60 $44,593.00 $15,386.00 52%
Mar 12 09 MANULIFE MFC 1000 Shares Purchased @ 11.88 $11,887.00    
May 15 09 MANULIFE MFC Dividend 1000 X .26   $260.00  
Aug 6 09 MANULIFE MFC 1000 Shares Sold @ 22.70 $22,693.00 $10,806 90%
Aug  09 Total Dividends earned Earned on above positions $3860.00    


Total Capital Invested: $112,138.00
Total Dividends Earned: $3860.00
Capital Gain: $69,898.00
Total Capital Available: $185,896.00
Return: 65.77%

 

Here are the stock trades I did in my US Portfolio following the collapse of Sept 2008  March 2009
Here are the stock trades I did in my Canadian Non-Retirement Portfolio (Margin) following the market collapse of Sept 2008  March 2009


 

 

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Disclaimer: There are considerable risks involved in all investment strategies. Trade at your own risk.
Stocks, options and investing are risky and can result in considerable losses. None of the strategies, stocks or information discussed or presented are financial advice, trading advice or recommendations. Fullyinformed.com is a private website. Everything presented and discussed are the author's ideas and opinions only.
By using this site, you agree to be bound by its terms of use. The full terms of use can be read here. If you do not agree to the terms of use, do not use this site. The author of fullyinformed.com assumes no liability for topics and ideas discussed, errors and omissions, ads and their content and external links. Any corporate insignia used are registered trademarks of their respective company or corporation and are being used for identification purposes only. All material copyrighted by FullyInformed.com. Reproduction in whole or in part prohibited. Copyright © 2008

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