Week's Performance

Good morning,

Last night is the first time I tried an 8 years old Sake fermented in French wine barrel and it was so unbelievable good. The owner of the bistro told us that we were fortunate as he has kept the bottle for years and only thought of drinking last night and we were in the right place at the right time. Timing is important, isn’t it? Isn’t it the same to have a good strategy to time stock’s entry and exit execution?

You may be asking why I was drinking last night. Shouldn’t I be trading? This brings me to the question why does one trade in the first place. There are many who trade for excitement and enjoy the adrenalin boost when market is volatile. Some could be trading because they are addicted and trading has become part of their life. There are others who trade to speculate and hope to make some easy money, and the list of reasons goes on. I trade smart to make money. To trade to make money, I must know my overall trading strategy, that is, the trading mission. My main goal is to achieve 40% return on my capital per month. To achieve this main goal, my tactical plan is to make 10% per week for the stocks I purchased. Once I achieved my goals I will usually reward myself with a good drink to enjoy my returns.

Since I am sharing my goals, I would like to highlight that my targets are always percentage returns and not dollar returns. Having percentage returns as a target helps me to control my emotion and manage risk. What do I mean? Well, if the stock I bought is $1000 in capital used, a 10% return is $100. This figure is unexciting to many traders and I am sure most will want to make actual dollar return of above $500 from the $1000. That’s an amazing return of more than 50%! We all know that we have to take more risk if we want higher returns so I leave it for you to decide if such returns can be achieved consistently every week. If it can be, I am sure Mr. Warren Buffet will be knocking at the trader’s door soon.

DJIA started the week at 9996.67 and ended at 9972.18, reached high of 10157.94 and low of 9949.36, in line with my forecast that it will trade within range and will trend higher in the longer term.

Of the stocks I recommended, CAH started at $28.75, high of $29.15, low of $28.38 and closed the week at $28.66. PTEN opened at $17.27, high of $18.07, low of $16.63 and closed at $17.00. GCO opened at $26.58, high of $28.71, low of $26.47 and closed at $28.05. Watts Water opened at $30.60, high of $31.82, low of $29.99 and closed at $30.81. EIX opened at $33.50, high of $34.02, low of $32.54 and closed at $32.64. DRIV opened at $24.99, high of $25.50, low of $23.39 and closed at $23.74. OSG opened at $45.09, high of $46.53, low of $40.77 and closed at $41.01. XTO opened at $44.78, high of $46.49, low of $43.49 and closed at $43.88.

Looking back at my October 19th blog, my KUTE system is quite correct to help me identify the stocks to trade. My decision then was to trade only PTEN, GCO and CAH. I held OSG and sold when it reached my target, and made good returns buying these three stocks on dip and sell when they achieved my tactical goals. Even if the 3 stocks were to be bought and held for the week, the returns are not too bad. After all these are fundamentally good companies.

See you next Monday morning for my new stock picks.

Have a great weekend!

Francies Cheng
BBus MAppliedFinance