Continuous Improvement with Investing

As always, let me preface by saying that this is not investment advice, but this is about my investment strategy and journey in trading stocks. 

 

Summer vacation was nice and the Arkansas mountains were lovely.  Remember, stocks are a means to an end.  You just have to take a break to renew, relax, and refocus.  That is a little tricky when you have been in a stock position for a couple of weeks and you are riding a downhill roller coaster.  I filled my cart with Humanigen stock (HGEN) on June 25^th for 18.15/share, and then watched it take a nosedive to 15.76, but yesterday in the pre-market, woohoo, boy was I happy!  It shot up to 20.00 and I knew it was going to be a good day.

 

“I was right on top of it, and sold for a 10.2% profit before the market had even opened” is the sentence I would like to be true.  However, I believed it was going to just keep going up all day as a breakout event.  It didn’t quite work out that way.  Right when the markets opened, it went right back down to the lower 16’s and finished off just above 17.  Reality is that I missed a great opportunity and it cost me 10.2% profit and left me in the negative still on a position I have been in longer than I wanted to.  Longer than my strategy calls for, which means my growth rate is postponed…again.

 

Investing is hard work and it takes an emotional toll on you sometimes.  In manufacturing we focus a lot on continuous improvement.  No matter how good you do something, there is always a way to make a more defect-free product for less money in less time.  After I realized my mistake yesterday, I read some good advice:  Always sell during a gap up if it is in the pre-market.  I am adding this to my investment strategy.  There are few records kept of the pre-market and after-market price swings, and those do not always show up.  On the WSJ website, it shows a range of 16.57 - 18.675 for yesterday.  No mention of the 20/share price.  Since it was pre-market, it wasn’t official.  But I have bought and sold in the pre-market before and there are no extra fees, penalties, or criteria for trading in the pre-market.  Anyone can do it, but you have to set up your Ask for Extended Hours AM and PM.  In TD Ameritrade, it looks like this:  GTC+EXT.  Good till closed plus extended.  You can cancel or modify as you wish, but if you do not have extended hours selected, you will not sell or buy at a limit price during the pre-market or after-market.

 

Don’t beat yourself up for the missed opportunities.  Just by nature there will always be more missed opportunities than the one path you take.  Instead learn from them and next time you will have one more tool on the tool-belt that can help you steer clear of the investment potholes.  I am confident I will sell my Humanigen stock for a profit soon, and next time I see this set-up in the pre-market, I will be ready.

 

-Johnie

Minimizing Risk Still Has Risk

 

As always, let me preface by saying that this is not investment advice, but this is a blog about my investment strategy and journey in trading stocks. 

 

“Hindsight is 20/20.”  “It’s easy to be a Monday morning quarterback.”  “Woulda, coulda, shoulda…”

These are all phrases that make me think of this week in stocks.  Currently I am at a wash for June.  Last Friday I was sitting at 219% ROI, but today I am back down to 203%.  I am locked into RAIL over the weekend, and the way I see it, possibly for the next week.  It doesn’t fit my overall strategy, but I do not like actually losing money, and if the trendline looks like it will recover, then it is better to stay in than jump out. 

 

The fundamentals for RAIL were pretty good, but I wasn’t finding any stocks that really stuck out to me as better than another.  Also, if it wasn’t for my 1.7% greed, I would have sold it on Thursday.  I know – 1.7% doesn’t sound like a lot, but it was a costly choice that locked me into this stock until it pulls out.

 

I bought in on Tuesday at 5.53 and I decided to set my sell price price for 5.79 (4.7% profit), and I remember when it hit 5.71.  I questioned whether or not I should sell then at a 3.2% ROI.  It was decent, but then it dropped to 5.69 and my enthusiasm won out over the logic of the trade.  The fundamentals were there saying this was a declining stock, and that I should jump out with any profit, but I stayed in hoping to break 5.71.  So the next day I reset my target to 5.72.  It hit 5.69, and again I thought maybe I should sell with a 2.9% profit.  I had already violated part of my trading strategy, which states “buy one day, sell the next.”  But even though I was in the green it felt wrong.  I wanted more.  Maybe this is a bit like something I never do – gambling.  Even if my trading strategy minimizes risk, there is still risk.  And violating the strategy is kind of like driving off the road and into the desert.  You get deep enough into it and you have to use your boy-scout skills to re-orient yourself so you can get back to the road.  Hate to say it, but I even remember when I could have sold at 5.53 and just broke even. 

It’s not like I’m trading all day.  I set alerts that tell me when the stock price hits different prices.  It would have been nothing to go in and change it – set it and forget it.  After market close on Thursday, I changed my ask price to 5.53.  I sold 1 share in the premarket, and then it pretty much tanked all day Friday to close at 5.36. 

Now I’m at a fork in the road.  The decline could either stop at 5.12 or 4.61, and then have a sharp reversal so that I’m green again in a week.  I’m hoping for it to rebound quickly and if it does, I will probably reset my ask price once again to make a 3% profit.  I know – kinda cringey.  “Glutton for punishment” is another phrase that comes to mind.  That fork in the road I was talking about looks less kind.  If the price goes below 4.61, that would be less like getting lost in the desert and more like getting lost in space.  Then I have to weigh do I actually take a loss, or just sit in time out until it recovers which could be a VERY long time.  From 9/23/19-3/15/21, the RAIL stock price never went above 5.00 and it mostly hovered below 3.00.  

We’ll see how it goes, but history can be a great teacher as well as a schoolyard bully.  Woulda, coulda, shoulda.  For posterity sake, I’ll report how it went next week.  Be careful out there in Wallstreet world.  And whatever your trading strategy is, use your head not your heart to make logical trades.

-Johnie

May 2021 Stock Strategy Review

 So I have started a new stock strategy during the month of May, so let's see how it has performed.  

I started May at 163% of my initial investment, and I finished at 179%, so I made 16% ROI from my initial investment.  Not too bad since I was just getting started in the new stock strategy, and since I am not planning on adding any more money to my IRA.  May was a pretty good month.

I am targeting 10 trades a month making 4% per trade.  Including the exponential growth factor, that ends up being 48% per month.  The 16% was the end of the last stock strategy I was using with Humanigen, HGEN stock.  I was heavily loaded in on HGEN, and was holding until the submitted the application for Emergency Use Authorization with the FDA.  If I would have sold the day before, I would have ended up making 40% growth for May.  I learned that HGEN has been following the principle of "buy the rumor, sell the news."  That is where the stock price increases on anticipation of a catalyst and then as soon as it happens, there is a mass sell-off.  I expect the same thing to happen again before receiving EUA in a couple of weeks.  It's not that HGEN is a bad stock.  I will probably buy more the 3rd week of June, but it depends on the price.  HGEN does meet the general qualifications of my stock strategy (see the screenshot).

June is off to a good start with ASTS.  I went all-in on 6/3 for 7.20 and sold on 6/4 for 8.20 and made 14%, but because of the exponential factor, I am now sitting at 203% ROI.  

If you have followed my previous blogs, you might be checking out WINT stock as well.  The Windtree Therapeutic stock went way up on Friday, from 1.99 to 3.40.  That would have been a good one to have, but you never know when a stock is going to go up like that.  However, I think it is strange that two stocks I have been targeting went up quite a bit this week.  That is a good sign that my strategy is picking stocks that have a lot of potential.  I have noticed that targeting 2.5-3.0% less than the open is more successful than 3.5-4.0%, and that makes sense since most stocks have about a 2.5% decline from open all the time.  Not a rule but an average.  I have yet to review the stocks completely for Monday, so I am not sure which one I am going to target.  It could be one of the ones that I have already targeted before.  Maybe HGEN since it has been in a little slump, but I see that one going down some more before EUA is granted.  Also, I am not too keen on ASTS or WINT since both of them had a big spike on Thursday and Friday.  Happy trading!

Stepping Stones of Investment

 

Let me preface by saying that this is not investment advice, but this is my plan for investing in stocks.

In the simplest terms, investing is buying part of a company as shares, and then selling at a profit.  The goal is to buy at a low price and sell at a high price in the shortest amount of time to maximize your return on investment.  These are my stock investing principles for trading within an IRA.  Time for some definitions and formulas.

Return-on-Investment (ROI) is: (Share Sell Price / Share Purchase Price) – 1 = ROI %

ROI Example:  If you buy 100 shares of WINT at $1.71 and sell them at $1.82, your ROI for that trade is (1.82/1.71) – 1 = 6.43%.

Profit is:  (Shares Sold x Sell Price) – (Shares Bought x Purchase Price) = Profit ($)

Profit Example:  If you buy 100 shares of WINT at $1.71 and sell them at $1.82, your Profit for that trade is (100 x 1.82) – (100 x 1.71) = $11.00.

Now time for a little strategy via the Stepping-Stone Principle.  Let’s say the spring rains have been relentless and your yard is saturated.  You need to fetch some tools from the shed, but you do not want to get your feet wet in the standing water in the yard.  Your goal is the shed, which is 30 feet from the back door.  If there was only one stepping-stone 15 feet from the back door, you would have be a Olympic long-jumper to reach it, only to find yourself stuck on an island with no runway for your next jump.  In investing, this would be like saying you were only going to wait for large ROI’s, like 50% or up.  You will spend most of your investment career feeling like you are stuck with a stock that mostly disappoints and you seldom make money. 

If you have 3 stepping-stones spaced 7.5 feet apart, you will still be jumping pretty far from stone to stone.  This would be equivalent to 25% ROI.  You’re probably going to get your feet wet again even with three!

However, if you have 11 stepping-stones spaced 2.5 feet apart, that is a comfortable walk to the shed. 

The Investment Stepping-Stone Principle:  Long-term investment goals are more easily achieved with more frequent yet smaller ROI goals. 

If I want to double my investment, I could buy a stock and sit on it for a long time and wait for it to grow in value and then double.  That is an option, although it may take a year or two, or more.  But if I calculate that a specific stock’s average daily low is 3-5% less than its opening price, AND that the average range from previous day low to next day high is 5-7% or greater, then I have laid out the plan for my stepping-stones.  If my target stock opens at 1.73, I will create a limit purchase bid at 1.68.  If the bid is not picked up, then I try again the next day based off the next day’s opening price.  If the purchase goes through at my target price, then it is expected because that falls within the average.  Then the next day, I will set my sell price for something comfortable that falls on the low-side of the next day high average range.  I will target a 4% ROI, so I set my limit sell price at 1.75.  This is a likely outcome since it falls on the low-side of the calculated previous day low to next day high average.  When my stock sells, there is always a little regret that I did not set my sights higher, because I have seen it go up another 5% after I sold sometimes, but I have also seen it go the opposite direct, so be careful to not play at the edge of the average.  All investments have risks.  Even this strategy might fail me since averages always contain some anomalies.  When you are looking at your average ranges, you might want to throw out the anomalies and set your target price after excluding those data points.

 

In the long run, this will give me a 40% ROI per month, but really 48% compound ROI since I will also be reinvesting my profits with each subsequent purchase.  By targeting a 4% ROI with each purchase, and planning to sell the next day, it creates a path of stepping-stones that yields more than double the investment in 2 months (119.1% ROI).  Small achievable stepping-stones will empower the investor with more control and a better performance than a wait-and-see or moon-shot approach.

Overcoming Investment Fear

 

Overcoming Investment Fear

 

It’s not hard to say why I never really got into the stock market before last year.  I was afraid.  Every penny went to raising our four kids.  I saw it as success if we did not have a negative bank balance at the end of the week.  I remember the garage sales and the trips to the pawn shop just to get us back in the green.  Back in Georgia I did take $500 from a tax return and opened an account with TD Ameritrade.  That was back when you still had to pay commissions.  So I opened the account, but 2 weeks later I needed the money, so I just withdrew it all and closed the account without ever trading.

 

We were never really about the money either.  We were living paycheck to paycheck and pretty happy, but never wealthy financially.  I still find it hard to believe that for the 4.5 years when we lived in Georgia, we only had ONE vehicle between us!  Waiting outside PCC for my wife to pick me up was just a thing we had to do sometimes.  However, there was a slight fear of materialism that made me villainize the financial market and those who were better off.  In a way I had a fear of success and a fear of investing.  So what changed?

 

Last summer, when I was filing taxes, there was a deduction I could take if I contributed to an IRA.  It was the first time I felt like I had a few bucks to spend on it, so I opened my IRA and then I forgot about it.  Friends at work were telling me about their investments, and I started getting curious.  A close friend shared a link with me so that if I opened a Robinhood account, then both he and I could get a free stock.  I got 1 share of WPX.  That started me on my journey of overcoming my investment fear. 

 

Investing involves picking the right stock at the right time at the right price, and then selling said stock at the right time for the right price.  There are a lot of similarities between investing and gambling that are worth considering before investing.  Can you deal with the stress of seeing your stock price go down?  The first week I bought HGEN, I saw it lose about 25% in value!  I’m glad I did not set a stop loss or I probably would have just been discouraged so much that I would want to quit.  Instead I rode it out.  I added more money to the account and bought down my average.  In the end I saw it bottom out near a 50% loss.  So in a 3 month period, I rode out a full investment of HGEN seeing a 50% loss and then a 95% gain on my investment.  As a side note, I don’t know if I will ever use a stop-loss, just because I know they are often manipulated on low volume days.  Most people that use stop-losses, set them to trip and sell at 10-20% loss.  Some stocks hit a 10% day loss a couple times a month, so setting a stop-loss would be throwing money away in my opinion.  So my failures have been good teachers. 

 

 Picking the stock:  Predictability breeds confidence.  If I am looking for a stock to trade, I want to find one that is trading near it’s low price and with a large enough range to support a 3-5% 1-day growth rate.  I am looking for something that also has a large enough trading volume, say 500K and up.  By studying the individual stock historical data downloaded from the Wallstreet Journal, I can check the range.  By using TD Ameritrades free software, ThinkorSwim, I can find stocks that are near their all-time lows and that have traded large daily ranges.

 

Picking the right entry price:  Trade within the historical data range.  So I have picked a stock (WINT), near its low.  Now I want to set my entry point.  In the last week, the low from open (LFO) has averaged 3%, so whatever the open is, that is what I will set my limit price for.  If it opens at 1.75, I will set it for 1.70.  If it is increasing in value, then I will have to adjust to a 2.5%, so if it opens at 1.74 and it has had an increasing range of LFO at 2.6%, then I will set my limit buy price to 1.70.  I always target below the open.  If it doesn’t take, that’s okay.  When it does trade, then I have to wait a day to sell. 

 

Setting the right exit price:  So the next day I set my limit sell order for 5% above what I paid, unless the range does not support it.  The average range for WINT in the last month has been 8% from previous day low to next day high, so 4-5% is a good target. So I bought at 1.68 and sold at 1.75 this last time.  If I had set my sell price higher, I could have made 10%, but the odds of it selling the next day go down with each percent that I increase the sell price.  If I want to make 20%, it will take a long time to hit that price.  I am aiming to sell the next day, so I will trust the data and get my 4-5%.  I have done that 5 times in the last 2 weeks!

 

Conclusion:  Predictability breeds confidence and understanding how the market moves is the first step to overcoming the fear of investment.  If you trade, do your research, trust your data, and start off small.  Please do not take this as investment advice, but as me sharing my investment journey.  The market is a tool so that I can reach my financial goals.  Plain and simple.  Happy trading!

Investing the Bits and Pieces

 Investing the Bits and Pieces

 

As always, let me preface by saying that this is not investment advice, but this is my plan for investing in stocks.  Here we go.

A big part of my investment plan hinges on two things:

1.            1.  Weekly small wins of 3-5% growth

2.            2.  Exponential growth from reinvesting earnings

I would like to give a real-world example of trades I made this week that illustrate both of these hinge-points.  Since most of my investment is currently tied up in Humanigen  (HGEN), that leaves me with few investment options.  However, most accounts will end up with some cash on-hand available for trading just because it is hard to invest 100%.  I would like to show how investing the bits and pieces can grow that uninvested portion of an account.  It may not be much, but it does make a difference.

 

So I looked for a stock that was at or near its low and selling around $2-3.  I decided on Windtree Therapeutics (WINT) which I have previously traded.  The stock has been in decline since last summer when it hit around $10/share.  But it met my criteria for trading since it hit a 52-week low and would support my growth plan of 5%.  The growth support is derived by averaging the range of previous day lows to next day highs.  If that range supports a 3-5% gain, then I go ahead with the trade even if the stock is in decline. 

WINT stock recent average range will support 3-5% growth since the previous day low to next day high average is greater than 5%.  It is important to target a good leverage entry point, so if my Low-from-Open (LFO) is 5% average, I want to target an entry point that is 4-5% lower than the daily open.  So on 5/12 I entered at $1.80.  It took a big drop on 5/10 and had a low of $1.77 on 5/11, so I thought it was set up to increase.  It is like pulling on a rubber band.  There was tension in the stock price leveraging upward, so I did not want to put a bid in that would likely not be picked up.  It felt like the bottom, so I went in at $1.80 and it was right in the middle from the open.  It bottomed out at $1.78, then it took off, but since I am trading in an IRA, I couldn’t sell the same day as I bought.  But the next day I targeted my 5%.  Good thing I was not greedy!  It sold on 5/13 at $1.89 (exactly 5% growth), then the stock tanked again.  The trade cleared sooner than I thought it would, so I was able to buy again the next day at $1.67.  It closed 5/14 at $1.76, right at my next 5% growth sell price.  No point in being greedy, so I follow the plan.  This stock has some history of not gaining in a day, so I have set my sell price at $1.76 for Monday, and I have confidence I will hit it. 

 

This technique is what I will exclusively use after I sell my HGEN stock.  Waiting around for a parabolic seems to me a waste of time.  I’ve made good money doing it, but I think the low-growth strategy seems more certain and risk adverse.  I was able to make 2 trades in a week, which is twice as fast as my stock growth strategy plan.  That’s ok, but I am not a fan of rushing into things, so one positive trading cycle a week is still success.  Two is the max.  Besides, there isn’t a CD or a savings account out there that can give a 5-10% return a week.  So I’m pretty happy with this strategy. 

 

Regarding the exponential growth, since I only had enough money for 6 shares on the first trade, I then had enough for 7 shares on the 2^nd trade, thus investing a greater portion of my stagnant account.  So in 2 trades targeting 5%, I actually end up making 10.8% off of the original investment.  I am always amazed at the power of exponential growth in trading stock.

 

Thanks for taking the time to read this and, if you trade, I hope you found this encouraging. 

 

-Johnie

My Stock Investment Strategy

 

My Stock Investment Strategy

 

Let me preface by saying that this is not investment advice, but this is my plan for investing in stocks.  Follow this plan at your own risk.

 

After searching the internet I have not been able to find a stock investment strategy like the one I am using, so I am sharing it with the world since, so far, it has worked out pretty well.

 

I started by opening a traditional IRA with $426.  I didn’t even have any plans to open one, but I could get an additional credit on my tax return by opening one, so I did.  Then I forgot about it for 3 months.  I just didn’t even log in to the account.  Then when I had some time off, I thought maybe now is a good time to learn about stocks.  I had never bought or sold stocks before this, so I didn’t know what I was doing or how to go about it.  I was afraid I would mess the whole thing up and lose all my money.  I started by subscribing to the Wall Street Journal.  I thought it would be good to look at the stocks that hit 52-week lows and target them.  Lucky for me I wasn’t aiming very high.  I found a stock to target, AKUS, and then I targeted a 2% return.  I bought one day and sold the next.  Easy peasy.  I was still afraid I would lose my shirt on stocks, so I had even retargeted so that I only made 1.5%.  But I now knew how to buy and sell stocks.  Over the last 6 months, I have started with a plan, then broken away, failed, won, and now I am settling in on a new plan. 

 

My plan is simple:  Grow the $2700 I have already invested and not add any more.  Grow it 3.75% per week, and in 5 years I can make my first withdrawal of $1,000,000 and pay off all my debt.  Sure, I’ll pay 42% in tax on the million, but it will be worth it because I will still have more remaining in my account for retirement.  I also started a Roth IRA, so it will be tax free when I turn 59 ½.  That is my investment plan in a nutshell.  It involves having to pay the piper when I decide to take out the first withdrawal.  Until then, it will grow tax free, and I do not have to deal with it when filing taxes.  It’s not day trading, but a form of low growth swing trading. 

 

So how’s it working so far?  In these 6 months of learning to trade I have made 62% ROI, which is far better than I would have done in a mutual fund.  I am invested in Humanigen (HGEN) right now, which should take me over the 100% ROI very soon, since it is expecting a large increase in stock price for the EUA (Emergency Use Authorization) of it’s covid drug Lenzilumab.  Otherwise, my plan is to search for $3-5 stocks that are under-valued and near their all-time lows, and make my 4-5% growth in buying when they are down.  Then sell in the next few days when they are up.  I pick a stock based on the average range from the previous day's low to the next day's high and take into consideration the company news, and if it is near the tested low.  This I repeat once, maybe twice a week.  Since I have an IRA, I cannot buy and sell in the same day, but I can sell the very next day.  I just have to wait 2-3 days for the trade to clear before I can trade again.  Once I start dealing with larger money, I will either have to split it between stocks, or start investing in more expensive stocks.  That will be a good problem to have.  We’ll see how it goes.