Portfolio February 20-24, 2017

So we begin anew. With the passing of Andrew Sirski, the “farm” is passed on to his sons, Jon and Steven. Please find below the latest of our portfolio and some of the ideas we’re pursuing.

First, we need to start with a disclaimer.

We do not offer any financial advice nor are we recommending to buy or sell any of the securities we mention. The following information is provided strictly for educational purposes. Before placing any trade, please consult a qualified financial professional. Some of the ideas we are considering are not for everybody. Further, by using this site and its contents, you understand that StocksTalk and its contributers WILL NOT BE HELD RESPONSIBLE, LIABLE, OR ACCOUNTABLE for any loss incurred as a result of the information provided. Our goal is only to provide financial education and are by no means recommending buying or selling any of the stocks, options, etc. that we write about. We provide our own thoughts on what we will do with our money inside of our portfolios and bear no responsibility to report every transaction. We will do our best to provide up to date information on our trades for educational purposes only and, with that, all information provided is believed to be true and accurate at the time of its transmission.

All that is to say: Be smart about your money. Do your own research and consult a qualified financial professional before making any trades. It is your money and your responsibility, not ours.

With that, let’s get down to what’s been going on.

A few changes. We’re hoping to release this newsletter both in text format and online so that we can post charts and label them accordingly. Moreover, we want you to be able to see them right away instead of waiting for your charting site to load up or whatever you’re using. Second, we’re looking for your feedback for what you would like see covered and maybe added or subtracted to the website. Third and lastly, we’re hoping to post a few more informational articles on what to look for in the markets instead of focusing just on the trades themselves.

Now, onto trading.

The first thing to notice is that GOLD jumped this past week and teased us into thinking that it might bring up all of its related stocks but you can see from the charts. Currently, we hold NUGT, DGC.to, and MUX.to. Andy held SLW.to just before his death and had sold CALLs on his shares which were all exercised a few weeks back.

NUGT. We hold 400 shares of this leveraged ETF and have been doing alright with it since we purchased the majority of them around $10-11. I sold WEEKLY CALLs on Tuesday or Wednesday thinking that the ETF would drop with the price of GOLD. However, the trade must’ve triggered a reaction in New York as shortly thereafter, the price jumped. As a result, I bought those CALLs back on Friday thinking that, despite the loss, I could sell another CALL next week or, better yet, wait for the ETF to go up and try to sell at a higher strike price. This is, of course, very speculative.

On the technical side of things, we can see that the price has sliced through the 20 EMA and has since traded along that line. Will it drop further or will it do its “normal” end-of-month/beginning-of-month rally? The play we have in mind is to wait and see how this ETF acts around the end of month and then possibly selling another series of WEEKLY CALLs.

We should point out that you should be very careful with these leveraged ETFs because they can move very fast in either direction. The smiles are fast to evaporate when the numbers turn from green to red and then the deadly thought of “It’ll go back up again” or, even worse, “I’ll wait for it to go back up and then sell.” Yeaa…. right. So, be careful! If you’re not comfortable holding these things then don’t buy them. They are good for a few days and often move very quickly but they’re not unpredictable. The best thing to do with these leveraged ETFs is to watch two things: first, the underlying ETF that they track, the so-called “regular” ETF. Next, watch the range within which these ETFs trade. For instance, many of these ETFs will jump $7-10 before pulling back a little. By studying this price movement you can gauge and create a reasonable point of entry or, even better, know when to possibly stay out. This can be tricky because sometimes they can continue to go up despite indications that they should go down.

That being the case, I suspect that NUGT will actually test its 50 DMA or possibly drop just below it before making another surge. It’s just an idea.

Next, DGC.to. This stock has basically traded sideways for the last few months but I’m not altogether bearish on it. Maybe I’m an optimist but is that some sort of basing pattern I see? I don’t know. This past week we sold 2 CALLs for an $18 strike price for March 17. Why? Because when we did sell them the stock price dipped and so the premium was quite low. Our purchase price is around $18.23 and we only got $0.29 for the CALLs so this is one that we might buy back or simply let get exercised. Andy never liked buying back CALLs but I do because I hate seeing that loss on the underlying stocks. At least with CALLs you can “re-do” the trade and basically erase whatever loss you might have incurred from buying them back. It’s your choice.

Now, let’s step back and look at the technicals of DGC.to. On the daily chart we see a rising RSI, which is a good thing. All the way back from October of last year we see that the RSI has been rising despite the price FALLING and now trading sideways. Full Stochastics has basically been in synch with the price movement so it might be a good indication of when to get in and out of the stock right at this moment. MACD, also rising. The technicals look good-ish, good enough to warrant watching the stock and/or selling options on it to bring in an income.

One last note about DGC.to. It is a stock that we watch pretty closely because it is often a good barometer of how the rest of the GOLD STOCKS might act. If DGC.to goes up or down while another stock like AEM.to barely moves, that is often a telling sign that something is amiss in the GOLD STOCK sector and caution is warranted. We point this out mainly because DGC.to can offer some nice rewards (especially by way of WEEKLY CALLs) but it often can jump around quite a bit which may make you swing from joy to despair pretty quickly.

Next, MUX.to. We bought this basically because we heard it mantioned on one odf the podcasts we listen to and thought, well, they’ve done well before so why not now? They mentioned it back a year ago, we bought it a couple of months aaaaand… it’s down so far. It does have monthly options available but since our account is mainly tied up with DGC.to, we don’t have enough room to add any more to this position nor to sell a reasonable about of CALLs to bring in any sort of profit. We may end up selling this one and just take the loss. Take a look at the charts below and see for yourself.

Onto PD.to. Andy never bought this stock but never had anything bad to say about it. Instead, he chose Birchcliff Resources which, to me, seems a bit more volatile. Looking at the charts for PD.to, I see that the RSI is hitting oversold territory, the Full Stochastics is declining but turning up, and the MACD basically is down. So too, the price is down but reaching its 200 DMA which may act as support. If we take a longer view of this stock, the longer term trend is up and this may be in fact a good time to add to our position. We’ve sold CALLs on this before since we’ve held it for a few months now and have made enough money to keep it going. Our purchase price is around $6.50 per share so, with this fall to the 200 DMA, we’re basically even on the stock. Should we have sold at the top a few months ago? Should we have bought a PUT? We did buy a PUT back in December for the January $7 expiry and guess what happened? The stock ran up just in time to take our PUT OPTION MONEY! Just look at the stock price from January 16-23! Grr! But that’s the risk with PUT options. At the same time, we had sold a CALL at the same strike price ($7) and actually bought that one back at the same time, so we made money on the CALL at least. We then sold another CALL for February 17 and that expired worthless. So, overall, we seem to be making money with PD.to.

One other trade we’re watching with some interest is India.  

We play India by using the INDL leveraged ETF. We made money on it a few weeks back and, looking at the chart, its showing some signs of life. Again, with these leveraged ETFs, it pays to watch and study the price movement, including the typical amount it can jump PER SWING/RALLY and the typical amount it can fall PER DECLINE. We don’t mean OVERALL, we mean per RALLY, how much does this ETF move? From what we can see, it moves about $6-8 per rally and then drops $2-3. This isn’t an exact science and you’ll need to watch it yourself to see where you’d be comfortable entering into such a trade (if at all) but with that in mind, we might see this ETF pull back to its 20 EMA before making another surge. Should it fall through its 20 EMA, then we’d expect a 50 DMA test or a 200 DMA test. Now it’s good to note how the RSI has been going up since November and might be making a lower high despite the price going up. Full Stochastics have been overbought for a while but the MACD looks good, as do the moving averages. Overall, we might see this ETF temper its rally and trade sideways for a few weeks before it makes up its mind whether or not to break through its previous high (around $60). Consider the 5-year chart below:

Sadly, this ETF is a little more expensive than NUGT so it prevents us from building a larger position with which we could sell CALLs (probably not a bad thing considering how volatile these things can be) but, the upshot is that if you use an ebrokerage such as Questrade, then BUYING these ETFs is free but selling can be done all under one commission. So that’s something to think about.

Listening to the Talking Heads & Bloggers, GOLD should go down… or up, depending who you listen to, and ENERGY should go up… or down, depending who you listen to. Markets should go up… or down, depending who you listen to and so, overall, all we know is that things should go up… or down, depending on who we listen to and which way we hold the chart. There is a famous quote that goes something like “If you torture the data long enough, it will confess” (Ronald Coase). And so it goes with our trading!

That’s it for this week’s portfolio. We have a few other posts we’d like to put up in the meantime so we’ll get at those right now. As always, we’re available to answer any questions you might have. **The phone number Andy used will no longer be in service so it’s strictly through email for the time being until we figure out another method of communication.

Happy trading!