Saturday, January 31, 2015

Jim Leitner quote: Follow up on your investment ideas

Global macro investor, Jim Leitner of Falcon Management was interviewed for Steven Drobny's book, Inside the House of Money. I've included one of my favorite quotes, on the importance of following up on investing ideas, below.

"Learn to love to listen to people and when you hear something interesting, follow up on it. Don't just think, "Well that's an interesting idea" only to find out a year later that the company you could've bought shares in is now up 500-fold. You never want to say woulda, coulda, shoulda." 

Jim Leitner Falcon hedge fund manager quote investing

This is an especially relevant quote, as I've struggled with regrets over missed opportunities after I failed to pull the trigger on some of my best investing ideas (click through for more on this trading phenomenon). 

During the course of this bull market, I've also made errors of omission when it came to following up on unique investing and trading ideas gleaned from other smart traders. Maybe you've faced the same issues in your trading and investing journey. So what steps can we take to change and seize the opportunities that we uncover?

The important thing to take away from Leitner's quote is the importance of following up on ideas, even if it's just by taking a small starter position ("a tiny amount of money"). 

If you reduce the size of your initial commitment (say, 20 shares vs. your usual 200 or 1000 shares) it will allow you to have a small "feeler" position that can be increased as the investment works out or goes your way. That way, you can step up your position size as you begin to see a profit. Conversely, you will limit your initial losses to a small portion of your overall capital if the trade should go against you.

Thursday, January 29, 2015

Tech stocks chart roundup: GOOG, AMZN, PCLN, AAPL, BABA, GPRO

Earlier today I tweeted about Alibaba (BABA) and the stock's plunge after its 3Q earnings update.

Since we'll also see earnings from Google (GOOG) and Amazon (AMZN) after the close today, it's a good time to review some leading tech stock charts and follow up on some of my past posts and recent tweets.

1) BABA. As I mentioned this morning, BABA's plunge came after weeks of decline. Despite a few rallies, BABA has been making lower highs and lower lows since peaking at $120 in November. Today's move down was the second consecutive day lower on above avg. volume, and the stock sank through the psychologically important $100 level. 

While there may be an upcoming relief rally, I am avoiding BABA as a long trade until the stock can find support and put in a strong base to move higher. For now, the stock remains in a downtrend. 

BABA stock price chart Alibaba


2) AMZN. Amazon, America's great e-commerce giant (and provider of hosting, e-payments, etc.). Last time we checked in with AMZN, the stock was sailing towards new highs above the $350 level. It then peaked above $400 in early 2014 and has edged lower for the past year.

AMZN will report earnings after the close. Bulls will be hoping for a strong quarter to help turn around its recent EPS losing streak. Prior lows near $283 may provide some support, but the stock is still trending lower and could easily violate these levels. A move above this recent downtrend line and back above the $340 level might signal a change in trend.




3) GOOG. Google will also report earnings after the close. Like AMZN, it peaked out in early 2014 and has drifted lower since. 

While betting against Google has never been a good long-term strategy, the intermediate trend remains weak. GOOG is currently trading below its 50 and 200 day moving averages (see daily chart).



Google stock price chart


4) PCLN. Priceline will report earnings next month. Just wanted to point out another high-dollar tech leader that's drifted lower off its early 2014 highs. See a pattern with this group?

Potential support at the $780 - $800 level may come into play if the stock continues lower.



5) AAPL. Apple is the one consumer tech leader that is showing strength here. After a blowout quarter and the usual gushing over the piles of cash Apple makes, it's clear the notion that "Apple's best days are behind them (post-Jobs)" are being put to rest.

I will consider AAPL as a long trade in the coming days. Probably should have acted on the bullish turnaround view earlier (May 2014 tweet).



6). GPRO. GoPro is down considerably from its October 2014 highs near $98. 

Hopes for a big Christmas rally in GPRO shares did not materialize, and the stock is trading below its 20 and 50 day moving averages. While the pattern of lower highs and lower lows persists, I will not go long GPRO. Note: GPRO reports earnings next week.



To sum up, much of the current action in these tech leaders is bearish. The exception being AAPL, trading near an all-time high. With earnings season volatility upon us, it's best to be highly selective and manage your risk. 

Disclosure: Watch list review. No positions in stocks mentioned at this time. May initiate positions any time after, do your own due diligence.

Tuesday, January 13, 2015

Crash at ASPS and OCN: early warning signs

Altisource (ASPS) and Ocwen Financial (OCN) are on the rocks. 

What were the early warning signs? We'll examine the stock charts of these two mortgage finance companies to see what went wrong. First, let's provide a little background on the firms and the lead-up to this recent mess.

Here's a quick summary from Housing Wire on the how and why of this interrelated financial unraveling:

"To say that Ocwen Financial (OCN) took a beating on Wall Street Tuesday would be the understatement of the century...Ocwen's stock closed Tuesday at $7.78, a loss of more than 36% for the day. One year ago today, Ocwen’s stock was trading at $55.20.

...Ocwen was under fire for most of last year, especially from the New York Department of Financial Services, which reached a settlement with Ocwen last month for failures in its mortgage servicing practices.
As part of the settlement, the NYDFS forced Erbey to resign from his position as chairman of the board of directors of Ocwen, and each of its four related companies: Altisource Portfolio Solutions S.A. (ASPS), Altisource Residential Corporation (RESI), Altisource Asset Management Corporation (AAMC), and Home Loan Servicing Solutions, Ltd. (HLSS), over allegations into Ocwen’s servicing practices and its relationships with its affiliated companies."

Just over a year ago, Bill Erbey's mortgage finance empire was the subject of flattering profiles in the financial press. Today OCN and ASPS both closed down over 36% and RESI is one of the few REITs starting the year off in negative territory. What a difference a year makes. 

Here are the weekly charts of ASPS and OCN, shared earlier today on Twitter. I'll include some expanded charts below.



 
While the deteriorating price action on the weekly charts may now seem obvious in hindsight, let's take note of some major clues (click charts to expand).


ASPS stock price chart

OCN stock price chart

If you'll review the chart annotations, you'll see that ASPS and OCN both suffered a sharp multi-week sell-off on above average volume in early 2014. These sharp down moves resulted in breaks of ASPS and OCN's newly-formed 200 day moving averages, which could be seen in real-time on their daily charts. Later, a break below the weekly MAs would be evident in the weekly charts above.

Neither stock could successfully reclaim its previous highs and both continued to trade at new lows. OCN and ASPS continued to trade below their weekly moving averages for the remainder of 2014. You can clearly the see the pattern of lower highs and lower lows that took over. Each successive plunge to new lows came on high volume, a bearish sign indeed. Investors and institutions were saying, "get me out!".

Another late clue: as stronger stocks bottomed in October 2014 and went on to make new highs, ASPS and OCN both continued lower. Even at that late date, ASPS was trading near $50, while OCN traded above $21 through November.

A related stock, AAMC, popped up on my radar via manual daily stock scans in the summer and fall of 2014. While the price action looked bearish, I quickly scratched it as a short candidate; AAMC was a $600 stock that traded an average of just 20,000 shares a day.


AAMC stock price chart

To protect yourself from steep losses in stocks like ASPS and OCN (or any stock), remember: every big drop starts as distribution and a small decline. Watch for signs of topping or distribution and a change of trend. It's up to us to as traders and investors to manage our risk and decide beforehand where we will cut our losses.

Disclosure: I have no long or short positions in any of the stocks mentioned at this time.

Wednesday, November 19, 2014

You'll learn more from your losing trades than your winners

After a series of poor trades, I recently went back and read this Dan Zanger quote:

"You'll learn more from your losers than your winners will ever provide."

Now I believe in studying success and I also think you can learn a lot from your best trades and life decisions. In fact, I sometimes think that people put too much emphasis on the value of learning from one's mistakes instead of studying what went right (and the reasons why). 

Having said that, I'm a big believer in journaling your trades and taking the time to honestly examine your results. That includes our missteps, the less than optimal trades, and those flat out wrong or near-disastrous moves that take big chunks of money out of our accounts.

So if you've hit a rough patch in your trading or your investing returns aren't all they could be, maybe it's time to take a good, hard look at your records and figure out what you can learn from your losing trades. You may just improve your long-term results.


Dan Zanger trading quote losers winners learn

   

Tuesday, November 04, 2014

Admit when you're wrong... and profit (Jesse Livermore)

In trading, it's best to quickly admit when you're wrong. 

If you can keep your losses to a minimum, you will be able to preserve your trading capital (along with your mental capital) and improve your odds of profiting from future opportunities.

As Jesse Livermore once said, "I have long since learned, as all should learn, not to make excuses when wrong. Just admit it and try to profit from it."


Can you think of a time when admitting you were wrong saved you from prolonged agony or bigger trading losses? Did you ever turn the situation around or even go on to profit from it? Share your story with us in the comments and on Twitter.
 

Tuesday, October 28, 2014

Twitter's big year: TWTR 2014 in charts

If you follow Finance Trends on Twitter, then you've probably heard me talk about our favorite social media company and its stock (TWTR) quite a bit over the past couple years. 

However, this will be our first (!) post on Twitter's stock performance here on the website. Now that Twitter has reported 3Q earnings, it's a great time to look at the charts and see where TWTR has been in 2014, and where it may go from here.

Let's cut to the chase. Here is a newly updated chart (click to enlarge), showing today's price action post-earnings. 

Twitter TWTR stock price chart


TWTR gapped lower after last night's disappointing EPS report, opening near $42 today. Although TWTR managed to move higher during the day, the price action, as viewed from the daily chart, is rather bearish. The stock is now trading below its 50 and 200 day moving averages and it has moved lower the last 2 days on heavy volume.

Update: TWTR is now down 31% year-to-date while its rival, Facebook (FB, which reports earnings today), is up 48% YTD.  

Facebook Twitter performance charts FB vs. TWTR
FB vs. TWTR charts via Finviz.com


After a poor showing in its first year after IPO, FB turned things around and has steadily moved higher, leaving TWTR in the dust.  

Facebook FB stock chart
 

Although Twitter's revenues are climbing, with large growth in mobile ads and data licensing, Techcrunch feels the company will need to pair those gains with stronger user growth: 

"[Twitter] has a history of beating on its financial goals, and missing, or disappointing on user growth. Twitter has done an excellent job at monetizing its user base, in other words, but has had a harder time growing the base itself.".

But as Twitter co-founder Ev Williams likes to reminds people: 

"Twitter isn't a social network, it's really an information network."

Will Twitter be able to engage new, "secondary" users through TV and apps that embed tweets in their content? Only time will tell. For now, the bearish price action is telling me to find other trading opportunities on the long side.   

Long-time Twitter followers know I've also been bullish on TWTR in the past. 


 

As a long-time Twitter user and observer, I've been alternately bullish or bearish on the company's platform vs. the stock. We can wish Twitter the company a bright and profitable future while taking an indifferent or bearish stance towards the stock. As of now, I have no position in TWTR. At some point in the future, I may turn bullish again.

Disclosure: I have no current position in FB or TWTR.

Monday, October 20, 2014

Stock index and futures performance 2014 YTD

Quick update on the performance of key US stock indices and futures year-to-date, via Finviz.

Coffee (+80%) and Feeder Cattle (+44%) lead the pack YTD, while soybeans (-27%) and cotton (-26%) fare worst. Crude oil is down sharpy from its summer highs, -16% YTD. Natural gas is down 13% YTD. 

Here's the data for stock indices year-to-date: Nasdaq 100 (+8%), S&P 500 (+3%), and the small cap Russell 2000 (-6%) YTD. 



If you want to dig deeper and check out the performance of individual US stocks, try the Finviz screener and adjust the fields in "performance". You can search stocks for YTD performance and sort the results by volume, percentage gains, stock price or market cap.