Exits, 6/1/2024
How we did on the trades we exited this week.
Dids/Pexels
This Week’s Trade Exits
As soon as I exit a trade, I note that in the comments of the post where I first mentioned the trade; at the end of the week, I try to track them all in one post. These are the trades I exited this week.
Stocks or Exchange Traded Products
Direxion Daily Semiconductor Bull 3X Shares (SOXL 0.00%↑). Bought at $39.10 on 5/3/2024; stopped out at at $46.11 on 5/31/2024. Profit: 18%.
Options trades
Call spread on DELL (DELL 0.00%↑). Entered at a net debit of $0.80 on 5/30/2024; expired worthless on 5/31/2024. Loss: 100%.
Comments
Stocks or Exchange Traded Products
Our core strategy of buying equal dollar amounts of Portfolio Armor’s top ten names, placing 15%-20% trailing stops on them, and replacing them with new top names when we get stopped out, continues to perform well. I was a little wary of buying a triple-levered ETF as part of this strategy, but SOXL was our top name at the beginning of May, so I decide to eat my system’s own cooking, and got stopped out with an 18% profit in four weeks.
Since we started this Substack, we now have 6-month returns for 49 weekly top names cohorts. On average, those 49 top names cohorts have returned 22.73% over the next six months, versus 12.63% for the SPDR S&P 500 Trust ETF (SPY 0.00%↑).
You can click here to see an interactive version of that table, where you can click on a date and see what are top names were then and how each of them did.
Options
This DELL trade was a heads you make 200%, tails you lose 100% trade, and we lost 100% on it. In hindsight, there’s a way we could have made 100% on it, without knowing which direction the stock would go post-earnings. We could have paired our call spread set to make 200% with a ~8% upward move in the stock with a put spread set to make 200% with a similar move in the other direction. We would have still lost 100% on the call spread, but made 200% on the put spread, leaving us with a net gain on both trades of 100%.
That’s one approach we’ll look at next time when we don’t have less conviction in the direction of the move than the size of the move.
The other approach we’re going to be using more is post-earnings trades. A few stocks this week suffered huge drops, despite having solid fundamentals. I’m working on ways of timing entries into them for trades on their next earnings release. Currently, I’m looking at two approaches:
Using Chartmill’s set-up rating to look for a consolidation in prices.
Using Chartmill’s valuation rating to gauge when the stock has tilted slightly into value territory. One of the stocks reporting this week, for example, had a valuation rating of 4 (out of 10) before it reported; after its post-earnings crash, it now has a valuation rating of 6. We will likely be placing a bullish trade on that one next week.