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Jan,
I do. However, I don't short until the intermediate term trend is
falling and that hasn't happened yet. Remember, I always trade in the
direction of the intermediate term market trend. I used to ratio trade
going from 50/50 for neutral markets to 3/1 in the direction of the
intermediate term trend. However, I found that I did better when I kept all
my positions in the direction of the intermediate term market trend and just
go to cash when uncertain. Another problem with shorting is that over 70%
of my trading funds are in self directed IRAs that do not allow shorting.
Therefore, I have to use short substitutes like the Rydex bear funds for
shorts in the IRA account.
JimG
-----Original Message-----
From: Jan Robert Wolansky <jrwolansky@xxxxxxxx>
To: metastock@xxxxxxxxxxxxx <metastock@xxxxxxxxxxxxx>
Date: Saturday, February 13, 1999 11:07 PM
Subject: Re: Weekly Pick
>Jim, why don't you take a look at the short side? Markets go up and
down--don't
>you want to have the tools to participate in both?
>
>Jan
>
>Jim Greening wrote:
>
>> All,
>> What a week! The DJI fell Monday and Tuesday then opened strong
>> Wednesday only to lose most of the gain by the close. At that point, my
>> move to 75% cash last week was looking good. Then Thursday the high
techs
>> exploded off the open and the NASD had an all time record up day and the
DJI
>> ended in about the middle of Wednesday's trading range. By the end of
>> Thursday, I was wondering if my move to cash was bad <G>. Then the
bottom
>> dropped out again Friday. In summary, both the DJI and the NASD OTC
indices
>> were down for the week with the DJI at about the midpoint of its weekly
>> trading range and the NASD OTC near the bottom of its weekly range. It
>> looks like the DJI is making a Trader Vic type horizontal channel (HC)
after
>> falling through the bottom of its Short Term Up Trend Channel (STUTC).
It
>> will finally give us a trend continues signal or a trend reversal signal
by
>> breaking out of the top or bottom of that HC, respectively. On the other
>> hand, the NASD OTC index closed just above the bottom of its STUTC.
Either
>> the bottom will hold and the bull continues or it won't and the bear will
>> take over for a while. I don't know which will happen so, in retrospect,
my
>> decision to go to cash was a good one <G>.
>> The problem is that I don't like sitting on this much cash at the
low
>> money market yields especially if the correction drags out. Therefore,
I've
>> started to look at some alternatives. I wanted something with more yield
>> then the money markets, some capital gains potential, and little downside
>> risk. I think the Real Estate Investment Trusts (REITs) fit the bill
here.
>> They have been in a down trend for over a year and their average yield is
>> now around 8% which is much higher than the money markets. If interest
>> rates hold steady or drop during the year (which I think will happen),
then
>> the REITs have to be close to their bottom on a yield basis. Therefore,
the
>> downside risk should be small. On the upside, real estate values and
rents
>> are on the rise. That should help the REITs earnings and the analysts
are
>> expecting about 7% growth for the REITs this year. If we can get a 8%
yield
>> and 7% growth, that means about a 15% annual gain. That's much better
than
>> sitting in a money fund considering there is only a small additional
risk,
>> but I don't want to over expose myself to REITs either. The answer for
me
>> is to invest about 20% of my portfolio in REITs.
>> After scanning the REITs and looking at several charts, I've decided
on
>> two REITs - a shopping center REIT and an apartment building REIT. The
>> first, Mid Atlantic Reality Trust (MRR), is a fully integrated, self
managed
>> REIT which owns, leases, develops, redevelops and manages retail shopping
>> centers & commercial properties. The other, Charles E. Smith Reality
>> (SRW),SRW is a real estate investment trust engaged in the acquisition,
>> development, management and operation of multifamily properties in the
>> Washington, D.C. metropolitan area.
>> MRR at 10 1/2 is in a STUTC that I constructed from Monday's low to
>> Friday's high. Obviously, this isn't a well defined channel and I won't
>> really use it for anything until we get a lot more data. This is a fixed
>> income substitute and value play. MRR made a triple top of 15 in Dec97
and
>> Jan98. It's been in an Intermediate Term Down Trend Channel (ITDTC) ever
>> since then. However, I think its low of 10 last Monday on heavy volume
was
>> the blow off bottom. At that point it was very over sold and had fallen
>> through the bottom of its ITDTC. When it rebounded Tuesday, it not only
>> climbed back into its ITDTC, it also broke through the top of its Short
Term
>> Down Trend Channel (STDTC). The Tema PV Binary wave is rising from a
very
>> negative peak and the Tema StochRSI turned positive last Tuesday. The
>> fundamentals are good with a yield of 9.9%, the P/E is 12.4 (which is the
>> lowest P/E in the last five years, the highest was 41.5), the EPS grew
16.5%
>> over the last year, the debt/equity is 1.6 which is only slightly over
the
>> industry average, and the profit margin is 25%. I'm going to open a
>> position Tuesday. Since this is a value play and a fixed income
substitute,
>> I won't set an initial target and I'll set a loose stop just under
Monday's
>> low at 9 3/4.
>> SRW at 29 1/2 is in a STUTC with the top at 32 and the bottom at 29
>> 1/8. Since this is a value play, not a momentum play, I constructed the
>> STUTC using with a standard deviation channel with the deviation set at 2
>> from the 10/8/98 low to the 12/31/98 high and extended it to the right.
>> There is also a Long Term Up Trend Channel (LTUTC) bottom at 27 7/8. SRW
>> reached an all time high of 35 3/4 on 12/31/97. It repeated that high
for
>> the next two trading days, then went into a down trend that lasted to the
>> 10/8/98 low that started the current STUTC. It is currently in the
process
>> of correcting back to the bottom of the STUTC for the fourth time and is
>> only 1/4 above the bottom. The binary wave is at an extreme negative
value
>> which normal means it should turn up soon. The fundamentals are good.
The
>> current yield is 7.3%, the P/E is 13.6, the EPS grew at 18.9% over the
last
>> year, the debt/equity is a little high at 2.9, and the profit margin is
>> 30.6%. I'll open a position Tuesday. I also won't set a target for this
>> one and I'll set the stop loose below the bottom of the LTUTC at 27 3/4.
>> I'll send a MRR.GIF and SRW.GIF chart to everyone on the chart email
>> list.
>>
>> JimG
>
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