TIB: Today I Bought (and Sold) - An Investors Journal #274 - US Semiconductors, Social Media, Hedge Funds, US Banks, Oil, AI, Pharmaceuticals

Facebook drags down tech stocks. Europe muddles more. Shuffled the semiconductors and oil stocks. A slice of profit taking to free up cash. Bought into the Facebook debacle and a few other falling knives, like AT&T. SEC rejects Bitcoin ETF, again

Portfolio News

Market Jitters - Tariff Tantrum The market open was surreal with talking heads focused on Facebook and markets going up elsewhere.

The day ended with Nasdaq and S&P500 down and Dow Jones up. There are a few other threads emerging in the news. The Senate changed some of the Chinese tariff rules. US housing market is beginning to look a little soft with dropping foreign demand adding to local softening. Homebuilders had bounced earlier in the week. Key data is out this week on US GDP which is expected to be strong. Larry Kudlow,head of the National Economic Council, landed in hot water with this quote.

You’re going to get a very good economic growth number tomorrow, big

https://www.ft.com/content/a1db534a-90ec-11e8-b639-7680cedcc421

Is he guessing or did he blurt out confidential data? I suspect he is right

Europe Muddles European Central Bank (ECB) held its meeting and changed nothing.

Again I watched Mario Draghi, ECB President, answering questions. He reminds me why I labelled what Europe does as "Europe Muddles". The assessment was that ECB was comfortable with the growth and wages trajectory but that the Euro zone still needs "significant monetary stimulus". This looks like muddling to me. If the growth was on track there is no need for the word "significant" in the next sentence. European interest rates listened for a while and went down and then went back to what they want to do - go up.

This article has some good takeaways on what he said. Growth is on track. Wage growth is on track. Rate increase is unlikely until the end of Summer 2019. The markets have it right.

https://www.forexlive.com/centralbank/!/what-we-learned-from-the-ecb-meeting-20180726

I must say I do not agree. The Euribor futures are showing a move in September 2019 but only a full 25 basis point move by March 2020 and again in December 2020. I am invested thinking they will be wrong and that rates will move faster than that.

https://www.cmegroup.com/trading/interest-rates/stir/euribor.html

Bought

Cirrus Logic, Inc (CRUS): US Semiconductors. Cirrus has appeared on my stock picking screens a few times. It appeared on Price to Sales screen today at a time when other semiconductor stocks have been languishing [Note: Screen includes price making a one month high]. I added a small parcel to one portfolio. I liked the chart which shows price recovering after being beaten down for a while.

The key comparison is how Cirrus was outperforming its sector and then fell back (shown against VanEck Vectors Semiconductor ETF (SMH - orange line). Close half that gap offers a 40% upside potential for Cirrus and that is only half way to its 2017 highs.

Global X Social Media ETF (SOCL): Facebook presented a set of confused messages in its earnings announcements. I listened to some of the conference call. It sounded like a bunch of inexperienced IT nerds who did not really grasp the basics of their economics in a naive way. The analysts clearly did not get my view - they took it at face value and smashed the stock by 20%. Yes: revenue growth did slow. Yes: costs are increasing to provide data centre capacity and to improve security and privacy. Yes: Engagement is dropping. No: Instagram engagement is growing. No: They are not monetizing the massive user bases on Messenger and Whats App. Facebook have proved they have some very smart people and innovative ideas. They will find solutions.

My path to capitalise on any price over-reaction was to increase my holdings in the Social Media ETF in which Facebook was the largest holding (about 15% the last time I looked) before its collapse. It has dropped to 2nd place behind Twitter (TWTR) now. Price of SOCL dropped 3.5% which is a bit more than the drop of 3% implied by the Facebook drop (15% of 20%).

Globalive Technology Inc (LIVE.V): Artifical Intelligence. My investment in this Canadian AI venture house has looked ugly without any news impetus and is down 35%. I averaged down my entry price across all my portfolios - position size is still small.

Alerian MLP ETF (AMLP): US Midstream Oil. Consistent with my policy of reducing company specific risk in midstream oil, I increased my expusre to this MLP ETF on the sale of Antereo Resources (AR). See TIB219 for the rationale on midstream oil.

AT&T Inc (T): US Telecom. I have been toying with buying the stock since the Time Warner acquisition was completed. I did buy a January 2020 33/42 bull call spread then, which is under water now. July 25 results did not deliver what analysts were calling for and stock retreated from the bounce it had made. My instincts are that analysts are looking at the wrong things - i.e., they are looking backwards and not forwards. I do note that the Department of Justice has appealed the court ruling that validated the merger. AT&T have said that the deal is closed and they are not bothered about the appeal. They have also indicated that they are not planning to change the dividend (6% yield).

The chart feels like a falling knife. I bought the stock on those instincts and my prior analysis (see TIB257 for that rationale).

I did find this article about the results. Always good to find someone confirming my instincts with some data.

https://seekingalpha.com/article/4190726-t-much-fuss-bad

Sold

**Novartis AG **(NOVN.VX): Swiss Pharmaceuticals. Closed out a duplicated 2020 expiry 84 strike call option for a 18% blended profit since initial purchase in May 2016. Profit on an averaging down tranche bought in November 2016, directly after election of Donald Trump, and the war on pharma, was 177%. I remain exposed through December 2021 strike 76 and 84 call options.

Antero Resources Corporation (AR): US Midstream Oil. Closed out this midstream oil producer in favour of the industry ETF (AMLP) for 17% profit since May 2018.

SPDR Global Dow ETF (DGT): Global Index. I needed some cash in one of my portfolios and closed half my holding in this ETF for a 38% profit since July 2013 = 7% annual return, which is less than the S&P500 has done in that time. Hindsight is amazing science.

Goldman Sachs Hedge Industry VIP ETF (GVIP): Hedge Fund. I needed some cash in one of my portfolios and sold my holding in this ETF for an 11% profit since November 2017. For context, in that time S&P500 went up 10%. See TIB140 for the rationale on this ETF for an interesting mix of technology stocks plus some other growth stocks. I am still invested in other portfolios.

Qualcomm (QCOM): US Semiconductrs. Qualcomm announced that they were not going ahead with the acquisition of NXP Semiconductors (NXP) after a 21 month saga.

The thesis of the deal was that it would allow them to diversify their business from its dominance of mobile to autonomous vehicles. I decided to exit all my positions as there is a degree of business risk in the mobile business with Apple choosing to use its own modem chips for the next generation iPhone. Specific profit results were for January 2020 57.5/67.5 bull call spread - 12% profit since May 2018. Stock: 7.8% since October 2012. Short term August 2018 strike 62.5 call options - 75% profit in 3 days. Disappointing to see price move well ahead of the price I sold at later in the day. My guess is there were a lot of investors invested for the NXP deal who exited in early trade.

I have been invested in Qualcomm on and off since 2010. In that time I have generated stock returns averaging 32%. The short term options trade which started in May 2018 produced a modest return of 17% helped a lot by the fact that in the June roll-up I doubled the exposure.

SunTrust Banks, Inc (STI): US Regional Bank. Sold half my holdings of January 2019 strike 55 call option for 188% profit since December 2016. In TIB202, I compared US banks and SunTrust was outperforming then. Here is the updated chart which looks at SPDR Banks ETF (KBE - black bars), SPDR Regional banks (KRE - red line) and a few specific regional banks.

SunTrust (yellow line) continues to be the star performer and is 90 percentage points ahead of the banking sector and 70 percentage points ahead of he regional banking sector.

Cryptocurency

Bitcoin (BTCUSD): Price range for the day was $459 (5.5% of the high). The heady heights of $8400 were too much for Bitcoin traders and then the SEC rejected the Bitcoin ETF application a second time.

Now we know why price was rising - hope that the application would succeed. The SEC said they felt that the applicants had not demonstrated conclusively that they could prevent price manipulation through the surveillance mechanisms they had proposed. This is not a decision about blockchain or its technologies, but about market mechanisms to protect investors from fraud and manipulation.

Price pulled back to the lower support level around $7800. We need to see price hold this level if we are to see a push to a higher high. Without the ETF catalyst and weekend time again, I am not hopeful.

Read the SEC ruling here https://www.sec.gov/rules/other/2018/34-83723.pdf

Ethereum (ETHUSD): Price range for the day was $25 (5.1% of the high). Price followed BTC lower and rejected the resistance level and traded lower and made more train tracks. We have seen 3 sets of train tracks in 10 days = markets do not know which way to go. Volatility was again lower than BTC.

CryptoBots

Outsourced Bot No closed trades. (213 closed trades). Problem children stayed at 18 coins. (>10% down) - ETH (-43%), ZEC (-48%), DASH (-59%), LTC, BTS, ICX (-65%), ADA (-48%), PPT (-72%), DGD (-63%), GAS (-75%), SNT, STRAT (-62%), NEO (-69%), ETC (-41%), QTUM (-62%), BTG (-66%), XMR, OMG (-46%).

STRAT (-62%) joined 60% down group to replace DASH (-59%) which improved a little.

Profit Trailer Bot Two closed trades (1.44% profit) bringing the position on the account to 0.95% profit (was 0.92%) (not accounting for open trades). BAT came from one level of DCA.

Dollar Cost Average (DCA) strategies were changed to continue with one level of DCA but using a Bollinger Band threshold as the entry method. I did watch this in operation during the day. Entry was triggered correctly. Entry did trail until price had bounced. Entry was rejected if there was not enough buying volume. Entry was not possible when ETH went into sell only mode after a 2% drop in a 45 minute window. Only one entry was made and it did not double up. Two coins are now on the DCA list and both have done the one level of DCA.

I have put this all on a 15 minute chart to show what happened to BAT.

Dark blue line is the entry point after bot has trailed price to the bounce. Pink line is the level at which DCA price entry is allowed. Green line is the point at which the bot starts to trail at 2% below the Bollinger Band. Light blue line is where the 2nd trade entry is made. Yellow line is the exit. As it happens, a straight entry from the DCA trigger line (pink line) would have been at the same point as the bot would have trailed down and waited for the bounce.

Pending list remains at 10 coins with 1 coins improving, 6 coins trading flat and 3 worse over two days. Given the sharp drop in BTC and ETH in the time period, holding ground is a good outcome.

I did discover a tool during the day that helps tackle these sorts of situations. Called PT Defender, it buys and sells coins until they get back to a point when one can close out at a reasonable loss. Users swear by its ability to free up capital so that trading can begin again. Like all these trading tools it does require capital in the account and the software has a fee ($199). I have a few technical things to assess before implementing. Do I need to upgrade from V1.0 to 2.0? Can it work on my Pending List now that I have taken them out of DCA list?

New Trading Bot Positions dropped 2 points to -49.5% (was -47.5%)

All 4 coins dropped with NEO worst at 4 points down.

Currency Trades

Forex Robot closed 6 trades (0.24% profit) and is trading at a negative equity level of 5.2% (higher than prior day's 3.9%).

Outsourced MAM account Actions to Wealth closed out 2 trades for 0.12% profits for the day.

Cautions: This is not financial advice. You need to consider your own financial position and take your own advice before you follow any of my ideas

Images: I own the rights to use and edit the Buy Sell image. News headlines come from Google Search. Euribor rates image comes from CMEGroup. All other images are created using my various trading and charting platforms. They are all my own work

Tickers: I monitor my portfolios using Yahoo Finance. The ticker symbols used are Yahoo Finance tickers

Charts: http://mymark.mx/TradingView - this is a free charting package. I have a Pro subscription to get access to real time forex prices

Crypto Trading: get 6 months free trades with Bitmex for leveraged crypto trading. http://mymark.mx/Bitmex

Bitcoin: Get started with mining Bitcoin for as little as $25 http://mymark.mx/Galaxy

July 26, 2018