Sell in May vs S&P Upgrade

If you have been following me, you may know by now that I am holding only two stocks.  Since buying them when Fitch upgraded PH, LTG returned around 33% and TA around 24%. TA with a bonus .04 Cash Div! Both closed near their all time highs for the month of April. What does this mean? LTG and TA now have very little resistance! The chance of moving further up is more probable than down. Trend following is simply following where the least resistance is.

What do we do now in May? As trend followers, we want to maximize our gains and be greedy. We want to catch the biggest possible profit! We simply trail our stops and wait until it gets hit. These two are the true leaders of this year’s market run and we want to make the most out of them.  We don’t want to lose our position. We want to sit tight and be patient as long as we can.

To quote Old Turkey, “My dear boy, if I sold that stock now I’d lose my position; and then where would I be? And when you are as old as I am and you’ve been through as many booms and panics as I have, you’ll know that to lose your position is something nobody can afford; not even John D. Rockefeller. I hope the stock reacts and that you will be able to repurchase your line at a substantial concession, sir. But I myself can only trade in accordance with the experience of many years. I paid a high price for it and I don’t feel like throwing away a second tuition fee. But I am as much obliged to you as if I had the money in the bank. It’s a bull market, you know.”

Meanwhile, S&P just upgraded Philippines to investment grade, but news don’t really matter to trend followers. We just sit tight and watch the price action. We want to see increasing volume on breakouts and decreasing volume on pullbacks. We simply stick to our rules. The simpler, the better, and the more profitable we become.

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Trade Reviews for April

Let’s review positions for the past month! TA and LTG were opened on March 27 when Fitch upgraded PH to investment grade. Both positions were opened due to breakout of a resistance line. My mistake for April is I tried to trade basuras T, SINO and SUN and they all ended as losers. I also bought DNL when it broke out of 6.20 but was shaken out the next day.

The most important principle to trading success is money management, I only needed 2 winners over 6 positions to perform. That’s only 30% winning rate. For the 4 losers mentioned, I lost -0.54% of my portfolio. It was also helpful to do “test buys”.

Remember, cut losers quick and let profits run! Be patient with winners and very impatient with losers!

Currently, TA is looking to be healthy closing at a new high. We just wait and trail our stop. Bonus cash div to be paid out on May 6!
2013-05-01-TA

Although LTG is still trending up, it looks like it is now showing some danger signs. We don’t need to predict what will happen next. The key is to be disciplined to trail stops and follow it without hesitation.
2013-05-01-LTG