Tag Trends

Posts: 38

Market Trends

Identifying market trends is like eating and drinking the Zeitgeist. It has to be inside you to understand it. You have to be social, go outside, go to parties, etc. If you're not "hip" then you'll never see emerging trends until they're already established. Then it's a matter of chasing their coattails and riding them for a bit.

Years ago Howie had a great tag-line for his blog, it was "Trends… Find them, ride them and get off." I thought that was a great way to frame the problem and represent one way to generate "alpha" for the short term. Get in on a trend before it takes off and then ride it up (or down). The next trick is getting out, as Howie so eloquently puts it, "ride them and get off."

Identifying Trends in Stocks

Trend following in stocks has been around ever since a market has existed. Tulips anyone? It's super easy to do if you access to a computer. All you do is load up your favorite stock, set the time period to daily or weekly, and it should become readily apparent which way the trend is going.

TRTC, 11/25/2019

Some traders and investors like to use moving averages, usually the 50 and 200 day/week moving averages to confirm that the stock is trending higher or lower. Since I like to be positive, I really like up trends relative to down trends, but both are very useful for things happening in the social sphere (see below).

Identifying Social Trends

This one is trickier because because it requires you to leave your computer screen and go out into society. You need to observe, read, mingle, and talk. I know that this can be tough for introverts - and a lot of good traders/investors I know are introverted - but you have to put on your social shield and go out.

Having kids is good too, or at least access to nieces and nephews. You can ask them what all the kids are buying or having bought for them. What are they playing, what's cool, etc. Right now it's Fortnite, Discord, and iPhones. This is how I learned about the Minecraft craze and ended up going long in Microsoft. Granted, Minecraft is now "so old" but it's still played by millions of people and Microsoft is doing well.

Note: I didn't just buy MSFT because my kid was playing Minecraft, I really like what their cloud strategy is for Machine Learning and Data Science. I think they're going to hurt Amazon and beat Google quite handily, but that's a topic for another post completely.

MSFT, 11/25/2019

But that's technology. What about retail, fashion, and other consumer type goods? For that you have to "go shopping" or at least visit the mall. I rely on my wife for a lot of retail and fashion stuff. For consumer goods or building related things I usually visit a Lowes or Home Depot.

TGT, 11/25/2019

I also talk to my Engineering friends, now that I'm out of that field. If they tell me they're busy right now then I can expect a 6 to 9 month follow through in the economy. Right now, they're not so busy because the holidays are coming. What happens in January will really sets the tone for 2020.

End Notes

While I like looking at stock charts, I really feel that the smart money is made when you buy and buy-in low. Of course you can get a clunker like TRTC (that's my loser from years ago), but with good risk management and a smart entry, you can really ride things up. Of course, you don't make any money until sell, and finding price point can be very hard. What are some good spots to sell? I'll share that in another post.


Chipotle, the Bowl That Got Away!

I just came across an old post about my favorite Mexican fast food joint, Chipotle. I posted about this stock back in May 2007 when it was trading at $82 or so. I love the food just as much now as I did back then. I've had my share of burrito bowls over the years!

CMG, 5/29/2007

CMG did run into a few 'food safety' problems over the years. They were hit with a doubly whammy of making people sick, not once but twice. That took the wind out of the share price and she bottomed out somewhere around $260 at the beginning of 2018.

Fast forward to June 2019 and she's trading at $700!!! WOW, just wow.

CMG, 6/9/2019

I'm not bummed that this one got away, I'm glad that a Mexican fast food business, with better ingredients, can actually grow into a multi-billion dollar company.


Revisiting FXI from 2007

Back in 2007 I thought I had a great trend following system. I was feeling pretty smug about the direction that my AI trend models were giving me (because it was up). Little did I know that I was just lucky. The markets were trending upwards and I was riding their coat tails. So it's fitting that to revisit my FXI calls from 2007 and see where are they now.

FXI then

Back in 2007 I made at least two posts about FXI. I posted this chart and noted that the trend remains still up. FXI was trading around $115 per share.

FXI, 5/12/2007

A little bit later in 2007, FXI split 3:1, so the price got cut by a third. For today's argument, assume the split happened at $115 (it was a bit higher than that).

FXI now

Today FXI is trading at $39.93, which is just over $1 higher than if FXI split at $115. So it did a whole hell of nothing over 12 years. If you look at the chart, it's been nothing but a roller coaster. Up, then down, then up, etc.

FXI, 5/27/2019

Sure you could've picked up some FXI at the bottom of 2009 but who knew it would recover? Sure you could've picked it up when it touched $30 a share a few times over the years but maybe it would've gone lower.

What moral?

What's the moral here? I don't think there is any except that dollar cost averaging is good and buying when people are scared is better.

Seriously though, dollar cost averaging is WAY easier than buying when people are scared because sometimes it's better to stay out of their way. No one wants to catch a falling knife, now do they?


EWM Redux

Just a few days ago I found some old Neural Market Trends posts that I archived when I switched between blogging platforms. These were mostly about my Stock and Forex trading using AI (aka Machine Learning). While I was more lucky than right w.r.t. to AI in a strong trending market, the posts serves as a good reminder of the longterm investing strategy.

Woulda, coulda, shoulda.

I traded the EWM ETF back in April 2007. You can see it was in a nice upward trend and was trading last at $11.80.

EWM, 04-25-2007, Trends

Now fast forward just over 12 years and today it's trading $28.51. Note: It was a lot higher than $28.51 a few months ago.

EWM, 05-17-2019, Trends

If it had been AAPL or AMZN then I would've told everyone what a genius I was.

Buy and Hold

Essentially I would've more than doubled my investment over 19 years if I just did a 'Buy' and Hold.' Would it have been risky to buy one ETF or stock over the course of 19 years? Of course. If it had been GE or Ford, well then I'd be kicking myself. If it had been AAPL or AMZN then I would've told everyone what a genius I was.

Buying ETF's would been smart here because they're diversified across a specific sector or group. If I had been really keen on Malaysia for the long term, then this would've made sense. Ideally I should've bought some broad based International ETF like Vanguards VXUS or the similiar.

Woulda, coulda, shoulda.

It's no use crying over this, the right thing to do is get started now. Find some great low cost ETFs and buy 100 shares in an IRA account. Can't afford 100, then buy 20. The only winning strategy is to do less in the markets and keep your costs low.


Microsoft the AI Powerhouse

I've been a long term shareholder of MSFT and I've been rewarded quite well. Under the leadership of CEO Nadella, Microsoft has become and AI powerhouse, and I believe he'll win the cloud computing wars. Right now Amazon is the dominant player but based on what I see in Azure's development, I think both companies will be 'neck to neck' in a few short years.

Investors have rewarded the stock with new highs and crossing (before retracing just below) a $1 Trillion dollar valuation. Sure Apple did it first and then Amazon, but the one who wins is the one with staying power.

MSFT AI Powerhouse

This one key thing caught my eye from a recent Bloomber article. The change in perception from a 'fixed mindset' to a 'growth mindset.'

Microsoft marketers like to attribute its reemergence as a tech power to a sort of cultural rehab, involving what Nadella calls corporate “empathy” and a shift of his team from a “fixed mindset” to a “growth mindset.” The reality of the company’s turnaround was more painful, according to interviews with more than four dozen current and former executives, board members, customers, and competitors. Under Nadella, it cut funding to Windows and built an enormous cloud computing business—with about $34 billion in revenue over the past year—putting it ahead of Google and making progress in key areas against the dominant player, Amazon Web Services. “I don’t know of any other software company in the history of technology that fell onto hard times and has recovered so well,” says Reed Hastings, CEO of Netflix Inc. via Bloomberg

I know how hard it is to change a massive juggernaut like Microsoft from the inside. Ballmer certainly didn't do it but I think Nadella will. The numbers won't lie and I expect to add more to my position over time.