I’ve been in the Investment industry since 1990. In my early years, I was an Investment Advisor working with IIROC firms like Midland Walwyn, Merrill Lynch and CIBC Wood Gundy. In 2007 I became a discretionary Portfolio Manager and began running a Platform that we at ValueTrend continue to run as an equity model. Prior to becoming a Portfolio Manager and eventually moving to operate my own firm under OSC regulation, I used to trade some very select stocks in a different manner than the “regular” strategy I used for the majority of my clients. These early clients fondly remember my trading these lower liquidity growth orientated securities during the 1990’s. Some have enquired about such an offering at ValueTrend.
The current challenge for ValueTrend to provide such an offering is liquidity. Back in the early 1990’s, I had a small group of clients who had committed a relatively small amount of capital to this more aggressive trading style. It was easy to get in and out of the positions given the smaller amounts of capital I was trading. ValueTrend didn’t want to launch this platform until we were fully confident of the strategy – one that would have the potential to provide better returns than a conservative strategy, yet still offer ample liquidity within our now much larger greater asset base. And now, at long last, we are offering this strategy to the appropriate clients. Today’s blog will outline the 3 strategies we will be utilizing within this platform. Rather than being a “product pitch” – I would expect that you will gain some insight on how you can incorporate some trading rules into the more aggressive securities that you might be exploring. Below is a description of our strategies with a few examples of how we might utilize them. I hope you gain insight for your own trading from our strategies.
- Swing trades (3 days-4 weeks)
Swing trades will typically involve very short holding periods –often only days or weeks.
Buys within the swing trading strategy will be determined by concurrently occurring oversold signals on a daily chart via:
- Lower Bollinger Band touch (2 standard deviations from a 20 day Simple Moving Average)
- Lower Zone RSI (Mid termed oversold price momentum, lower zone below 30)
- Lower Zone Full Stochastics (Short termed price momentum, lower zone below 20)
Sells are determined by the opposite signals to a buy per above. That is, a touch of the upper Bollinger Band, and movements by RSI above 70, Stochastics above 80.
We do not use stop loss orders, however a stop-loss sell signal will be a move below the last significant support level on the daily chart.
The chart below illustrates the TSX 300 index May 7, 2018 to April 1/ 2019. On it are marked the buy/sell signals for that index using this system. By legging in & out in 2-3 – trade increments (i.e. ½ to 1/3rd of the allotted capital for this trade deployed/signal), it provided good short termed entry and exit strategies, had one used an ETF that mimicked the index. The manager’s discretion will determine if the trade will be done in increments and at what percentage allocation.
- Mid termed trades (4 weeks – 6 months)
Technical analysis will bias decisions, but fundamentals will be respected for value or growth catalysts. Buys and sells within the mid termed trading strategy will be determined by chart patterns on a weekly and / or daily chart. These patterns include:
- Traditional breakout patterns from technical base, or a bounce off of the lower support zone within a sideways trading pattern. Equities, ETF’s and commodity ETF’s will be reviewed for these trades.
- Fundamentally undervalued or higher growth potential in the case of an individual equity (i.e. not a commodity or ETF). If we believe a catalyst is eminent in the 1-6 month horizon, we will buy a position in the security so long as the technical profile is bullish.
- Sell at technical targets. Stop loss sell signal will be a move below the last significant support level on the chart.
- The China Internet ETF KWEB looks to be a typical mid termed trading setup. After breaking out of a technical base that followed a downtrend (lower dashed line), the ETF targets the higher dashed line. The relatively fast movements on this chart indicate that future targets, should they be met, may occur over a few months.
- Longer termed trades (6 months +)
Longer termed trades will typically have an equally weighted bias of technical and fundamental analysis for entry or exit timing.
- Traditional technical basing patterns, or contained trading patterns. A test of a mid to long termed trendline will signal buys
- Fundamentals will focus on longer termed undervalued stocks or those with mid-longer termed growth potential. A longer term track record of continuous proven growth and stability is not necessary. We will be looking for the future growth potential which may be underappreciated in the current environment. Our intention will be to invest in securities that have an intrinsic value much higher than current valuation
- As with mid termed trades: Sell at technical targets which could include technical resistance or upper trend channel lines. A sell will also be triggered by a break in trend. Stop loss sell signal will be a move below the last significant support level on the chart.
- Blackberry, below, is a good example of a stock that traded between 2012- 2019 within a trend channel. You can see the buy and sell points on its chart below. The swings typically occur over a one to two year time frame.
For those interested
Our ValueTrend Aggressive Growth Strategy (VTAGS) officially goes live June 1, 2019. The VTAGS strategy will not be offered as a standalone product for new clients. You must hold a minimum of $500,000 in family assets with us diversified through our other platforms: If you are interested…Please contact either Craig or Keith to for a full description of the VTAGS strategy and to discuss how ValueTrend can administer your entire portfolio needs.