Can you trade 1 single stock to success?

Posted by scolio on July 28, 2011 (07:50PM)

I have many different things on my radar and have employed a few different short and long term strategies.

But I want to discuss the topic of trading a single stock on swings.  I have seen some of OtterWays posts on trading a single thing, which I guess is somewhat similar, but I am talking more on bigger intervals of time to get nice sized swings of the stock.

For example, I have held an oil tanker stock at various points.  I recently sold it off at a strong resistance level.  The stock is VLCCF, knightsbridge tankers.  I like the company and think they are a good company with good fundamentals.  Somewhat questionable industry, but I believe they will continue to be alright.  The stock has established a fairly nice range.  Strong resistance in the 22.30 area, but at the same time it always climbs back there even when it gets knocked down.

It has gotten knocked down some last few days, as many stocks have, I am looking at this way.  If I can pick it up at $20, sell at $22. grab a 10% return. Also, have a quarterly dividend in August.  Obviously, nothing is that easy.  But I am confident with the movements of this stock for monitoring for quite some time.  I am talking about trying to do this constantly when it hits the right levels.

Any thoughts on the general topic - not necessarily on the particular stock would be appreciated.

Posted by El Dorado on July 28, 2011 (09:01PM)

I’m not really in the market at this time, just a few calls. 
But I have thought about what you’re talking about for some stocks I watch. Have you considered options? Even at level 1 you can sell a cash secured put for where and when you want to buy in, and if your right and get “stuck” with the stock sell a covered call at the price you think it’s going, if its called away, start over. 

Posted by treeHamster on July 29, 2011 (01:22AM)

Honestly, I would never buy a mid-term held stock (a couple weeks) and worry about the dividends. Even the highest stock dividends per annum are at most in the 5-6% range (Microsoft/Verizon range) and there are only a few of them. When you divide that up quarterly it goes down to 1.25-1.50%. So it will be insignificant compared to what the stock move is.

Now, 10% isn't bad but have you looked at trying to watch for some stocks that will move when a related company IPO's? For example, I bought up $5k of JVA Wednesday near the close even though it was falling, because it is related to Dunkin Donuts that had their IPO Wednesday. Over night it went up 20% and peaked at 25%. JVA also had a high enough volume and price so you could have purchased in the 20-30k range if you chose to (though I doubt you're looking to gamble that much on 1 position) and disappeared into the masses that were trading the last two days (good idea to not push the stock in a specific direction until you sell). The price of gold should also move hard due to the debt crisis problem so shares of a gold holding company will follow. The same goes for silver. So you could also move on one of those. However, if you KNOW the stock will move in the 10% range, a guaranteed 10% is much better than a chanced 50% any day in my book.

The biggest thing is to keep an eye on the stock and figure out what you want to make. Once you hit that percentage, sell, and be happy with the profits. Or if it starts falling early, sell out and take what you made and be happy with the fact that you made money and didn't lose any.

I have lost out on thousands in profits because I held onto the stock too long, even when I was up 40% on the position, (I only day trade and don't hold overnight) and didn't sell. So take what you can get, and be happy with it. That's what makes you a successful trader.

Posted by russianmunkee on July 29, 2011 (02:16PM)

So you're saying now is probably a good time to buy...seeing as it's $20.47?

It's interesting to look at it's 1mo graph and see it consistently bounces between 20 and 22, like you mentioned.

Posted by Kenvestor on July 29, 2011 (06:32PM)

I think everyone has tinkered with this idea in their head at some point in time. Taking this route puts you in much more active control and could even be fun (if you were successful) But would this be your single strategy, because for this strategy to work one thing has to be true above all others: The stock has to be volatile.

In my honest opinion I think it would be hard to make this strategy pay off. After all, timing the market is one of the most difficult things to do. Much more difficult than finding a company that is undervalued- in my opinion.

Posted by The Otter Way on July 30, 2011 (03:03PM)

In a short reply to the topic, the answer would be yes.  Yet, this is contrary to beliefs of being diversified as well as protected in many categories of holdings.

The plus side is you become an expert on how the stock reacts to market conditions, as well as how it is performing and what really drives that one paticular stock.  This is mainly what most day traders do... they become experts in a few positions and don't try to pick amoung the several thousands of stocks available.

The downside... you have all your eggs in one basket.  So I would not recommend trading in one stock if you hold overnight.  You can wake up one morning and be trapped in a up position watching the world collaspe around you.  Remember, there are others who don't have to wait until 8:00 to enter extended trading.

I don't recommend day trading to anyone who is an enter key trader.  To enter the world of day trading... I believe you need the following...

Level I/II data feed (unfiltered)
Strong Computer
Strong Strategy
Strong Rules
Big Account over 100,000.00
Computer "Bots"

I hope this helped in your topic.

Posted by Fiddie on July 30, 2011 (04:24PM)

Kenvestor said:
... more difficult than finding a company that is undervalued- in my opinion.

Just look at price to book and PEG. 
treeHampster, if the market has averaged about 12% the last century, +4% annual dividends could turbo-charge the average investment by +30% - not a waste of money.  btw, good call on JVA - and if you're interested here are
4 stocks yeilding more than 8%.  Now to disagree with some of Otter's post:

I have an acquaintance (friend of a friend) who pulled this off last year with Boeing, and I believe him when he says his ROI for 2010 was +60%! If I could commit to checking up on a stock every couple hours, I'd do it too (MU, F, SIRI, C or some other large volume stock). Every stock has beta, just get something which analysts feel has momentum or slow growth - better to have slightly more time going up than going down ;-).

The trick would be not only following the company closely in news, commentaries and blogs - but getting to know the both it's competition and trading partners.  F has slowed down recently - do you know who it's Japanese suppliers are?  MU has dropped most of the summer - who are it's customers and are they ordering from elsewhere?  How is C dealing with mortgages and any govt regulations?  Will the 1-2 punch of mp3's and the cloud make Sirius radio irrelevant?  I feel these are the nuances which, if you can keep up with them, could make anyone a successful swing trader specializing in one to five companies.  You'd just have to commit to following up on a company the way a bovine keeps up with a grassy field.

No, this shouldn't be your whole strategy! (unless you've got
Just realized how long my opinion can be. cheers, fiddie.

Posted by treeHamster on July 31, 2011 (04:46AM)

Fiddie, I was just recognizing that dividends in the short term would have little bearing on his trading. The window he has seen the cyclic pattern is only in the past month. Now in a longer term, such as an entire quarter, that pattern will change based upon filed reports (earnings, operations, etc.) as well as general market news (the debt deal fails and the economy tanks again, we can only hope). So for the short term, any dividends won't matter because they will be awarded after the end of a quarter and an earnings report would be filed. Giving a strong report, the stock will probably break the pattern and go up and outside that 20-22 range. A weak report would send it below that range. However, he would want to avoid holding a position on the company at that point because he isn't sure what direction his investment will go. Now if he's willing to honestly roll the dice, then he'd hold it to see where it goes.

For what he is asking about though, he wouldn't want to hold until any official SEC required filings. He's looking to play on the emerging pattern. That pattern would be disrupted by any major company news and makes this pattern unpredictable.

So back to my original point, dividends shouldn't be worried about because you won't likely have any position in hand when the dividend is awarded unless you're willing to gamble on the company outside the stochastically cyclic patten it's currently following.

Oh and thanks for that on JVA. I got lucky, somewhat. I knew it fell too much and so figured it was about time for the rebound after DNKN had their IPO and ran 50% on it's open, especially in this highly rumor/psychology driven time in the market.

Posted by treeHamster on July 31, 2011 (04:57AM)

Oh and I would also like to mention an APY of x% only works if the stock is staying priced at the average when dividends are being released. If the company's stock falls on value when dividends are released and then rises in between, you aren't making x%, you're making even less. So dividends don't mean a lot unless the stock is quite stable which most stocks that give higher dividends (>3%) aren't that stable in this market.

However, if you can pick a stock that is undervalued, and grows during the year as well as it gives dividends, you found a good long term holder. That's when you can start to earn higher rates. Though for that type of venture, you're probably better off just putting money down on Netflix for now since they are still expanding and faster each month. In just the past year they've gone up over 150%. Right now it's seen as over valued but if the economy dips even more (into another recession), then they will definitely see soaring prices from higher profits as well as expansion into the rest of the world.

Posted by scolio on August 02, 2011 (01:16PM)

Thanks for all the responses.  I simply mentioned the dividend, but understand in this strategy, it couldn't and shouldn't be a big factor.  Right now, it has dropped right around to my target buy price.  I am holding off for a little while to see how the markets play out with all the debt stuff.  Also, will wait for the chart to look better and volume to pick up.  

But I am fairly confident, this stock will climb back up to the $22 range. Also, this strategy doesn't play for dividends like has been mentioned, however generally this quarters ex-dividend date has been around August 20th of 50 cents.  So potentially another 2.5% there if everything could coincide together.

Posted by elanoralph19 on August 09, 2011 (08:11AM)

I am learning about the stock market and penny shares, and read so many articles but found something very interesting facts about the penny shares and penny stock. They are perfect for anyone near the low salary range.

Penny stock

Posted by TampaJake on August 13, 2011 (11:54AM)

Although looking back is never an indication of future returns, I will offer the following -

Annaly Capital Management (NLY) - if you purchased $500 per month beginning August 1st, 2006 and reinvested all of the dividends you would have spent $30,500 and as of close Friday 8/12/11 your account would have a value of $49,813.68 and your net return on investment would be 63.32% or approx. 12.66% per year. Consider this was through one of the roughest markets in years.

Would I do it? No, not with one stock. But I would (and am) with a basketfull of dividend payers. NLY is not currently one of them, but it is on my watchlist.

Posted by billman on August 13, 2011 (10:50PM)

I've done this from time to time, but not with any single security as my sole investment.  When following this strategy, I like to find a stock that trades within some range.  My target price for purchase is close to the bottom of that range, and I plan to exit somewhere near the top of that range.  Normally then I'll begin selling covered calls with a strike price at or close to the high side of the normal trading range with expiration one to two months out.  The profits from the sale of stock options adds profit and protects somewhat from a drop below the normal range.

While I have not done this in a while, it has worked well for me. 

Posted by Minion on August 14, 2011 (12:16AM)

My first trade ever was physical gold (buy and hold of the purest kind).  It provided currency devaluation avoidance at a rate of 20% a year. 

How's that for making just one investment?  The return could have been doubled if I played the little waves along the way, but I didn't know enough about trading to even try, at the time.

Posted by COUGARBRENT on August 15, 2011 (01:08PM)

If you can find a good formula for calculating the intrinsic value of a company, just cut that number in half then use that number as your entry point.  Its not to hard to find great stocks on sale and buy them while they are down.  A few come to mind like

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