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In addition to a review and discussion of the performance of previous Momentum, Income and ETF portfolios, the meeting discussed considerations of a portfolio of “Speculative Stocks”. Some might suggest this might be likened to throwing darts at a dartboard of all stocks, but it can lead to spectacular results. One such example is seen in competitions run by Fairfax newspapers.
In order to provide focus and longer term perspective, stocks associated with electric car development were considered. An easy association for Australian stocks is mining of metals for battery production of which lithium, cobalt and nickel are prominent. Stock in these categories were discussed.
Both the maintenance of portfolios from the September meeting and the construction of a “Income” portfolio were considered. For consideration of an Income portfolio, the definition of Income stocks was considered.
A key factor in maintenance of a portfolio is a stock stop loss. EMA stop loses considered in September will be compared to stop losses from a per cent drop from a recent high. The later has the advantage of a direct indication of an “acceptable loss” from a high.
In most cases, ETFs are a basket of stocks representative of the theme of the ETF. Volatility in any one stock in the ETF holding only has a small impact on the price of the ETF as a whole. Low price stocks in general have high volatility as a very small price change may represent a large per cent change. However most low price stocks are low priced as they do not have the valuation backing to support a higher price. The September meeting discussed recent medium term momentum of both ETFs and lower price stocks as possible contenders for a portfolio. “Lower price” is open to definition, but for the purpose of the meeting a price of less than $3.00 was considered as “lower price”. The variation of momentum of ETFs and “lower price” stocks was discussed in relation to setting stop sell values and possible profit targets.
The August meeting discussed stock price momentum and volatility procedures as management methods. Concepts presented by Jim Berg as the The Truth about Volatility have ben widely discussed and adopted to many charting packages. The concepts are based on ATR and RSI indicators and rises and falls from lowest lows and highest highs. The concepts were discussed along with using tabulations of these rises and falls as a means of determining relative stock performance.
The role of ETFs has increased significantly. Investors are now using ETFs as an important component of their stocks portfolio. In a single stock holding, an investor can effectively buy one stock that covers off a whole market index, a specific sector or an asset class. The price of an individual ETF stock may be representative a market index, a specific section, an asset class, price movements in currency and bonds yields internationally and in Australia. Investing in these aspects is achieved by purchasing ETFs on the ASX. The price movement of ETFs is a reflection of the market climate associated with the ETF component.
“Money Flow” Indicators for Stocks are based on the variation of both the price and volume from period to period. Two such indicators found in many charting packages are Chaikin Money Flow and Twiggs Money Flow. Colin Twiggs from Incredible Charts makes extensive use of his own indicator in his summaries.
These use of these indicators along with price indicators was discussed in combination with the top and worst performing stocks in the ASX S&P200 list along with the top performing ETFs on the Australian market. The top and worst performing stocks were defined by three month per cent change in price.
The types of support and resistance lines will be the main topic of the meeting. Included in the discussion will be support and resistance lines advocated by Allan Hull, Daryl Guppy, Jim Berg, Fibonacci, Darvas and others as available on most charting packages.
Price momentum values available in data directly imported into Microsoft Excel will be used to consider the current state of the stock market along with information in charting packages.
There are two broad types of Exchange Traded Funds (ETF) traded similarly to shares on the Australian Stock Exchange. “Passive” ETFs track an asset or market index. For example the ASX200 Australian share index or an overseas index. Active ETFs are different to passive ETFs in that they are actively managed to try and outperform an index or achieve some other investment objective, rather than simply track or mimic the index. Fund managers must make a distinction between an ETF and Active ETF so that investors know what sort of fund they are investing in. The performance of both types of funds were compared by momentum tools as discussed in previous WASINT meetings. As the price of an ETF is an average (of stocks in an index fund) they are generally have much less short term volatility than their individual components.
Microsoft Excel contains tools to directly import data from web pages. This allows data for share to be imported and then manipulated in Excel. Example spreadsheets were available for both ETFs and shares on the ASX.
Online charting sites was discussed at the meeting. The focus was on sites that provide features to members rather than a comprehensive listing. Features were compared with offline charting packages. The information from online sites can be more “up-to-date” than that available in offline packages. Output from both types of packages were used to compare and discuss the rotation in performance of sectors on the Australian stock market. The impact of this sector rotation will be discussed in relation to the WASINT Group focused stocks.
This meeting looked back over events and results from 2016 and the early part of 2017 to assist in the planning of financial issues for 2016. On the Australian Stock Market the materials and some mining sectors enjoyed a particular successful year. Means to identify and be part of these successful sectors were discussed at the meeting. Legislation is being drafted to introduce significant changes to Australian superannuation from 1 July 2017 and the possible impact of these changes was discussed.