Momentum Portfolio: New Picks For This Week

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Includes: AMRS, FSLR, GLD, JNUG, LABU, TIGR, UXIN
by: Lejun James Shao
Summary

A review of the last two weeks’ trades and our picks for the coming week;

A review of our Portfolio's year II performance.

Our goal for the Portfolio year-III run.

Review of Some of the Last Two Weeks’ Trades

In our latest Updates, we listed four possible picks for trades: First Solar (FSLR); two cannabis stocks, Hexo Corp (OTC:HEXO) and New Age Beverages Corporation (NBEV); and Uxin Inc (UXIN).

FSLR – FSLR was rated as our top pick, and we set our profit target at $57.00. We bought it at $53.34 and sold the stock at $56.97 four days later.

After our sell, the stock dropped slightly the next day, then made a big breakout move to $61.00 in response to Goldman’s upgrade. We missed the stock’s additional run and gained only 6.81% on this pick.

NBEV – This was our top gainer of the last two weeks.

The stock surged on April 8th after the company announced an expanded Marley brand distribution deal with Walmart.

The stock closed at $6.63, up 39% in one day, with more than 66 million shares changing hands. We made 20.89% profit on our NBEV trading.

UXIN – The stock dropped big last week after a $3.34 -> $4.25 run. We bought it at the $4.00 level and sold it later for some trading loss.

Direxion Daily Junior Gold Miners Index Bull 3x Shares ETF (JNUG)

This is our additional pick. We made a bullish call on April 4th on gold and gold miner stocks and bought JNUG one day later.

Our bullish call on gold and gold miners is based on the following observations:

  1. The US dollar will move down in the coming days. The US dollar has been trading in a zigzag pattern this year; it dropped big on April 4th, and its technical indicator also turned down that day.
  2. The GLD daily chart showed a bearish H&S pattern with its neckline at 120.00, but we believe that the bearish H&S pattern will not be confirmed as it is our view that the 2019 gold bull run has not yet finished. GLD made a big one-day reversal from its key 120.00 support level on April 4th. Its technical indicator also turned up at the same time.
  3. I have repeatedly said that the US dollar’s strength will become a deciding factor in the strength of the gold price.

In my January 2018 article, I said that

Historically, the gold price always has a positive correlation to the Fed Funds interest rate, but it is not the case this year. The deciding factor, which influenced the gold price direction in 2018, is the strength of the US dollar.

In this year’s round table discussion, organized by SeekingAlpha, I predicted that

Gold will shine in 2019. We may see 1,400+ even though the US dollar will stay strong.

See the US Dollar and SPDR Gold Trust ETF (GLD) daily charts below, which I showed to my members on April 4th.

US Dollar

SPDR Gold Trust ETF (GLD)

We, therefore, bought JNUG at $9.55 on April 5th, and the buy proved to be right on target, even though we did not buy at its bottom. JNUG moved to $10.50 in three days, a 9.95% gain, but we were a little greedy and thought it would run further to $11.00—our target. We did not do proper risk control to protect our profits. This ETF closed at $10.02 that day and gapped down the following day. Eventually, we sold it at a breakeven price.

Amyris, Inc (AMRS) – This stock is in the biotech sector. We also made a few trades on this highly volatile stock and all were winners.

This stock is mainly a buy-and-hold pick for our Core Portfolio. We bought it at $2.11 and sold it at $3.54, using our Profit Protection rules, and bought it back again at $2.10 (in the pre-market session). Now we have over 100% total returns on this pick from realized and unrealized gains. We only made a few quick trades on this stock for our Momentum Portfolio.

See its recent chart below:

Our Momentum Portfolio gained 14.38% in the last two weeks and is up 90.89% so far in 2019. See the Portfolio’s 2019 weekly performance below:

New Picks for the Coming Week

  1. UP Fintech Holding Limited (TIGR)

    A newly IPO’d stock. This is a Chinese-focused brokerage firm, which enables Chinese investors to trade foreign stocks, including US stocks.

    It started trading on March 19, 2019, with an IPO price of $8.00. The stock has made four weeks of runs since the IPO, and the stock price has more than doubled during those runs. The momentum is still there.

    2. AMRS - The run should continue this week and it may re-visit $4.00+.

    3. Direxion Daily S&P Biotech Bull 3x Shares ETF (LABU)

    After big runs this year, LABU’s run seems to have stopped recently. It has been traded in a range for more than a month; it tried to break out from its $66.00 resistance three times, but all failed. The current support is at $54.00. We hope to see a breakout move on the fourth attempt.

    4. JNUG or another gold miner stock –We still believe that JNUG will touch $11.00+ in the coming weeks. We may also play a beaten-down gold miner stock.

5. UXIN - This stock is now at its strong long-term support level and it may re-visit it's after IPO low of 2.81. But we strongly believe that the stock will make a run before Q1, 2019 earnings release.

We may also provide additional picks during the week.

A review of Our Portfolio Year II Performance

Our Portfolio gained 90.89% in its year II run. The following chart shows our Momentum Portfolio weekly balance during its year-II run.

During the Portfolio year II run, we identified one problem: risk control.

An investment’s financial risk is measured by its drawdown.

A drawdown is a peak-to-trough decline during a specific period for an investment. It is usually quoted as the percentage difference between the peak and subsequent trough.

Normally, we do not want the drawdown to be greater than 20% during its run.

It can be seen from the chart that the Portfolio was in a zigzag pattern for the first 32 weeks and had a much smoother ride over the last 21 weeks.

The maximum drawdown in the first 32 weeks was 28.81%, which fell to 9.93% over the next 21 weeks — a big improvement. The Portfolio also made good runs last December even the market crashed.

Why the big improvement?

The reason: we made a detailed analysis, identified the problem, and took the corresponding action.

The problem: risk control.

We can make 20%–30% gains on certain trades and then lose 20%–30% in the subsequent trades. The result: big volatility.

The action: We made a new set of trading rules:

  • Diversification: extend the maximum number of spots at any time from two to three, possibly extending to four later. Two spots are for buy-and-hold picks and one spot is for day trading only. The purpose of diversification is to avoid over-trading during the day and reduce the risks.
  • The maximum holding period for buy-and-hold picks: five days.
  • Stop-loss and profit-taking: For day trades – the stop-loss is 2%, but most often 1%; profit-taking starts at 2% but may extend to 10% if a pick is very hot. For buy-and-hold – the stop-loss is 5%, profit-taking at 7%.
  • Do not hold a pick during its earnings release.
  • If a pick gains 20%+ in one day, close the trade and take the profit.
  • Buy/sell signal: we will issue buy/sell signals in our live-chat room for all the picks.

Additional rules will be added and refined during the year-III run.

Our Goal in the Portfolio’s Year-III Run

Our Momentum Portfolio was launched on April 11, 2017, with $30,000 seed money. It finished its year II run last week. The Portfolio grew to $130,264.64, a more than four-fold gain via S&P 500’s 23.34% return during the same period. See the Portfolio’s monthly performance since its inception:

But the Portfolio does exist risk-control problems. We want to make our Portfolio having a better run in year-III and set two goals below:

  • Grow the Portfolio to $300,000 by the end of its year-III run— a ten-fold gain in three years.
  • Reduce the Portfolio’s volatility and lower its risk. That is, reduce the maximum drawdown to below 10% and the recovery time to less than three weeks.

That is, we want to achieve a higher return with lower risk.

Conclusion

Our Momentum Portfolio performed very well in its first two years of existence.

During its year-III run, we want to achieve two goals:

  • Grow the Portfolio to $300,000.
  • Reduce the Portfolio’s volatility and lower its risk; maximum drawdown less than 10% and recovery time less than three weeks if a drawdown happens.

If you want to enjoy the Portfolio's high returns with less risk, I invite you to join us and try our service. We always offer two weeks of free trials for newcomers and you can cancel our service at any time if you are not satisfied with our service.

Disclosure: I am/we are long amrs, labu, uxin. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.