247Bull Trading Portfolio: Market volatility triggers stop losses but active trades remain profitable

Last week’s downside volatility in the major US stock markets caused two of our stocks to trigger their stop losses. However, our other two active trades remain in strong uptrends and continue to build a healthy profit. This article provides an update on all of our trades.

Portfolio strategy

The 247Bull Trading Portfolio employs a trend following strategy which seeks to take advantage of companies that have broken out from a period of consolidation.

Active trades

Kimberly-Clark (KMB): On 22 January 247Bull went long Kimberly-Clark (KMB) at $87.25 as it broke above $87.00, a level which had acted at overhead resistance since August 2012. Immediately following its breakout the stock pulled back, however it did not reach our stop loss and has since formed a nice uptrend (green lines).

KMB is now trading at $95.04, an 8.9% profit. We will remain long KMB all the time the uptrend is intact.

Our stop loss has once again been moved up and is now at $93.70.

A 1 year daily chart of Kimberly-Clark Corporation (NYSE:KMB) (Click on the chart for a larger version)

A 1 year daily chart of Kimberly-Clark Corporation (NYSE:KMB) (Click on the chart for a larger version)

Chart courtesy of stockcharts.com

HCP, Inc. (HCP): On 25 January 247Bull went long HCP at $46.94 after it breached previous overhead resistance. Following its breakout HCP experienced a period of congestion, however it overcame this and has since established a strong uptrend.

HCP is now trading at $49.46, a 5.4% profit. We will remain long HCP all the time the uptrend is intact.

The stop loss has been moved up to $48.50.

A 1 year daily chart of HCP, Inc. (NYSE:HCP) (Click on the chart for a larger version)

A 1 year daily chart of HCP, Inc. (NYSE:HCP) (Click on the chart for a larger version)

Chart courtesy of stockcharts.com

Kimco Realty (KIM): On 1 February 247Bull added KIM to its trading portfolio going long the stock at $21.00. Following its breakout KIM established an uptrend, however on 20 February the stock began to selloff with the rest of the market and on 25 February the stock fell beneath $21.20 triggering its stop loss.

The trade produced a small profit of 0.95%.

A 1 year daily chart of Kimco Realty Corp. (NYSE:KIM) (Click on the chart for a larger version)

A 1 year daily chart of Kimco Realty Corp. (NYSE:KIM) (Click on the chart for a larger version)

Chart courtesy of stockcharts.com

M&T Bank Corp. (NYSE:MTB): On 12 February we went long M&T Bank Corp. at $104.40 after it broke out above previous resistance (upper blue line). On 21 February however, MTB fell with the wider market and triggered its stop loss at $103.50.

The stock was sold for a small loss of 0.86%.

A 1 year daily chart of M&T Bank Corp. (NYSE:MTB) (Click on the chart for a larger version)

A 1 year daily chart of M&T Bank Corp. (NYSE:MTB) (Click on the chart for a larger version)

Chart courtesy of stockcharts.com

Final thoughts

As reported yesterday, major stock markets look to be forming a short-term top. If this turns out to be the case and a 10-20% correction ensues, we are likely to be stopped out of our two remaining trades. As a result we have tightened up our stop losses in order to lock in maximum profit.

Once any market correction is behind us, it seems likely that the ultra-loose monetary policy being pursued by governments around the world will continue to drive markets higher, at least in nominal terms. This is a view that seems to be shared by trend following firm Transtrend. In a recent newsletter they write:

“One thing is obvious. As long as central governments succeed in completely controlling markets, meaning that they manage to sustain the high peak by absorbing any undesired movement at all cost. Then one cannot expect miracles from a trend following strategy. No nice profits, but also no large losses. Patiently and consistently trying to limit losses, this is the name of the game for a trend follower in such an environment…

But what if markets start to move away from the grip of governments? It does not take a great visionary to predict that at some point this will inevitably happen. We have already stated: Not all countries can stimulate their exports and their economy with a weak currency. Government debt cannot keep rising without any consequences. Effective yields cannot stay negative forever. Looking back at history we see multiple ways out of such an impasse. They all have one common characteristic. They are accompanied by movement – if not with a carrot, then with a stick.

The socially least undesirable way out of the high peak propped up by cheap money, is probably the road paved with inflation. Many a banker has been taught that inflation is a dirty word, but the burden to service piles of debt for a country in crisis becomes much more bearable when a large part erodes with inflation. And which country is currently not in crisis? If this turns out to be the road we travel down then indeed this would also not be bad news for the trend following investor. We await developments with patients and confidence.”

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