2018 Tax-Loss Selling – Final Report

So this year’s tax-loss selling set-ups was unlike any I have executed over the past several years – the late-year selling in the overall market made it unlike any year-end that I can remember being a part of. I think I heard something to the effect that this past December was the worst in performance terms that the market has seen going back to I believe 1931.

So in the end, I was busy trading the market into year-end/early January, but I wasn’t really focused on tax-loss selling candidates. I ended up with only three positions that came out of my work … I continue to hold call March call options in VLO that I may end up taking profit in and rolling the strike up from the $70 level that I own currently – the stock is at $82.68 and it makes sense to roll it up to say $80, book a winner and let it go for another month or so.

My other oil & gas play was in APC ($55 call strike) and it expired worthless yesterday. My only other tax-loss position was in January 250 NOC calls which I sold it for a nice little win on Thursday.

So overall, tax-loss candidates were a real non-event for me this year … that almost guarantees that it will be a big factor next year!!

Here is the final data/watchlists that I was monitoring/keeping track of …

The above charts shows how the market basically bottomed together on Dec 26th … that is so unusual for my tax-loss strategy, but like I said earlier, it has been a strange/non-typical year this past year.

Watchlist Sorted by Change Since Nov 30/18

The above chart is sorted by the percentage change in stock price from the Nov 30th closing prices – note that only 17 out of the 45 stocks on the list are above their Nov 30th closing prices. The leader is GE, and that was one name that I did not want to trade because of the low price level of that stock – it didn’t make sense to trade using options, and I didn’t feel like trading 10,000 shares in a name that was facing questions about possible bankruptcy.

Watchlist Sorted by Change off of Dec 2018 Lows

The above watchlist is sorted by the % increase off of each stock’s December lows – the leader was Nektar Therapeutics (NKTR). That stock bounced 58.11% off of Dec low of $29.22. Note that 7 out of the top 10 on this list were energy stocks – that what I was referring to when it makes sense to look at the list every year in terms of sectors, because there may be other stocks from common sectors in that tax-loss list that a trader can trade in addition to the actual tax-loss candidates … sectors often bounce together.

The above chart is the final summary of all that has happened in these names. The thing to note is on the bottom right … you can see that in all respects, most of the names on this list outperformed the overall market (using the SPY as the reference) out of the Nov30th levels, the Dec lows, and the year-end prices.

If you look at the average for the watchlist, the change from the Nov 30th level was -0.8% vs the SPY at -2.6%. The change from the Dec lows averaged +25.4% for the watchlist vs +14.1% for the SPY, and finally, the change since Dec 31st for the watchlist average was +15.9% vs +6.8% for the SPY.

Note that all of the final price data utilized was adjusted for any and all dividends paid by the SPY and the watchlist names.

So again, I think that this strategy will be big value-added next year as I can’t imagine having two back-to-back year ends like the one we had this year.

Cheers … Leaf_West

Addition to Tax Loss Portfolio … ROC

Earlier today I started a new tax loss long position in ROC.  As I have noted in many of my early postings this year, ROC has shown early strength as price bounced off of its early December lows.  I have been monitoring the pullback to see if I could get a starter position in place.  I’ve done that today by starting a long NOC Jan $250 call @ $12.70.  Here are the charts I have been watching …

NOC 195-Minute Chart #1

As you can see on the above chart, NOC made a nice 3 wave pattern into the early December low … we have pulled back from the first move higher out of that low and currently, price is holding the SLOT support zone.

I noted on the chart that this morning’s first candle made a possible reversal candle … that is where price pushed to a new low and then reversed to close above the low of the prior candle.  For the 195-min time frame, I typically like to see “three consecutive new lows” when putting in a possible reversal candle – we had that with NOC this morning.

The current 195-min candle is an inside candle, and if this morning’s candle is a true reversal candle, this morning’s low will not be taken out ($254.28).

NOC 195-Minute Chart #2

You can see on the relative strength vs the S&P 500 Index chart on the right that NOC is showing the type of relative strength I like to see if I am looking for a reversal trade out of a possible end of price structure low.

NOC 30-Minute Chart

I’ve included a Volume Profile analysis on the above 30 min chart to show the level that price needs to get above to give me additional proof that the December bottom is likely in for NOC.  Once we get above that level, I will be looking to increasing the size of my NOC trade via options and likely common stock as well.

Cheers … Leaf_West

2018 Tax Loss Candidates – Week Ending Dec 21, 2018

Dec 21st Update – I think I heard earlier this week that December 2018 so far is the worst December in the S&P since the great depression of the 30’s. I’m going to keep track of my tax-loss data for data sake, but I’m going to focus more the next couple of weeks on the overall market and the big momo stocks that could give us some great bounces out of support rather than focusing too much on tax loss candidates.

Instead of updating my blog daily/weekly, I’ll just publish a final 2018 analysis after the January OpEx.

Here is the new low list as of Friday’s close …

Here is the sorted list of the watchlist based on last week’s performance ...

Dec 20th Update – Stocks continue to sell-off making the tax-loss idea a tough one to get traction with. New lows hit a high for the month that I have been monitoring them. Maybe OpEx helps this market to complete the heavy selling. We’ll see …

Dec 19th Update – FOMC rate decision today did little to help stocks bounce off of their December lows.  The tax loss candidates that I am monitoring continued to generally grapple for a bottom to trade off of.

No bottom evident yet for the majority of the tax-loss watchlist.  The only stock that looks like it probably put a definitive bottom in is GE, and I am not going to trade that name.

GE is now 15% off of its low.  GIS reported earnings today and despite a revenue miss, it bounced and that stock could have seen the worst now that it has reported and there were no major surprises.  My son Paul bought some stock today after the earnings announcement (he works with GIS here in Canada).

This sorting of the watch list is based on the 5-day relative strength vs the SPY ETF.  Nothing really jumps out to me as we have not made the kind of lows I would like to trade against.  We will see what happens the last two days of this week – Cheers.

Dec 18th Update – I posted a blog earlier today about adding a position in NOC as part of my tax-loss portfolio (click here).  Here are the charts for today …

Another day of new December lows for this watchlist … a little better than yesterday, but I think the rest of December will be determined by the FOMC and their announcement tomorrow.

Watchlist sorted by the biggest bounces off of each stocks December lows … note that GE is now the biggest bouncer.  I don’t plan on trading that one since its price is so low, and I would have to trade a ton of shares to make it worthwhile.

The above list sorts the stocks by the ranking since Nov 30th close … NOC is the best performing stock of the list having lost only 1.13% since November 30th.  No stock is higher than its Nov 30th levels.

The above is my monitoring the watch list for possible reversal candles on the 65m, 195m and daily charts.  NOC made a second candle confirmation of a possible 195min reversal candle, and HIG made a possible 65min reversal candle with the last candle of the day today.

Tomorrow should be an interesting day ….

December 17th Update  –  Another day another beating of the bull tards … new December lows were seen in 75% of my possible candidates.

Here is the data at today’s close …

I created a new sheet to watch for/identify possible reversal candles on the 65min, 195min and daily time frames.  Here it is …

The only possible reversal candle that my screens pop up today is BHGE on the 65min chart.  No changes to my two holdings (VLO/APC) … maybe once we get the FOMC decision the market can bounce.  If not, then maybe it gets nice and ugly into year-end and relief is only seen that last day or two before the end of the year.

Cheers … Leaf_West

2018 Tax Loss Candidates – week ending Dec 14, 2018

Tax loss candidates sorted by the bounce off of their December lows – highest to smallest.  I added a couple of new columns to the right.  They are labeled “30mATR” “65mATR” and “195mATR”.  Those columns paint a green check mark when the ATR position for that time frame is in a position of support.

Obviously when these stocks make a bottom after the tax selling is complete, they will flip the ATRs to support on their bounce higher.  These columns just help me keep track of which stocks are beginning to move.

I’m going to just pin this daily update to the front of my blog so I don’t have to tweet out each day’s update.  Here is a running summary of the number of lows hit on each day this month.

Updates (Dec 14th) … the market pushed lower today on growth fears.  I will update my road maps this weekend, but as you can see on the chart below, new lows in my list tax loss candidates expanded today – 28 or 62.2% of my list made new December lows today taking out the prior max low date of December 10th.  I am expecting to find a couple of more tax loss trades before year-end, so the next two weeks should hopefully give us a capitulation whoosh …. maybe the FOMC announcement on Wednesday December 19th will mark the absolute low for many stocks.

If you look at the chart at the top of the blog post, you will note that only NOC has made it above its Nov 30th closing value.  Eight stocks are showing positive relative strength vs the S&P 500, and 11 stocks outperformed the S&P 500 index this past week – four of those 11 were from the energy sector so I am still holding out hope for my VLO and APC tax trades (both of those outperformed the SPX this past week).

Updates (Dec 13th) … the market was flat today, but now all of my tax loss candidates are up off of their December lows.  No changes to my tax-loss holdings in VLO or APC.

Updates (Dec 12th) … I started a position in a possible tax-loss selling candidate today.  I purchased March monthly $70 call options in VLO at $7.48.  I chose the March month because I am also trading VLO as an overall valuation play going into 2019.

I also bought a starting position in APC … here I am just playing a tax-loss bounce in APC and energy stocks in general.  I bought the Jan $55 calls for $2.10 today.  I have about a 1/3 position and I want to buy on any consolidation/small pullbacks over the rest of this week.

Updates (Dec 11th) … just looking at the first couple of names on this list (NOC, ATVI, and EA are interesting charts to me, and possibly the first candidates to buy using options.  I’ll monitor and update the blog going forward.

Cheers … Leaf_West

2018 Tax Loss Selling – Update (Dec 8/18)

Lots of selling in all stocks so far this month … as I have done in previous years, I monitor a list of about 45-50 stocks for possible candidates to trade into early January.  Typically this would mean buying call options and/or stock in the last two weeks of the year from a list of candidates that are possibly in the midst of selling by investors who are liquidating their big 2018 losers for tax-purposes.

As mentioned in previous blog posts on this topic, I screen for stocks at the end of November each year (or the first Friday of December if that means Dec 1-4th) that have a large 2018 price range (minimum of 25%) of the stock’s closing price and the closing price for my analysis is in the bottom 10% of that YTD price range.  This year I decided to use the S&P 500 as my scanning universe.

I monitor these tax loss candidates on a variety of ways, but the end goal is to try and find stocks that are clear “victims” of unrelenting tax-loss selling and therefore are likely candidates to pop once the 2018 selling is complete – that can mean a pop on the last few days of the month and typically the first couple of weeks in January.  My preference is to use January monthly call options so I know my exact risk for each trade.

Anyways, I will try to keep traders abreast of what I am seeing and planning to trade again this year.  Below are a list of PDFs taken of my tax-loss watch list sorted a variety of ways – I will update them every weekend until the end of January 2019.

Here is a summary of what sectors are dominating my 2018 tax loss list …

You can see that this year, the sector most found in my list is the energy sector.  I like when a sector is well represented as that could mean that all stocks in that sector are getting liquidated and that the reasons behind the weakness are less related to company-specific issues.

Here is my watch list sorted by the last week’s stock performance …

Anyways I’ll put my PDFs as at December 7, 2018 here for any interested traders (you will need to zoom in on the sheet to see all of the detail).  All I need to do now is to constantly reviewing the daily charts for these stocks to see when and if any good trade candidates appear over the next couple of weeks.

Cheers … Leaf_West

Tax-Loss Selling …

It’s almost that time of year … no, I don’t mean Christmas!  I’m referring to tax-loss selling.  Every year, I find several great set-ups in stocks that get punished/liquidated into year-end as traders try and sell their big losers to take advantage of the tax losses that those stocks create.  I will try and post the work I do in this area again this year.

To start, I do a search for possible candidates … I concentrate on the biggest and most liquid names.  So my search begins with the top 1000 market cap names on the US exchanges.  Then I look to only stocks that have a YTD High/Low range that is at least 25% of the current closing price … I do this because I want to look at only stocks that have been punished this trading year and therefore are obvious candidates for tax-loss selling.

Then I want to only look at stocks that are in the bottom 10% of their YTD High/Low range … those are the stocks that are near their lows for the year, and probably the ones that are going to see pressure over the next month.  There are only 69 stocks that make up this list as of Friday’s close.

I really don’t start to focus on this group of stocks until we get into December … but it is always interesting to see the names on the potential list as we move through November.  I like to see the dominate sectors to see if there is a theme for this year’s tax-loss selling.  Anyways, here is the current list of potential tax-loss sellers.

By Market Cap

The most notable/largest market cap name on the potential tax-loss seller list is FB.  YTD FB is down 17.85%.  interestingly, GE is once again on the tax-loss selling list here in 2018 just like it was in 2017.

GE – Daily Chart

You can see the circled area on the above daily chart, the price action at year-end 2017, and then the first 8 trading sessions of 2018 where GE made a bounce many tax-loss candidates will often make.  GE gained over 11% in those first few trading days of 2018.

By Sector – Chart #1

 

 

 

 

 

 

 

By Sector – Chart #2

By Sector – Chart #3

By Sector – Chart #4

By Sector – Chart #5

 

I’ll update my watchlist as we get to the end of the month.

Cheers … Leaf_West