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.
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.
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.
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.