With the recent selloff I been waiting for an opportunity for SPY to fall to some decent support across larger timeframes and see if I could build a pf that would start small and eventually lead to an account that could generate some decent income with theta strategies. The goal is to start depositing $500 a month and buy undervalued companies. That deposit amount could increase but will always be at least $500.I have generally just bought companies according to p/b, ev/ebitda or things of that nature. This time around I'm going to highlight gurufocus's value score as my number one factor and combine that with technical analysis to hopefully lead to some good buys. That isn't to say that following along will make you rich or that it's advice that you should follow. This is an unproven strategy from someone you don't know and will go to zero the minute you think this advice is good. Please keep that in mind as I make posts about this pf and highlight my buys and sells. We are in a bear market with very high inflation making this even more riskier than your usual seeking alpha article about how a stock can't go any lower it's a screaming buy. Speaking of that I don't want these ideas to just be buy this or that. I'm going to try and highlight one or two things and dive a bit deeper into them. This journey is meant to educational for me as well and what better way to learn than to try and teach others. With all that being said I'm going to be leading off with my first pick - SPY.
Why SPY Why?
It's a wild pick I know. But why? Why is the investment advice heard around the world "Buy Spy"? Why do even some of the most successful stock traders in the world hold SPY in their portfolio? It all comes down to diversification. Why diversify? To minimize risk. The S&P 500 (SPY) is a capitalization-weighted index for the leading companies in the world. Capitalization-weighted index just means that the percentage a component takes up in the index (in this case stock) is weighted by the market cap. It's basically supposed to represent the best of the best and you get a piece of each of those with the purchase of 1 SPY. This is an easy way to diversify and why you always hear "Buy Spy".
It is going to take a few months at $500 per month to get things weighted properly but I'm not looking for this to be a portfolio full of SPY. SPY is my hedge for when I certainly pick wrong. I'm will be looking to average down on my picks or dollar cost average (DCA) but the goal is to not let pride get in the way (it will) and sell when it makes sense.
Now for the Technical Analysis Part(TA):
SPY has finally come down to the AVWAP for COVID low. These AVWAPs can be put into a lot of different places but these COVID ones has proven to be somewhat reliable. Volume on the selling has started decreasing and I'm looking for some consolidation/bounce. We could easily drop more. Inflation is through the roof, Powell just admitted we may not land softly, and there is a war that directly and indirectly effects billions. I like the entry point though and if SPY falls through the floor we are going to have much larger problems than this account not making it to theta size. Sidenote: I'm going to keep calling it theta size until I figure out what size that is. When I feel comfortable upping the risk of this pf is when you'll start seeing me discuss that. I have included the simplified version of my chart and as do buys (and need some filler content) I'll post more about what I'm using and why. For now here is a multiple timeframe chart with my typical indicators.
For those who end up following along wish you the best of luck. You can scale these buys up and down to whatever size you would like (most brokers allow partial buys now). I'll try and post these on the day I buy but make sure you at least take a look and see what the market is doing before you get the buy in. If I post you see it in the evening and it's up a 100% maybe move away from the buy button. The typical disclaimer of not financial advice and do your own research applies(I said this in my head in a mocking tone). I don't know if those even work but don't sue me because you took a loan out on your house, bought my picks, your account went to zero, and now you are divorced and homeless after you took the advice of a trading view idea from a guy who has 10 followers and still sometimes opens a browser and immediately forgets why he did.
Why SPY Why?
It's a wild pick I know. But why? Why is the investment advice heard around the world "Buy Spy"? Why do even some of the most successful stock traders in the world hold SPY in their portfolio? It all comes down to diversification. Why diversify? To minimize risk. The S&P 500 (SPY) is a capitalization-weighted index for the leading companies in the world. Capitalization-weighted index just means that the percentage a component takes up in the index (in this case stock) is weighted by the market cap. It's basically supposed to represent the best of the best and you get a piece of each of those with the purchase of 1 SPY. This is an easy way to diversify and why you always hear "Buy Spy".
It is going to take a few months at $500 per month to get things weighted properly but I'm not looking for this to be a portfolio full of SPY. SPY is my hedge for when I certainly pick wrong. I'm will be looking to average down on my picks or dollar cost average (DCA) but the goal is to not let pride get in the way (it will) and sell when it makes sense.
Now for the Technical Analysis Part(TA):
SPY has finally come down to the AVWAP for COVID low. These AVWAPs can be put into a lot of different places but these COVID ones has proven to be somewhat reliable. Volume on the selling has started decreasing and I'm looking for some consolidation/bounce. We could easily drop more. Inflation is through the roof, Powell just admitted we may not land softly, and there is a war that directly and indirectly effects billions. I like the entry point though and if SPY falls through the floor we are going to have much larger problems than this account not making it to theta size. Sidenote: I'm going to keep calling it theta size until I figure out what size that is. When I feel comfortable upping the risk of this pf is when you'll start seeing me discuss that. I have included the simplified version of my chart and as do buys (and need some filler content) I'll post more about what I'm using and why. For now here is a multiple timeframe chart with my typical indicators.
For those who end up following along wish you the best of luck. You can scale these buys up and down to whatever size you would like (most brokers allow partial buys now). I'll try and post these on the day I buy but make sure you at least take a look and see what the market is doing before you get the buy in. If I post you see it in the evening and it's up a 100% maybe move away from the buy button. The typical disclaimer of not financial advice and do your own research applies(I said this in my head in a mocking tone). I don't know if those even work but don't sue me because you took a loan out on your house, bought my picks, your account went to zero, and now you are divorced and homeless after you took the advice of a trading view idea from a guy who has 10 followers and still sometimes opens a browser and immediately forgets why he did.