Riding the MCHP train

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I am interested in making money on the volatility of the Microchip stock price (MCHP on Nasdaq stock index).  The share quote price rises and falls about a 10% a month during the uncertain times of lockdowns and elections, and about an average 5% a month in less stressful times.   You know the company: you work with its products everyday: it's solid.

 

   To make money, buy 100 to 1000 shares (@ $10000 - $110,000 USD) near the low side of the value oscillation and sell near the high side of the price swing.   Well, yeah, buy low, sell high, and easier said than done.  But while MCHP is trending upwards as a long-term investment, it is also bouncing around on a weekly basis.  Block buying of, say, 50 shares at  $105 a share,  another 50 at 103, 50 more at 102, and 50 at 100  (roughly $22000 investment) when the price is heading downwards and hits these points would seem reasonable because a week or two later you can sell 50 at 105, 50 at 106, 50 at 108 and sell the remaining 50 shares when the price has fallen 15% off its weekly peak (indicating the start of a downward trend). 

 

   This is "harvesting" about $2000 in short-term capital gains every two or three weeks from a $22,000 cash stake.  Expect the tax man to take %30 to %40  (actually a WAG on my part, but still reasonable).  In order to do this, you need a stock broker that charges minimal or no commissions, such as AmeriTrade which charges a fee $30-$50 on any stock transaction of any size or Charles Schwab, which charges no commissions on transactions for accounts with $100K - $200K worth of stocks and cash.

 

Look at a chart of MCHP stock price for the past six months.  There's a lot of "bounce".

 

Is anyone doing this?  Any tips on what to watch for? and what to avoid?

 

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Simonetta wrote:
Well, yeah, buy low, sell high,

Or reverse that and sell high, then buy low (shorting)! But I prefer to use options as it does not tie up as much capital.

You will find that having a written trading and risk management plan will improve your results greatly.

I had a thread on this a year ago, but did not find many capitalists on the list, at least not publicly.

 

Jim

edit: add risk management

 

(Possum Lodge oath) Quando omni flunkus, moritati.

"I thought growing old would take longer"

 

Last Edited: Wed. Nov 4, 2020 - 09:34 PM
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I do all my short-term trading in a tax-advantaged account to avoid the tax bite. I view market timing akin to gambling so limit it to 10% or less of my portfolio.

I view your strategy as incomplete since the cash position earns squat while waiting for MCHP to drop again. You need a counter investment so the dough is always working.

My favorite short-term play is SPY vs VIX. It did quite well for me during Trump's trade-wars with China.

My favorite long-term play is SPY vs GLD. It's kept me ahead of the market for decades.

I trade primary ETFs since they're commission free with my broker (Firstrade).

 

Good Luck! Don't bet the farm!

 

 

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I do all my short-term trading in a tax-advantaged account to avoid the tax bite.

 

I need to find out more about that....paid too much in short-term "penalties"

When in the dark remember-the future looks brighter than ever.   I look forward to being able to predict the future!

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Is anyone doing this?

I created a discount brokerage with that sort of thing in mind, quite a long time ago.

Those "peaks" when you should sell are especially hard to recognize, and eventually I gave up in favor of a longer-term buy-and-hold strategy.   I'm up about 1400% (in 15-20y?), so I'm not complaining.  It helps not to have ever needed to take any cash out.

 

Last sold Microchip 07/08/19 at $88.5, and bought (substantially less) 3/16/20 at 59.76.

 

I did pretty well on some of Atmel's swings, too.

 

At the moment, though, the market doesn't seem to be making a lot of sense, so it's harder.  I mean, I knew TWTR was up more than reasonable amounts, but no way did I expect it to crash 25% (on essentially good news.)

 

 

Also, look up the original meaning of "hedge fund."

 

 

AmeriTrade which charges a fee $30-$50 on any stock transaction

Where did you get that idea?  These days almost all of the discount online brokers have zero-fee trades.  AFAIK, Ameritrade only charges for "Broker assisted" trades.

 

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avrcandies wrote:
I do all my short-term trading in a tax-advantaged account to avoid the tax bite.

i use a rothIRA for that, tax free when I need it!

 

 

(Possum Lodge oath) Quando omni flunkus, moritati.

"I thought growing old would take longer"

 

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Who missed the AMD train??

 

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I can tell you which trainwrecks I didn't miss.  Xerox, Kodak and AT&T. indecision

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I jumped on the CSL "train" at A$12.80... now traveling around A$300.

Ross McKenzie ValuSoft Melbourne Australia

Last Edited: Thu. Nov 5, 2020 - 01:32 AM
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when the market was crashing this year, I road it down on inverse etf, and road it back up with normal etf, guessed the bottom pretty close to actual.. mostly used the spy etf. But almost anything worked as everything was trending in the same direction. For a while I also day traded during the crash as oscillations were large, short selling down and riding up. Telsa was a huge winner after the crash if you bought in at the bottom. Programmers can usually see patterns in things, makes good for trading I think.