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Mar 24

Long – Cerner ($CERN), Packaging Corp ($PKG)

While many commentators are advising caution, reducing risk, or taking profits, we continue to find new buying opportunities. We’re not deliberately trying to be contrary to the misplaced fear over Cyprus or other supposed headwinds facing the market and economy, we’re just following our process and executing ideas as and when they present themselves. Price dictates what we do. Not news stories, media opinion, or hearsay.

Trend following effectively acts as a filter for finding market leaders. You need take no meaning from what buy signals for those stocks might say or imply about the health of the market or economy. If forced to read something into the names appearing on our radar recently, it’s probably fair to say they are more defensive in nature; healthcare, consumer goods, consumer staples, things like that. We also still have all four longs in utilities.

What does that mean? No idea. Don’t care. I’d guess some would say that it’s not a good sign that defensive stocks are leading, others might say a rising tide lifts all boats. All that matters is there are still a lot of strong uptrends out there in a market that remains in an intermediate and long-term uptrend. Those are the names you want to have working for you, and if they’re offering some low-risk entries we’ll be happy to participate.

Currently we have 27 open positions (4 losers, 23 winners), the performance of which you can see here in our latest weekly review. Here are two more names we’ll be adding at Monday’s open:-

 

Cerner ($CERN)

$CERN is in a strong long-term uptrend that extends back well beyond the 18mos shown on the weekly chart below. It’s noticeable that the move through prior resistance to all time highs has been on increased volume, in 7 of the last 12 weeks in fact. That $88.10-$88.41 level may act as first support, but at this stage it would take a break of the wider $82.64-$85.38 area, that marked the highs of 2012, to invalidate the longer-term uptrend. The second chart shows the last 3 months in greater details on a daily chart. We saw little conviction in any selloff last week, with Friday’s action reversing all weakness to end at an all time high, again on increased volume.

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Packing Corp Of America ($PKG)

Another great example of a solid uptrend. Whether looking at over 18 months or 18 weeks the charts look the same. $PKG is having another shallow pullback that provides us with a low-risk entry. A clean break and close below that $40.64-$40.87 area which currently also houses the 50-day would invalidate our rationale.

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6 comments

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  1. Chris

    Do you have a limit on the number of open positions at any one time? Assuming you are risking 1% per position, there is a chance that you would get a 27% drawdown should some black swan event occur?

    1. Jon Boorman

      I don’t currently have a specific limit on the number of open positions, but it’s been rare for me to have much more than this, purely from an ability to effectively manage. Re drawdown a 27% drawdown wouldn’t be uncommon for a trend-follower, take a look at the drawdowns for some of the best in the business here http://www.trendfollowing.com/perf.html . Should a black swan event occur we’d execute whatever stops were triggered and move on to the next trade. It’s possible at times of perceived higher risk to hedge the long portfolio with a short $SPY position, but that’s not something I do for the purposes of measuring performance here.

  2. Chris

    Thanks for the link. It does put the drawdowns into perspective.

  3. Ken Lee

    I think $CERN topped today at $93.93

  4. Ken Lee

    I have PKG topping out today or tomorrow at the $44 level

    1. Jon Boorman

      Exited 1 year, 1 month, and 4 dividends later for 57% gain.

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