Commodity prices are low and resource companies in Canada have lost quite a bit of value recently. But did the world really change that much since March to warrant such a huge sell off? Maybe, I don’t know. The price of gold dropped like a sack of potatoes last week. But even at $1400 per ounce, gold production companies are still making about $600 in gross margin for every ounce they mine and sell, so their bottom line is still good (~_~) Stocks could get a lot worse before they get better again. However if this turns out to be the buying opportunity of the year then I don’t want to miss out（＾ｖ＾） So it’s time for another swing trade 🙂
I’ve decided to trade Goldcorp, Silver Wheaton, and Suncor in my margin account. This means the bank will lend me money to buy stocks. In this case they’re lending me 70% of what I buy. But I have to cover the remaining 30% with cash. In other words I only need $30 of my own money to buy $100 worth of stocks 🙂 Earlier this morning I plunked down $2,000 to start a swing trade. This means I can buy roughly $6,670 worth of stocks because the bank is financing 70% or $4,670 of it 🙂
Initial Investment: $2,000.
Leveraged up to $6,679.
Transaction details below.
I chose these companies because they are high quality, large cap stocks with over 50% institutional investors, so there is very little risk of them going down to zero. Let’s take Suncor for example. Here are 3 reason why I think it’s a good stock to buy now.
1) Stock analysts love this company. According to Globe Investor Suncor currently has 16 analysts reporting on it. 14 of which calls it a strong buy. These people spend way more time studying companies than I do. If their professional consensus shows that Suncor is a strong company then that’s probably a good sign 😀
2) High price target prediction. Stock analysts often have to come up with 12 month projections for where they think a stock will be. 1 year is a long time and it’s hard to get these estimates right. Some analysts will be bearish while others will be bullish so there will always be a range of predictions. In Suncor’s case, this range is between $36 to $48. That’s a pretty good target, considering where the stock is at today.
3) Near 52 week low point and strong support. Suncor has maintained a nice technical support around the $27/share range for many years now. Today we are pretty much at that point again. If it stays within it’s 52 week range then there is a good chance it will go up from here.
I hope my leveraged trading strategy pays off 🙂 My plan this time is simple. Sell all 3 stocks once I make $1,000. Or BUY MORE if falling oil and gold/silver prices drag down commodity stocks even lower. I can lower my average cost of buying and make a profit later on. Will I be $1000 richer at the end of all this or will I lose big time? We’ll just have to wait and see 🙂
I never thought about doing swing trades. To be honest, that seems a bit risky for me. Still, I would like to know more. What is your main criteria to select stocks suitable for swing trades? Thanks.
I normally trade stocks that are cyclical in nature so they tend to outperform the index on the way up. Also they should ideally have market capitalization over $5 billion and have lots of liquidity so it’s easy to jump in and out of. Being leaders in their respective industries helps too because even though there will always be volatility, I shouldn’t have to worry about the company going bankrupt in the short term, or at least not before the entire sector collapses. Swing trading IS very risky and I’ve lost $2000 doing it before so I don’t recommend it for everyone. But it can also be quite exciting and fun 🙂