I'm timing the market - who's in?

NedS

I know, everyone here hates people timing the market - it's time in the market that counts.

I have a healthy holding in City of London Investment Trust (CTY) in my SIPP - 17,000 shares to be precise. I'd like to increase that holding, to around 20,000 shares (+17.65%) but I'd rather not pay out £12,600 for those extra 3000 shares.

For a bit of fun, I'm going to try to achieve that this year (2023) by timing the market - selling some or all of the holding and buying back after market falls (volatility is your friend). If I achieve my goal, I will add 17.65% in value in addition to any natural gains/losses and dividends (I will account for any lost dividend income). Follow along if you are interest, or ignore if you are not.

My strategy is simple - CTY basically trades within a range, Covid aside, pretty much 375-440p in the last 8 years so it should be relatively straight forward to trade. I will look to reduce the holding towards the upper end of that range and look to buy back lower judging what I think market sentiment is at the time. I am not taking a long term view other than I'm happy to hold CTY for the long term as part of my retirement strategy.

So lets see how we get on:

5/1/2023: 1st trade - sold 7000 shares at 420.6868p today. Hold 10,000 shares and banked £29,435.13 after fees.

Plan to sell the remaining 10,000 on further price increases (looking for ~425p) or buy back lower using the banked £29k. I'm confident that markets will be lower than they are now at some point in the next 3 months although I'm mindful the next ex-dividend date is 26/1/2023.

flaneurs_lobster

So that's Buy Low, Sell High. Seems like a good strategy to me.

Albermarle

 I'm confident that markets will be lower than they are now at some point in the next 3 months 

50:50 chance of being right at least .

coastline

My kind of game this. Here we go. Set the following chart at 6 months. View the chart with Candlesticks. From the upper indicators add in a 10 day slow moving average (SMA). From the lower indicators add Stochastic ,Williams%R , RSI and MACD. Stochastic and Williams are now overbought in the red zone but the price is still above the 10 day SMA . The recent rally is still intact just like 23 OCT to 5 DEC in the red zone . You can remain overbought or oversold for a good while. Never mind the decision has been taken and could well work out and I'm not betting against it. The next entry point will be in the lower green zone when price and the indicators show signs of curling up.

The City of London Investment Trust Plc, CTY:LSE interactive chart - Investors Chronicle

The above chart is easier to understand with the overbought and oversold highlighted regions. Another view below but the Stochastic is set faster by default so I can't adjust it.

City of London Investment Trust PLC, UK:CTY Advanced Chart - (LON) UK:CTY, City of London Investment Trust PLC Stock Price - BigCharts.com (marketwatch.com)

Just add in my set up in this as an alternative.

CTY.L | SharpCharts | StockCharts.com

Anybody grasping the idea yet ? It's not hard really I'll post when I can. As NedS suggests the idea is to build up more units over time. You get a few wrong at times there's no doubt but volatility and momentum can bring rewards. It's made me money over the years but I accept it's not for everyone. Relax and let it play out.

eskbanker

Albermarle said:

 I'm confident that markets will be lower than they are now at some point in the next 3 months 

50:50 chance of being right at least .

The fact that there are only two (strictly three) outcomes doesn't mean that they're equally probable!

NedS

coastline said:

My kind of game this. Here we go. Set the following chart at 6 months. View the chart with Candlesticks. From the upper indicators add in a 10 day slow moving average (SMA). From the lower indicators add Stochastic ,Williams%R , RSI and MACD. Stochastic and Williams are now overbought in the red zone but the price is still above the 10 day SMA . The recent rally is still intact just like 23 OCT to 5 DEC in the red zone . You can remain overbought or oversold for a good while. Never mind the decision has been taken and could well work out and I'm not betting against it. The next entry point will be in the lower green zone when price and the indicators show signs of curling up.

The City of London Investment Trust Plc, CTY:LSE interactive chart - Investors Chronicle

Great - I love a bit of chart analysis too.

Well, I've hedged my bets at this point by only selling 7000 out of 17,000 shares today, leaving me holding a further 10,000 should the rally extend further, so I've tipped my hand but I'm not yet all in. Lets see where the price goes now.

What's your prediction for a top? I said in the first post I'm looking for around 425p to offload the remaining 10,000 (probably in two batches of 5,000 to maximise the offer price available).

Any thoughts on how best to optimise the strategy - buy/sell shares in 3 equal batches to cost average, or go all in (I'm thinking more in terms of minimising risk than maximising returns)

NedS

eskbanker said:

Albermarle said:

 I'm confident that markets will be lower than they are now at some point in the next 3 months 

50:50 chance of being right at least .

The fact that there are only two (strictly three) outcomes doesn't mean that they're equally probable!

and my bet is loaded, like saying if I flip a coin, I'm confident it will come up heads at some point in the next 3 flips.

coastline

NedS said:

coastline said:

My kind of game this. Here we go. Set the following chart at 6 months. View the chart with Candlesticks. From the upper indicators add in a 10 day slow moving average (SMA). From the lower indicators add Stochastic ,Williams%R , RSI and MACD. Stochastic and Williams are now overbought in the red zone but the price is still above the 10 day SMA . The recent rally is still intact just like 23 OCT to 5 DEC in the red zone . You can remain overbought or oversold for a good while. Never mind the decision has been taken and could well work out and I'm not betting against it. The next entry point will be in the lower green zone when price and the indicators show signs of curling up.

The City of London Investment Trust Plc, CTY:LSE interactive chart - Investors Chronicle

Great - I love a bit of chart analysis too.

Well, I've hedged my bets at this point by only selling 7000 out of 17,000 shares today, leaving me holding a further 10,000 should the rally extend further, so I've tipped my hand but I'm not yet all in. Lets see where the price goes now.

What's your prediction for a top? I said in the first post I'm looking for around 425p to offload the remaining 10,000 (probably in two batches of 5,000 to maximise the offer price available).

There's no predictions. The charts and indicators are giving the direction . The price of CTY is above the 10 day moving average so we hold. Indicators are overbought so we know we are on alert. As I said the decision has been taken the next buy is in the green zone. It's like saying we'll wait until the froth is off the top and away we go again.

zagfles

Have you modelled what would have happened if you'd tried this approach in previous years? Say Jan 2012, when the price was 288. The previous 8 years ie 2004-2012 the price varied between 185-320. So maybe you'd have sold 7000 shares at 288, as the price is towards the top end of the historic range, and then sold a further 10,000 in late 2012 when the price reached its previous record of 320.

You're now sitting on a pile of cash waiting for the price to drop to the lower part of the historic 8 year range. You'd still be sitting on the cash now, having missed out on 30-45% growth plus dividends. Would you still be waiting?

 

bd10

NedS said:

I know, everyone here hates people timing the market - it's time in the market that counts.

I have a healthy holding in City of London Investment Trust (CTY) in my SIPP - 17,000 shares to be precise. I'd like to increase that holding, to around 20,000 shares (+17.65%) but I'd rather not pay out £12,600 for those extra 3000 shares.

For a bit of fun, I'm going to try to achieve that this year (2023) by timing the market - selling some or all of the holding and buying back after market falls (volatility is your friend). If I achieve my goal, I will add 17.65% in value in addition to any natural gains/losses and dividends (I will account for any lost dividend income). Follow along if you are interest, or ignore if you are not.

My strategy is simple - CTY basically trades within a range, Covid aside, pretty much 375-440p in the last 8 years so it should be relatively straight forward to trade. I will look to reduce the holding towards the upper end of that range and look to buy back lower judging what I think market sentiment is at the time. I am not taking a long term view other than I'm happy to hold CTY for the long term as part of my retirement strategy.

So lets see how we get on:

5/1/2023: 1st trade - sold 7000 shares at 420.6868p today. Hold 10,000 shares and banked £29,435.13 after fees.

Plan to sell the remaining 10,000 on further price increases (looking for ~425p) or buy back lower using the banked £29k. I'm confident that markets will be lower than they are now at some point in the next 3 months although I'm mindful the next ex-dividend date is 26/1/2023.

Nothing wrong with timing. Am doing the same, but for phasing in from cash back into risk.

Out of curiosity, how many trades would you be expecting to do this year? All else being equal, transaction costs would be my concern: 50bp stamp duty, commission, bid/ask spread all adds up quite quickly and that might exceed the savings you were hoping to achieve.

Apart from that, good luck and fingers x'ed!

NedS

zagfles said:

Have you modelled what would have happened if you'd tried this approach in previous years? Say Jan 2012, when the price was 288. The previous 8 years ie 2004-2012 the price varied between 185-320. So maybe you'd have sold 7000 shares at 288, as the price is towards the top end of the historic range, and then sold a further 10,000 in late 2012 when the price reached its previous record of 320.

You're now sitting on a pile of cash waiting for the price to drop to the lower part of the historic 8 year range. You'd still be sitting on the cash now, having missed out on 30-45% growth plus dividends. Would you still be waiting?

 

That's a fair question, and I opened this thread acknowledging it's not a popular position, for good reason. It's not something I can back test, as a large part of any decision is based on sentiment at the time (markets are largely driven by sentiment in the short term), and I've no idea how I would have felt about the markets in Jan 2012. I do know that I traded CTY in 2019 and made 30% in the year including dividends. I sold out on 16/12/2019 at 438.43p which in hind sight was a great decision as markets felt 'toppy' to me at the time, and then bought back in during the Covid pandemic - my average price paid for my 17,000 holding is 349p. If anything I was far too cautious and got cold feet when the price bottomed below 300p even though my model told me to double down and buy more below 300p, so ended up buying some of the recovery and missing out on the very best prices.

But yes, I absolutely get your point. My interest in investing really started in 2013 and my first crisis was the 2013 taper tantrum (April/May 2013?). I was paralysed by fear, looking back at charts for the last 15 years and seeing huge crashes in 2000 and 2008, figuring the next huge crash must be due any time soon, so my investing priorities were firstly capital preservation as logically I did not want to lose the relatively small amount of capital I had worked hard to save. Of course that was a huge mistake in hindsight as I missed out on a further 7 years of bull market. But I learned valuable lessons along the way, didn't lose my capital, and I have still managed to grow my capital significantly, to the point where I have enough to achieve my goals (of early retirement).