Pyramid Up - minimum time lapse between adds?

[chang]

Question for retiredat48: do you practice a minimum time lapse between PU adds?

My specific example: I bought AMZN at yesterdays open for $98. It closed at $103.41, so I managed a 5.5% gain on the first day of my first purchase. The purchase was around 20% of a notional holding, so let’s say I have divided the buildup into 5 buckets.

If my planned PU spacing was 5%, should I buy bucket #2 on the next trading day (Monday)? Or should I give it some more breathing time? TIA.

[Deleted]

Oct 29, 2022 15:21:59 GMT chang said:

Question for retiredat48 : do you practice a minimum time lapse between PU adds?

My specific example: I bought AMZN at yesterdays open for $98. It closed at $103.41, so I managed a 5.5% gain on the first day of my first purchase. The purchase was around 20% of a notional holding, so let’s say I have divided the buildup into 5 buckets.

If my planned PU spacing was 5%, should I buy bucket #2 on the next trading day (Monday)? Or should I give it some more breathing time? TIA.

DCA is adding based on time. PU is based on price increases. I would suggest using limit orders for PU.

[Chahta]

Seems to me that “PU” only works in a generally rising market. A choppy market like this it doesn’t make sense, but I suppose it’s like DCA.

[chang]

Oct 29, 2022 15:42:33 GMT Chahta said:

Seems to me that “PU” only works in a generally rising market. A choppy market like this it doesn’t make sense, but I suppose it’s like DCA.

Well, the idea in theory is that it works in rising and falling markets. In falling markets, it saves you from losing money by avoiding a second buy. It might fail in the case of a high dividend stock whose price stays in a channel (you would be better off buying the entire lump sum and collecting the divvies). I think it would make sense for a non-divvy, growth stock like AMZN.

[retiredat48]

Oct 29, 2022 15:21:59 GMT chang said:

Question for retiredat48 : do you practice a minimum time lapse between PU adds?

My specific example: I bought AMZN at yesterdays open for $98. It closed at $103.41, so I managed a 5.5% gain on the first day of my first purchase. The purchase was around 20% of a notional holding, so let’s say I have divided the buildup into 5 buckets.

If my planned PU spacing was 5%, should I buy bucket #2 on the next trading day (Monday)? Or should I give it some more breathing time? TIA.

I have a general SELF-IMPOSED LIMIT  of 2-3 days wait between buys.

At very volatile times, like market bottoms/bear market type markets, one can hit buy-up percentage limits the next day.  Waiting assures such a day or two market move is not just "short-covering."

I would not be absolute with this wait a day or two rule, especially if buying ETFs.  Mutual Funds require the close of the day price.  An ETF may have been bought and up 5-10% that day!!  If I made such a buy,  was up 5%, and the next day continued strong,I would consider buying more.

BTW I put odds at greater than 50/50 you will be buying more AMZN between now and XMAS.

R48

[yogibearbull]

retiredat48 , as both 50-dMA and 200-dMA are declining for AMZN, and the stock is well below both of those MAs, does your "exceptional value" exception apply to AMZN now? chang has made his 1st buy anyway, so it may not matter to him whether there was a PyrUP initial signal to buy AMZN.
stockcharts.com/h-sc/ui?s=AMZN&p=D&yr=1&mn=0&dy=0&id=p25641066868

[retiredat48]

Oct 31, 2022 2:46:58 GMT yogibearbull said:

retiredat48 , as both 50-dMA and 200-dMA are declining for AMZN, and the stock is well below both of those MAs, does your "exceptional value" exception apply to AMZN now? chang has made his 1st buy anyway, so it may not matter to him whether there was a PyrUP initial signal to buy AMZN.
stockcharts.com/h-sc/ui?s=AMZN&p=D&yr=1&mn=0&dy=0&id=p25641066868

Well, I don't buy individual stocks.

Pyramid Up is a BUY-IN Strategy; the investor decides when they want to start.  For me, yes, a "compelling value" may be a first-start buy point.  In Chang's case, he made a buy of AMZN and is considering averaging up-pyramiding up.  So now, the basic rules are in effect for each subsequent bucket.  (If he is right, that AMZN has been punished enough and likely bottomed for the year, and he buys on upward moving dips, he will be well rewarded.)

BTW my buy-in points for STOCK mutual funds/ETFs are: 1) compelling values (like, a yield is very good for my portfolio); 2) a strong rebound off of a bear market bottom; 3) a breakthru on the upside of a Moving Average, such as 100 or 200 day MA; 4) when the SLOPE of an MA turns upward (usually follows an MA breakthrough); and 5) the market itself is zooming upward.  DIPS may be bought as long as each dip buy point is higher than my previous buy.

R48

[mnfish]

In this current market and AMZN's most recent earnings I wouldn't be too excited about buying any more. Especially at a higher price. I would bet you could buy some more at $98 again if you so desired. IMO, if you want to own a company that makes a 30% margin on 16% of its sales (AWS) and loses money on the rest, ($3B loss on $365B in sales - 9mos ended 9/30/22) good luck.

BTW - AWS posted the slowest growth since 2014 (CNBC)

[retiredat48]

At@admin,...Chang...let's revisit since your original post.

By using Pyramid Up buying, you saved yourself a ton of money.  Some observations:

--If you implemented the suggested 2-3 day wait (self-imposed) rule, you should not have bought any more buckets.

--By dividing into five bucket buys, you have mitigated the loss.  Example: If the AMZN purchase was to be 2.5% of your portfolio, then the first bucket is only 0.5% of ones portfolio.  With AMZN dropping to $88/share, a ten percent loss is only 0.05% of your portfolio.  I am sure you are not losing sleep over this.

--PyrUp technique now requires to "call a timeout"...One can either exit via selling the first bucket.  Or, as a minimum, re-assess the initial buy.  What are you missing fundamentally?  Like, are you aware AMZN may be laying off tens of thousands of employees next year?  Or that fed chm.Powell just stated the terminal fed funds rate is likely higher than the Sept fed forecast, and will last longer in place, thus impacting the PE ratio of companies like AMZN? Is this just market forces at work?

--If you still like AMZN, then hold; but do not buy more unless a new high is made above your previous purchase....or at least six months passes...and you start over.  There are many other opportunities around.

R48

[chang]

Correct - it continued dropping, and I did not buy any more. My initial buy was 0.2% PV, so the damage is indeed trivial.

However, should it drop to $80, I would probably buy more.

[Deleted]

I am not buying more of aapl, amzn, or goog. I have enough. I am watching msft. Amzn has a high p/e and the argument is the parts justify it. It might still work against. I look at all of these as 10 year money. It won't really matter what you pay for it if viewed that way.

[retiredat48]

Nov 4, 2022 7:43:33 GMT chang said:

Correct - it continued dropping, and I did not buy any more. My initial buy was 0.2% PV, so the damage is indeed trivial.

However, should it drop to $80, I would probably buy more.

This is what creates the potential for large losses....and/or dead money...Buying on a downtrend.

One can get same returns by buying AFTER a bottoming process and price moves up through Moving Average values, which is a longer way off.  Use momentum to ones advantage.

BTW here is an interesting bet for you.  I will wager $25 that  leveraged FI CEF, PDI (13+% yield), will have a better total return, next five years, than AMZN, starting at your initial purchase share value..  Makes one stop and think, eh!

R48